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TOP STORY
ANALYSIS: EUA pricing may be shifting back to fundamentals as spec-driven whipsaw seen ending
Europe’s carbon market has seen sharp price swings in recent months amid an increased focus on technical trading as participants have focused on speculative positioning, but after the most recent episode of short-covering traders are starting to question whether EUAs are overvalued, with some are saying allowance costs may again start to reflect fundamentals.
EMEA
BRIEFING: EU nations face major ambition hike in non-ETS sectors
Most emissions reductions needed for the EU to meet its 2030 climate ambitions fall under the bloc’s Effort Sharing Regulation (ESR), with signs that nations will struggle to meet their binding annual national targets in non-ETS sectors even if they make use of provisions to tap abatement from the ETS or land use sectors.
Euro Markets: EUAs post biggest monthly gain since January even as fundamental sentiment weakens
European carbon ended June with the largest month-on-month increase since January as the benchmark EUA contract wiped out early losses with an afternoon surge, shrugging off growing bearish sentiment based on fundamentals, while energy prices also gained strongly in the afternoon as traders eyed the supply outlook for the coming quarter.
EU ambassadors fail to agree on power market reform, leaders urge speedy industry deal
Representatives of EU nations failed to find a deal on Friday to reform the bloc’s electricity market to help speed decarbonisation amid continued squabbles on how nuclear and coal should be treated.
AMERICAS
California cap-and-trade account backlog continues building in Q2
The number of entity accounts pending approval to participate in California’s WCI-linked cap-and-trade system continued to balloon during the second quarter, according to Carbon Pulse analysis of government data published Friday, as more speculators sought physical exposure to the market.
Washington Q3 current vintage carbon auction volume remains identical to May sale, but features consigned allowances
Washington state will offer an identical number of current vintage allowances at the August auction compared with the Q2 sale, according to a notice published Friday, with some of the volume stemming from consigned permits under the cap-and-trade programme.
US Carbon Markets and LCFS Roundup for week ending June 30, 2023
A summary of legislative, regulatory, and policy action on carbon, clean fuel standard, and clean energy markets at the US federal and subnational levels this week, including a Maryland climate plan that features an economy-wide cap-and-invest programme, and a California Senate committee advancing two carbon credit related bills.
Compliance entities add CCAs and slash RGA holdings, while speculators stay quiet
Emitters trimmed their net short position in California Carbon Allowances (CCAs) while depleting their RGGI Allowance (RGA) net length this week, as financial entities did not alter their holdings to a significant degree, according to US Commodity Futures Trading Commission (CFTC) data published Friday.
Brazil eyes mobilisation of $9.1 bln in clean energy investment after fund approves grid plan
Brazil expects to see a $9.1 billion mobilisation of clean energy investment in the country after a multilateral fund’s board on Friday endorsed a $70 million plan to support renewable power onto the grid.
ASIA PACIFIC
CN Markets: CEA price stable with improved trading volume, though CCER liquidity shrinks amid lack of clarity
The spot price in China’s national emissions trading scheme (ETS) remained stable over the past two weeks with a steady increase in trading volume, while the domestic offset market saw shrinking liquidity as participants are taking a wait-and-see attitude ahead of the official relaunch of the national programme.
Japan tweaks J-Credit scheme for CORSIA reapplication
Japan has made further adjustments to the rules of its national voluntary carbon credit programme to remove doubts over double claims, agreeing to subject it to corresponding adjustments in preparation for its participation in ICAO’s aviation offsetting scheme CORSIA.
India, China seen to have greatest potential to cut livestock emissions
A handful of countries, including India and China, disproportionately contribute to global livestock emissions, and a shift in their investments can help reduce related emissions and allow food systems to adapt to climate extremes, according to the Consultative Group on International Agricultural Research (CGIAR).
INTERNATIONAL
Investor shine fades in carbon sector amid general slowdown in climate tech
Venture capital funding in the carbon industry slumped in the first half of the year amid a general retrenchment in the climate tech sector, but largely because of a boom in 2022, according to research published on Friday.
South Korea, Vietnam sign MoU on Article 6 collaboration
South Korea and Vietnam have signed a deal to collaborate on carbon trading under Article 6 of the Paris Agreement.
VOLUNTARY
New forest carbon standard pivots to more ecosystem-focused assessment, eyes September launch
A new nature-based voluntary carbon market standard on Friday said it will revise its focus following a consultation towards the assessment of ecosystem and habitat indicators as it looks to make an official launch in early September.
Liberian government warns against participation in carbon credit ‘black market’
The Liberian government has warned the public against participating in the ‘black market’ for carbon credits.
