CP Daily: Thursday May 21, 2020

Published 22:56 on May 21, 2020  /  Last updated at 22:56 on May 21, 2020  /  Newsletter  /  No Comments

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

** COMING JUNE 18: Carbon Fast Forward – Online **

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**Due to public holidays in the UK and US, no CP Daily will be published on Monday, May 25**

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TOP STORY

ANALYSIS: California offset developers see limited long-term impacts from COVID-19 crisis

Entities may surrender fewer offsets for the WCI cap-and-trade programme’s third compliance period as the COVID-19 pandemic slashes emissions, but market participants anticipate the utilisation rate will remain relatively unchanged.

EMEA

Major emitters urge UK govt for post-Brexit carbon pricing clarity

The UK government needs to urgently clarify its carbon pricing policy from 2021 after the country leaves the EU ETS, a group of large British-based businesses said, noting that time is running out for the planning and negotiations required for a smooth transition.

EU must review ETS benchmarks to help decarbonise industry -NGO report

The EU must reform the ETS to unleash its untapped potential for industrial decarbonisation by reviewing free allocation benchmarks and aligning the scheme with other policies, a report co-authored by several green groups urged this week.

EU Market: EUAs slip after setting new 1-month high in thin trade, as gas prices plummet

EUAs extended their one-month high above €21 in thin holiday trade on Thursday but lost ground later as near-term gas prices plummeted, as carbon’s gains stalled despite bullish technical indicators.

Brussels to propose ETS-linked support for clean hydrogen in recovery plan -leaked draft

The European Commission will next week propose an EU ETS-linked contract-for-difference support scheme for clean hydrogen as part of its wide-ranging coronavirus recovery package, according to a draft document leaked to media late Wednesday.

AMERICAS

NA Markets: California allowances climb above WCI floor price, RGGI flatlines on zero interest

California Carbon Allowance (CCA) prices hit a two-month high this week as they edged above the WCI auction reserve price on thin activity, while RGGI allowances (RGAs) stagnated on the secondary market as no volume transacted.

LCFS Market: California prices tick up as forward activity increases

California Low Carbon Fuel Standard (LCFS) credits this week approached levels not seen since the coronavirus pandemic hit, while activity began to ramp up further out on the curve and forward prices narrowed against near-term deliveries.

Nodal Exchange to offer Oregon LCFS futures contract, three new REC commodities

US-based Nodal Exchange will launch two Oregon Clean Fuels Program (OCFP) contracts and three new renewable energy certificate (REC) offerings next month, product development firm and bourse partner IncubEx announced Thursday.

ASIA PACIFIC

SK Market: KAUs rebound as big buyers step in

South Korean CO2 allowances recorded a sixth successive session of gains on Thursday, rising 6.4% on the day as several large buyers have stepped in to take advantage of the drop that took almost a quarter off KAUs’ worth earlier this month.

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BITE-SIZED UPDATES FROM AROUND THE WORLD

Road to nowhere – Australia on Thursday released a long-awaited draft discussion paper for its technology roadmap, which will play a key role in the government’s climate policy over the next decade. The paper outlined some 140 technologies that could be implemented across various sectors of the economy, reports the Sydney Morning Herald. However, a massive focus on natural gas drew ire from many observers, who accused the government of wanting to continue to rely on fossil fuels instead of carving out a carbon free future.

More gas – A leaked report shows Australia’s COVID-19 recovery commission is pushing several major natural gas projects, with the bill – in the billions of dollars – set to be footed by taxpayers, the Guardian reports. A taskforce headed by a Dow Chemical executive and Saudi Aramco board member is pushing for major gas projects to underpin a transformation of the manufacturing sector, but has not even considered any other fuel types.

See you in court (maybe) – Uniper is threatening to sue the Dutch government over a plan to phase out coal power by 2030, Climate Home reports, in a case experts warn could have a chilling effect on climate ambition internationally. A law passed in December will force the German energy company to close Maasvlakte 3 coal plant near Rotterdam less than 15 years after it opened, or convert it to run on a different fuel. It forms part of a strategy to cut the Netherlands’ GHG emissions 49% from 1990 levels by 2030. The company is seeking a reported €1 bln in compensation under the Energy Charter Treaty (ECT) – a pact signed in the 1990s to boost investment flows between western and post-Soviet countries. Uniper wrote to the government on Dec. 18, seeking an “amicable settlement” and could go to arbitration if no agreement is reached. Asked about the case at Uniper’s AGM on Wednesday, chief executive Andreas Schierenbeck said: “We reserve legal possibilities to secure shareholders’ interests. We believe that the [Netherlands] coal phaseout in its current form is not appropriate.” He declined to comment on the level of compensation sought.

