Newsletters > CP Daily: Wednesday February 15, 2023

CP Daily: Wednesday February 15, 2023

Published 01:39 on February 16, 2023  /  Last updated at 23:45 on February 17, 2023  / /  Newsletters

A daily summary of our news plus bite-sized updates from around the world.

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TOP STORY

ANALYSIS: Hydro, nuclear comeback to pressure EU power sector emissions

Returning hydro and nuclear generation is expected to help push EU ETS-covered emissions levels lower in 2023, despite a strengthening macroeconomic picture and low expectations of a resumption of coal-to-gas fuel switching.

AMERICAS

South American REDD+ issuance seen to be on the rise at both project and jurisdictional level

Carbon market analysts on Wednesday pointed to the strong likelihood that South America will significantly increase its REDD+ carbon credit issuance in the coming months and years, with jurisdictional-level methodologies quickly increasing in prominence.

Battle lines drawn in US Senate committee’s first hearing on national clean fuel standard

A US Senate hearing on Wednesday for a national clean transportation fuel standard saw Republicans and Democrats clash and industry panellists take sides over technology-neutrality and the benefits of existing state-level low-carbon fuel standard (LCFS) programmes.

LCFS Market: California prices tick up from 5.5-year low ahead of rulemaking workshop

California Low Carbon Fuel Standard (LCFS) values increased slightly from 5.5-year lows this week as traders pointed to a forthcoming workshop that may provide more details on ratcheting up the transportation sector programme’s environmental ambition.

RFS Market: RIN prices bounce back as refiners buy dip

US biofuel credit (RIN) prices rebounded from two-month lows after the past week, which traders attributed to refiners stepping back in after selling down the market.

EMEA

Euro Markets: EUAs jump to seven-day high on “shake-out” of short positions amid lack of data

EUA prices rose to their highest in seven sessions on Wednesday as traders pointed to strong gas prices amid forecasts for colder weather, as well as suggestions that some traders were seeking to shake out short positions despite a second successive week without Commitment of Traders data from the largest exchange.

Brussels preparing new proposals to support industry decarbonisation

The European Commission is due to present three new legislative proposals for its energy and industrial policy next month, EU sources said on Wednesday, as lawmakers struggled to unite on how the bloc should best support its industries to decarbonise.

Sweden may allow subsidised bio-CCS removals for sale on voluntary carbon market

The Swedish Energy Agency has proposed that state-supported removals credits from bioenergy carbon capture and storage (bio-CCS) projects could be sold onto the voluntary carbon market (VCM), with the units counted towards achieving Sweden’s national climate goals.

ASIA PACIFIC

Australia’s below baseline credits may not work under current settings, integrity group warns

Australia’s Safeguard Mechanism Credit (SMCs) scheme may not work as intended with the current approach to setting baselines as it risks facilities having higher emissions caps than intended by the government, a corporate watchdog has warned.

Puzzling emissions data could add to the woes of China’s climate goals -analyst

Puzzling government data on China’s 2022 emissions and coal consumption could raise concerns as to whether the country is falling behind its near-term climate goals, according to an analysis published Wednesday.

VOLUNTARY

Carbon removals marketplace lobbies investor group to change track

A carbon removals marketplace is spearheading a campaign to urge the Net Zero Asset Owners Alliance (NZAO) to reverse its recent decision to exclude their members use of carbon removals for their own sub-portfolio or sector climate targets before 2030.

US start-up raises $4 mln for fungal-based carbon removal credits

A Texas-headquartered company on Wednesday announced it has gained $4 million in seed funding to scale up carbon removals from belowground fungal biodiversity restoration to the tune of 3 billion tonnes by 2050.

Ikea posts 5% drop in emissions in 2022, underlines no-offset policy

Swedish furniture firm Ikea said on Wednesday that its value chain emissions fell 5% in 2022 year-on-year due to renewable energy use, reiterating that its wider 2030 climate goals will not be achieved by purchasing carbon offsets.

INTERNATIONAL

World Bank issues $50 mln bond linked to emissions reductions from Vietnamese project

The World Bank on Tuesday announced it has partnered with a private Vietnamese company to issue upfront capital for a water purifier initiative funded through the sale of carbon credits.

BIODIVERSITY (FREE TO READ)

FEATURE: The quest to make protecting the ocean profitable

A US-based start-up is on a mission to help governments make it profitable to implement and enforce Marine Protected Areas (MPAs) by setting up an open-access analytics platform that among other things can form the basis for issuing biodiversity and blue carbon credits.