Japanese bank invests in two forest carbon funds
A major Japanese bank has signed investment agreements with two global forest investment funds with the intention of earning voluntary carbon credits that it expects to over time become eligible for use towards the domestic obligations of its Japanese clients.
INTERVIEW: Private equity house eyes partnering up with carbon credit investors on climate projects
A New York-based private equity firm wants to establish partnerships with carbon credit investors on financing climate projects in developing countries as it looks to increase its involvement in the voluntary carbon market, a senior member of the firm told Carbon Pulse at the sidelines of the Gold Standard conference in London earlier this week.
Pakistan teams up with Verra to build VCM capacity, eyes bigger market role
Pakistan’s environment ministry has teamed up with carbon standards body Verra to share knowledge and educate stakeholders on carbon markets, as the country aims to explore the potential in international voluntary markets.
Colombian mangrove project sees carbon credit score downgraded by rating agency
Carbon credits from a mangrove project in Colombia have been downgraded to a moderate chance of achieving a tonne of carbon avoidance or removal , while credits from three other projects, including a cookstove project in Somalia, have been given low chances.
BIODIVERSITY (FREE TO READ)
Global biodiversity fund ready for August launch after GEF reaches agreement
The Global Environment Facility (GEF) Council has reached an agreement on the design of the Global Biodiversity Framework Fund (GBFF), leaving everything set for the fund to be formally launched at the GEF Assembly in Canada in August.
Australia’s nature repair market bill risks delay amid scrutiny
The parliamentary committee scrutinising Australia’s nature repair market (NRM) legislation has had its reporting date extended indefinitely, potentially delaying the passage of the bill in the Senate.
UK lawmakers publishes report on marine mammal protection
A report from a British parliamentary environment committee on protecting marine mammals published this week calls for new comprehensive and precautionary actions to protect species.
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CONFERENCES
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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
EMEA
A farewell to the charter – The EU Commission is readying a proposal for EU countries to jointly quit the Energy Charter Treaty, a spokesperson told Reuters. The executive will make legal proposals for a coordinated EU exit “in the coming weeks”, after EU countries – some of which already plan to exit the treaty – could not agree to pass reforms to it which would have allowed the government to phase out protection for fossil fuels. “As it stands, the treaty is not in line with the EU’s investment policy and law and with the EU’s energy and climate goals,” the spokesperson said. Four sources familiar with the discussions told Reuters the proposal will be tabled next week. Cyprus, Hungary and Slovakia, however, said they would prefer to stay in an updated version of the accord. Observers are concerned about the “sunset clause”, that would protect existing fossil fuel investments in Europe for 20 years even after the EU quits. Read our recap of the mutiny among member states.
Pricey packages – The carbon tax applying to importers of cement, iron, steel, aluminum, fertilizers, electricity and hydrogen from outside the EU from 2026 under the EU’s CBAM will also apply to good when parcelled from third countries and the charge exceeds €150, according to ERR. It is not yet known who will pay the levy but the result will be more expensive goods for end consumers, as the objective is to bring the price of EU-made products to parity with those made in third countries.
REPowerEU – Czechia and Lithuania asked to revise their recovery and resilience plans and add REPowerEU chapters. Czechia’s reforms aim at streamlining the permitting procedures for renewable energy projects, improving the predictability and transparency of electric grid connections, and investing in buildings’ energy efficiency and railway infrastructure. All these changes make the overall submitted modified plan of Czechia worth €14 bln, up from the €7 bln of the original plan. Lithuania’s proposed REPowerEU chapter includes new measures aimed at facilitating investments in renewable energy, developing green financial products, expanding the production of renewable energy capacity and supporting the renovation of multi-apartment buildings. These make the submitted overall modified plan worth up to €4 bln, up from the €2.2 bln of the original plan.
Power to the people – Shell’s European renewable power boss Thomas Brostrom has decided to leave the company as the oil supermajor revises its strategy to focus more investment into fossil fuels, Bloomberg reports. The company announced Brostrom’s departure in an internal memo seen by Bloomberg, which was confirmed by a company spokesman. Shell had hired the executive from Danish renewable energy giant Orsted amid its push into renewable power.
Going for Goldsmith – A British Conservative Party minister, who was named in a committee report for interfering in the then prime minister Boris Johnson’s ‘partygate’ probe, has resigned from government, Sky News reports. Zac Goldsmith, a former lawmaker, quit his environmental role in government, claiming current prime minister Rishi Sunak is “simply uninterested” in the issue. Goldsmith said in his resignation on Friday that the UK had made great progress in leading on climate change internationally, particularly when Johnson, a close ally of his, was in power. Britain now risks slipping behind the US and EU on climate legislation.
