Shell Buys Australian Carbon Offset Project Developer Select Carbon

August 7, 2020

Royal Dutch Shell's Australian division, Shell Australia, has bought Select Carbon, a carbon offset developer that focuses on nature-based greenhouse gas reduction projects, for an undisclosed sum, the company said Monday.

The carbon credits generated through Select Carbon's projects are offered for sale through the Australian Government's Emissions Reduction Fund (ERF), a government-run offset purchase programme, and other carbon offset markets.

Australia's ERF and the Safeguard Mechanism, a baseline-and-offset system, covers the emissions from selected large emitters. Under the Safeguard Mechanism, facilities exceeding their baseline need to purchase Australian Carbon Credit Units (ACCUs) generated by the ERF to cover the excess emissions.

The spot price of an ACCU on 31 March 2020 was $16.40/mt, according to the Australian government website.

IHS Markit Global Carbon Index showed that the weighted global average price of carbon was at $19.44/mt on Friday.

Select Carbon has developed and manages a portfolio of over 70 projects covering about 9 million hectares across different ecosystems and agricultural uses in Australia.

Select Carbon's portfolio includes fourteen Human Induced Regeneration (HIR) and four Avoided Deforestation (AD) projects in New South Wales; four HIR projects in Queensland; thirty-eight HIR projects in West Australia; and twelve near-term pipeline projects.

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com
--Editing by Paddy Gourlay, patrick.gourlay@ihsmarkit.com
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Virginia Membership Approval Fuels RGGI Rally as Prices Climb 17cts/st

July 28, 2020

Regional Greenhouse Gas Initiative (RGGI) secondary market prices Tuesday strengthened as much as about 17cts/st from Monday, continuing upward momentum totaling about 50cts/st since Virginia announced in early July it will participate in the cap-and-trade program starting 2021.

V20 prompt July 2020 RGGI allowances traded Thursday at low of $6.49/st and a high of $6.55/st on the Intercontinental Exchange (ICE) after being assessed Monday at $6.38/st by OPIS.

OPIS assessed them at $6.06/st on July 8, the day RGGI announced the official acceptance of Virginia into the program.

Sources recently told OPIS that the addition of Virginia -- and the possible addition of Pennsylvania -- to RGGI has been a boon for prices and lent credence to the longevity and stability of the program.

In addition, on Tuesday, a broker told OPIS that speculative interest from financial players may be driving RGGI prices higher.

A RGGI spokesperson did not immediately comment on additional secondary market interest from hedge funds.

Under RGGI, fossil-fuel power plants with more than 25 megawatts of generation capacity must offset emissions with either RGGI allowances or approved offset credits.

Pennsylvania is still awaiting to enter RGGI as rulemaking by the state's Department of Environmental Protection (DEP) is still underway. Last month, Gov. Tom Wolf (D) extended a July deadline for the rule proposal to September.

RGGI currently consists of 10 member states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Verra To Issue Carbon Credits for Using Electric Vehicle Charging Stations

July 24, 2020

Verra, the world's largest issuer of voluntary carbon credits, has broken fresh ground for the electric vehicle market by agreeing to start issuing Verified Carbon Units (VCUs) to Electrify America, the largest fast charging network in the U.S. with more than 400 charging stations.

Under the plan, Electrify America will start to receive VCUs from Verra when motorists use its electric vehicle charging stations in 48 U.S. states, excluding California and Oregon which have compliance marketplaces for carbon emissions.

The average price carbon offset credit was worth $3/metric ton in 2018 in the U.S. voluntary market, according to Ecosystems Marketplace.

The VCUs could be bought by companies anywhere in the world which want to voluntary cut their carbon emissions, and they could be backdated for a company's 2019 greenhouse gas pollution.

In 2019, battery electric vehicles (BEVs) accounted for less than 2% of total U.S. light vehicle (LV) sales, notes analysts at IHS Markit.

The most popular BEV in the United States, the Tesla Model 3, sold for an average price of $50,000 in 2019, while the average LV sold for approximately $37,000.

The global carbon offset market was worth $600 million in 2019, according to investment bank Berenberg,

The Electrify America carbon offsets will also be validated by SCS Global Services, a third-party verifier.

 

--Reporting by Nandita Lal, Nandita.lal@IHSMarkit.com

--Editing by Patrick Gourlay, Patrick.gourlay@IHSMarkit.com

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German Cabinet Drafts Vehicle Tax Changes Penalizing Polluters on the Road

July 21, 2020

Germany's federal government has decided on draft amendments to the motor vehicle tax act that foresees a progressive taxation system based on carbon dioxide (CO2) emissions, in a bid to penalize polluters and reward owners of low- and zero-emission cars, according to a legislative proposal released last week.

Subject to parliamentary approval, the bill is among the policy instruments aimed at cutting CO2 emissions in the country's transport sector by 40%-42% from a 1990 baseline to 95 million-98 million tons per year by 2030, as outlined in the national climate program 2030 last fall.

The Berlin government proposes to extend the tax exemption for all-electric cars, first registered by end-2025, to end-2030 at the longest. This is to bring 7 million-10 million electric cars onto the road by the end of the decade.

Vehicles with combustion engines are to be taxed in line with their carbon footprint.

A 30-euro ($34)/year levy on new cars emitting no more than 95 g CO2/km will be waived for five years if registered before the end of 2024.

Other vehicles to be registered from 2021 onward face progressive taxation, with the extra tax for each additional gram of CO2 per kilometer rising in stages from 2.0 euros (over 95 to 115 g CO2/km) to 2.20 euros (over 115-135 g CO2/km), then 2.50 euros (over 135 to 155 g CO2/km), 2.90 euros (over 155 to 175 g CO2/km), 3.40 euros (over 175 g CO2/km), peaking at 4.0 euros (over 195 g CO2/km).

The higher tax rates for more carbon-intensive vehicles shall "signal that in the future, higher fuel consumption will be felt as cost factor not only at filling stations."

Other carbon-mitigating measures spelled out in the climate program from Sept. 20, 2019 include helping build a charging infrastructure for e-cars, developing low-carbon and synthetic fuels, shifting travel from air to rail, improving public transportation and modernizing inland waterways.

The draft has yet to pass the lower house of parliament (Bundestag), which published the document. An attached letter by chancellor Angela Merkel suggests that the upper house (Bundesrat) has decided not to raise objections.

 

--Reporting by Inge Erhard, ierhard@opisnet.com;

--Editing by Charles Kim, ckim@opisnet.com

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California Receives Second Win in Federal Cap-and-Trade Lawsuit

July 20, 2020

A federal judge ruled Friday that the California Cap-and-Trade Program's link to Quebec is constitutional and does not violate the U.S. Foreign Affairs Doctrine.

The lawsuit, filed by the U.S. Department of Justice (DOJ) in late 2019, alleged that California exceeded the federal government's foreign affairs power when it linked to Quebec for the program.

"The United States has failed to show that California's program impermissibly intrudes on the federal government's foreign affairs power," U.S. District Judge William Shubb wrote in a 30-page ruling.

Shubb ruled the cap-and-trade program applied to "agreements between sub-national actors, rather than a state-wide prohibition on trade with an entire nation."

The DOJ also argued in the lawsuit that the cap-and-trade program would impede the Trump administration's decision to leave the Paris Agreement. President Donald Trump announced the withdrawal in October, and the process would officially occur after the 2020 election, according to the accord's terms.

Friday's announcement marked the second positive ruling for California in the lawsuit by the DOJ.

The judge previously ruled against the DOJ in March in the same lawsuit on two of four total claims, saying the linkage was a "compact" instead of a "treaty" between California and Quebec.

International Emissions Trading Association (IETA) CEO Dirk Forrester said in a statement Friday that the most recent ruling "will add an extra dose of confidence for future investment" for businesses under the cap-and-trade program.

"We congratulate the state of California on defending its carefully crafted program that allows businesses in California and Quebec to cooperate to reduce greenhouse gas emissions through a market system," he said.

Following the ruling, analyst firm ClearBlue Markets forecast stronger prices for California Carbon Allowances (CCA), which are the compliance units for the cap-and-trade program.

"This result is bullish for the market sentiment and could lead to higher demand in the upcoming August auction compared to the significantly undersubscribed May auction. However, the current oversupply of CCAs in the market is still expected to limit the upside to prices," ClearBlue said Friday in a note.

On Friday, OPIS assessed V20 July 2020 CCA prices at $17.885/mt, nearly flat to Thursday. By 2:30 p.m. CT on Monday, the V20 July 2020 prompt did not trade and had a bid/offer range of $16.85/mt to $16.89/mt on the Intercontinental Exchange (ICE).

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Truck, Bus ZEV MOU signed by 15 US States, DC for 100% Sales Goal by 2050

July 15, 2020

A group of 15 states and the District of Columbia have signed a memorandum of understanding (MOU) to ensure that all new medium- and heavy-duty trucks, buses and vans sold are zero-emissions vehicles (ZEV) by 2050, according to a joint news release Tuesday.

The group will collaborate to advance the ZEV market for electric large pickups and vans, delivery and box trucks, school and transit buses and big rigs to also reach an interim target of 30% of all sales by 2030, it said.

