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TOP STORY
ANALYSIS: EU ETS reforms catch investor attention on rocky road to higher prices
At least one long-term investor has piled into the EU carbon market, attracted by the prospect of double-digit returns in recent months, though traders warn that the road to higher prices is still littered with regulatory uncertainty and supply overhang.
CONFERENCE SPECIAL
CARBON FORWARD: Brexit drops more uncertainty on EU carbon rollercoaster ride
(FREE ARTICLE) – The EU ETS faces an extensive re-wiring next year as Brussels prepares contingency plans to guard against an un-coordinated Brexit, wrapping a new layer of uncertainty around the market just as lawmakers near completion of an extensive, years-long reform process.
AMERICAS
US Republican senator breaks rank to back carbon price, work on bipartisan bill
A prominent US Republican senator has backed putting a price on carbon to help bring down US greenhouse gas emissions and said he is working on a bill with the Democrats, breaking with his own party’s establishment.
EMEA
EU Market: EUAs dip back below €7 on weaker power, but volatility continues
European carbon prices dipped on Wednesday amid weaker power and flat coal, cooling off after the previous day’s heavily-traded 4.5% gain but maintaining some volatility.
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BITE-SIZED UPDATES FROM AROUND THE WORLD
Long-awaited linkage – Ontario, Quebec and California are expected to announce the linkage of their carbon markets under WCI on Thursday, according to Quebec Environment Minister David Heurtel, who was speaking Wednesday at the IETA Carbon Forum North America Conference in New York. The three governments have been aiming to formally link their markets starting in Jan. 2018, and have recently taken legislative steps to make that a reality. (ClearBlue Markets)
Invest4Climate – The UN and World Bank have announced plans to accelerate the flow of climate finance through a new platform dedicated to identifying and facilitating transformational investments in developing countries. The new Invest4Climate platform is designed to bring together governments, financial institutions, investors, philanthropies and multilateral banks to support transformational climate action in line with the Paris Agreement. The platform will attract investment for high-impact opportunities in developing countries such as large-scale development of battery storage, electric cars, and low-emission air conditioning. It will also facilitate such investments through the development of risk mitigation instruments and, based on demand, will work with national governments to improve policy environments. It will not have its own funding sources, though, but rather will complement existing climate and development finance initiatives and institutions. The first Invest4Climate initiatives are expected to be announced at the Climate Summit in Paris this December.
So what are your thoughts on Article 6? – IETA on Wednesday launched a facility to gather business thoughts on how Article 6 of the Paris Agreement should be operationalised. The web portal was designed in response to observers being excluded from the formal UNFCCC submission process on the implementation of Article 6, which relates to market mechanisms. The portal launches with seven submissions already, and will be open for further proposals in the run up to this year’s COP23 in Bonn. Over the coming weeks, the information gathered will further inform IETA’s work on Article 6, with the association planning to produce a synthesis report of all submissions received, aimed at drawing governments’ attention to the unique insights the business community has to offer.
Unitum or Forniper? – Finnish utility Fortum plans to offer €8.05 billion ($9.7 billion) for E.ON’s legacy fossil fuel and trading business Uniper, Bloomberg reports, as consolidation in the European power sector accelerates. Fortum is in advanced talks to buy EON’s remaining 47% stake in the business, it said in an exchange filing Wednesday in response to a Bloomberg story. E.ON, Germany’s largest renewable energy producer, floated a 53% stake in Uniper in Sep. 2016 in response to Germany’s shift to solar and wind power from nuclear and fossil fuels. Uniper’s assets include hydroelectric and coal- and gas-fired plants, as well as stakes in gas pipelines and nuclear power sites. Analysts have since said that Uniper is an attractive acquisition target, especially to fellow German utility RWE.
Auf wiedersehen fossil fuels – Germany’s fourth largest utility EnBW plans to pull out of fossil power generation by 2025, according to an internal strategy paper, reports Handelsblatt. Conventional power generation does not feature in the company’s medium-term plan dubbed “EnBW 2025”, which was seen by the newspaper. Instead, EnBW bets on wind power, grids, and new infrastructure projects like e-mobility and high-speed internet. Handelsblatt writes that EnBW’s plans appear less radical than those of E.ON and RWE, which have each split themselves in two. (Clean Energy Wire)
Do more please! – The EU’s 2030 and 2050 GHG emission reduction targets “will not be achieved without significant additional efforts”, says a new report from the European Court of Auditors. It quotes several points of criticism from an advisory report by German auditors from 2016, such as energy surcharge exemptions for energy-intensive industry at risk of ‘carbon leakage’. The auditors had “found that the responsible ministry had not investigated whether high electricity costs were actually encouraging companies to relocate or whether such costs were offset by gains in energy efficiency”, the review says. (Clean Energy Wire)
This might just work – Exxon Mobil’s foray into CCS technology with FuelCell Energy “is making progress,” Cowen & Co. analyst Jeffrey Osborne wrote in a research note Tuesday, Bloomberg reports. The technology has moved from the lab to a commercial test at a power plant in Alabama. The beauty of capturing CO2 from coal- or natural gas-fired plants is that routing the emissions through fuel-cell systems generates additional electricity.
Cap-and-growth – Two suburban counties with a substantial industrial and manufacturing economy in southern California are growing economically because of the state’s cap-and-trade programme, and not in spite of it. Researchers at the University of California at Berkeley have found the economic gains from California’s climate policies exceed its costs for the so-called Inland Empire, comprised of Riverside and San Bernardino Counties. “The main reason is that the distribution of proceeds from the state’s auctions of carbon permits, have proven to be an effective driver of regional economic development,” noted the Oregon-based Climate Trust in an email. “The study found that after accounting for carbon compliance costs and lost economic activity the region has experienced net benefits of $25.7 million in economic activity and 154 additional jobs. This increased economic activity has generated an additional $900,000 in local and state tax revenues, meaning governments could expand services or cut taxes because of cap-and-trade.”
Quebec VER deal – Solifor Perthuis, a partnership between forest manager Solifor and Quebec sawmill Scierie Dion & Fils have completed the sale of 140,000 tonnes of voluntary carbon credits to Canadian gas and electricity retailer Just Energy and the TD Bank Group. The value of the transaction – the largest to date in the Canadian province involving forestry credits – was not disclosed. The deal was handled by Enviro EcoCredit and Carbonzero.
Maintenance – Due to system maintenance operations at the UNFCCC’s International Transaction Log (ITL), transactions won’t be possible at the hub and the Swiss emissions trading registry for 24 hours from 1900 local CEST on Sep. 23.
And finally… An Ivy League of their own – In an effort to reduce Yale’s carbon footprint, the university has implemented a carbon charge – the first of its kind at any US university – designed to effectively tax campus buildings for the cost of their emissions. The initiative, which took effect on July 1, seeks to research and develop lessons relevant to national carbon pricing policy. The project and was initially recommended by the Presidential Carbon Charge Task Force, established in 2014 to investigate the feasibility of carbon pricing at Yale. After a pilot programme analysed the impact of carbon pricing, university staff and faculty on the project steering committee found that a $40/metric tonne was the most effective policy.
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