Newsletters > CP Daily: Wednesday January 18, 2023

CP Daily: Wednesday January 18, 2023

Published 02:26 on January 19, 2023  /  Last updated at 02:27 on January 19, 2023  / /  Newsletters

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

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TOP STORY

ANALYSIS: Macro, policy uncertainty driving big changes in EU carbon positioning

Growing economic pessimism, increased borrowing costs, and policy uncertainty have forced many European carbon market participants to either change the way they trade EUAs or to reduce their exposure to allowances, as speculators in particular appear to be backing away from the market amid the clouded outlook for 2023.

EMEA

Ahead of carbon market entry, business groups urge EU to double down on buildings

The EU must toughen a law regulating the bloc’s building stock to ensure overall climate goals are met, business and investor groups urged this week even as legislators are set to include the sector in a new carbon market.

Euro Markets: EUAs soar 4.7% on short covering and new length while energy markets extend gains

EUAs jumped to a two-week high on Wednesday as buyers surged back into the market amid rising gas and power prices and as participants suggested the market had been roiled by a short squeeze.

UK relieves industrials of a further 1.7 mln free ETS allowances

The UK government has slashed another 1.7 million tonnes from industrial emitters’ free carbon allowance allocations under the country’s ETS, removing subsidies worth an estimated £112 mln at current prices.

ASIA PACIFIC

Australia Market Roundup: ACCU price reaches 11-month high, as regulator issues first credits for 2023

The price for Australian Carbon Credit Units has soared by nearly 9% in the week following the release of the government’s final consultation of its Safeguard Mechanism framework, while the Clean Energy Regulator has made its first credit issuance for the new year.

ADNOC signs CO2 mineralisation, low-carbon ammonia deals

The United Arab Emirates (UAE)’s Abu Dhabi National Oil Company (ADNOC) has signed two deals, one involving a pilot project to mineralise CO2 in rock formations, and the other to create new markets for hydrogen and promote global clean energy value chains, at Abu Dhabi Sustainability Week, the Gulf state’s national oil company announced on Tuesday.

AMERICAS

Alberta TIER amendments will decimate credit bank without CCUS -analysis

New amendments to Alberta’s Technology Innovation and Emissions Reduction (TIER) regime will cause the programme’s credit bank to plunge 75% over the rest of the decade in the absence of significant carbon capture, utilisation, and storage (CCUS) uptake, analysts said in a recent report.

LCFS Market: California prices retreat amid drop in fuel demand, expectations for large credit build

California Low Carbon Fuel Standard (LCFS) credit values this week continued to sink towards 5.5-year lows as traders pointed to depressed short-term fuel consumption, strong credit generation expectations for the third quarter, and uncertainty regarding the programme’s revised 2030 climate target.

US EPA details new climate regulations for this spring, as agency eyes private sector involvement

The US EPA announced on Wednesday that it will publish a suite of new emissions reduction regulations in the coming months, while federal agencies are relying on the private sector to help decarbonise the electric grid.

INTERNATIONAL

UAE envoy dismisses concerns over oil links, warns on COP global stocktake

The UAE’s climate envoy on Wednesday shrugged off conflict-of-interest concerns about the nation appointing its state oil firm boss as head of upcoming COP UN climate negotiations, while warning that the global stocktake due at the meeting will likely show the planet off-track on global warming goals.

Global consultancy launches supply chain emissions training push

A global consultancy has launched an academy and series of training courses aimed at plugging the training gap for firms when dealing with Scope 3 emissions, it announced Wednesday.

VOLUNTARY

REDD prices hold firm despite damning reports of over-crediting

Prices for forestry conservation carbon credits held steady on Wednesday despite the publication of damning reports about Verra-accredited REDD+ projects that the standards body has refuted as untrue.

VCM Integrity Council announces timelines for carbon credit quality labels

The Integrity Council for the Voluntary Carbon Market (ICVCM) released new timelines on Thursday, aiming to guide integrity for carbon credits amid a wave of quality-related concerns, with labels aimed at clearly distinguishing credits expected to emerge this year.