California, Connecticut, Colorado, Hawaii, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington state, and Washington, D.C., signed the MOU.

"To provide a framework and help coordinate state efforts to meet these goals, the signatory jurisdictions will work through the existing multi-state ZEV Task Force facilitated by the Northeast States for Coordinated Air Use Management (NESCAUM) to develop and implement a ZEV action plan for trucks and buses," according to the release.

The transportation sector is the nation's largest source of greenhouse gas emissions and also contributes to unhealthy levels of smog in many of the signatory states," according to the release.

Trucks and buses account for 4% of vehicles on the road but nearly 25% of total transportation greenhouse gas emissions, the release says.

The MOU announcement comes after the California Air Resources Board (CARB) voted late last month to adopt the world's first electric-truck standards, mandating that over half of trucks sold in the state be zero-emissions vehicles (ZEV) by 2035.

The Advanced Clean Trucks (ACT) Regulation will accelerate California's large-scale move away from diesel trucks and vans to medium- and heavy-duty ZEVs, helping the state meet its climate change targets of reducing greenhouse gas (GHG) emissions by 40% by 2030 and 80% by 2050, according to CARB's website.

Beginning in 2024, California manufacturers producing Class 2b-8 chassis or complete vehicles with combustion engines will be expected to sell an increasing percentage of ZEVs, CARB says. By 2035, the sales percentages will be set at 55% for smaller Class 2b-3 trucks, 75% for Class 4-8 delivery trucks and vans, and 40% for tractor trailers.

 

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com; and Aaron Alford, aalford@opisnet.com;

--Editing by Barbara Chuck, bchuck@opisnet.com

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Virginia Becomes 11th Member to Join RGGI Cap-And-Trade Program

July 9, 2020

The Regional Greenhouse Gas Initiative (RGGI) has added Virginia as its 11th member state, the cap-and-trade consortium announced Wednesday.

Virginia will participate in RGGI beginning January 1, 2021, RGGI said.

"The RGGI states find that Virginia's final rule is consistent with the RGGI Model Rule and with existing state regulations, and that Virginia's starting CO2 allowance budget and emissions reduction trajectory demonstrate comparable stringency with the existing RGGI program," RGGI said.

The Virginia Department of Environmental Quality (DEQ) began work to join RGGI in mid-2017 following an executive order from former Gov. Terry McAuliffe (D).

"This initiative provides a unique opportunity to meet the urgency of the environmental threats facing our planet, while positioning Virginia as a center of economic activity in the transition to renewable energy," Virginia Gov. Ralph Northam (D) said in a separate press release Wednesday. "Our Commonwealth is ready to lead the way in ensuring that the path to reducing carbon emissions is equitable and protects the health and safety of all Virginians."

In April, Northam signed two clean energy bills, allowing Virginia to join RGGI despite restrictive language in the state's budget.

One of the energy bills directed the Virginia DEQ to "establish and operate an auction program to sell allowances into a market-based trading program" as part RGGI and adopt regulations aiming the reduction of carbon dioxide (CO2) from power plants beginning in 2021 to 2050.

For RGGI, fossil-fuel power plants with more than 25 megawatts of generation capacity must offset emissions with either RGGI allowances or approved offset credits.

RGGI is comprised of 10 member states - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. New Jersey rejoined RGGI in January after withdrawing in 2012. The addition of Virginia will increase the regional emissions cap coverage by about 30%, RGGI said.

After the announcement Wednesday afternoon, RGGI secondary market trade remained lackluster and prices declined 2cts/st compared with Tuesday. OPIS assessed V19-V20 prompt July 2020 RGGIs at $6.06/st and V19-V20 forward December 2020 RGGIs at $6.12/st.

By Thursday afternoon, the RGGI market continued to be inactive. V20 prompt RGGIs were bid $5.99/st and offered $6.08/st on the Intercontinental Exchange, while V20 forward RGGIs showed a measure of weakness, bid at $6.07/st and offered at $6.11/st.

Pennsylvania also aims to join RGGI as part of Gov. Tom Wolf's (D) goal to set a climate strategy for the state, including a target of reducing emissions by 26% by 2025 and 80% by 2050 compared to 2005.

On Wednesday, legislators in Pennsylvania's House of Representatives sought to block the state from joining RGGI in 2022.

Republicans along with 26 Democrats voted yes (130 to 71) on House Bill 2025, which seeks to require legislative approval to join RGGI after six months of public comment and four public hearings.

In June, Wolf extended a July deadline to September to allow the Pennsylvania Department of Environmental Protection (DEP) more time to develop proposed rulemaking to join RGGI.

 

- Reporting by Mayra Cruz, mcruz@opisnet.com, Bridget Hunsucker, bhunsucker@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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European Union Eyes 10 Million Tons Renewable Hydrogen Output in 10 Years

July 8, 2020

The European Union is aiming to install up to 40 gigawatts worth of renewable hydrogen electrolysers and produce 10 million metric tons of renewable hydrogen by the end of 2030, it said in a report Wednesday.

The EU's long-term strategy in the report "A hydrogen strategy for a climate-neutral Europe", supports renewable hydrogen, which is produced by the electrolysis of water in an electrolyser. The report outlines a clear pathway to build a large-scale renewable hydrogen infrastructure by 2050, to compete with fossil-fuel derived hydrogen in price terms.

"With 75% of the EU's greenhouse gas emissions coming from energy, we need a paradigm shift to reach our 2030 and 2050 targets. Hydrogen will play a key role in this, as falling renewable energy prices and continuous innovation make it a viable solution for a climate-neutral economy," said Kadri Simson, the EU energy commissioner.

IHS Markit estimates the cost of hydrogen from autothermal reforming (ATR) with carbon capture and storage at between 1.7 and 2.4 euros/kg, compared to electrolytic hydrogen at up to 5 euros/kg. However, the cost of electrolytic hydrogen is expected to decline rapidly to be cost competitive with ATR by 2030, according to IHS Markit forecasts.

In the first stage to 2024, the EU expects to see at least 6GW of renewable hydrogen electrolysers installed, which will produce up to 1 million mt of renewable hydrogen. These electrolysers would be installed next to existing demand centres in larger refineries, steel plants, and chemical complexes, and powered by local renewable sources.

Installed electrolyser capacity is forecast to increase by another 36GW by 2030, while production will increase by 4 million mt, making renewable hydrogen cost-competitive with other hydrogen technologies, the report said.

In the final stage, between 2030 and 2050, renewable hydrogen technologies in Europe should be mature enough to be deployed in aviation and shipping and other hard-to-decarbonise sectors via synthetic fuels derived from hydrogen.

The strategy also mandates the creation of a European Clean Hydrogen Alliance, an industry body which will identify and facilitate viable investment projects.

Delivering the green hydrogen program could cost up to 480 billion euros by 2050, according to EU estimates.

Hydrogen is expected to account for up to 14% of Europe's energy mix by 2050, according to the EU.

 

--Reporting by Selene Law, selene.law@ihsmarkit.com;

--Editing by Rob Sheridan, rob.sheridan@ihsmarkit.com

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IMO Should Follow CORSIA Emission Reduction Guidelines: Report

July 7, 2020

The international maritime industry should follow the lead of the aviation industry in adopting alternative fuels and reducing greenhouse gas emissions, a report by the U.K.'s Environmental Defense Fund and University Maritime Advisory Services urges.

The report argues that the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which caps net carbon emissions from the aviation sector at 2019 level, offers a good blueprint for the International Maritime Organization (IMO) to follow.

The IMO has pledged to reduce greenhouse gas (GHG) emissions from the shipping sector by 50% by 2050 compared with 2008 levels. The organization capped sulfur limits from ships at 0.5% compared with 3.5% from Jan. 1, but the report published this week argues that the IMO needs to further tackle emissions.

"The shipping industry needs to put in place the right rules for alternative fuels to truly drive the decarbonisation of the sector and it does not need to start from scratch. The rules adopted by ICAO offer valuable lessons and a good starting place for the IMO to chart its course toward a genuinely sustainable shipping sector," says Aoife O'Leary, director, Environmental Defense Fund, in the report, referring to the International Civil Aviation Organization.

The IMO should consider using alternative fuels, including sustainable aviation fuels (SAF), in its fuel blends while making sure that explicit rules for calculating emissions reductions for each biofuel pathway are followed, the report says.

There have long been calls to include the shipping sector in the European carbon trading scheme. European Commission President Ursula von der Leyen said in a December speech in Brussels that the European Commission, the executive arm of the European Union, intends to extend the remitting of the European carbon market to shipping.

There is little transparency in SAF pricing, but IHS Markit estimates that the cost of HEFA, the most common SAF blend, will average $1621/mt in 2020. OPIS pegged the cost of the very low sulfur fuel oil, the new IMO 2020 compliant marine fuel, at $310/mt on Monday.

 

--Reporting by Selene Law, selene.law@ihsmarkit.com;

--Editing by Barbara Chuck, bchuck@opisnet.com

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CORSIA Baseline Rule Change Welcomed by Airlines, Criticized by Green Groups

July 1, 2020

UN's aviation body ICAO's decision Tuesday to use 2019 as an emissions baseline for the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) instead of the average of 2019 and 2020 was lauded by airlines but heavily criticized by green non-governmental organizations (NGO).