Cornish rock – The UK is to gain its first lithium mine in Cornwall after a British startup agreed a deal with a French mining company that could supply much of the country’s need for the crucial electric car battery mineral. British Lithium has agreed to start a joint venture with Paris-listed Imerys that aims to extract 20,000 tonnes of lithium ore, the companies said on Thursday, as reported by the Guardian. The project is expected to employ 300 people and would produce enough lithium for 500,000 electric cars per year by the end of the decade. If it proceeds, it would require £575 mln in spending, according to a person close to the project. The agreement is a significant milestone in the race to build a viable UK lithium industry. Imerys said the UK lithium deposit comprised 161 mln tonnes, enough to sustain mining there for 30 years.
White hydrogen – La Francaise d’Energie (FDE) has discovered a large deposit of natural hydrogen in the abandoned mines of France’s Lorraine region, igniting hopes that it could be a game-changer in Europe’s energy transition, Euractiv reports. It is believed that the Lorraine basin could contain 46 mln tonnes of natural hydrogen – equivalent to half the world’s current hydrogen production – and enough to contribute to the EU’s decarbonisation objectives significantly. Natural hydrogen is naturally present in the Earth’s crust and mantle and, unlike hydrogen produced from natural gas or electrolysis, requires no water and little energy to extract while taking up very little land. These advantages make natural hydrogen a much cheaper resource than hydrogen produced from electrolysis, with an estimated price of €1 per kilo versus renewable hydrogen costs of around €6 currently.
ASIA PACIFIC
London Calling — Australia legislation to adopt amendments to the London Protocol to allow the international transport and storage of CO2 in transboundary regions has sparked alarm by environmental groups, the Guardian reports. Kirsty Howey of the Environment Centre NT said she was concerned the changes would be used to facilitate the expansion of gas developments such as Santos’ Barossa offshore project, which it has proposed will include a CCS facility in the depleted Bayu-Undan gas reservoir in waters off Timor-Leste. Tim Beshara, of the Wilderness Society, said allowing unproven, large-scale CCS projects offshore in Australia risked permanently industrialising places that were once identified as being temporary locations for industry. The climate scientist Bill Hare said storing CO2 under the seabed was not as simple as it sounded and efforts to do this in the North Sea had “thrown up really serious problems with movement of the CO2 and the permanence of its storage”.
Lots of loans – The World Bank has approved $1.5 bln in loans to accelerate India’s transition to low-carbon energy. The financing will help India promote low-carbon energy by scaling up renewable energy, developing green hydrogen, and stimulating climate finance for low-carbon energy investments. India’s energy consumption per capita is only one-third of the global average, but the country’s energy demand is expected to grow rapidly as the economy expands. This calls for a phasing down of fossil-based energy sources in line with the national goal of achieving net-zero by 2070. Much of the finance will be focused on green hydrogen as a way to decarbonise hard-to-abate industrial sectors, such as fertilizer makers and refineries.
Work together – Japan’s J-POWER has teamed up with Australia-based Genex to work on a multi-staged solar power generation and battery project at Bulli Creek, Queensland, it announced in a statement on Friday. The agreement gives the Japanese utility a 50% interest in the project. In addition to the joint development agreement, J-POWER also agreed to provide Genex with a corporate loan facility of AUD 35 mln, the statement said.
AMERICAS
Cleared for landing – A US appeals court on Friday rejected a challenge to the first federal regulations on GHG emissions from airplanes, which environmental groups and several Democrat-led states have insisted are too lenient. The US Court of Appeals for the District of Columbia Circuit said the EPA adequately considered issues like climate change when crafting the rules for commercial and large business planes, Reuters reports. Circuit Judge Neomi Rao, writing for the court, said the decision to not adopt stricter rules rested on the “reasonable judgment that the best way to reduce greenhouse gas emissions globally would be to align with international standards.” Three environmental groups, 12 states and the District of Columbia sued in 2021 saying that the EPA’s regulations “by EPA’s own analysis, will reduce no emissions whatsoever and will prompt no improvements to airplanes’ emissions reduction technology.” Liz Jones, an attorney for the Center for Biological Diversity, one of the environmental groups, said aviation pollution will keep rising as a result of the EPA’s “do nothing” regulatory approach. The EPA said it is reviewing the decision. The states, including California, Illinois and New York, did not immediately respond to requests for comment. The ICAO’s standards were agreed to in 2016. They are “technology-following,” meaning they do not set unachievable standards with the hopes of spurring future innovations, the court said. The US rules were finalised in Jan. 2021 in the final days of the Trump administration, with industry support. The Biden administration said it would not rewrite the rules but would press for more ambitious international standards.