Portfolio of carbon removal methods needed to Paris climate targets -report

Countries need to double the amount of existing forms of nature-based carbon removals and to roll out new technologies by a factor of 1,300 to keep within a 1.5C of warming pathway as outlined in the Paris Agreement, according to a report published Thursday.

Blockchain marketplace to sell tokenised forward carbon contracts

A blockchain marketplace, that has just raised $7.5 million, is to sell tokenised forward carbon credits to boost pre-funding of voluntary carbon market projects, it announced on Thursday.

BIODIVERSITY (FREE TO READ)

Biodiversity-related litigation expected to be on the rise -experts

Experts are bracing for increasing legal action linked to biodiversity in the coming years, the WEF annual summit in Davos heard on Wednesday, taking as a cue the recent rise in litigation against big companies and governments over their climate-related actions or inactions.

Biodiversity experts “cautiously optimistic” for progress on finance in wake of global framework

Experts in biodiversity finance speaking at a meeting of the Coalition for Private Investment in Conservation (CPIC) expressed optimism that the global biodiversity framework agreed at COP15 would help to channel steady flows of private finance into conservation and restoration as well as scaling the nascent crediting market.

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BITE-SIZED UPDATES FROM AROUND THE WORLD

Carbon Pulse has teamed up with CME Group to provide its clients with regular updates on the global carbon markets. Check out these briefs for the latest insights on pressing trends and events impacting markets, published every other week. Registration required

INTERNATIONAL

Big lies – UN Secretary-General Antonio Guterres has launched his latest stinging attack on the global fossil fuel industry, accusing the sector of knowingly pursuing business models that are “incompatible with human survival”. Speaking at the WEF summit in Davos, Guterres said  that scientists, including scientists working within the fossil fuel industry, had known for decades that such a catastrophe loomed and that “peddled the big lie” by riding rough-shod over their own science and should be held to account. He also warned businesses that their “transition to net zero must be grounded in real emissions cuts – and not rely on carbon credits and shadow markets”. (BusinessGreen)

Metal mania – Demand for key metals needed for the deployment of energy transition technologies such as solar, wind, batteries, and EVs will grow fivefold by 2050, under BloombergNEF’s so-called Net Zero Scenario. Supply, on the other hand, is constrained due to a lack of investment, increasing country risk toward mining, and ever more depleted reserves. Country risk remains the key barrier to the development of new mining projects. The global economic slowdown and the need for countries to secure supplies of critical metals have led to the resurgence of resource nationalism and higher resource taxes. These interventions slow down investments in new mines. Given the importance of these metals to the energy transition, governments must strike a balance between meeting the immediate needs of their local economies and the long-term ambition of a global net-zero future. (BloombergNEF)

AMERICAS

Running on fumes – The US Energy Information Administration’s (EIA) January Short-Term Energy Outlook forecasts the natural gas spot price at the US benchmark Henry Hub will average $4.90/MMBtu in 2023, more than $1.50/MMBtu lower than the 2022 average. EIA expects prices to stay nearly the same in 2024 as dry natural gas production continues to grow in the US and outpaces domestic natural gas demand and exports for most of the year. EIA forecasts the Henry Hub price will average close to $5/MMBtu in Q1; both winter weather and LNG exports at near-capacity volumes will lead to greater natural gas demand, which will result in higher prices in the US. After a warm start to January, the office expects colder winter weather to return, prompting higher natural gas consumption for space heating in the residential and commercial sectors, which causes prices to rise.

Climate risk report – The US Federal Reserve is instructing the six biggest US banks to deliver a report on how their operations will be affected by climate change and the transition to a low-carbon economy by July 31, Reuters reported Tuesday. Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo received a 52-page set of instructions from the central bank. The Fed is attempting to discern the financial risks of climate change and the economic adaptation to it.