The rule change agreed upon by the International Civil Aviation Organization's 36 Member States Council means that airlines must offset emissions above their 2019 levels during CORSIA's upcoming voluntary pilot phase so they don't have an "inappropriate economic burden," according to an ICAO press release issued Tuesday night.

The baseline was originally set at an average of 2019 and 2020 by ICAO's 193 Member States Assembly in 2016. ICAO's next Assembly is in 2022 when a review of CORSIA will take place.

The decision comes after months of differing views and debate between environmental organizations and the airlines that will participate in the program. While groups such as the Environmental Defense Fund (EDF) warned that a baseline change would result in zero offsetting requirements during the program's pilot phase, the International Air Transport Association (IATA) lobbied for a 2019-only baseline to safeguard against unusually high offsetting requirements. IATA reasoned that having 2020 in the baseline would lower the baseline emissions due to impact on air travel of the coronavirus 2019 disease (COVID-19), leading to "unusually high"  offsetting requirements.

"Adapting the baseline will help ensure that voluntary participation from countries is maintained at current levels, and hopefully increased," European airline association spokesperson A4E told OPIS Wednesday. A4E's airline traffic remains down 89% compared to June 2019.

According to A4E and International Air Transport Association (IATA), using 2019 emissions as the baseline maintains a level of ambition comparable to that which underpinned CORSIA's adoption as net emissions will be stabilized going forward at a level close to the pre-crisis forecast of around 600 million tonnes of CO2.

"This [decision] does not weaken the impact of CORSIA," IATA said in a note Wednesday, adding that airlines were committed to reducing net emissions to half 2005 levels by 2050.

Meanwhile, green groups opposed ICAO's decision, saying it will suspend airlines' obligations to offset a portion of their carbon pollution if emissions do not rise to the 2019 level during the pilot phase.

Carbon Market Watch said in a note Wednesday that the decision by ICAO meant that airlines were "off the hook while taxpayers are forced to pay tens of billions of euros/dollars in bailout money as part of the Covid-19 recovery packages."

According to the NGO, the EU has "handed out close to 30 billion euros in bailouts" to airlines.

The International Coalition for Sustainable Aviation said in a statement Wednesday that the decision was "unnecessary."

"Given ICAO's unwillingness to lead, ICSA urges governments to adopt national measures to support the climate ambition that is needed," ICSA said.

Jos Cozijnsen, carbon specialist at Climate Neutral Group, told OPIS Wednesday that ICAO's decision may lead to "patchwork" policies by countries to decarbonize aviation emissions like taxation.

Carbon trading house ClearBlue Markets said in a note Wednesday that the demand for offsets for compliance obligations under CORSIA "will depend on the recovery of the airline industry, but in the short-term the voluntary offset market demand is expected to mainly be driven by the Oil & Gas sector."

Investment bank Berengbeg said in a note in May that it  expected sectors such as food and beverage, technology, oil and gas, where companies were setting net-zero targets, to drive demand for offsets instead of CORSIA.

CORSIA-eligible carbon offset prices range between $0.5-$12/metric ton, with an average of $3.60/mt, OPIS estimates. The wide price range is in part a reflection of the value of varying offset project types, sources said.

CORSIA aims for carbon neutral growth in global aviation emissions by making airlines buy offset credits and use sustainable aviation fuels.

In CORSIA's pilot phase (2021-2023) and phase 1 (2024-2026), flights between states that volunteer to participate will be subject to carbon offsetting requirements. From 2027, all international flights will be subject to offsetting requirements.

Currently, 87 countries have volunteered to participate in the voluntary phases.

 

--Reporting by Nandita Lal, nlal@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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European Carbon Prices Reach Nine-Month High

June 30, 2020

European carbon prices touched the 27 euro/mt mark Tuesday for the first time since September 2019 amid "speculative and technical trading," sources said.

The ICE EU Allowances December 2020 futures contract was trading at 27.02 euros/mt at 3 p.m. U.K. time (10 a.m. ET).

The ICE EUA December 2020 futures contract settled at 26.63 euros/mt on Monday, up nearly 2 euros/mt on Friday -- a year-to-date high.

"Speculative and technical trading dominates the market, but yesterday, news about two unplanned outages on French nuclear power plants added to the upside," trading house Energi Danmark said in a note Tuesday.

Brook Green Supply said in a note this morning that the European carbon could be "overbought" as prices were "ignoring the fundamental picture of demand destruction both in terms of lower power demand and strong coal-to-gas switching with abundant cheap gas."

Nicolas Girod, a trader at ClearBlue Markets, told OPIS Tuesday that he didn't see "a real fundamental reason to trigger this movement."

"The market is turning bullish and the shorts are taking pain," he said.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com,

--Editing by Mayra Cruz, mcruz@opisnet.com

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Ford Targets Carbon Neutrality by 2050 Via Renewable Energy, Zero Emissions

June 29, 2020

Ford Motor Co. will use renewable energy and have zero emissions from facilities with the aim of being carbon neutral by 2050, the company has announced.

The automaker released its sustainability report Thursday outlining its strategy to lower its carbon dioxide (CO2) emissions.

"We are focused on three areas -- vehicle use, our factories and our suppliers -- which account for about 95 percent of our carbon emissions," Ford said in its report.

According to the report, the automaker aims to have 32% renewable energy in its 55 manufacturing and assembly plants by 2023 and 100% renewable energy by 2035.

In February 2019, Ford announced it had sourced 500,000 megawatt hours of renewable energy through Michigan's DTE Electric's MITGreenPower program for Ford's Dearborn Truck Plant and Michigan Assembly Plant.

Ford will also invest $11.5 billion through 2022 to electrify new vehicle models, such as the Mustang Mach-E, which will be launched later in 2020 in North America and Europe. Other electric vehicle (EV) versions of the Ford Escape, Lincoln Aviator and pickup truck Transit will be available for the 2022 model year in both regions while the Territory EV will be sold in China.

In July 2019, Ford joined Honda, Volkswagen and BMW in entering a pact with California regarding annual increases in vehicle mileage and decreases in greenhouse gas (GHG) emissions through the 2026 vehicle model.

IHS Markit, the parent company of OPIS, forecast in 2019 that 43 car brands will offer at least one EV option by 2023. These new models will include nearly all existing brands along with new brands entering the market -- compared with just 14 offering EVs in 2018.

IHS Markit also projected that the EV market will have 1.28 million units in the U.S. by 2026 that will account for 7.6% of total vehicle sales, compared with fewer than 200,000 in 2018.

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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Pennsylvania Gov. Wolf Extends July RGGI Rulemaking Deadline to September

June 24, 2020

Pennsylvania Gov. Tom Wolf (D) has extended to mid-September an approaching deadline to develop proposed rulemaking allowing the state to join the regional cap-and-trade program known as RGGI, according to a release from his office.

Wolf amended the July 31 date to Sept. 15, updating in an executive order first issued in October 2019 to instruct the Pennsylvania Department of Environmental Protection (DEP) to begin the regulatory process to participate in the Regional Greenhouse Gas Initiative, the release issued Monday said.

"Addressing the global climate crisis is one of the most important and critical challenges we face. Even as we continue work to mitigate the spread of COVID-19, we cannot neglect our responsibility and our efforts to combat climate change," Wolf said in the release. "Amending this order will provide DEP with more time to develop a strong plan without impacting" implementation goals.

Pennsylvania would become RGGI's 11th member state, joining Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, Vermont and New Jersey.

Fossil-fuel power plants with more than 25 megawatts of generation capacity must offset emissions with either RGGI allowances or approved offset credits.

"Given the feedback from members of our advisory committees and the general public comments, and the disruption caused by the COVID-19 pandemic, we plan to continue our conversations and outreach among the environmental justice community, affected communities, and general public throughout this summer,"

DEP Secretary Patrick McDonnell said in the release. "Gathering additional feedback prior to promulgation will allow us to strengthen the regulation and work with affected communities and will not affect the ultimate timeline for the regulation to go into effect."

Late last year, a group of state Republican lawmakers asked Wolf to reconsider joining RGGI due to the downturn in the state's economy.

Any regulation would be financially devastating to residents as unemployment claims increase due to coronavirus disease 2019 (COVID-19) lockdown measures, according to an April 21 letter drafted by 18 senators.

At the time, DEP spokesperson Neil Shader told OPIS that "the administration is not considering suspending the implementation of RGGI in Pennsylvania" and the state hopes to link to the program in January 2022.

In January 2019, Wolf signed another executive order to set the state's climate goals, including reducing emissions by 26% by 2025 and 80% by 2050, compared to 2005 levels.

On Wednesday morning, V20 RGGI secondary market allowances traded at $5.96/st for delivery in December.

The price was 5cts/st weaker than OPIS assessment on Thursday of $6.01/st.

 

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com;

--Editing by Mayra Cruz, mcruz@opisnet.com

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Hydrogen-Powered Aircraft Prototype Ready by 2028, Says EU Clean Sky Study

June 23, 2020

A short-haul hydrogen propulsion prototype aircraft could be available in eight years, according to a joint-study commissioned by European research program Clean Sky.