Island showpiece – Denmark plans to build two giant “energy islands” as part of a world-leading $37 bln offshore wind project. The country’s biggest single infrastructure investment was the centrepiece of a new climate package unveiled by the Danish government that aims to cut the country’s emissions by 70% under 1990 levels by 2030. Climate Minister Dan Jorgensen said the coronavirus pandemic had only increased the government’s determination to boost green investments, adding that the climate plan would create thousands of jobs. (Financial Times)

See ya Soto – Portuguese utility EDP is considering shutting its 346MW Soto de Ribera 3 coal-fired plant in Spain by 2022 and only keeping the 562MW Abono 2 coal unit in the country after that date, Argus reports. In a market presentation this week, the company mentioned that 0.7 GW of its 1.25 GW in Spanish coal-fired capacity is “to be shut down by 2022”, implying that just 0.55 GW would remain operational. Apart from Abono 2 and Soto de Ribera 3, the company owns the 342MW Abono 1 unit in Spain. All units are located in the northwestern region of Asturias. EDP had already confirmed plans to reconvert Abono 1 into a 181MW gas-fired plant by 2022 and revealed that it was studying potential renewable projects to replace its entire 2.4GW coal-fired power fleet in Iberia, which also includes the 1.18MW Sines plant in Portugal. But it had not previously disclosed any estimated closure dates for its remaining coal-fired plants, only saying that the whole fleet should be permanently shut down “well before 2030”.

Fund fun – The UK government is launching a new effort to support green start-up companies across the UK, joint-funding a £40 million venture capital fund to supercharge the development of next generation clean, low-carbon technologies. The Clean Growth Fund will contribute towards the UK’s plans to reach Net Zero by 2050 and will be accessible to UK-based companies driving green technology across the power, transport, waste, and building energy efficiency sectors. Potential examples of projects the fund could support include energy storage and smart grid systems to bolster resilience in the power system, renewable heating and ventilation technologies across homes and commercial buildings, and bio-fuels and bio-energy systems. With £20 mln of government investment matched pound-for-pound by CCLA, one of the UK’s largest charity fund managers, the fund could reach £100 million by autumn 2021 through private sector fundraising.

Flying exemption – The EU Commission this week adopted a draft delegated decision excluding incoming flights from Switzerland from the EU ETS.  The move results from an agreement between the two jurisdictions to not double-count flight emissions under their carbon markets. Under the deal, which is part of the wider ETS linking agreement reached between Switzerland and the EU, equal treatment of aircraft operators flying routes between the two regions is maintained, with the EU regulating flights from the EEA to Switzerland, and Switzerland regulating flights from that country to the EEA. In terms of environmental effects, the additional CO2 from aviation under the linking of the two ETS’ is estimated at around 3.2 Mt, split equally between arriving and departing flights. “In respect of the 1.6 Mt from flights from the EEA to aerodromes in Switzerland, the level of free allocation in 2020 will be around 550,000, and this will decrease by 2.2% per year from 2021,” the decision said. “There will be additional auctioning of 100,000 allowances. Therefore, it is expected that 950,000 additional emissions will be offset from the other sectors covered by the ETS’ in respect of flights from the EEA to aerodromes in Switzerland.” This decision is also required to operationalise the link between the two carbon markets, with the physical connection now expected to be completed this September.

Beehive budget cuts – A Utah lawsuit challenging California’s cap-and-trade programme under the US Constitution’s Dormant Commerce Clause and Federal Power Act may be in jeopardy due to expected budget cuts, a lawyer involved in the case told Carbon Pulse. The Beehive State legislature set aside $1.7 million to sue the Golden State in its 2020-21 budget, but Snell & Wilmer Partner Denise Dragoo said all appropriations are under consideration due to COVID-19 budget impacts. The Utah legislature is currently holding a special session to address the budgetary issue.

Tide turning – A US House Republican strategist says the party might be open to backing a carbon tax if the proceeds were used to pay down debt amassed during the COVID-19 pandemic or boost major indebted programs, even though existing proposals have no chance of enactment in the current Congress. “I do think that there is a possibility [for a carbon tax scenario] in taking down the debt, or saving Social Security, you know something like that,” said Dave Banks, the Republicans’ chief strategist on the House Select Committee on the Climate Crisis, during a May 20 webinar discussion hosted by ConservAmerica, a GOP group that aims to promote market-based solutions to environmental and energy challenges. (InsideEPA)

Bill block – Brazil’s lower house of Congress has delayed voting on a bill giving deeds to squatters on public lands seen by some as contributing to deforestation in the Amazon rainforest, which has dozens of European companies threatening to boycott Brazilian exports. Bill proponents said it had been headed to a vote but there is now an impasse as parts of the Bolsonaro government think the proposal no longer goes far enough. (Reuters)

And finally… Don’t eat the green snow – A new study shows green snow is spreading on the Antarctic peninsula as global temperatures rise. A team of researchers from the University of Cambridge and the British Antarctic Survey have created the first ever large-scale map of microscopic algae as they bloom across the surface of snow along the Antarctic coastline, playing an important role in the continent’s ecosystem and its carbon cycling. The map provides a baseline to analyse how rapidly Antarctica is turning green from the impacts of climate change. Although each of the single-cell organisms are microscopic in size, when algae densely populate the snow, it turns a vivid green across an area so large that it can be seen from space. (Independent)

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