Waste alternatives – The City of Spokane has asked Washington state lawmakers to pass a bill to exempt its Waste-to-Energy (WTE) solid mass incinerator plant from the state’s cap-and-invest programme, similar to the exemption passed for municipal landfills, The Spokesman-Review reported. The sole WTE plant in the state that has been online since 1991, processes 800 tonnes of solid waste a day, generates 22 MW of electricity, and emits 234,000 tCO2e. Revenue from electricity sales and tipping fees for solid waste disposal offset facility costs. But additional emission costs incurred under the cap-and-invest scheme would be passed onto customers, who might then choose to dispose off garbage to landfill alternatives, resulting in “greater long-term climate, environmental, and social equity impacts,” Spokane officials said in the letter to state lawmakers. Washington’s Department of Ecology has said that the department lacked the authority to change the way WTE facilities were treated under the statute. Furthermore, free allowances granted to utilities would be given to Avista, to whom the city sells electricity from the WTE plant.

Plenty of storage space – A first of its kind study in British Columbia posits that more than six decades of provincial GHG emissions can be captured and stored in the northeast of the province, Alaska Highway News reports. Geoscience BC says the region’s geology is key to the province’s carbon management and reaching its net zero goals. It plans to present and discuss the findings of the new Northeast BC Geological Carbon Capture and Storage Atlas with its project partners at this week’s Natural Resources Forum in Prince George. Initial assessments show “significant potential” to store CO2 in depleted pools north and northeast of Fort St. John, as well as in deep saline aquifers in areas around the city, and areas around Dawson Creek and Fort Nelson. Geoscience BC says the research found as much as 4.23 bln tonnes of CO2 could be potentially stored in such formations — for comparison, it says the province’s net emissions were 62.5 Mt in 2020. All told, that means the region could potentially store more than 66 years-worth of British Columbia’s GHG emissions, the organisation says.

Biofuels terminal – USD Clean Fuels on Tuesday announced its intention to build a new biofuels terminal in National City, California that will have the capability to transload renewable diesel, biodiesel, ethanol, and sustainable aviation fuel (SAF). The terminal will be served by the BNSF Railway and will provide efficient transportation of clean fuels to the area from the Midwest and US Gulf Coast. Pending receipt of all local and state permits, the terminal is expected to be operational by early 2024, the company said in a press release.

Joining the club – GTCR, a leading private equity firm based in Chicago, announced Wednesday that it has become a signatory of the UN-supported Principles for Responsible Investment (PRI). The PRI is recognised as the leading global network for investors which are committed to integrating environmental, social, and governance considerations into their investment practices and ownership policies. Formed in 2005 and launched at the New York Stock Exchange in 2006, the PRI brings together an organisation of the world’s leading investors which share a dedication to implementing responsible investment practices.

Mort-off – John Morton, who most recently led international climate efforts at the US Treasury Department, has returned to the private sector after two years with the Biden administration. Morton is now managing director, global head of advisory at investment firm Pollination, where he worked before his latest government stint. (Politico)

ASIA PACIFIC

Adieu Ardern – New Zealand Prime Minister Jacinda Ardern is resigning, in a shock announcement that came as she confirmed a national election for October this year. At the party’s annual caucus meeting on Thursday, Ardern said she “no longer had enough in the tank” to do the job. “It’s time,” she said. Her term as PM will conclude no later than Feb. 7, but she will continue as an MP until the election later this year. Ardern was first elected PM in 2017, and won re-election in 2020. Under her leadership, New Zealand declared a climate change emergency and committed to a carbon neutral government by 2025, in what Ardern called “one of the greatest challenges of our time”. Her administration has pursued more ambitious GHG cuts, including from agriculture – New Zealand’s largest source of planet-warming gases. Ardern’s government has also pushed for no new household gas connections by 2025 and a dramatic shift to electric cars in the next decade. (Guardian)

SAF ready – Japan’s top airlines All Nippon Airways and Japan Airlines have expanded their sustainable aviation fuel purchases by adding supplies from Japanese trading house Itochu and US producer Raven SR, Reuters reports. The global airline industry has sought to rely on sustainable aviation fuel (SAF) — which is produced from feedstock such as agricultural waste and used cooking oil — to meet its net zero emissions target by 2050. Itochu and Raven SR signed a memorandum of understanding to supply the cleaner fuel to ANA and JAL, Itochu said in two statements.