The study, Hydrogen-powered Aviation, was conducted with 24 aviation companies and other organisations. The findings estimate the first hydrogen propulsion aircraft prototype could be ready by 2028, and ready for commercial deployment between 2030 and 2035.

Hydrogen-powered aircraft will add an extra $20 per person on a short-range flight, while reducing climate impact by 50 to 90%, according to the study.

Hydrogen propulsion is best suited for commuter, regional, short-range, and medium-range aircraft, the study suggests.

Hydrogen propulsion technology could power as much as 40% of all aircraft by 2050, according to the study. Synfuel, which is carbon and green hydrogen (hydrogen produced by using sustainable energy), as well as biofuel, or sustainable aviation fuel, would account for the remaining 60%. All technologies would require significant policy support from the European Union and local governments, the Clean Sky study points out.

Synfuels are the cheapest to produce out of the three fuels, but hydrogen propulsion technology combined with fuel cells would yield the biggest reduction in carbon dioxide emissions. However, the liquid hydrogen tanks needed to power the aircraft are around four times bigger than the kerosene-jet fuel tanks currently used in aircraft designs.

"The main challenge to introducing new propulsion technologies is the additional weight and volume of the alternatives relative to conventional jet fuel," IHS Markit downstream consulting executive director Daniel Evans told OPIS. "We were less optimistic about the ability to reduce the size and weight of the tanks than the Clean Sky study. It would be unlikely to be economically competitive with a conventionally-fueled aircraft even when a carbon price doubles."

The inability to reduce hydrogen tank size would render the future aircraft uneconomical, according to Evans. Procedures for safely storing liquid hydrogen onboard an aircraft, while subject to a wide range of temperatures and pressures, present other challenges, he said.

IHS Markit forecasts that most large, commercial aircraft will be fueled by traditional hydrocarbons with some SAF blended in by 2050. SAF will account for up to 15.5% of total aviation fuel supplies in 2050. The European Union aims to de-carbonise the aviation sector by 2050 and is planning to launch its hydrogen strategy in July.

 

--Reporting by Selene Law, selene.law@ihsmarkit.com;

--Editing by Rob Sheridan, rob.sheridan@ihsmarkit.com

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E.U. Carbon Prices Steady After Breaking 200-Day Moving Average

June 19, 2020

E.U. carbon prices are steady Friday after breaking through the 200-day moving average price on Thursday, which could signal a long-term upward trend, according to Poland's National Centre for Emissions Management.

The ICE E.U. Allowances December 2020 futures contract was trading at 24.44 euro/mt at 1.45pm U.K. time Friday, close to Thursday settle price of 24.47 euro/mt, up 1.72 euro/mt from Wednesday.

The 200-day moving average was 23.21 euro/mt before Thursday's rally, technical trading house Wattiox said.

Robert Jeszke from Poland's National Centre for Emissions Management (KOBiZE) said "a technical brake could bring the beginning of the long-term upward trend on the carbon market."

However, he expects volatility going forward.

"In the pandemic, we should be very cautious in forecasting EUA price levels because market sentiments could change immediately (we can observe high EUA volatility and speculation) and not forget also about fundamentals aspects such us a large drop in E.U. ETS emissions this year caused by pandemic and the greater supply of EUA in 2020 than in the previous year (e.g. restart UK auction)," he noted.

EUAs are the main unit of trade in the E.U. emission trading system (ETS).

The rally also came ahead of the E.U. council meeting on Friday to discuss the EU recovery package from coronavirus 2019 disease (COVID-19), of which the EU Emissions Trading System is a "key underpinning," sources said.

The proposals for the recovery package were presented by the European Commission on 27 May. Options in the package include "possible extension "of the E.U. ETS to the maritime and aviation sectors, and a carbon border adjustment mechanism.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Patrick Gourlay, Patrick.gourlay@ihsmarkit.com

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Calif. Senate Votes for Cap-and-Trade Program Review, Seeks Improvements

June 16, 2020

The California Cap-and-Trade Program must go under review to "consider improvements" like raising the carbon allowance auction reserve price (ARP) and implementing rule-based approaches to adjust allowance oversupply, according 2020-2021 fiscal state budget document passed by the Senate Monday night.

"This comes as California legislatures look to adapt the program to remove the oversupply in the market, as the economic and social impact of the [coronavirus disease 2019] COVID-19 pandemic continues to unfold," ClearBlue Markets said in a note Tuesday.

SB-74, the name of the Senate bill, directs the California Air Resources Board (CARB) to make regulatory changes to the emissions-reduction trading scheme by March 2021. These changes include annual banking metrics to measure allowances and a method to calculate total unused compliance instruments, the budget document showed.

According to ClearBlue Markets, updates to the California Cap-and-Trade Program could be implemented as early as 2022.

"While the CARB has to date been reluctant to implement new supply side measures considering that there were already mechanisms in place to remove the oversupply ... it is possible that the current economic crisis has pressured them to act," ClearBlue's note said.

In March, as the pandemic escalated, California Carbon Allowance (CCAs) secondary market prices unexpectedly fell more than $6/mt to near $12/mt -- a level last seen at the program's inception in 2013. Market participants at the time said CCA prices slid in line with prices in the greater energy complex and on the expectations of lower emissions during stay-at-home orders.

On Tuesday, CCA current year prompt prices traded as high as $16.70/mt, 2cts/mt stronger than the program's 2020 quarterly auction reserve price of $16.88/mt.

Overall, regulatory updates "would be bullish for CCA prices in the future, but with the current depressed demand and the last failed auction, prices are expected to stay close to the floor price, at least for the coming year," ClearBlue added.

The California-Quebec joint cap-and-trade auction on May 20 sold just 37% of the 57.54 million carbon allowances on offer and settled at the floor price of $16.68/mt. Auction No. 23 was the sixth undersubscribed quarterly auction in program's history. The last time an auction failed to sell out was in Q1 2017, according to OPIS analysis of CARB data.

A CARB spokeswoman did not immediately comment.

The budget must still be signed into law by Calif. Gov. Gavin Newsom (D). It was passed by the California State Assembly earlier Monday.

Typically, the governor has 12 working days to sign the budget bill.

 

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com;

--Editing by Nandita Lal, Nandita.lal@ihsmarkit.com

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CARB Launches CCO Invalidation Investigation for Wisconsin Offset Project

June 9, 2020

The California Air Resources Board (CARB) is considering invalidating 15,002 California Carbon Offsets (CCOs) produced from a Wisconsin dairy farm, according to an investigation announcement.

The Central Sands Dairy in Nekoosa, Wis., may have failed to comply with permit requirements under Wisconsin's Pollutant Discharge Elimination System, CARB said Friday in a release.

During the investigation, a portion of the offset credits generated from the project have been blocked "until a final determination is made," CARB said.

The offsets in question were issued by CARB with an eight-year invalidation period under the California Cap-and-Trade Program.

In the associated California offsets market, the units are categorized as CCO-8, which trade along with CCO-3 (three-year invalidation) offsets and Golden (validated) offsets.

Each CCO equals 1 metric ton of CO2.

An offset invalidation investigation is a rare event for CARB.

Since the start of the cap-and-trade program in 2012, CARB has investigated four offset projects, including the Wisconsin dairy farm.

To date, the agency has invalidated offsets from two projects.

In January, CARB invalidated 18,867 offset credits created by Scenic View Dairy in Michigan for not following the Michigan Department of Environment, Great Lakes and Energy health and safety rules for a methane destruction project.

In 2014, CARB invalidated 88,955 offset credits from the Clean Harbors Incineration Facility in Arkansas for not adhering to federal guidelines on waste disposal.

The current investigation will last 25 days. CARB then has 30 days to make a decision.

California offset allowances are generated by projects in the private sector and sold for compliance obligations under California's Cap-and-Trade Program.

One allowance equals 1 metric ton of CO2. Under the program, offset producers are required to monitor, report and verify GHG reductions for each project.

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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UK Emissions Trading System (ETS) Link to Forthcoming EU ETS an 'Urgent Priority': IETA

June 9, 2020

The International Emissions Trading Association (IETA) wants the U.K. to make linking its carbon Emissions Trading System (ETS) with the forthcoming EU ETS an "urgent priority," according to a letter dated Tuesday.

In the letter to U.K. Secretary of State for Business, Energy and Industrial Strategy Alok Sharma, IETA said that the linkage would guarantee that the U.K.

ETS, set to begin in 2021, would not suffer potential headwinds such as lack of liquidity, price volatility or competitive distortions.

Switzerland's ETS linked with the EU ETS at the start of 2020 and IETA said that linkage can act as a template for a U.K. one and the EU one.

However, linking of the two programs could be drawn out like those between Switzerland and the EU, which lasted a decade, Dr. Brendan Moore, senior researcher at the Tyndall Centre for Climate Change Research, told OPIS last week.

"Switzerland, for example, was forced to be a policy taker when it negotiated linking with the EU ETS," Moore said. To align with the EU program, the Swiss ETS had to expand to include power generation."

