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TOP STORY

California carbon market watchdog recommends tightening allowance supply, studying no-trade zones

California should consider numerous changes to its cap-and-trade programme that would ratchet down annual allowance supply to hit the state’s GHG reduction targets, and also study how no-trading zones could benefit air quality in disadvantaged communities, according to a watchdog report published Tuesday.

EMEA

Critics round on EU ETS2 design and lack of support for exporters in legislator agreements

An imbalance in emissions obligations in the EU’s second carbon market and fears about manufactures’ ability to sell their products abroad were the focus of stakeholder criticism at an event on Wednesday taking stock of last month’s legislator agreements on the bloc’s carbon market-related reform bills.

Euro Markets: EUAs give up midday gains as bearish sentiment grows amid sharp energy price drops

EUAs ended the day nearly 2% lower after an early effort to wipe out Tuesday’s losses was sideswiped by a rush of selling in the afternoon that appeared to reflect speculation that falling energy prices may bring natural gas back into the merit order and cut EUA demand.

South Africa’s blue carbon restoration can contribute to climate goals -report

South Africa’s blue carbon ecosystems can be leveraged to help meet its NDC goals, the first ever blue carbon sink assessment completed for the country has found, despite the fact that mangroves, salt marshes, and seagrasses collectively account for only a limited share of the large African economy’s land area.

ASIA PACIFIC

AU Market: ACCU prices rises as Safeguard proposals sink in

The spot price for Australian Carbon Credit Units (ACCUs) rose 2% Wednesday amid market expectations that the changes made to the Safeguard Mechanism will have a bullish impact on price, as the debate on the merits of the Labor government’s proposal continues to rage.

SK Market: Korean auction clears below secondary market amid lacklustre demand

South Korea sold just over 60% of the allowances on offer at Wednesday’s monthly carbon sale with the clearing price reaching a new low, as the current economic slump and allowance surplus continue to weigh on market sentiment.

Taiwan should release carbon levy details as soon as possible, green groups urge

Several environmental groups have expressed concerns over the inadequacies of Taiwan’s newly-passed climate bill, urging the government to clarify the details of an upcoming carbon levy scheme as soon as possible.

Indonesian project developer secures land for REDD+ project in Papua

An Indonesian carbon project developer has secured a land agreement to turn a land concession in Papua into a REDD+ project that it says could generate the equivalent of 3.7 million VCUs per year.

AMERICAS

Washington policymakers see carbon allowance prices dropping with auctions, linkage

Steep Washington Carbon Allowance (WCA) prices should abate as the state commences quarterly auctions and moves towards linking with the California-Quebec scheme, while fuel suppliers are reportedly gouging customers by justifying compliance with the carbon market and Clean Fuel Standard (CFS), Department of Ecology (ECY) officials told a legislative committee meeting on Wednesday.

Voluntary retirements of California compliance offsets spike by a third, as new issuances tick up

California should consider numerous changes to its cap-and-trade programme that would ratchet down annual allowance supply to hit the state’s GHG reduction targets, and also study how no-trading zones could benefit air quality in disadvantaged communities, according to a watchdog report published Tuesday.

VOLUNTARY

Anew Climate commits up to $640 mln to nature-based offset developer Terra Global

Environmental services firm Anew Climate has agreed to invest as much as $640 million in nature-based carbon project developer Terra Global Capital to scale jurisdictional emissions reduction and removal efforts.

Xpansiv closes $125 mln capital raise, completes acquisition of Evolution

Xpansiv has closed a $125 million capital raise to help fuel continued growth, the environmental markets platform announced on Wednesday, while confirming the completion of last year’s acquisition of emissions brokerage Evolution Markets.

Carbon removals marketplace strikes deal to help supply industry coalition

A carbon removals marketplace has agreed a partnership with the First Movers Coalition, adding to the companies providing member firms access to carbon removals to help them fulfil their buying mandates.

Carbon credit platform partners with carbon removal funders’ club to broaden reach

A leading climate platform and carbon credit provider announced a partnership on Wednesday which will broaden the scope and volume of carbon removal credits available to its customers.

INTERNATIONAL

WEF warns of “polycrisis”, with climate risk topping the list ahead of annual Davos summit

This is the year of “polycrisis” where risks become more interdependent and reciprocally damaging, the World Economic Forum (WEF) said in its annual risk report published Wednesday ahead of the think-tanks annual Davos talks that predicted climate risks will dominate the challenges over the next decade.

