News and intelligence on carbon markets, greenhouse gas pricing, and climate policy
Published 02:35 on November 14, 2023 / Last updated at 02:35 on November 14, 2023 / Newsletters
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A series of factors may be coming together to trigger a big year-end EU carbon price rally, including record short selling by speculators and dwindling auction supply, some experts believe, while others think looming bearish pressures remain too great for prices to see any meaningful recovery from recent lows.
The UK is planning to launch its own carbon border adjustment mechanism that would mirror the full 2026 launch date of the EU’s programme, the FT reported on Monday, citing anonymous officials, while the Australian government announced it’s assessing the need for its own CBAM.
Australia has raised five potential policy options in a review process to address carbon leakage, including a Carbon Border Adjustment Mechanism and integrating flexibility levers of the Safeguard Mechanism into a broader suite of policies.
The restoration and protection of global forests could sequester approximately 20 years’ worth of fossil fuel emissions, a new study has found.
The 439 million smallholder farmers globally are spending as much as $368 billion collectively of their own income each year on tackling the impacts of climate change, including on pest control, soil improvements, and biodiversity conservation, which significantly dwarfs the $230 mln pledged for the Adaptation Fund at last year’s COP27 and highlights the increased levels of climate support required by the sector that produces around a third of the world’s food, according to a study published Tuesday.
The world’s first orbital sensor capable of identifying CO2 emissions from individual industrial sites was launched from the US into space this weekend.
The European Commission has released a study examining how to price greenhouse gas emissions from the agricultural sector and provide financial incentives for climate action.
EU co-legislators late on Monday found an informal agreement on a bill seeking to reduce the bloc’s dependency on third-countries in sourcing raw materials indispensable for the development and building of clean technology.
The EU’s climate chief announced on Monday that the bloc will contribute a “substantial” amount to a new fund for climate mitigation and adaptation as well as allocate further funding for renewables and energy efficiency on Monday.
A new registry regulation implementing a five-month shift in the annual EU ETS compliance schedule may lead to a change in the market’s seasonality, moving the periods when prices tend to rise amid increasing compliance demand, according to European carbon market analysts and traders.
European carbon prices slumped on Monday, giving up most of Friday’s gain as mild and windy weather and weaker energy prices combined to hearten the bears, though numerous participants pointed out that time is running short for short positions to be covered ahead of the end of the 2023 auction programme and the expiry of the front-December futures contract.
A key component of the British government’s climate plan is unlawful due to its reliance on bioenergy with carbon capture and storage (BECCS) removals, which will undermine the country’s ability to achieve net zero by 2050, according to a legal case filed in a UK court.
A key political advisor to the UK government has stressed she is committed to fulfilling the country’s nature-related targets, including biodiversity credit action, the same day as a reshuffle of the country’s top ministers saw the environment secretary resign.
The Albanian government is preparing to adjust to the EU’s carbon border adjustment mechanism (CBAM) by increasing its tax on coal, as part of a 2024 budget draft that the finance ministry recently presented to the country’s parliament.
Approximately 4% of companies bound by Germany’s domestic nEHS carbon pricing programme failed to report emissions in year two of the initiative, according to a report issued by the German Emissions Trading Authority (DEHSt) on Monday.
China could see a structural decline in greenhouse gas emissions next year, as low-carbon energy expansion is expected to reach the scale needed to start driving down CO2 output, a report has found.
China has introduced a capacity payment mechanism to improve the profitability of domestic thermal plants, a move the government claimed will support the country’s low-carbon transition, though concerns have emerged as to whether the new policy will incentivise generators to build more coal.
The World Bank is working with Vietnam to progress an auction of excess carbon credits from the planned Mekong Delta Climate Change Adaptation plan and for the nation to plant 1 million hectares of low carbon rice.
South Korea is planning to set up a special climate fund with government and private investments, as the country is seeking to secure more credits from overseas carbon reduction projects to realise its climate goals, local media reported Monday.
South Korea’s SK E&S has signed a Memorandum of Understanding (MoU) with Australia’s Santos over carbon capture and storage collaboration, the latter said Monday.
Deforestation in the Amazon has fallen to its lowest level in five years, according to a report published this week by Brazil’s National Institute for Space Research (INPE), while efforts to fund the prevention of these activities were expanded.
The US and Canadian Great Plains lost 1.6 million acres (some 650,000 hectares) in 2021, partially due to federal policies that inadvertently favor conversion over protection of land for the production of biofuel, a recent report said.
The Oregon Department of Environmental Quality (DEQ) released on Monday a set of proposed clarifications and modifications to a suite of climate programmes.
Compliance entities in both California Carbon Allowance (CCA) and RGGI Allowance (RGA) markets moved their positions to this year’s vintage as speculators did the opposite, while both groups added to their Washington Carbon Allowance (WCA) net length, US Commodity Futures Trading Commission (CFTC) data showed Monday.