These views were echoed by Coralie Laurencin, director at IHS Markit, the parent company of OPIS. Laurencin said Tuesday that a U.K. ETS linked to the EU ETS would be "the best outcome for U.K. participants and EU participants but finalising the details could take some time."

The U.K. announced last week its intention to establish an ETS -- either standalone or linked to the EU ETS, starting 2021. It will remain part of the EU ETS until the end of this year, in line with its Brexit transition period.

The U.K. government said that if a UK ETS cannot be implemented, a carbon emissions tax will serve as an alternative, details of which will be published later this year.

The ICE EU Allowances December 2020 futures contract settled at 22.71 euro/mt Monday, down 0.53/mt on Friday. EUAs are the main unit of trade for the EU ETS.

IETA is a non-profit business organization created in June 1999 to establish a functional international framework for trading in greenhouse gas emission reductions.

The EU ETS covers about 11,500 installations. The EU ETS review is due in June 2021, which will include a review of its policy instruments like the Market Stability Reserve (MSR). It could also lead to a more ambitious 2030 emission reduction goal, reduction of free allowances to airlines overtime, and extension of the EU ETS to the maritime, according IETA's carbon market brief published last week.

 

--Reporting by Nandita Lal, nandita.lal@ihsmarkit.com

--Editing by Bridget Hunsucker, Bridget.Hunsucker@ihsmarkit.com

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EU Carbon Prices Returning to Pre-Pandemic Levels as Lockdowns Lift: Bank

June 8, 2020

EU Emissions Trading System (ETS) prices are generally recovering toward pre-coronavirus disease 2019 (COVID-19) levels as lockdowns lift and demand for industrial goods and electricity rises, a senior economist with Dutch bank ABN AMRO said Monday.

The benchmark ICE EU Allowances December 2020 futures contract hit a 2020 high of 25.61 euros/mt on Feb. 20, before falling sharply as COVID-19 lockdowns stagnated demand. On March 18, prices fell to a 1.5-year low of 15.30 euros/mt.

On Monday, the contract settled at $22.71 euros/mt, down slightly from $23.24 euros/mt on Friday.

Hans van Cleef said that prices are also being supported by expectations of a sharper emissions reduction goal in 2030, which means the Market Stability Reserve (MSR) for the EU ETS will be tightened.

The MSR is an EU ETS policy instrument which removes surplus allowances from the market. Between 2019 and 2023, some 24% of the carbon surplus will be placed in the MSR instead of the previous volume of 12%. The policy instrument will be reviewed in June 2021.

The European Commission intends to increase the EU's 2030 target for greenhouse gas emission reductions to at least 50% and towards 55% compared to 1990 levels, according to its website. EU's current goal is to cut GHG by at least 40%. The 2030 Climate Target Plan is under public consultation and a formal legislative proposal on the EU's 2030 goal will be tabled in September.

In contrast to van Cleef's price analysis, Coralie Laurencin, director at IHS Markit, expects EUA prices to soften this year. IHS Markit expects EUA prices to average 18.70 euros/mt for the rest of 2020.

"Coal to gas fuel switching [in power plants] will occur even if EUA prices fall dramatically from today's level. We do agree that in the longer term the fundamentals will tighten, and we have a higher price outlook in our forecasts, but there is no need for 2020 prices to be so high," she said.

Carbon prices favor gas versus coal production as gas is less carbon intensive.

IHS Markit forecasts prices to rise to 26.4 euros/mt by 2023. IHS Markit is the parent company of OPIS.

 

--Reporting by Nandita Lal, nandita.lal@ihsmarkit.com;

--Editing by Bridget Hunsucker, Bridget.Hunsucker@ihsmarkit.com

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Alberta Carbon Trunk Line Opens to Capture, Transport 14.6MN Tons/Yr CO2

June 4, 2020

The Alberta Carbon Trunk Line, a carbon capture, utilization and storage project, is now operational in Canada after a decade of planning and production, Wolf Midstream said this week.

"This critical piece of infrastructure supports significant future emissions solutions, new utilization pathways and innovation in the carbon capture space.

The future of energy and a lower carbon economy relies on key infrastructure like the ACTL," Wolf Midstream's Carbon Business Unit President Jeff Pearson said in a release Tuesday.

The project can transport 14.6 million tons of industrial carbon dioxide (CO2) a year along a 240-kilometer pipeline. The CO2 will be used in enhanced oil recovery before being permanently stored, the release said.

The trunk line project was conceived in 2010 and received regulatory approval the following year. The federal and provincial government provided $63.2 million and $495 million, respectively, according to the website of Enhance Energy, one of the project's founding partners.

In addition to Wolf Midstream and Enhance Energy, the trunk line is also owned by Nutrien and the North West Redwater Partnership.

CO2 will be captured at the North West Redwater Partnership Sturgeon Refinery Edmonton and the Nutrien Redwater Fertilizer Facility, both located northwest of Edmonton.

Captured emissions will move south to a storage facility in Clive, Alberta, where it will be stored about two kilometers in the ground, according to the project's website.

"We are putting CO2 to use," Enhance Energy CEO Kevin Jabusch in the release.

"We permanently keep CO2 out of the environment, while producing low-carbon energy. Not only are we reinvigorating our rural energy economy at a time when it is needed most, but we are playing a key role in advancing a sustainable solution to global energy requirements."

 

--Reporting by Mayra Cruz, mcruz@opisnet.com

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Nodal, IncubEx Launch First Oregon Clean Fuels Program Futures Contract

June 2, 2020

Nodal Exchange and IncubEx Tuesday launched the first Oregon Clean Fuels Program (CFP) futures contracts to physically deliver credits issued under the state's low carbon fuel standard for the transportation sector.

"We're expecting to see growth in this contract over the longer term," IncubEx Managing Director Nathan Clark said after the launch. "The Oregon CFP market is much smaller than the [California Low Carbon Fuel Standard] market, yet many of the largest obligated parties are the same as in those in California."

The partners launched the first physically delivered California Low Carbon Fuel Standard to the Nodal Exchange at the start of 2020.

Many of the refiners and large fuel distributor California participants are "natural hedgers" in the Oregon market, Clark said.

"Overall, we're optimistic about both California LCFS and Oregon CFP futures and options offerings, but like any new contracts, they take some time to grow," he said.

The CFP futures and associated options launched to Nodal two weeks after the Oregon Department of Environmental Quality (DEQ) unveiled preliminary work plans to double CFP greenhouse gas (GHG) reductions to 20% by 2030 and 25% by 2035.

The work is being done to carry out Oregon Gov. Kate Brown's March executive order to ramp up the efforts to reduce greenhouse gas (GHG) emissions by creating a state-wide cap-and trade program and extend requirements for the CFP.

Trade activity for credits under the Oregon CFP has generally been relatively sluggish and choppy since OPIS began assessing the markets in April 2017.

Oregon DEQ data recently showed that the program's system had 52 credit transfers for 315,371 credits during the first four months of 2020.

For the same period in 2019, there were 85 transfers for 278,941 credits.

The average price increased year over year to $142.85/credit from $133.79/credit.

OPIS assessed the Oregon credits at $130/credit on Monday, up $15/credit from the month-ago level.

The Oregon CFP contract was one of several new North American environmental markets launched Tuesday to Nodal Exchange.

Three renewable energy certificates (RECs) contracts including Massachusetts Class II Waste to Energy, Massachusetts Alternative Energy Certificates and Pennsylvania Tier II Alternative Energy Certificates also began service.

Each of the RECs contracts contain vintages from 2019 to 2025, according to the release. Also Tuesday, RECs vintages were extended to 2030 for 12 previously existing contracts.

The extended vintages resulted from customer requests and to keep up with individual states that have extended RECs programs to 2030 and beyond, Clark said, noting that the extensions "allow users to hedge further out the curve."

Nodal -- a derivatives exchange -- now offers 67 North American environmental contracts. Partner IncubEx designs and implements financial products in global environmental, reinsurance and related commodity markets.

Trading platform competitor Intercontinental Exchange (ICE) offers RECs contracts and holds futures contracts share for other environmental markets, like California Carbon Allowances (CCA) and the Regional Greenhouse Gas Initiative (RGGI).

 

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com, Jordan Godwin, jgodwin@opisnet.com;

--Editing by Mayra Cruz, mcruz@opisnet.com

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Q2 CCA Auction Undersubscribed, Settles at $16.68/mt: CARB

May 28, 2020

The California-Quebec Cap-and-Trade Program sold 37% of the 57.54 million carbon allowances on offer May 20 during the recent second quarter event, which settled $1.19/mt weaker than the previous auction, California state data showed Thursday.

About 21.17 million Carbon Allowances (CCA) sold during the "current" portion of the event, according to results released by the California Air Resources Board (CARB). Meanwhile, the "advance" auction had 8.68 million allowances available, but 1.76 million allowances were sold.

Both settled at the Auction Price Reserve (APR) of $16.68/mt.

"(The) price was not surprising as everyone expected it to clear at the floor," Clear Blue Markets Managing Director of Markets Nicolas Girod said in an email after the release of the results Thursday."That being said, the cover ratio was a bit higher than we expected and shows that despite (COVID-19) impact on current demand, we are seeing some longer-term opportunistic buying."