BIODIVERSITY (FREE TO READ)

FEATURE: Dos and don’ts – Biodiversity market looking to carbon for guidance

With momentum building behind biodiversity crediting following a string of announcements at COP15 in December, market experts have highlighted the lessons to learn from carbon, their close links and key differences, and why there is no time to waste in devising the framework to scale the nascent nature-based market.

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BITE-SIZED UPDATES FROM AROUND THE WORLD

Carbon Pulse has teamed up with CME Group to provide its clients with regular updates on the global carbon markets. Check out these briefs for the latest insights on pressing trends and events impacting markets, published every other week. Registration required

INTERNATIONAL

Brazilian Bethlehem – Brazil has officially launched a bid for the north-eastern city of Belem to host the COP30 UN climate summit in 2025. The country’s new president Luiz Inacio Lula da Silva said in a video on Twitter that Brazil’s foreign relations ministry had formalised Belem, located in the state of Para, as a candidate to host COP30. Para Governor Helder Barbalho said that COP was “the biggest climate event on the planet” and that COP30 would discuss the Amazon and the global climate and find solutions. (Climate Home)

Biden won’t budge – The EU is sceptical the US will make meaningful changes to the IRA climate law the bloc says that unfairly subsidises American companies. The US has ignored most of the bloc’s concerns and proposals for how to make the IRA less discriminatory against European firms, Bloomberg reported, citing anonymous sources. Anger is growing in Europe, with Belgium’s prime minister, Alexander De Croo, accusing Washington of trying to lure green industries across the Atlantic. “They are calling Belgian firms, German firms in a very aggressive way to say: ‘Don’t invest in Europe, we have something better,’” he said. “That is something to ring the alarm bells over.” Read Carbon Pulse’s analysis on the EU response to the IRA. 

Bearish on Brent – The US Energy Information Administration’s (EIA) Jan. 2023 Short-Term Energy Outlook forecasts that Brent crude oil price will rise to $83/barrel in Q1 from an average of $81 in Dec. 2022. EIA expects this forecast increase to follow the upcoming EU ban on seaborne imports of petroleum products from Russia, effective Feb. 5. It said the ban will likely be more disruptive to the global petroleum markets than the EU’s Dec. 2022 ban on seaborne crude oil imports from Russia. However, the EIA then forecasts the Brent price will stay relatively flat through Q2 averaging $85, and then decline through the end of 2024. The department expects the Brent price to average $83 in 2023 and $78 in 2024, down from $101 in 2022. The WTI price (the US benchmark price) is forecast to generally follow a similar path, averaging $77 in 2023 and $722024.

ASIA PACIFIC

Clash of the titans — Sun Cable, the Australian company that plans to export electricity from a massive solar farm in the Northern Territory to Singapore, has gone into administration, due to a financial disagreement between the two billionaires backing the project, the ABC reports. The company is backed by Atlassian co-founder Mike Cannon-Brookes and mining and green hydrogen magnate Andrew Forrest. The company released a vague statement saying “the appointment followed the absence of alignment with the objectives of all shareholders”. The ABC understands that the two billionaires had disagreements about the funding and direction of the company. These included the significant amounts of cash the company was spending, and its failure to achieve certain milestones – as required by its venture capital funding agreement. Global advisory firm FTI Consulting has been appointed as Sun Cable’s administrator. The company said going into administration was necessary to find additional capital to fund its projects. The company is developing the Australia-Asia PowerLink, which aims to export 20-GW of solar energy, generated from a massive project in the Northern Territory, via subsea cable to Singapore. The solar farm would cover some 12,000 hectares of land and the overall project is expected to cost some A$30 billion ($20 billion). The company has around 11 GW of other projects in the development pipeline. “I’m confident it will play a huge role in delivering green energy for the world, right here from Australia,” Mr Cannon-Brookes was quoted by Sun Cable as saying. “I fully back this ambition and the team, and look forward to supporting the company’s next chapter”.