Central bank outlines the benefits and risks of “debt-for-nature” swaps

The central bank of one of the world’s largest economies has suggested that so-called “debt-for-nature” swaps could tackle two of the world’s most significant issues – the rising debts facing low-income countries and nature degradation – but cautioned that the full effects and associated risks of the policy must be fully considered.

SBTN releases first science-based targets for land

The Science Based Targets Network (SBTN) has published the first draft land targets, intended to help corporations align their commitments and actions with the necessary speed and scale to halt and reverse global nature loss.

Chinese insurance giant launches policy to protect marine environment, ocean carbon sink

Ping An, one of the largest integrated financial groups in China, has launched its first ocean carbon sink index insurance policy in an initiative that will also help to protect marine ecological systems, the company has announced.

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CONFERENCES

North American Carbon World (NACW) 2023 – Mar. 21-23, Anaheim: For 20 years, the NACW conference has been the place for carbon professionals working in North American carbon markets and climate policy to learn, collaborate, and network. Taking place Mar. 21-23 in Anaheim, California, NACW 2023 will dive into new policies and developments that will shape and scale carbon markets and climate solutions with integrity, ambition, and equity. Register now to gain actionable insights for bold climate solutions and participate in premier networking opportunities with an active and engaged audience to strengthen your organization’s strategy for navigating the carbon landscape.

European Climate Summit (ECS 2023) – Mar. 28-30, Lisbon: Registration for the 5th edition of the European Climate Summit organised by IETA and partners is open. The ECS brings together leading private sector experts and policymakers from both the carbon and energy world, to analyse and discuss the current developments and pressing challenges. The summit provides a discussion and networking forum for policymakers, business leaders, and innovators involved in building, scaling, and collaborating on markets for net zero. The event will feature high-level plenaries, cross-cutting deep dives, interactive side events, and quality networking opportunities. Registration here.

ANNOUNCEMENT

Call for Expression of Interest to join the Climate Action Data Trust User Forum. Climate Action Data Trust has launched a Call for Expression of Interest to join the CAD Trust User Forum. The Initiative is looking for a variety of stakeholders across the carbon market value chain, from both the public and private sector. The purpose of the User Forum is to act as a market sounding board for the Council and the Technical Committee on business, policy, and technical matters. CAD Trust is a decentralised meta data platform that links, aggregates and harmonises all major carbon registry data to enhance transparent accounting in line with Article 6 of the Paris Agreement. Deadline for applications extended to Feb. 28, 2023.

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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

Malpassing the torch – David Malpass, the embattled president of the World Bank, on Wednesday announced his intention to step down by June, roughly a year before his term expires. Malpass, who was appointed to the Bank by former President Donald Trump, became the target of intense criticism from climate activists and Democratic politicians after he declined to say whether he accepted the overwhelming scientific consensus that fossil fuels were rapidly warming the planet. The exchange prompted scientists, activists, and US senators to call for his resignation. At the COP27 climate talks in Egypt late last year, Malpass continued to face questions about his views on climate change, even after he tried to clarify his position. (NYT)

Should I stay or should I go – Investors in coal have reaped the benefits of keeping their shares in the most polluting fuel, as the price of coal rose on higher demand last year and as the fuel’s price rose following the sky-rocketing price of gas, the FT reports. Hedge funds including Third Point, Makuria Investment Management, and Odey Asset Management have racked in significant profits thanks to keeping their shares in coal which has been instead shunned by other funds due to its role in contributing to global warming. Some funds have exited the fuel completely, saying that it is on its way out anyways. However, others point to the renaissance of coal in the last year as evidence that the most polluting fuel is here to stay for years to come, despite the world’s efforts to transition to cleaner sources of energy. Glencore, the world’s most profitable coal company, saw its shares go up by more than 40% since the start of last year and is trading near a record high, while profits at the world’s 20 biggest coal miners tripled last year to more than $97 bln. But some are saying coal’s bounce back is just temporary as it follows the price of gas, which has now fallen.

Double standard – The scientists who plan out how to limit global warming to 1.5C have asked coal-reliant countries to phase out the fuel faster than is realistic, a new study says. The study published in the journal Nature found that a typical 1.5C energy transition model expects nations like China, India, and South Africa to get off coal faster than any country has ever got off any energy source before. But these models ask for much slower reductions in oil and gas – fuels that tend to be produced and used more in wealthy countries. The study’s lead author Greg Muttitt told Climate Home that these models are amplified by the IPCC scientific reports and guide decision-makers’ policies across the world.