During the recent auction, 98.8% of bids for current allowances were made by compliance entities, according to CARB.. Auction No. 23 was the sixth undersubscribed quarterly auction in program's history. The last time an auction failed to sell out was in Q1 2017. There are two other instances of an auction with a bid-to-offer ratio of less than .50, both in 2016.

The .37 Q2 bid-to-offer ratio "was right around where people thought it might be, but any guess would have been a good guess under 50%," one carbon trader said Thursday.

Going into the auction last week, many CCA market participants said the Q2 auction would likely be undersubscribed because of prolonged weakness in the secondary market. In March, CCA secondary market prices fell sharply as a result of coronavirus 2019 (COVID-19) pandemic restrictions. Then, CCAs traded as low as $11.05/mt.

Historically, CCA secondary market prices are stronger than the ARP and the settlement price. Compliance and non-compliance entities under the program can buy CCAs at auction and sell then into the more expensive secondary market. On the day of the Q2 auction, OPIS assessed current year prompt CCAs at $16.69/mt, 1ct/mt stronger than the ARP.

Directly following the release of the auction results midday Thursday, the Intercontinental Exchange V20 CCA June 2020 contract traded seven times at $16.85/mt.

 

-Reporting by Mayra Cruz, mcruz@opisnet.com and Bridget Hunsucker, bhunsucker@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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ICAO Urged Not to Change Rules Measuring Airlines' Emissions in CORSIA

May 26, 2020

The International Civil Aviation Organization (ICAO) should resist lobbying to change the starting year for measuring the carbon pollution of airlines despite the slump in flying amid the coronavirus disease 2019 (COVID-19) pandemic, an open letter from trading houses and other market participants urged Monday.

ICAO is set to launch CORSIA, the acronym for Carbon Offsetting and Reduction Scheme for International Aviation, next year in a bid to ensure carbon-neutral growth in global aviation emissions by making airlines buy offset credits and use sustainable aviation fuels.

Airline trade bodies, such as the International Airlines Trading Association (IATA), have been lobbying to change the starting year for measuring the industry's carbon emissions from 2020 because the lockdowns and travel restrictions from COVID-19 have grounded fleets of planes.

Keeping 2020 in the calculation will lead to "unusually high" offsetting requirements under CORSIA for airlines, warns IATA.

But the open letter from market participants warns an "ad hoc rule rewrite could damage investor and public confidence in the program."

"Changing the rules and thereby eliminating three to five years of offset obligations would damage the credibility and long-term stability of CORSIA," said the letter's signatories, including consultancy and trading company Natural Capital Partners, certification program Gold Standard and trader EnKing.

The International Civil Aviation Organization (ICAO), the U.N. agency that is creating CORSIA, is expected to decide on the baseline year for the scheme during a council session on June 6-26.

CORSIA is scheduled to have three phases, with the pilot phase starting next year. From 2021 until 2026, only flights between states that volunteer to participate in the pilot and/or first phase will be subject to offsetting requirements. Over 80 countries, including the EU member states, have signed up for the voluntary phase.

All international flights will be subject to offsetting requirements from 2027.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Paddy Gourlay, Patrick.gourlay@ihsmarkit.com

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Analysis: California Cap and Trade Q2 Auction Likely to be Undersubscribed

May 20, 2020

After a two-month upward hike, California Carbon Allowance (CCA) current year prompt allowances finally surpassed the state's cap-and-trade program's auction reserve price (ARP) of $16.68/mt, just as the much-anticipated second quarter event took place Wednesday.

For months, carbon industry participants pondered if secondary market prices would rally to the auction floor price after crashing by $6.50/mt in March - when fears of the Coronavirus 2019 (COVID-19) pandemic escalated. CCA secondary prices edged higher during April and May as the market recovered, but questions remained as to if the Q2 auction would attract enough buyers for the 57.54 million current allowances on offer.

"It's probably still cheaper to buy and take delivery [in the secondary market] versus bidding at auction," one CCA trader said last week, when the CCA prompt price traded within a few cents below the ARP level.

At about noon CST, the V20 CCA for prompt delivery was bid at $16.69/mt on the Intercontinental Exchange. OPIS on Tuesday assessed the price at $16.68/mt, based on a bid of $16.67/mt and an offer of $16.69/mt.

Historically, secondary market CCA prices are stronger than the quarterly auction floor price and the settlement. Compliance and non-compliance entities under the cap-and-trade program sometimes buy CCAs at auction and profit buy selling into the more expensive secondary market.

The Q1 auction on Feb. 19 sold out of 57.09 million "Current Auction" allowances and settled at $17.87/mt -- 1ct/mt below OPIS' CCA current year prompt price assessment that day. Both the settlement and assessment were about $1/mt more than the ARP of $16.68/mt.

The CCA quarterly auctions are separated into two events - a Current Auction where current year or older vintages are sold and an Advance Auction with future vintages on offer.

Another carbon trader said Tuesday that the Q2 auction would likely settle at the ARP and would "fail to sell out."

Analyst firm Clearblue Markets said in a note Monday that the auction could be undersold due to a lack of demand, but CCA prices will continue to increase in the long term.

"While financials continue to limit their selling pressure, we will see prices remain near the floor for the time being," according to the note." Unsold auctions could lead to the removal of allowances from the available supply, which is bullish in the longer run."

The auction Wednesday is No. 23 for the cap-and-trade program, which began in November 2014. Since then, just five auctions were undersold during the Current Auction event, according to the California Air Resources Board.

The last time a CCA auction failed to sell out was on Feb. 22, 2017.There was also secondary price weakness before that Q1 event. That day, OPIS assessed the current year prompt price at $13.55/mt, 1cts/mt weaker than the 2017 ARP of $13.56/mt.

In 2016, all four quarterly "Current Auction" events were also undersubscribed.

On the day of each, the differential between OPIS CCA current year prompt assessment and the 2016 ARP of $12.73/mt varied at plus 2cts/mt for Q1, minus 32cts/mt for Q2, plus 5cts/mt for Q3 and plus 15cts/mt for Q4.

CARB is scheduled to release the auction results next week.

 

- Reporting by Mayra Cruz, mcruz@opisnet.com and Bridget Hunsucker, bhunsucker@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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Oregon DEQ Submits Plan to Direct More Ambitious GHG-Reduction Projects

May 19, 2020

The Oregon Department of Environmental Quality (DEQ) on Monday unveiled its plans to carry out Gov. Kate Brown's March executive order to ramp up the state's efforts to reduce greenhouse gas (GHG) emissions.

Among the key pillars of the plan -- which include establishing a cap-and-trade program for large stationary sources, transportation fuels and other fuels -- the state plans to expand its Clean Fuels Program (CFP).

Within the preliminary work plan on how the state plans to expand the CFP, DEQ laid out its timeline over the next two years, beginning with a webinar this Friday to discuss the elements of the timeline and process.

DEQ said it will also develop contracts for technical analyses to provide scenarios on how the fuels market could achieve the new targets and evaluate potential areas of new credit generation and assess the impacts of those scenarios on tailpipe emissions and associated changes in social and health costs.

DEQ will also conduct an electricity rulemaking to advance the transportation electrification goals. DEQ said it aims to establish a rules advisory committee in the second half of this year, with consideration of proposed rules by March 2021.

Brown's order in March came after the state's 2020 legislative session ended without a vote on a GHG cap-and-trade bill. The Legislature was unable to vote after Senate and House Republicans fled the capital for the second straight year to block action on the program.

The executive order updates the existing state carbon emissions goals and calls for a 45% reduction in GHG emissions from 1990 levels by 2035 and an 80% reduction from 1990 levels by 2050. The state had in place a 10% reduction by 2020 and had targeted a 75% cut by 2050.

The order also doubles GHG reductions under the CFP to 20% by 2030 and 25% by 2035. That's up from a 10% cut in the carbon intensity (CI) of motor fuels from 2015 levels by 2025. DEQ said it aims to make the new targets effective at the start of 2023.

 

--Reporting by Jordan Godwin, jgodwin@opisnet.com;

--Editing by Aaron Alford, aalford@opisnet.com

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Net-Zero Pledges to Drive Carbon Offset Demand Instead of CORSIA: Bank

May 14, 2020

"Net-zero" pledges from the food and beverage, technology, and oil and gas industries will drive demand for carbon offsets for the next three years, rather than airlines, German investment bank Berenberg said in a note Wednesday.

The slump in flying and the long recovery ahead will supress the global aviation market's demand for carbon credits to meet compliance obligations from the United Nation's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) scheme.

CORSIA aims for carbon neutral growth in global aviation emissions by making airlines buy offset credits and use sustainable aviation fuels.

The carbon neutral growth will be measured versus a baseline case of emissions over 2019 and 2020.

"Without carbon offsets, it is impossible to achieve "net-zero" long-term commitments for a rising number of companies, cities and countries," the bank said, adding that they expect the "quality of offsets will improve" as publicly listed companies such as Shell and BP invest in them.

The global carbon offset market is valued at $0.6 billion compared to the much larger global carbon permit market's value of $44 billion, Berenberg added.

In Europe, EU Emissions Trading System (EU ETS), certified emission reductions (CERs) can be used for compliance subject to a limited quota till the end of this year (phase 3 of the EU ETS).