Cotton carnage – There’s global demand for cotton and big profits to be made for farmers — but the growing industry in Australia’s vast Northern Territory (NT) is putting one of the last tropical savannas and untouched river networks in the world under threat, ABC reports in a special investigation. Deep in the NT outback, stations — some double the land size of London — are being bought for millions and converted at a rapid rate to make way for a lucrative industry: cotton. Paul Burke, the chief executive of the NT Farmers Association, has been spearheading the expansion of the industry in the north. He says it’s a silver bullet crop that could rocket to a A$200 million economy within the decade, helping small family farmers diversify from the cattle status quo, which has driven the territory up until now. But now, satellite imagery shared with the ABC shows what appears to be land clearing without a permit, which is generally against the law. Two stations are being investigated by the NT government, whose environment department says its regulations are strong, and proponents of the industry maintain the rules are being upheld. But environmental groups say this alleged unlawful activity speaks of a culture of cowboy antics in a jurisdiction with limited environmental oversight and “a piecemeal set of laws”. In March last year, the NT government slashed approval times for land clearing permits from six months to six weeks in a bid to cut red tape and attract investment to fuel its ambitious plan to create a A$40 billion economy by 2030. “At that point, we really knew that we needed to start scrutinising very closely what was going to happen in the Territory with land clearing,” says Kirsty Howey, executive director of the NT Environment Centre.

Kickstarting hydrogen – India, which last week announced a national green hydrogen mission at a cost of $2.4 billion, will by May invite bids for subsidies for setting up green-hydrogen manufacturing and utilisation hubs, fertiliser and steel plants based on the fuel, and factories for making electrolysers, Reuters reports. The bidding process is part of a first phase of the incentive plan announced last week to boost use of green hydrogen to cut emissions and make India a major exporter in the field. The government will call within three to four months for competitive bids for establishing two green hydrogen hubs, two government sources, who did not want to be named, told Reuters. In the same period it will seek bids for setting up two fertiliser plants using green hydrogen and green ammonia – ammonia made with green hydrogen – they said. It will subsidise establishment of the activities proposed by the winning bidders, which will retain ownership. The government intends to award contracts within a year, both sources said.

Money for net zero – India needs an additional investment of up to $100 billion annually to meet its 2070 net zero carbon emissions goal, the head of a government panel told Reuters, Business Standard reports. The parliamentary panel on finance, chaired by Jayant Sinha, is studying India’s investment requirements for sustainable growth, particularly for climate adaptation and mitigation. “The incremental investment required in India, above and beyond what we are already doing, to be on a net zero trajectory of 2070, is $50-100 billion a year,” Sinha told Reuters in an interview. Companies in India are already investing $65-$100 billion to cut carbon emission from existing and new capacities. “We almost have to double private sector capex in India to be on a net zero trajectory,” Sinha said.

Transition backing – UN agency UNDP stands ready to support the Vietnamese government in the detailed formulation and implementation of the Just Energy Transition Partnership (JETP) resource mobilisation plan in 2023, UNDP Resident Representative in Vietnam Ramla Al Khalidi said, VN Express reports. “This includes our proven technical assistance services to the governments in green transition/NAMA projects, which can help Vietnam identify cost effective de-risking public instruments to promote and scale up private sector investments in the JETP resource mobilization plan,” Khalidi said in an interview with Vietnam News Agency. According to the UNDP Resident Representative, the UNDP is initiating assessments on the impact of phasing-out coal power and energy transition in Vietnam and defining what these processes would specifically mean for the country. As Vietnam will embark on a greener and more resilient path in the next three-five years, including the JETP, the country needs to accelerate preparations for a package of public instruments to de-risk investments in renewable energies and design a just and feasible process to phase out coals in both state-owned enterprises and foreign-invested coal power plants, she suggested.

New cooperation  – Harbin Hatou Investment, a Shanghai-listed investment company owned by the government of Harbin city, has signed a letter of intent with Guotai Junan Securities for cooperation on carbon finance, according to a company statement. The two firms are keen on possible carbon transactions, and they will work together to revitalise carbon assets, explore carbon product innovations, and share information about the latest developments in carbon markets, the statement said. The agreement remains valid until Dec. 31 2025.

AMERICAS

Auto April – The National Highway Traffic Safety Administration (NHTSA) plans to propose new fuel economy standards for the 2027 model year and beyond in April, which could dramatically reshape new cars on America’s roads, Reuters reports. Acting NHTSA Administrator Ann Carlson told reporters on Tuesday the agency aims to release its proposal by late April and finalise it within a year. The US EPA has said it plans to introduce companion stringent vehicle GHG emissions standards from 2027 through at least 2030 model year by March. One big question is whether the new rules will be consistent with California’s aggressive efforts to ramp up zero emission vehicles and phase out new gasoline-powered vehicles by 2035.

