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TOP STORY

POLL: Analysts elevate EUA price outlooks as market eyes new all-time highs

EU carbon prices will rise through the rest of this year, though they may not reach a new all-time high or sustainably hold above the tenuous €30 level until well into 2021, analysts predicted, as they substantially raised their EUA forecasts across the board.

AMERICAS

ANALYSIS: WCI sale volume to skew higher in 2021 as industrial allocations drop

WCI auction volumes appear set to rise slightly in 2021 compared to this year’s quarterly sales, with free allowance distributions to industrial emitters falling by more than 10%, according to cap-and-trade programme data published Monday.

RGGI auction volume stagnates at 16.2 mln for Q4 sale, while new speculator joins

The Northeast US RGGI carbon market will offer 16.2 mln allowances at the December auction, the programme administrator announced Tuesday.

Hudson Technologies and Bluesource team up to develop voluntary HFC offset projects

US refrigerant services provider Hudson Technologies and offset developer Bluesource announced a partnership on Tuesday to spur the creation of voluntary market carbon credit projects that reclaim high-global warming potential gases around the country.

EMEA

UPDATED BRIEFING: MEPs brace for knife-edge vote on EU 2030 climate target

*** Updates with details on the vote timeline and pinpoints key amendments ***

EU lawmakers face a tightly-contested vote on the bloc’s 2030 emissions cut target this week, with more progressive forces willing to back a 55% goal but rejecting any inclusion of natural sinks and foreign carbon credits.

EU Market: EUAs dip after reacting to reports of Brexit progress

EUAs slipped further below €27 on Tuesday, sliding despite a stronger auction as prices wavered in response to differing reports of progress on a post-Brexit trade pact.

*** Carbon Pulse’s new EU legislative guide and calendar allows subscribers to stay up-to-date with all relevant European Green Deal legislation and key dates. It is available under the EMEA tab. ***

ASIA PACIFIC

NZ Market: NZUs slink to 3-week low as floor price tempers demand

New Zealand carbon allowances notched their sixth consecutive session of losses on Tuesday as the NZ$35 fixed price option (FPO) curbs appetite to buy at or above that level.

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BITE-SIZED UPDATES FROM AROUND THE WORLD

Tax it already – A US carbon tax would decrease emissions by 25% over the next 5-10 years, and go even further when combined with other green subsidies, according to Goldman Sachs. Analysts at the investment bank forecast that a moderate tax could significantly reduce emissions without disproportionately affecting lower-income households. On top of that, innovation in technologies fostered by the tax could lower emissions by another 10% in the subsequent decade, while a further 10% cut could be generated by spending 0.5% of US GDP on green subsidies. The analysts added that any resulting overweight impact on less wealthy households could be mitigated if after-tax revenue rebates are properly implemented. They pointed to research from the US Treasury, which showed a moderate carbon tax on Americans of $49/tonne would raise income for the bottom tenth of households by 10%. And while a 35% cut in emissions over the next couple of decades wouldn’t be enough to get close to a net neutrality target of 2050, “the combination of a carbon tax with clean energy subsidies in areas such as renewables, electric cars, and batteries, could be quite powerful”. The team’s estimates suggested that a combination of a carbon tax and green subsidies could reduce emissions by 45% over the next two decades.

Controversial coal – KEPCO, the South Korean state-controlled power company, this week decided to go ahead with a $189-mln investment that will buy it a 40% stake in two 600MW coal-fired power plants in Vietnam. The KEPCO board made the decision despite intense lobbying from civil society and some major international investors. The company’s own forecasts say the initiative is likely to lose money, but that did not stop government ministers from backing it, even though South Korea’s ruling party earlier this year made an election campaign promise to go carbon neutral by 2050. (Korea Herald)

Closures considered – India is considering a proposal that may force some of its dirtiest coal plants to close, as policy makers in one of the world’s top polluters increasingly focus on climate change. The plan under consideration by the power ministry would cap plants’ heat rate – a measure of how much coal energy is needed to produce each unit of electricity. Power stations totalling 10 GW have been identified as breaching the proposed benchmark and more could be added, sources said, who asked not to be named as the discussions are ongoing and no policy has been finalised. That would account for roughly 5% of the coal power capacity in India, the world’s second biggest consumer of the fuel after China. (Bloomberg)