CERs are carbon offsets generated by Kyoto Protocol's Clean Development Mechanism (CDM) projects.

The ICE CER December 2020 futures contract settled at 0.24 euro/mt on Tuesday.

Meanwhile, EU Allowances, which allow the bearer to emit one tonne of carbon dioxide (carbon permits), are the main unit under the EU ETS. The ICE EUA December 2020 futures contract settled at 18.55 euros/mt on Tuesday.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Paddy Gourlay, Patrick.gourlay@ihsmarkit.com

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CORSIA Could Fail Without EU Backing: EU Transport Commissioner

May 12, 2020

The UN Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) could fall to pieces if the EU were to turn its back on it, Adina Ioana Valean, European Commissioner for transport for the EU said on Monday.

CORSIA is a scheme by the United Nations (UN) Aviation body International Civil Aviation Organization's (ICAO), aiming for aviation carbon neutrality via carbon offsets and sustainable aviation fuel, setting the 2019 and 2020 average as the baseline case for emissions.

"The EU walking away from CORSIA will provide the pretext for major global players to bury CORSIA and do nothing to reduce international emissions. It could set international negotiations in ICAO back by many years," she told the Committee on Environment, Public Health and Food Safety, European Parliament on Monday.

Valean urged the EU member states to be at forefront in the CORSIA implementation to improve its standards for the review in 2022. CORSIA would complement the European Emissions Trading System for airlines rather than replace it, the commissioner noted.

"A full scope of the EU ETS on the aviation sector would cause a worldwide boycott of the EU. CORSIA is the only realistic option to tackle carbon emissions from international aviation," Valean said.

The transport commissioner said that the European Commission is about to start an impact assessment to analyse different options to implement CORSIA in the European Union (EU), but it is too early to tell which option the commission will choose.

Some of the committee members are sceptical of the scheme. Committee chair French MEP Pascal Canfin has called CORSIA ineffective and lacking credibility in tackling global emissions.

The EU included airlines in the EU ETS in 2012. However, in April 2013 the EU gave in to external pressure and temporarily stopped enforcing the EU law through the so called 'stop the clock' derogation, to give ICAO another chance to take action to stem growing emissions from the aviation.

Currently, the EU ETS only covers flights within the European Economic Area (EEA) and Switzerland.

CORSIA in the European Union will be implemented through an amendment to the EU ETS directive based on the findings of the impact assessment, Adina Ioana Valean said.

CORSIA is scheduled to have three phases, with the pilot phase starting next year. From 2021 until 2026, only flights between states that volunteer to participate in the pilot and/or first phase will be subject to offsetting requirements. Over 80 countries, including the EU member states, have signed up for the voluntary phase.

All international flights will be subject to offsetting requirements from 2027.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--editing by Selene Law, selene.law@ihsmarkit.com

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Pa. Governor Denies Request to Retract Executive Order to Link to RGGI

May 8, 2020

Pennsylvania Gov. Tom Wolf (D) won't back down from directing the state to join the regional cap-and-trade program known as RGGI, though a group of Republican lawmakers asked for reconsideration due to the downturn in the state's economy, the Pennsylvania Department of Environmental Protection (DEP) said Friday.

Any resulting regulation would be financially devastating to residents as unemployment claims increase due to coronavirus disease 2019 (COVID-19) lockdown measures, according to an April 21 letter drafted by the 18 Republican senators.

Regarding the letter, "the administration is not considering suspending the implementation of RGGI in Pennsylvania," said DEP spokesperson Neil Shader.

In the letter, the senators requested Wolf rescind an executive order issued in October 2019, in which the DEP was tasked with drafting a market-based carbon reduction regulation for power facilities no later than July. The proposed regulation would then need approval by the Pennsylvania Environmental Quality Board (EQB) and a public comment period.

Pennsylvania would become RGGI's 11th member state, joining Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont and New Jersey, which withdrew in 2012 and rejoined in January.

Participating member states target carbon reductions from power plants by lowering their emissions cap every year.

Pennsylvania is targeting January 2022 to link to RGGI, Shader said.

Shader said the regulatory review process and public comment period has not begun since a draft of proposed rules to join RGGI has not yet been adopted by the EQB. He also added that a draft of the regulation has been available on the DEP website since April.

According to the letter, public outreach efforts have also stopped while social distancing has been in effect.

"Communities, such as those in Western Pa. and other parts of the state with fossil fuel plants, are already suffering under the effects of the pandemic.

These very same communities are the ones to suffer exponentially more if a carbon dioxide trading program proceeds in Pennsylvania," the letter said.

After the Wolf administration told news sources Thursday of the decision to stay in support of joining RGGI news sources, RGGI secondary market prices rallied 9cts/st. On Thursday, OPIS assessed the RGGI prompt price at $5.88/st.

Trade slowed Friday and there were no deals done.

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Lack of Shareholder Activism Preventing Net Zero Goals in US: Investor

May 5, 2020

U.S. oil majors are not under pressure to cut emissions in the same way as European oil peers are because of a lack of shareholder activism, Edward Mason, Head of Responsible Investment for the Church of England said Tuesday.

On Tuesday, Total joined its European peers BP, Shell and Repsol to pledge net zero emission goals by 2050.

"There was a leading domestic asset manager involved in all the European oil & gas net zero commitments. For BP it was LGIM. For Shell it was Robeco. For Total it was BNP Paribas. Sadly, there are still no leading U.S. asset managers really pushing Exxon & Chevron forward," Mason said.

Total said on Tuesday that it will cut its worldwide operations emissions (scope 1, 2) to net zero by 2050 or sooner. It will also cut its production and energy products emissions (scope 1, 2, 3) in Europe to net zero by 2050 or sooner.

According to the Greenhouse Gas Protocol, scope 3 emissions are all indirect emissions that occur in the value chain of a company. This includes both upstream and downstream, but not indirect emissions from the generation of purchased energy, which are considered scope 2 emissions. Scope 1 emissions are direct emissions from owned or controlled sources.

The French energy giant said that it will increase the proportion of its Capex dedicated to low-carbon electricity from 10% now to 20% by 2030 or sooner to achieve this goal. Total said it has targeted 25 GW of renewable generation gross capacity by 2025, with plans to further expand this.

"Today's joint statement with Total means all of Europe's oil and gas majors are now working towards achieving net zero ambitions," Climate Action 100+, the investor initiative, said in a statement Tuesday.

Climate Action 100+ represents interests of 450 investors with more than $40 trillion in assets collectively to bring down emissions of global corporate emitters.

BNP Paribas Asset Management and EOS at Federated Hermes were the lead institutions undertaking engagement with Total as signatories to the initiative, the statement said.

The Church Commissioners for England and New York State Common Retirement Fund wrote an open letter to ExxonMobil shareholders in advance of the ExxonMobil annual shareholders' meeting, which takes place May 27 in Dallas, Texas.

The open letter urged the shareholders of Exxon to join the two institutions, who lead engagement with ExxonMobil as part of the Climate Action 100+ initiative.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Lisa Street, lstreet@opisnet.com

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Business Airline Association Calls for CORSIA Baseline Change to Nix 2020

April 29, 2020

The International Business Aviation Council (IBAC) is urging the UN's International Civil Aviation Organization (ICAO) to adjust the emissions baseline for the upcoming global carbon reduction program CORSIA "to take into account the unprecedented effects of COVID-19 on worldwide air travel."

The trade association said in a release Monday that ICAO should use only 2019 emissions levels as the baseline for the Carbon Offsetting and Reduction Scheme for International Aviation instead of the current rule which will take a baseline of the average level of emissions between 2019 and 2020.

ICAO's 36-State Governing Council will discuss "possible solutions to assure that the overall integrity and objectives of the CORSIA program aren't diminished due to COVID-19 traffic impacts" at its 220th session from May 4-22, an ICAO spokesman told OPIS Wednesday.

CORSIA was designed to work under the principle of using carbon credits and sustainable aviation fuel to offset growth in emissions. Some industry participants have argued that a baseline of average emissions between 2019 and 2020 could set the cap too low if aviation demand snaps back next year.

"Given the exceptional circumstances caused by the COVID-19 pandemic, IBAC is concerned that a baseline average taken from 2019 and 2020 will reflect a highly anomalous circumstance inflicted on international aviation," Kurt Edwards, Director General of IBAC, said.

The International Air Transport Association (IATA) has already requested ICAO to make the rule change earlier in April.

CORSIA is scheduled to have three phases, with the pilot phase starting next year in 2021. From 2021 until 2026, only flights between states that volunteer to participate in the pilot and/or first phase will be subject to offsetting requirements.

From 2027, all international flights will be subject to offsetting requirements.

ICAO announced on April 6 that Benin was the latest nation state to join the CORSIA pilot scheme, bringing the tally to 83 states.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Bridget Hunsucker, Bridget.Hunsucker@ihsmarkit.com

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France Seeks Floor for EU Carbon Allowance Price Amid Falling Energy Prices

April 28, 2020

The French government wants a carbon allowance floor price for the EU Emissions Trading System (ETS) to preserve the "true environmental cost" of emissions amid falling prices of oil, gas and coal, according to a recently published federal document.