Share the wealth – Glencore will return more than $7 bln to shareholders in dividends and buybacks after the commodities giant reported another blockbuster profit driven by its coal and trading divisions, Bloomberg reports. While Glencore and its rivals have been positioning themselves to take advantage of rising demand for metals linked to the energy transition – such as copper for wiring and nickel for batteries – the company’s profits last year were overwhelmingly driven by mining and trading fossil fuels. Glencore’s core profit rose 60% to a record $34.1 bln, of which more than half – $17.9 bln – came from coal production, the company said in a statement. The commodity trading unit earned $6.4 bln in core profit, also its highest ever.

In hydro demand – The International Renewable Energy Agency (IRENA) released a report on Monday stating that hydropower capacity, including pumped storage, should more than double by the year 2050 in order to meet the 1.5C of global warming outlined by the Paris Agreement, Power Technology reported Tuesday. For installed capacity to double, investment in hydropower will need to increase fivefold between now and 2050. In order to reach the required $100 bln in investment, IRENA suggests that markets recognise the high value of hydropower. While installation costs are high, hydropower represents the cheapest source of renewable electricity available. Despite this, in recent years investments in hydropower have been dwarfed by investments in solar and wind technologies. Between 2013 and 2018, roughly $72 bln was invested in hydropower, compared with $1.8 trillion of investment in renewables, equating to roughly 4% of total renewable investment.

AMERICAS

Upping the ante – The Union of Concerned Scientists (UCS) on Monday announced that it delivered a letter to the US Environmental Protection Agency (EPA) in support of their draft report on the social cost of GHGs, which includes provisions to strengthen the estimates US government agencies use to calculate the economic damages associated with the release of each tonne of heat-trapping emissions. Under this proposal, the central value of the 2020 estimate of the damage caused by a tonne of CO2 — commonly referred to as the “social cost of carbon” — would increase to $190 from $51. The proposal also updates the social cost of methane and nitrous oxide gases. The letter was signed by approximately 400 experts. “This update by the EPA more closely reflects the latest climate science and economics to help ensure government agencies are appropriately accounting for the damages caused by US global warming emissions, and the significant benefits from cutting them,” said Rachel Cleetus, the policy director and lead economist in the Climate and Energy Program at UCS.

Tariff talk – US Senator Bill Cassidy is planning to unveil a carbon tariff bill in the “next couple of months”, he told Axios. This would be the first such legislation introduced by a Republican, and it’s likely to be a huge part of an emerging bipartisan conversation on the Hill.  “We’re obviously trying to build support, but it’s pretty mature product, and so I feel like it could be soon,” he added.  Cassidy, who represents Louisiana, has been talking about what he terms a “foreign pollution fee” for some time.  The senator is proposing to slap a fee on imported goods, such as steel, that have a high emissions profile compared to those produced in the US. Part of the legislative strategy here is to get the US into a “foreign pollution club” with the EU and other trading partners to counter China and other major emitters.  However, some experts believe it would be difficult to enact a US carbon tariff without a carbon tax on domestic emitters, as this could go against WTO rules. Republicans don’t support such a domestic fee, but Cassidy believes existing US regulations already impose compliance costs that would prevent a carbon tariff from running afoul of global trade rules.

Diablo in the details – The US nuclear safety regulator has no legal basis to give PG&E an exemption that could allow California’s Diablo Canyon nuclear power plant to keep running with expired federal licenses, according to a petition filed by environmental groups, Reuters reported Wednesday. Friends of the Earth, San Luis Obispo Mothers for Peace, and the Environmental Working Group told the Nuclear Regulatory Commission Monday that the two nuclear units at the plant, once slated for closure, pose potentially severe environmental and safety risks, making them ineligible for an exemption to agency rules requiring renewal applications be received at least five years before licenses expire. The dispute comes as members in Congress from both parties are finding rare common ground on nuclear energy between traditional Republican nuclear boosters and climate-minded Democrats who are increasingly convinced that the zero-carbon energy is pivotal for the transition to a clean energy future, E&E reported on Wednesday. The bipartisan consensus has already produced results. Hundreds of millions of dollars in funding and tax credits for existing and new nuclear projects were included in the Inflation Reduction Act and the 2021 bipartisan infrastructure law. Now lawmakers are beginning to coalesce around a new, more controversial target for this year: burdensome safety and environmental regulations on new and existing nuclear plants.