New focus for FERC? – New climate guidance from the White House may change how FERC assesses natural gas, a prospect that could dramatically affect emissions and split the bipartisan panel, EnergyWire reports. The White House Council on Environmental Quality (CEQ) last week issued guidance for federal agencies to analyse, quantify, and mitigate GHG emissions “to the greatest extent possible” as part of the environmental review process. The framework also encourages agencies to evaluate whether proposed projects or other actions would disproportionately harm disadvantaged communities. To the frustration of environmental advocates, the agency has rarely assessed how much new gas projects would contribute to climate change aside from considering “direct” GHG emissions, such as those emitted during construction or operation of a pipeline. The CEQ guidance may change that. Experts say they expect FERC to try to follow the guidelines when conducting new environmental reviews for energy projects under the National Environmental Policy Act.

Come Whatcom may – The Whatcom County Council opted to not make a recommendation regarding the protection of four forest parcels through phase two of the Washington State Department of Natural Resources (DNR) carbon offset project following significant public testimony. Instead, council members voted Tuesday to request more information from DNR about the environmental and financial impacts of including the four parcels in the carbon project. The project, announced in April, allows counties to recommend specific parcels of state-managed forestland for protection from logging to DNR. During phase two of the project, four parcels – approximately 664 acres of “working” forest – were under consideration in the county. Though the project is still in the early phases, state officials project it will offset millions of tonnes of carbon emissions by entering local forests into leases that stipulate their use for storing carbon while generating revenue for state trust land beneficiaries, including schools, colleges, and local services. (Cascadia Daily news)

Ash and you shall receive – Cement maker Lafarge Canada and power generator TransAlta on Tuesday announced in a press release on Tuesday that they have entered into an agreement that will advance low-carbon concrete projects in Alberta. The newest project will repurpose landfilled fly ash, a waste product from TransAlta’s Canadian coal-fired electricity operations west of Edmonton, which ended in 2021. The ash will be used to replace cement in concrete manufacturing.

Who pays for CCS? – Alberta Premier Danielle Smith said the province was open to providing CCS tax credits but wanted the federal government to increase financial support, Reuters reported on Tuesday. Canada’s oil and gas industry has requested more government support to scale up the technology given the large tax credits made available to their US counterparts through the Inflation Reduction Act. However, Prime Minister Justin Trudeau last week urged the province to use its budget surplus to fund the tax credits. The Premier told a news conference that the Alberta Petrochemicals Incentive Program had provided companies with grants worth 12% of a project’s capital costs and was hoping the federal government would come to the table with something more significant to ensure the province could compete to attract investment.

Adieu Brochu – Sophie Brochu is stepping down as CEO of Hydro-Quebec, less than three months after the provincial government set up a “super ministry” for economic and energy issues that oversees the utility, Bloomberg reports. Brochu, one of Canada’s most prominent female business executives, will leave on Apr. 11 after three years in the job, the company said Tuesday. Within Quebec, tensions had been building between Brochu and the government of Premier Francois Legault over how to deploy Quebec’s vast renewable power capacity as a lure for industrial development in the province of 8.8 mln people. Brochu had said in media interviews that she was concerned about putting too much pressure on energy supply.

EMEA

Forcing the issue – France’s lower house of parliament adopted a draft bill aimed at speeding up the development of renewables late on Tuesday although the industry fears it may create more delays, Montel reports. The bill passed despite opposition from right, far-right and far-left parties and would now go before a committee to draw up a compromise text before a final vote. Measures outlined in the legislation aimed to cut red tape to fast-track renewables projects and put the country back on track to meet its green targets. The move came as France was the only EU member state to have missed its 2020 target to its share of renewables in final energy demand to 23%. Under the auspices of the bill, renewables projects could be declared of overriding public interest, allowing exemptions from environmental legislation. In addition, it increased the potential land available for solar power generation, such as along major roads and coastlines, totalling 11 GW of capacity, the government said. Solar panels would be compulsory for big car parks, for instance, with fines for non-compliers. The text would also speed up the implementation of offshore wind farms by establishing priority zones for such projects, while tax incentives would be brought in to encourage the building of renewables units.

Bank snags – The ECB may be about to make life harder for bond issuers with big carbon footprints. Executive Board member Isabel Schnabel suggested the ECB may need to start actively reshuffling corporate-bond holdings to better reflect climate risk. She also said borrowing costs would need to be lifted significantly and steadily, with inflation only just having dipped back into single digits.   

