CP Daily: Thursday December 19, 2019

Published 00:37 on December 20, 2019  /  Last updated at 20:21 on December 20, 2019  / Stian Reklev /  Newsletters

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

**CP Daily will not be published between Dec. 23 and Jan. 1. Carbon Pulse will file stories and send out CP Alerts on merit during that period. Regular coverage will resume Jan. 2.**

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New Zealand outlines provisional carbon budget, ETS cap

New Zealand on Thursday released a draft provisional carbon budget for 2021-25 for public consultation, with specific proposals for its emissions trading scheme that would see the Fixed Price Option rise from next year and keep international units out of the market until at least 2026.


Brussels seeks to trim ETS industries getting power bill aid in Phase 4 -leaked doc

The European Commission is seeking to almost halve the number of industries entitled to indirect cost compensation next decade, according to a leaked document seen by Carbon Pulse, potentially hiking costs for those missing out.

EU Market: EUAs test €27 during fourth day of shortage-driven gains

European carbon rose for a fourth day on Thursday, testing the €27 level for the first time since mid-September as the year-end supply drought continued to grip the market.


NA Markets: WCI permits hit 4-mth high after option expiry, RGGI inches up on spreads

California Carbon Allowance (CCA) prices rose sharply after the options expiry this week to hit a four-month high, while RGGI Allowances (RGA) inched up as traders positioned themselves for the new year.

Nodal Exchange set to launch first physically-delivered California LCFS contract

US-based Nodal Exchange will launch two California Low Carbon Fuel Standard (LCFS) contracts in the new year that would be physically-delivered rather than a financially-settled contract.


SK Market: Govt on the defensive as KAUs notch new record highs daily

South Korean CO2 allowances hit record levels again on Thursday, as they have almost every day recently albeit on small volumes, leading concerned industry to pile pressure on the government to intervene.



Done deal – Russia and Ukraine have agreed “in principle” a new gas transit deal, with the details to be finalised on Friday, senior European Commission official Maros Sefcovic said late Thursday. According to S&P Global Platts, the agreement should end uncertainty over whether Russian gas supplies via Ukraine to Europe could be disrupted from the start of 2020. The existing gas supply and transit deal between Russia’s Gazprom and Ukraine’s Naftogaz expires at the end of 2019 and there had been concern that without a new contract to take effect from Jan. 1, Russian gas transit to Europe via Ukraine could be disrupted. European gas prices have been volatile recently based on developments linked to the negotiations, with Thursday’s announcement likely to weigh on prices tomorrow – declines that could feed through to EUAs.

Done deal, part 2 – Germany’s Bundestag on Thursday approved legislation to increase the price trajectory of the country’s ETS for transport and heating, a day after it was backed by a key parliamentary committee, with the rate to now begin at €25/tonne in 2021. Bloomberg reports that lower house lawmakers secured a majority of 426 votes against 221 votes. The Greens joined Chancellor Angela Merkel’s Christian Democratic-led bloc and the Social Democrats, and will also ensure passage in the upper house, or Bundesrat, on Friday. The compromise text modifies legislation approved in November, with the bulk of Merkel’s landmark effort to slash GHGs over the next decade now going into effect at the start of 2020. In addition to imposing costs on polluting activity with taxes on fuel prices and air travel, the legislation also reduces prices for rail travel and provides bigger rebates for commuters.  Legislation to finalise the country’s coal phaseout has been delayed until early next year.  Elsewhere, Germany will stick to its planned phaseout of nuclear power plants by the end of 2022, the spokesman for Merkel’s government said at a regular government press conference, quashing speculation about an extension for the remaining plants.

Forward thinking – Germany has yet to adopt a targeted climate and innovation policy for its basic materials industry. As a result, investment in this sector, which employs some 550,000 people, could suffer a massive decline, according to Agora Energiewende and the Wuppertal Institute. The EU’s long-term target of GHG neutrality by 2050 cannot be achieved without transforming the traditional, carbon-intensive production technologies currently in place. However, a robust framework with clear incentives to invest into novel, neutral technologies is lacking. In a new study, the think-tanks propose an immediate action programme for the steel, chemical, and cement industries. The goal of this initiative is to provide industry with a reliable investment framework so that it can innovate towards carbon neutrality by 2050. Read the executive summary of the study ‘Climate-Neutral Industry’ here.

