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Analysts polled by Carbon Pulse have raised their near-term forecasts for EU carbon by as much as 10%, with most predicting that front-year EUAs would finish this year near or above €10 but keeping a cautious tone for prices in early 2018.
EU carbon prices hit their highest level in five years on Friday as this week’s rally continued, though observers continued to question whether the gains were sustainable amid bearish indicators and still distant market reforms.
South Korean carbon traders and brokers are seeing a significant uptick in approaches from European investors looking to take advantage of impending offset rule changes in the Korean ETS, but opportunities are likely to be limited, according to market participants.
China has handed over the responsibility of running the nation’s offset registry to the Beijing Environment Exchange, but has yet to give final approval for reopening issuance of new carbon credits, according to several sources familiar with the matter.
Below is a table of the closing prices, ranges and volumes for China’s regional pilot carbon markets this week. All prices are in RMB, and volumes in tonnes of CO2e. Data sourced from local exchanges.
BITE-SIZED UPDATES FROM AROUND THE WORLD
Riding higher – A co-manager of the $500 million Tribeca Global Natural Resources Fund says he’s bullish on carbon prices this year. Singapore-based Ben Cleary told Bloomberg that his fund, which surged by 145% in 2016 thanks to profitable bets on North American marijuana producers, is riding coal and carbon in 2018. Chinese production cuts have reduced supplies, boosting metallurgical and thermal coal prices. Free cash flow yields at North American coal producers are still “incredibly attractive,” Cleary said. The fund also likes chemical producers that tap more environmentally friendly fuel sources. It gained 25% last year, helped by recovering commodity prices and investments in at least 15 fundraising deals that allowed smaller resource companies to bring projects into production.
Divestment in progress – Norway’s sovereign wealth fund has trimmed the proportion of its $1 trillion fortune that is invested in companies that emit the most greenhouse gas, a Reuters survey has shown. The review of the top 150 corporate greenhouse gas emitters showed that the proportion of their emissions that can be ascribed to Norway, based on the percentage of market cap it owns in the firms, fell to 0.74% in 2016 from 0.78% in 2014. That corresponds to an 11 percent reduction in the fund’s share of the group’s emissions, under the broadest definition that includes consumers’ use of products such as oil and gas, steel or cars, to the equivalent of 249 million tonnes of CO2 from 280 million. The decline outpaced a 6 percent fall in emissions by those companies over the period, and was primarily driven by the Norwegian parliament in 2015 banning the fund – which is itself built from oil and gas revenues – from investing in firms that get more than 30 percent of their business from coal.
Electric planes – Norway’s state-owned airport operator Avinor said that all of Norway’s short-haul airliners should be 100% electric by 2040, in a bid to be the “first in the world” to switch to electric air transport. “We think that all flights lasting up to 1.5 hours can be flown by aircraft that are entirely electric”, said CEO Dag Falk-Petersen. (AFP)
Double le wind – The French government on Thursday announced a 10-point plan which will simplify administrative procedures and accelerate the development of wind power projects in order to double its installed generation capacity by 2023. The government said the proposed reforms will cut in half the average time it takes for wind power projects to be completed and connected to the French electricity grid. According to Reuters, if successful, it could counter long-running opposition from activists who have frustrated the country’s attempts to reach renewable energy targets, which include aiming to have up to 26 GW of offshore wind generation capacity by 2023 compared to 12.9 GW currently.
Peaceful coexistence – According to the Pembina Institute think-tank, carbon pricing didn’t hurt Canadian provincial economies in 2017. Alberta, British Columbia, Ontario and Quebec, the four provinces with intact carbon-pricing systems, were also the best performing provinces in terms of real GDP growth last year. Pembina hopes to show that carbon pricing doesn’t necessarily harm economic competitiveness and growth.
Alliance on the rocks – BC Green Party Leader Andrew Weaver is threatening to walk out on his pact with NDP Premier John Horgan if NDP pursues a new LNG facility. Weaver and Horgan created a formal alliance last June, allowing the NDP to take power after 16 years of a Liberal provincial government. Weaver tweeted that the Greens joined forces with the NDP because of “their supposed commitment to GHG reduction [but] a push for #LNG means they are not serious”. (Global and Mail)
Wood could – UK power producer Drax plans to complete converting its fourth biomass power plant in the second half of the year so it comes online in late 2018. Drax’s ETS emissions have tumbled since it converted three of its six units to burn wood pellets. The fourth unit will likely operate with lower availability than the other three biomass units but would run at periods of high demand, the company added. Drax made the decision after the government said that rather than imposing a cap on subsidies for any future biomass unit conversions, a cap would be applied at the power station level.
Rivaling Russia – The IEA reports that the US is well-placed to overtake Saudi Arabia and rival Russia in terms of crude oil production over the course of this year. However, a volatile year is ahead of the oil market, due to geopolitical risks and uncertainty surrounding OPEC compliance.
Coal cuts – China’s Shanxi province, responsible for about a quarter of the country’s total coal output, will cut its production capacity by 23 million tonnes this year as part of its efforts to streamline the sector, it said on Friday. Shanxi, which produced 832 million tonnes of coal in 2016, has been part of a national campaign to reduce coal capacity by around 500 million tonnes over the 2016-2020 period in order to bolster prices and improve efficiency in the sector. (Reuters)
Fantastically well – Meanwhile in the US, two-thirds of states reported coal job losses in 2017, even as the industry saw overall gains in the sector, Reuters reported. Unreleased full-year employment data from the Mining Health and Safety Administration shows that, while the industry added 771 overall jobs, including gains in West Virginia and Virginia, numerous other states – including Ohio, Kentucky, Montana, Wyoming and Texas – reported losses, some numbering in the hundreds. Pennsylvania, which reported 96 job gains in 2017, is expected to report a significant job loss this year following a mine closure scheduled for June that will lay off nearly 400 people. The report follows a separate Reuters interview with President Trump this week, where he bragged about West Virginia “doing fantastically well” due to “great coal.” (Climate Nexus)
Neutral question – Assuming biofuels are carbon neutral may worsen irreversible impacts of climate change before benefits accrue, a new study suggests. Using a new model for analysing the life cycle for bioenergy, researchers simulated the substitution of wood for coal in power generation for forests in the eastern US. The results show the immediate impact of substituting wood for coal is an increase in atmospheric CO2 relative to coal. The payback time for this carbon debt ranges from 44–104 years after clearcut – depending on forest type and assuming the land remains forest. (Environmental Research Letters, Carbon Brief)
And finally… No room to grow – New Zealand’s government is scrambling to find enough land to meet its target of planting 1 billion trees in 10 years. The Labour/New Zealand First coalition committed to the target, which would require a doubling of the 50 million trees already being planted annually – to 270,000 a day on average, or 100 million a year. But Forestry Minister Shane Jones this week said his team is facing a “real challenge” finding the space. “The government in this context is not going to go into the business of buying land. New Zealand is on track to boost its annual yield by just 5 million trees or 10% this year. (Newshub)
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