British Tories now love “green crap” – Every home in the UK will be powered by offshore wind within 10 years, Boris Johnson announced Tuesday as he pledges a green industrial revolution that will create hundreds of thousands of jobs. The PM said the coronavirus crisis should be used as a catalyst to make the UK the world leader in clean power generation. The wind power plan will see £160 mln made available to upgrade ports and infrastructure across areas like Teesside and Humber in northern England, Scotland, and Wales as the next generation of turbines are built. Downing Street said the investment programme “will see around 2,000 construction jobs rapidly created and will enable the sector to support up to 60,000 jobs directly and indirectly by 2030 in ports, factories and the supply chains, manufacturing the next-generation of offshore wind turbines and delivering clean energy to the UK”. (ITV)

Hat in the ring – Spain approved on Tuesday a plan to boost clean hydrogen production, aiming to build enough infrastructure to give it a major role in Europe’s market for a fuel seen as key to meeting international emissions reduction targets. The EU is pushing to develop its capacity to produce hydrogen, which is widely used in heavy industry, from renewable power sources. However, production of this so-called ‘green’ hydrogen is prohibitively expensive currently. Spain hopes its well-developed gas storage and transport system, combined with the plentiful sunshine and windy hillsides that make it a prime location for renewable energy plants, will eventually help it make enough of the fuel to export. (Reuters)

Hurry up – Slow progress in reducing carbon emissions risks putting pressure on central banks to keep interest rates low, according to a European Central Bank working paper. “Climate risk reduces the natural rate of interest,” researchers Ghassane Benmir, Ivan Jaccard, and Gauthier Vermandel wrote in a study published Tuesday. “The reason is that households become more risk averse when firms fail to internalise the damage caused by their emissions.” Uncertainty, in turn, increases precautionary savings, lowering overall demand in the economy. The authors of the paper concluded that a carbon tax for companies determined by the market price of emissions would be helpful in countering risk aversion and allow natural interest rates to rise. That would provide central banks with more policy space and decrease the likelihood of hitting the effective lower bound. (Bloomberg)

Weighted sovereigns – In a world first, BlackRock has launched a sovereign bond ETF designed to weight countries on their level of risk from climate change. Government debt from Germany, Spain, the Netherlands, Belgium, and Ireland will be underweighted in the new ETF because of higher GHG emissions or greater exposure to climate change risks. “Climate change could significantly impact government finances. We have argued that there is a link between climate change and creditworthiness,” said Scott Harman, head of fixed income product management at FTSE Russell, which designed the index behind the fund. Blackrock said there was a chronic lack of climate change and ESG solutions in the sovereign space, despite the fact that 78% of global fossil fuel reserves are owned by governments. (FT)

Hitting pause – A survey of 300 large energy and utilities companies has revealed that 37% are planning to slow or postpone investments in low-carbon infrastructure or offers because of COVID-19, despite seeing clean power as a key driver of revenue. Conducted by Capgemini Research Institute, the analysis tracked how corporates in the sector across Europe are preparing for stricter climate legislation and are weathering the financial fallout of the pandemic. Almost two thirds of the respondents said their business has driven an increase in revenues through more sustainable operations in the past two years. They cited reduced operational costs through improved efficiencies, alongside growing consumer and investor demands for stronger ESG frameworks and low-carbon tariffs and packages. (edie)

Money & trees – The UN-REDD programme has announced a $2-mln project to restore and protect more than half of Myanmar’s mangrove area. Supported by the Norwegian government, the project aims to help the South East Asian nation meet its emissions obligations under the Paris Agreement. An announcement by the UN Food and Agriculture Organisation (FAO) indicated that payments would be based on documented results, although it offered no further details. Mangrove protection is an emerging climate issue in Myanmar, and several new CDM projects – especially with South Korean investors – have been established over the past couple of years.

Five for forests – US-based Forest Carbon Works (FCW) on Tuesday announced the closing of a $5-mln investment from global asset manager AXA Investment Managers. The funds will be used towards scaling FCW’s landowner membership service in its smartphone-based offset programme, which received its first California Carbon Offsets (CCOs) this year for an Oregon-based project.

And finally… Eruption – The ongoing August Complex wildfire in California has now burned over 1 mln acres (404,700 ha), according to a Monday update from the state’s Department of Forestry and Fire Protection, making it the first blaze in recorded California history to reach seven figures of acreage. The update on the August Complex came just after the forestry and fire protection agency said the state has seen a total of more than 4 mln acres burned so far this year. That’s more than the double the total destruction of 1.9 mln acres burned in all of 2018, the previous record year. (Politico)

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