RGGI allowances (RGAs) inched upwards in the past week to break a record settlement price for the benchmark contract for two consecutive days even as volumes took a dive, while market participants remained positive about prices hovering below the Cost Containment Reserve (CCR) trigger levels.
The US Department of Treasury on Monday provided an analysis of how federal policies to address climate change can uplift the economy.
The implosion of REDD credibility continued to dominate the voluntary carbon market last week with prices sliding again following news of certifier Verra suspending issuance of two connected Kenyan projects over allegations of sexual harassment and abuse by senior staff.
Voluntary carbon standard accreditation body ICROA is toughening criteria for certifiers looking for its endorsement amid an explosion of interest, the group told Carbon Pulse.
Aboveground carbon stocks in mixed planted forests could be a lot higher than in monocultures, new research has found, suggesting mixed forests could be far more effective as carbon sinks.
BIODIVERSITY (FREE TO READ)
A group of Australia’s past and present politicians and environmental groups have signed on to a pledge urging the state and federal governments to halt the logging of native forests in the country.
Submissions to New Zealand’s biodiversity market consultation agreed that governments alone can not muster enough cash to adequately address biodiversity decline, but there are concerns that credit-based schemes are too immature to be considered.
Carbon markets must learn how to deal with the application of new practices and norms in clean cooking, and ensure we take the lessons from past actions without judging them against criteria that had yet to be invented, writes Owen Hewlett of Gold Standard.
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BITE-SIZED UPDATES FROM AROUND THE WORLD
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Power of words – Strong communication will be needed to shift public opinion and generate political will for climate action at COP28 in Dubai, which kicks off at the end of November, as the talks come amid a barrage of geopolitical, health, and economic emergencies, the FT reports. The summit should launch a global campaign to “rally political support, particularly among big emitters” and to generate a surge of public opinion for urgent action on the climate emergency. Proper damage attribution should be assigned to fossil fuels for global warming, while the COP28 communication campaign should make it “crystal clear how growth and poverty reduction are predicated on cutting carbon emissions,” the author writes. World leaders should also commit to more stringent near-term emissions cuts in order to bring the urgency of climate danger to the here and now.
Big losses – Orsted has withdrawn from a partnership with Fred. Olsen Renewables and Hafslund Eco to develop offshore wind projects in Norway as the company struggles with heavy losses resulting from rising costs in its supply chain and the wider economy. The company intends to prioritise investments and so has “decided not to prioritise offshore wind development in Norway for now and will therefore not be participating in the upcoming tenders.” The two other companies intend to continue with their partnership on the Utsira Nord project specifically and offshore wind in Norway generally. (Bloomberg News)
Storage scare – The German economy ministry has warned that the future demand for hydrogen storage capacity has been significantly underestimated, largely due to a lack of certainty regarding possible supply bottlenecks and a general “optimisation logic” based on economic criteria on which earlier estimates were calculated. Unexpected additional demand could occur due to unusually long “cold and dark doldrums” in winter or supply problems for hydrogen leading to higher demand, which should be considered when planning the country’s fleet of storage, the ministry said in a paper. The ministry is also working on a power plant strategy with additional hydrogen plant capacities, which up until now has not been taken into account in the scenarios. (Clean Energy Wire)
Food for thought – The food industry says it is running out of time to prepare for new EU rules to cut carbon emissions from the supply chains of several key commodities, accusing Brussels of issuing proposals that lack detail and will fail to stop deforestation, the FT reports. The rules, which will oblige companies to prove their goods have not been produced on recently deforested land, are due to come into force at the end of 2024 and will make the EU the first region to ban imports of products linked with deforestation. Commodities including palm oil, coffee, cocoa, beef, soy, and rubber will be affected. But as crops for 2024-25 are planted, many in the industry argue the EU has left it too late to finalise the details of an initiative that aims to reduce carbon emissions and preserve biodiversity. As an example, the bloc has yet to finalise a list of ‘high-risk’ countries whose exported commodities will be subject to extra checks.
No end in sight – The UAE plans to extract 38 bln barrels of oil and gas between now and 2085, with significant further reserves that could also be extracted in that time, and no plans to end its oil and gas production despite being one of the wealthiest petrostates in the world, Energy Monitor reports. Some 28.3 bln barrels of oil remain in active fields in the UAE, with a further 1.5 bln barrels lying in fields that are currently planned, according to GlobalData. Active fields in the UAE also have some 38.2 trillion cubic feet (trcf) of gas remaining, while planned fields contain 10.5 trcf of gas. So combined, the COP28 host’s volume of hydrocarbons in active and planned oil and gas fields adds up to 38.4 bln boe. The country’s continued development of oil and gas fields is much in the spotlight as it gears up to host COP28 in a few weeks’ time.