Hard to capture – For CCS to be deployed at much greater scale, multiple policy changes are needed to break down investment barriers for the technology, according to new research led by a nonprofit founded by former Energy Secretary Ernest Moniz, E&E News reported Wednesday. The report on Tuesday from the nonprofit Energy Futures Initiative said that while CCS has been deployed for decades, its progress “as a decarbonisation solution in the US has been disappointing” and deployment is still limited to areas like natural gas processing and petrochemical production from coal gasification. The group zeroed in on different risks holding back greater investments. One key challenge for carbon capture is that its application is different depending on the sector — meaning progress in one industrial setting does not always translate to another.

Honey, I captured the carbon – Oil major ExxonMobil will use technology from Honeywell to capture CO2 at a proposed hydrogen production facility in Texas. Honeywell said the technology would enable Exxon to capture about 7 Mt per year, equivalent to emissions from 1.5 mln automobiles for one year. The facility at Baytown, Texas, facility, is expected to start operating by 2028. (Reuters)

GHG funding – The US Environmental Protection Agency (EPA) on Tuesday announced initial guidance on the design of the Greenhouse Gas Reduction Fund programme, created by President Biden’s Inflation Reduction Act. EPA published two federal assistance listings outlining key parameters of the grant competitions that will ultimately award nearly $27 bln to leverage private capital for clean energy and clean air investments across the country. The initial programme design guidance follows a robust stakeholder engagement effort with input collected from state, local, and tribal governments, community financing institutions, environmental justice organisations, industry groups, and labour and environmental finance experts.

ASIA PACIFIC

Full disclosure required – A complaint has been lodged with the Singapore Exchange outlining how Japan’s largest power company, Jera, has failed to disclose critical information on financial and legal risks in relation to a $300 million bond issued in Apr. 2022, investor climate activist group Market Forces stated in a press release on Wednesday. Market Forces highlighted that Jera has omitted key information about the risks of investing in Liquefied Natural Gas (LNG), when the Russia-Ukraine war has increased LNG price volatility and global climate goals are accelerating the transition from fossil fuels to renewable energy. Formally lodged to the Singapore Exchange Whistleblower Office, the complaint also highlighted a serious failure to disclose legal action by Australian Indigenous Tiwi Islanders over a major gas project, which could have a material effect on Jera’s financial prospects. Dr. Sachiko Suzuki, Japan Senior Climate Finance Analyst, Market Forces, said “It is of grave concern that Jera has failed to disclose key financial and legal risks on its fossil gas investments while attempting to raise hundreds of millions of dollars. There are clear duties of disclosure under the rules of the Singapore Exchange and Jera has been fooling investors by providing just part of the picture of the risks associated with its dirty dealings on fossil fuels”.

Another vast sum — Australian concentrated solar power technology Vast Solar has struck a deal with oil drilling contractor Nabors Energy Transition to become a publicly listed company on the New York Stock Exchange in a bit to take its technology to the world, RenewEconomy reports. The deal will see the Sydney-based company become known simply as Vast, with Nabors and existing shareholder AgCentral commit A$15 million ($10.3 mln) each into the company. The NYSE listing could see Vast’s equity double to $580 million, giving it a platform to pursue multiple gigawatts of projects around the world. The move comes just days after the company was granted A$65 mln in cash from Australia’s Clean Energy Finance Corporation to build the country’s first full scale concentrated solar power plant in Port Augusta, South Australia. The tech differs from its competitors by using modular arrays of solar towers and receivers to capture and store energy from the sun and use it to provide electricity and heat.

A brand new low – China’s thermal coal price plunged to a one-year low of 1,000 yuan ($147) per tonne this week, weighed down by high inventories amid weak demand and Beijing’s focus on energy security, according to Bloomberg. The current rate, which dropped below government-set caps, reflects bearish sentiment due to China’s weaker-than-expected economic recovery. “Industrial activity has picked up, but not fast enough to absorb rising stockpiles,” the report said.

EMEA

State aids –  The EU Commission approved two schemes to support renewable hydrogen production in Denmark and investments in batteries, photovoltaic cells and panels in Romania, respectively. The first measure will consist of €170 mln for the Power-to-X (‘PtX’) technologies, will support the construction of up to 100-200 MW of electrolysis capacity, will be awarded through a competitive bidding process to be concluded in 2023, and will take the form of a direct grant for a 10-year period. The second measure, €259 mln made available in part through the Recovery and Resilience Facility,  (‘RRF’), to support investments in the production, assembly and recycling of batteries, will run until 31 December 2024 and will take the form of direct grants to companies active in the production, assembly and recycling of batteries, photovoltaic cells and panels.