Greener Hollywood – Entertainment and studio leaders Netflix and The Walt Disney Company launched the Clean Mobile Power Initiative with the participation and support of nonprofit RMI and its global climate tech accelerator, Third Derivative, reported CleanTechnica. The Clean Mobile Power Initiative aims to identify and deliver cost-competitive, zero-emissions mobile power at scale for the entertainment industry, including developing alternatives to diesel generators, which currently account for roughly 700,000 tCO2e per year globally from the entertainment sector. The initiative will bring together representatives from leading production studios with equipment suppliers and cleantech manufacturers.
Eager about efficiency – California regulators on Thursday approved $4.3 bln in investments for energy efficiency efforts from 2024 through 2027, along with a forecasted budget of $4.6 bln from 2028 through 2031. Around 14% of the budget will be channelled to programs that target disadvantaged and underserved communities, “helping to ensure equitable access to energy efficiency programs for all Californians served by [California Public Utilities Commission]-regulated entities,” the agency said in a statement. Energy efficiency has been a core part of California’s strategy to meet its climate goals as well as reduce the amount of energy it needs to serve its load, CPUC Commissioner Karen Douglas said at the agency’s Thursday meeting. (Utility Dive)
VOLUNTARY
Another claims guide – Verra is currently developing claims guidance for buyers and users of its Verified Carbon Units (VCUs), which it intends to release as draft guidance for public consultation by the end of July 2023. The move follows the VCMI’s publication of its Claims Code on Wednesday that aims to provide corporates with a comprehensive framework that will not expose them to accusations of greenwashing. The Verra guidance will include an endorsement of the mitigation hierarchy and provide recommendations on the credible use of VCUs and associated claims. It will cover both contribution claims, which are those that go towards a company’s climate goals and global efforts to mitigate climate change through the purchase of VCUs, as well as compensation claims, which are about achieving within-value chain emissions reduction targets.
INVESTMENT
Ode to Joy – New venture capital fund Joyful Ventures has closed $23 mln of its $25 mln fund to propel the transition of the animal protein sector to sustainable food practices, as reported in TechCrunch. Advisors and investors in the Los Angeles-based fund include Bjorn Oste, co-founder of Oatly; Sandhya Sriram, CEO of Shiok Meats; Ryan Bethencourt, co-founder of Indie Bio and CEO of Wild Earth; and Arturo Elizondo, CEO of Every. The woman and LGBTQIA+-led fund is co-founded by Jennifer Stojkovic, founder of the Vegan Women Summit; Milo Runkle, co-founder of The Good Food Institute; and Blaine Vess, co-founder of edtech startup Student Brands. Joyful Ventures will invest at the pre-seed and seed stages into startups that have strong B2B opportunities and are innovating technologies, including plant-based, precision fermentation, mycoproteins, molecular agriculture and cultivated technologies. Investments so far include New School Foods, which raised $12 mln earlier this year to make plant-based salmon, and Orbillion Bio, a company making cultivated Wagyu beef and other products.
SCIENCE & TECH
Up for a chat? – OpenESG – a New York-based, female-founded ESG analytics firm – has launched ChatESG, an innovative solution driven by Generative AI that integrates business-specific data from various companies and provides rapid, verified responses to sustainability queries. ChatESG aims to revolutionise the way individuals, investors, and organisations navigate and interact with ESG, sustainability, and climate data. The product, developed through extensive research by the OpenESG team, strives to make sustainability and climate data open, clear, and affordable for all. ChatESG’s development team includes industry veterans from ConsenSys, the World Economic Forum, and Clear AI, among others. It marks a significant step towards simplifying the often complex and time-consuming process of acquiring actionable ESG insights.
AND FINALLY…
Tuvalu 2.0 – As a response to rising sea levels caused by human-induced climate change, leaders in the South Pacific island nation of Tuvalu are planning for a future where the country might disappear. According to The Guardian, they aim to create a “digital twin” of Tuvalu, a virtual reality representation that will allow future generations to experience the country as it was before it potentially gets swallowed by the Pacific Ocean. The plan also includes establishing a form of digital government that could theoretically function even after the land becomes uninhabitable. The goal of this initiative is to maintain the cultural connection of Tuvaluans with their land and oceans and help connect the Tuvaluan diaspora. However, it is uncertain if such a concept would be compatible with today’s international order, where nation-states are traditionally tied to geographical boundaries.
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