Baulking in the Balkans –  Slovenian and Croatian power prices are set to become the highest in Europe by the mid-2020s due to rising carbon and fuel prices, ICIS Power Horizon modelling shows. Generation from fossil fuels represents nearly a third of the overall installed capacity in both countries, so an increase in carbon, coal, and gas costs will continue to be a major influence on power prices in the region. Coal and gas in Europe are expected to rise due to bullish carbon over the coming years, according to ICIS forecasts, with the analysts predicting a jump from €23.40 in 2020 to €35.40 in 2025. A bullish energy complex outlook by the mid-2020’s will therefore increase the cost of thermal generation in the two markets, with power prices in the region expected to go above €75/MWh. Expectations of softening carbon prices by the late 2020s should slightly reverse the trend and bring power rates down to the low €70s amid carbon prices falling to around €21.20 by 2030.

FERC’d up – The Federal Energy Regulatory Commission (FERC) directed grid operator PJM to expand its current Minimum Offer Price Rule (MOPR) to address state-subsidised electric generation resources, including nuclear and renewable sources. Fossil fuel-fired generators had argued PJM’s rules enabled subsidised renewable and nuclear sources to submit below-market bids at capacity auctions to suppress power prices. PJM, which includes three RGGI states, has 90 days to respond to FERC’s decision.

Better future – Rhode Island Governor Gina Raimondo (D) believes the implementation of the Transportation and Climate Initiative (TCI) could create a safer and cleaner future for everyone as she signaled her support of the programme. The 13 TCI jurisdictions outlined a draft Memorandum of Understanding (MOU) on Tuesday that would reduce emissions from on-road diesel and gasoline in the Northeast and Mid-Atlantic regions. The proposal included an emissions target of up to 25% from projected 2022 levels. New Hampshire Governor Chris Sununu (R) already said the Granite State would not sign onto the final MOU.

All American – A Republican-backed group pushing for Congress to pass a US carbon tax has raised more than $5 million this year after adding new corporate funders Thursday, including America’s two largest automakers: GM and Ford. The companies, along with technology company IBM, are giving $100,000 each to Americans for Carbon Dividends, the lobbying arm of the Climate Leadership Council, a group led by former Republican Secretaries of State James Baker III and George Shultz. Texas-based power companies Vistra Energy and Calpine Corp. are also providing funding to the group, with Vistra committing $1 million over two years. (Washington Examiner)

Down & dirty – California’s Climate Action Reserve is launching an offset protocol development process to incentivise agricultural practices that enhance carbon storage in soils. The Soil Enrichment Project Protocol (SEPP) is being funded by Indigo Ag, which will be an active workgroup participant, and the protocol is expected to be completed in June. The primary GHG benefit targeted will be accrual of additional carbon in agricultural soils. The protocol may also address GHG emission reductions from other sources, such as N2O from fertilizer use. CAR is hosting a ‘public kickoff webinar’ on Jan. 15 – register here.

And finally… It’s an emergency – The bushfire emergency in Australia continued in full force Thursday, claiming the lives of two voluntary firefighters in NSW, the Guardian reports. The historical record average high across the country of 40.9C set on Tuesday was crushed on Wednesday with 41.9C (107.42F), and the heatwave carried on mercilessly on Thursday. Nine of the 10 hottest places on earth were in Australia, and over 100 fires were raging in NSW alone. News of the firemen’s deaths caused Prime Minister Scott Morrison to announce Friday morning he would be returning early from his holiday on Hawaii, which he has been heavily criticised for taking. Meanwhile, global temperatures in 2020 are expected to be more than 1.1C above the pre-industrial average, the Guardian reports, based on the latest year-ahead forecast from the UK’s Met Office. The paper says: “The hottest year on record currently is 2016, when there was an El Nino effect, and the years since have all been close to the record.” It adds that at current rates, the world could breach the threshold of 1.5C “within two decades”.

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