Steel appeals – The UK steel industry is appealing to the government to enact a string of reforms to bring down industrial power prices, with trade body UK Steel highlighting that steelmakers in the UK currently pay nearly two times as much for electricity as their competitors in Germany and France, at £113 per megawatt hour compared to an average of £61/MWh paid in the European countries. Reducing power prices for steelmakers has become even more critical as British Steel and Tata Steel attempt to move away from polluting blast furnaces and onto power-hungry electric furnaces, the trade body says. The timely imposition of the British Industrial Supercharger policy in April 2024 will be key to easing pressure on the sector, with the policy programme aiming to reduce network charges for industry by 60% and to exempt the sector from all renewable levies. UK Steel is also calling on ministers to press ahead with wholesale market reforms, which are also expected to ensure that lower-cost renewables generation feeds through better to end users. (BusinessGreen)
To market – New Forests has announced plans to bring four of its New Zealand forestry assets to market, as it approaches the completion of the term for its second round Australia and NZ Forestry Fund. The four estates have a combined area of almost 16,000 hectares, a quarter of which is established on post-1989 land registered under the country’s ETS. New Forests has engaged UBS NZ as a financial adviser to assist with the potential sale process.
Better estimate – Seoul-based NAMU EnR, a research company specialising in carbon emissions and renewable energy markets, has developed a price model that reflects the supply and demand factors in the domestic emissions market (KAU), which it claimed to be the first in the country, according to Hankyung. The model can be used to estimate the price level in the Korean carbon market, a thin market with low liquidity and distorted prices due to limited market participants, the company said.
Green energy out of the blue – Mitsui OSK Lines (MOL) has signed with Scottish wave energy company Mocean to jointly promote the latter’s offshore, off-grid power projects. MOL will also invest in Mocean, which uses wave energy to power underwater inspection equipment used in the offshore oil and gas industry. Mocean is developing wave energy tech Blue Star and the much larger scale Blue Horizon. There are many wave energy start ups but none yet providing commercial levels of power, but Mocean believes it will one day be able to power the equivalent of 50 mln homes and thus abate 50 mln tonnes of CO2 per annum.
Emissions out to pasture – Brazilian President Luiz Inacio Lula da Silva will announce a plan to financially incentivise farmers to buy or lease land used and degraded by cattle ranching but is currently unused, Reuters reported Friday. The announcement is expected to come on Nov. 22, just prior to COP28 in Dubai. Brazil currently has 200 mln ha of land devoted to cattle ranching, and only 200 mln cattle, leaving half the land mostly unused. Soybean and cattle ranching have been largely responsible for the deforestation of the Amazon, resulting in agriculture along with land use change as the leading cause of the country’s emissions. Upcoming CBAM regulations in the EU threaten Brazilian food exports, motivating the regulations. The Lula administration also plans on signing its national Emissions Trading System regulation into law ahead of COP28.
Sequestration schedule – The Barnett Zero carbon capture and storage facility saw its first injection of carbon ahead of schedule, according to owners BKV and Enlink Midstream, Reuters reported Monday. The plant is expected to sequester 210,000 Mt of CO2e this year. BKV’s natural gas will get shipped by EnLink to a well where the CO2 will be stored. BKV’s second CCS project will begin operations by the end of 2024, the company said.
Project investigated – The Gold Standard-accredited Bachu biomass project (GS1228) in Xinjiang, China, developed by South Pole, may be at risk of being implicated in potential Uyghur forced labour, according to articles jointly published by the UK’s Guardian newspaper and Dutch investigative outlet FTM. The reports cited project documents and satellite imagery of the power plant and its surrounding area, leaked South Pole data, and several experts on the Chinese government’s treatment of Uyghur Muslims. The investigation found that South Pole sold credits from the project since 2014. It was aware of the risk in 2021 and stopped selling the credits but did not raise its concerns with the companies that had bought the credits, or with Gold Standard, which said it welcomed the reports as part of contributions that can improve the voluntary carbon market. South Pole said it undertook a specific review of the situation, could not identify any material issues of concern, but took a prudent decision to halt sales given unrelated media reporting on allegations of forced labour in Xinjiang.
Credits measured – Spectaire, a provider of air quality monitoring and emissions reduction services, announced on Monday the sale of 12,500 carbon offset credits for $750,000 through Sankofa. According to the company, the credits will be some of the first credits sold based on the measurement of actual emissions in the field. Spectaire measures emissions directly in the field through AireCore, its integrated hardware, software, and data platform for real-time emissions monitoring and management.
Vamos! – The Santiago 2023 19th Pan American and Parapan American Games has claimed to be the first major sporting event in Chile to be carbon neutral via the use of renewable energy certificates and carbon credits generated from hydroelectric power, as reported by local news outlet Reporte Minero.
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News and intelligence on carbon markets, greenhouse gas pricing, and climate policy