Electrified mining — Australian based EV specialist SEA Electric is partnering with Europe’s Mevco in a landmark A$1 billion ($700 mln) deal to supply 8,500 electrified Toyota Hilux and Landcruisers to the mining industry, within five years, the Driven reports. SEA Electric CEO Tony Fairweather said the deal is the largest of its kind in the world and marks a significant shift to electrified transport for commercial vehicles in the mining industry. The conversions will take place at SEA’s Dandenong, Victoria 4,000 square-metre factory, which will grow to 8,000 square-metres as SEA expands to the neighbouring property. At capacity the company aims to convert up to 4,000 vehicles per year. The two companies said more than half of the 2023 allocation have been pre-sold, and demonstration models are available in Melbourne, Brisbane, and Perth.

More ESG investments – South Korea’s top 100 firms by sales in 2022 invested 5.44 trillion won ($4.40 bln) in the areas of environment and workplace safety, up a whopping 87.6% from a year earlier, according to a report issued by the Federation of Korean Industries (FKI). However, those large businesses also saw an increase in emissions last year – they emitted a combined 267.3 mln tonnes of CO2 equivalent, up 4.7% YoY, due to increased corporate production stemming from eased COVID-19 restrictions and increased fiscal spending, the report said.

New opportunity – A subsidiary of Hong Kong-listed CCIAM Future Energy Limited is currently in negotiations regarding potential co-operations and/or joint ventures with certain potential business partners based in Hong Kong, Europe and mainland China to explore the potential of carbon sink resources, the company said in a HKEX filing. CCIAM Future Energy, formerly known as The Hong Kong Building and Loan Agency, is also keen to explore business opportunities in the sectors of energy-saving devices and low-carbon services, according to the statement. 

EMEA

Iberian stretch – Spain and Portugal have formally requested a EU approval to extend the temporary Iberian cap on prices for natural gas used by power plants, a spokesperson for Spain’s EU representation told Reuters. The EU commission is “receptive” to the countries’ request, the spokesperson said, adding technical work was to follow to assess this possible extension. (Reuters)

Facing into the wind – The expansion of onshore wind power capacity in Germany in 2022 again remained below the level required for reaching the country’s renewable power targets, a shortcoming that the government seeks to address by auctioning the highest-ever onshore wind capacity this year. A total of 2.4 GW in about 550 turbines were installed in the past year, while the auctioned volume for 2023 of 12.8 GW is more than five times higher, the German Wind Energy Federation (BWE) said. While the expansion was 25% higher than in the previous year, the buildout in 2022 still does not match with the country’s ambitious 2030 target of 115 GW onshore wind capacity. The total installed capacity in 2022 was roughly 58 GW. As Germany’s most important renewable power source, onshore turbines generated nearly 20% of the country’s electricity last year, and almost 25% if offshore wind turbines are included, the BWE stated. (Clean Energy Wire)

It pays to be green – A report on the impact of the EU ETS on economic performance of companies has found that the carbon market had no significant impact on profit and employment, instead leading to an “increase in regulated firms’ revenues and fixed assets” in regulated firms. The report, published in the Journal of Environmental Economics and Management and written by academics from the London School of Economics and Political Science (LSE) and the OECD, is based on data from 31 ETS-regulated countries from 2005-2014. The dataset used includes information on over 1 mln companies and finds that the ETS led to a significant increase in revenue and in fixed assets for the companies, with no impact on the firms’ number of employees and profit. From this, the report deduces that having to pay for their carbon emissions may have forced companies to increase investment which in turn may have increased productivity.

AND FINALLY…

Gone rogue – Mexico has announced a new set of measures to ban solar geoengineering experiments in the country, after a US startup Making Sunsets began releasing sulfur particles into the atmosphere in the northern state of Baja California. The Mexican government said it will develop a strategy to ban future experimentation with solar geoengineering, which will also include an information campaign and scientific reports. In 2022, Making Sunsets claims it launched balloons injected with sulphur dioxide particles into the atmosphere, which were not monitored nor recovered. The Mexican government said the experiment was carried out “without prior notice and without the consent of the Government of Mexico and the surrounding communities”. Making Sunsets is already selling “cooling credits” for future balloon flights with larger amounts of sulphur dioxide for $10 each. (Climate Home)

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