Indirect emission costs – A €99.15 mln Slovenian scheme will help compensate energy-intensive companies for indirect emission costs, incurred between 2022 and 2024, under the EU ETS. The measure, announced today by the Commission, will benefit companies active in Slovenia in sectors at risk of carbon leakage. The compensation will be granted to eligible companies through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2025. In order to qualify for compensation, eligible beneficiaries will have to provide evidence in their application that they cover at least 30% of their electricity consumption with carbon-free sources. The maximum aid amount per beneficiary will be equal to 75% of the indirect emission costs incurred. Beneficiaries must use the compensation received for climate protection measures within two years of receiving the last aid payment.

VOLUNTARY

Risky comments – The American Carbon Registry (ACR) announced on Wednesday the launch of a public stakeholder consultation process on its updated Risk Tool 2.0 involving the reversal risk analysis and buffer pool contribution determination. The Risk Tool is used by carbon offset projects in the Agriculture, Forestry, and Other Land Use (AFOLU) sector that utilise the ACR buffer pool to compensate for unintentional reversals in order to determine a project-specific risk rating and buffer pool contribution rate. The proposed updates touch on all aspects of the Risk Tool and most notably include new methods for calculating project-specific and spatially explicit natural disaster risks using publicly available geographic datasets on wildfire, flooding, and insect and disease risks, the ACR statement noted. These updates aim to objectively and transparently ensure the solvency of the ACR buffer pool through an evidence-based risk assessment framework. ACR consulted with forest carbon experts from six organisations to better inform the proposed updates. The registry is expected to finalise the process and publish the updated version of the Risk Tool in Q2, and public comments can be submitted until Mar. 16.

Credit where credit is due – The Solaxy Group, a developer of net zero carbon projects, announced Wednesday the pre-launch of its carbon credit marketplace that provides users with the tools to calculate and reduce their personal carbon footprints, access carbon-offset projects, and be awarded carbon credits as they are produced from the many projects that they are involved in. The Solaxy platform carbon footprint calculator is an all-inclusive tool that makes it easy to calculate the environmental impact of daily activities. Solaxy platform users can earn carbon credits by reducing their carbon footprints and offsetting their unavoidable emissions. Users have full control over their carbon credits, and any excess carbon credits on the account can be redeemed with Solaxy partners or sold on the carbon credits market. Unlike other carbon credit programs that impose restrictions on credits, Solaxy gives users complete control over their carbon credits.

SCIENCE & TECH

Let’s get biblical – Climate change is causing sea levels to rise faster than for 3,000 years, bringing a “torrent of trouble” to almost 1 billion people, UN Secretary-General Antonio Guterres has warned. Speaking to the UN security council, he described “a mass exodus of entire populations on a biblical scale” as some nations could cease to exist. Guterres also notes that sea level rise can act as a threat-multiplier with “dramatic implications” for global peace and security, The Guardian reports. Guterres cited research by the WMO showing that even if global warming is limited to 1.5 C above pre-industrial levels – a goal of the Paris Agreement – there will still be a considerable sea level rise. He listed various “mega-cities” under threat – including Cairo, Dhaka, Shanghai, London, New York, and Buenos Aires. He also said such sea level rise amounts to “a death sentence” for vulnerable countries, including many small island nations. (Carbon Brief)

AND FINALLY…

Bankers strike back – Yes, US Republicans’ “woke wars” are intensifying on some fronts. Florida Governor Ron DeSantis (R) wants to pull state money out of financial institutions engaging in ESG investing, and Vivek entrepreneur Ramaswamy is trying to parlay his anti-ESG crusade into a presidential bid. But, according to Politico, if you look more closely, there’s a quiet, conservative backlash going on in some unexpected corners. Bills to prohibit state support of ESG investing are sputtering out in deep-red states. A bill that would have allowed North Dakota’s treasurer to refuse to do business with firms “boycotting” the fossil fuel industry failed 90-3 last week, and a Mississippi bill that would have barred the state pension board from making decisions with the primary purpose of influencing ESG goals died in committee late last month. One common thread is the opposition of state-level banking groups, which are bristling at efforts to restrict their activities — and finding receptive ears in statehouses. The Montana Bankers Association, for example, persuaded Rep. Steve Gist to substitute a non-binding resolution for his not-yet-filed anti-ESG bill that calls on Congress to oppose ESG. Even as Republicans are pushing the front lines of the ESG war further in states like Florida, Texas, and West Virginia, there’s some principled pushback. Before Republicans can fully slay the “woke” dragons out of their states’ investments and dash straight to a neat and tidy blacklist of financial firms, they’re having to contend with key historical allies aiming to rein in their most extreme urges.

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