Madrid missives – Spain has circulated a non-paper intended to kickstart debate ahead of the European Commission’s big electricity market reforms proposals, due in March — aimed at easing prices in the long run and protecting European households and businesses from the price shocks seen in 2022. Madrid’s ideas aim to decouple the high price of gas from that of electricity by “complementing” existing short-term electricity markets with greater use of long-term contracts — known as contracts for difference — between regulators and non-emitting power generators. (Politico)

More moors – Germany must restore 50,000 hectares of moorland annually – and the whole of the EU 500,000 hectares – for the world to reach the 1.5C Paris Agreement target,  according to the 2023 Moorland Atlas by the Heinrich Boell Foundation, Friends of the Earth Germany, and the Michael Succow Foundation. The organisations called on governments to set financial incentives to reach this target. “A rethink on how to deal with peatlands must take place in society as a whole, and the economy should also recognise the potentials,” said Jan Peters, managing director of the Michael Succow Foundation. “Climate services from wet agriculture on peatlands or innovative products of ‘wet biomass’ must be recognised and given attractive financial support,” he added. (Clean Energy Wire)

VOLUNTARY

Supplier software – Cloverly, a leading platform for climate action based in Atlanta, announced the launch of the first multi-channel distribution management software for carbon credit suppliers. Combining inventory management with the ability to manage distribution across different channels of demand, Cloverly’s new platform fills a critical gap required for carbon markets to scale. The carbon credit marketplace is evolving rapidly, requiring the digital infrastructure to evolve as well. Suppliers don’t have software to manage their distribution and inventory – something that exists in virtually every other industry. With the rapid growth of various sales channels, suppliers are having an increasingly difficult time tapping into those channels at scale. This stymies the growth of the carbon markets through inefficiency, siloed inventory pools, inability to fully capture demand, and unnecessary logistical and communication hurdles. Cloverly’s carbon credit distribution management software integrates these complementary solutions for the first time, creating efficiencies for stakeholders and amplifying the impact of the carbon market.

SCIENCE & TECH

Climate tech investments – Soaring energy costs bolstered investor demand for technology to reduce reliance on fossil fuels last year, providing a bright spot amid a meltdown in global markets, Bloomberg reports. Investment in climate tech by venture capital and private equity swelled to $59 bln, a 4% increase from 2021, according to a report published Wednesday by BloombergNEF, a clean energy research group. Funding for transportation, including EVs, and companies focusing on clean energy including solar and wind led the 1,182 deals in the period. Russia’s invasion of Ukraine at the start of last year pushed oil prices into the triple digits, while economies reopening from Covid lockdowns lifted energy consumption and prices. It made for a tough year for global markets, with both bonds and equities posting their worst year in a decade. Climate tech’s robust showing managed to counter this gloom, even with a roughly 30% drop in overall US VC funding from 2021 to 2022, according to preliminary data from research firm PitchBook. There may be scope for investor appetite to continue as there’s plenty of capital to deploy in the years to come — some 60 climate tech funds closed in 2022, raising $24 bln, according to the report.

AND FINALLY…

Booted4Good – FTSE Russell has ejected dozens of companies from a family of stock indices for failing to meet more stringent environmental standards, the first time it has taken such a step. According to the FT, the index provider has removed 34 groups from its FTSE4Good All-World benchmark after deciding they failed to meet its newly introduced Climate Change Score. The 34 were among 208 companies put on a watchlist in June 2021 for potential deletion if they did not meet FTSE Russell’s new requirements. They include US broker Charles Schwab, Luxembourg-based media conglomerate RTL Group, mining companies Fresnillo and MMG, Japanese advertising group Hakuhodo DY Holdings, and UK construction company Galliford Try. The vast majority are from emerging markets, however — despite a lower bar being set for EM companies — with 14 from India alone, including Oil & Natural Gas Corporation, Power Grid Corporation of India, and Asian Paints. Air China and compatriot Cosco Shipping Energy Transportation are also on the exclusion list. “Many of the constituents placed on our watchlist due to these tougher climate change standards in 2021 have worked hard to improve against the Transition Pathway Initiative scores we use to make this assessment and therefore retain index membership,” said David Sol, head of policy at FTSE Russell. “However, despite ongoing dialogue, some have unfortunately not reached the required standard and were therefore deleted.” The expulsions are relevant for investors in many index-tracking exchange traded funds and mutual funds, given that FTSE’s range of “sustainable” investment indices, which include the FTSE4Good range, are tracked by more than $260 bln of passive money. FTSE4Good’s new climate standards are based on parameters drawn up by the Transition Pathway Initiative, which is backed by 130 investors collectively managing $50 trillion in assets.

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