The position paper was made public Monday by Brussels-based newswire Euractiv.

It circulated to the other EU member states ahead of a meeting Tuesday of energy minsters to discuss the impact of the coronavirus disease 2019 (COVID-19) on the energy sector.

During the informal meeting, the "issue of carbon prices was raised by members of some delegations, but the discussion on this matter didn't go deep," Croatia Minister of Environment and Energy Tomislav Coric said Tuesday during a press conference.

The EU ETS is made up of the EU-28, as well as Iceland, Liechtenstein and Norway. U.K. remains part of the EU ETS until the end of this year and plans for a U.K. ETS or U.K. CO2 tax starting next year. France previously called for an EU ETS carbon floor price in 2018.

"France perseverance to have a carbon floor is back mainly due to the collapse of oil prices," Máximo Miccinilli, energy director at Brussels-based consultancy CERRE, told OPIS Tuesday. "I am not sure Germany will change its mind and accept it at an EU level, but this may well result in more EU countries to try national carbon floors such as the U.K. and more recently The Netherlands."

Miccinilli added that there was a "risk to move into a hybrid system if the EU does not find an agreement to stabilise the system," meaning that only some members states would have a price floor.

The U.K. government has a carbon price floor called the Carbon Price Support (CPS), frozen at 18 pounds per metric ton until 2022. It was introduced in 2013.

Additionally, the Netherlands plans in to introduce next year a carbon tax on industries already covered under the EU ETS.

"The government has previously announced its intention to introduce a CO2 tax. It follows from the Climate Agreement that this tax will also apply to companies participating in the ETS. The content and form of the CO2 tax is not yet known, as there is no concrete bill yet. The Climate Agreement envisaged the introduction of the CO2 tax in 2021," Jan Reinier van Angeren, a lawyer at Dutch law firm Stibbe, told OPIS last week.

Jos Cozijnsen, carbon analyst at the Dutch Consultancy Climate Neutral Group, told OPIS Tuesday that the additional tax on ETS-compliant industries in the Netherlands is "unnecessary" as an EUA price of 18-24 euros/mt was "sustainably" achieving its objective of reducing coal-fired power in the EU.

The ICE EUA December 2020 futures contract has traded between a high of 30.34 euros/ton and a low of 14.34 euros/ton in the last 52 weeks. On Tuesday, it settled at 20.21 euros/mt. EUAs are the main trading units in the EU ETS.

According to a note by NGO Ember Climate earlier in April, coal-power emissions in the EU ETS were down by 43% since 2013. Coal-power generation is still responsible for 30% of EU ETS emissions.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Bridget Hunsucker, bridget.hunsucker@ihsmarkit.com

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Aviation's Decarbonization Scheme CORSIA Under Threat From COVID-19: Analyst

April 20, 2020

The highly anticipated Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is under threat as cash-strapped airlines battle to rebuild their businesses because of coronavirus 2019 disease (COVID-19), an IHS Market analyst said Monday.

Associate Director of Oil and Downstream Ronan Graham said in a recent note the "catastrophic decline in demand for air travel in 2020" will scale back the industry's decarbonization drive as they "battle for survival."

The post-2020 aviation industry will encompass a "smaller set of well-capitalized airlines, likely offering fewer routes at a higher cost" and that "fear of contagion will persist" keeping demand below 2019 levels, Graham said.

Regulated by the United Nations' International Civil Aviation Organization (ICAO), CORSIA was designed to work under the principle of using carbon credits and sustainable aviation fuel to offset the growth in emissions using an average of 2019 and 2020 aviation emissions as a target baseline.

Early this month, the International Air Transport Association (IATA) -- which has long championed the scheme -- began voicing concerns about CORSIA and the use of 2020 in the baseline average.

On April 3, IATA urged ICAO to change the CORSIA emissions baseline to only 2019 amid an "unparalleled" drop in air traffic this year. It also said that "current [state] volunteers may reconsider their earlier decisions" to take part in the pilot scheme of CORSIA.

CORSIA is scheduled to have three phases with the pilot phase starting next year in 2021.

Louis Redshaw, carbon trader at Redshaw Advisors, recently told OPIS that the potential change of baseline emissions to 2019 would wipe out demand for carbon credits altogether "in the planned market if airline emissions remain below 2019 levels through 2023." He added that it would put business plans at risk in the offsetting market.

ICAO has not said whether it will consider IATA's proposal and has not responded to OPIS' request for a comment.

Graham said that demand for both carbon credits and sustainable aviation fuels (SAF) is expected to decline due to COVID-19.

"Investment in sustainable aviation fuels, often led by the progressively minded airlines themselves, is likely to take a short-term hit. In the next couple of years, most airlines will have more pressing concerns than seeking to increase their usage of uncompetitively-priced SAF," Graham said.

ICAO announced on April 6 that Benin was the latest nation state to join the CORSIA pilot scheme, bringing the tally to 83 states. It also said that it had been closely following the COVID-19 impact. CORSIA is scheduled to have three phases with the pilot phase starting next year in 2021.

IHS Markit is the parent company of OPIS.

 

--Reporting by Nandita Lal, nlal@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Va. Governor Signs Clean Energy Bills Allowing State to Join RGGI

April 17, 2020

Virginia Governor Ralph Northam (D) signed two clean energy bills on Sunday, paving the way for the state to become the 11th member state of the Regional Greenhouse Gas Initiative (RGGI) and to lower its carbon footprint.

The Clean Energy and Community Flood Preparedness Act allows Virginia to overcome a major hurtle that arose in the state budget Northam approved in 2019, which included a restriction preventing it from joining RGGI.

Democrats claiming majorities in both Virginia's House and Senate after November's election put RGGI back on the table.

"By joining RGGI, Virginia will take part in a proven, market-based program for reducing carbon pollution in a manner that protects consumers," Northam said in a release.

According to a release, the new law would direct the Virginia Department of Environmental Quality to "establish and operate an auction program to sell allowances into a market-based trading program" as part of the RGGI cap-and-trade program.

The funds raised from the auctions would be used to create a low-interest loan program to assist low-income communities that experience damage from constant flooding.

Currently, RGGI members states include Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont as well as New Jersey, which rejoined in January.

According to the RGGI website, the number of carbon dioxide (CO2) allowances per state are defined by each member states' statute or regulations.

The DEQ would also need to adopt regulations that aim to reduce carbon dioxide (CO2) from power plants beginning in 2031 until 2050.

Before being signed, the act was officially passed through both houses of the state general assembly on March 2, 2020 as House Bill 981 and Senate Bill 1027.

Northam also signed Virginia Clean Economy Act on Sunday, which passed the general assembly on March 18, 2020 as House Bill 1526 and Senate Bill 851.

The new law seeks to close old fossil fuel power plants and sets out deadlines for both Dominion Energy Virginia and American Electric Power to get rid of CO2 electricity producing units and replacing them with renewable energy sources, such as solar or wind.

Dominion Energy Virginia will need to abide by the law by 2045 while American Electric Power will need to meet the deadline by 2050.

Both utilities would be required to pay penalties if they do not meet their annual renewable energy targets, which would be then used toward job training and renewable energy programs in low-income communities.

"The bill that the Governor signed will make Virginia the first southern state with a 100 percent clean energy standard. The Act will create thousands of clean energy jobs, make major progress on fighting climate change, and break Virginia's reliance on fossil fuels," said Sen. (D) Jennifer McClellan.

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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New Alliance Calls for 'Green Recovery' Ahead of EU Budget Reworks

April 15, 2020

A new informal alliance of European Union parliamentarians and business leaders, led by France's member of the European Parliament Pascal Canfin, has sounded a clarion call for mobilizing post-pandemic economic recovery funds towards green investments.

The group, which also includes trade unions and think tanks, said in a signed statement, "Indeed, the transition to a climate-neutral economy, the protection of biodiversity and the transformation of agri-food systems have the potential to rapidly deliver jobs, growth and improve the way of life of all citizens worldwide, and to contribute to building more resilient societies."

The alliance in the European parliament has appeared ahead of next week's EU budget discussions. On Wednesday, Charles Michel, president of the European Council, announced that a reworking of the 2021-2027 EU joint budget will take place during a video conference summit on 23 April.

It is hoped that the budget, which is decided jointly by the EU Commission, Council and Parliament, will help raise funds for EU economies after the coronavirus disease 2019 (COVID-19).

The European Commission chief, Ursula von der Leyen, said, "The next European budget has to be the European answer to the corona crisis."

The body has already announced various funding initiatives to help healthcare workers and businesses, including 8 billion pounds to support 100,000 European businesses via the European Fund for Strategic Investments.

The new alliance in support of post-COVID-19 green investments said. "Covid-19 will not make climate change and nature degradation go away. We will not win the fight against Covid-19 without a solid economic response. Let's not oppose those two battles, but let's fight and win them at the same time. By doing so, we will only be stronger together."

The letter comes at a time when the pandemic presents the danger of derailing Europe's planned timeline of green legislation as health and economic concerns take center stage at member nations.

"All European countries will come out of this crisis poorer -- the COVID-19 crisis will lead states to reorganize their priorities, climate may suffer," Coralie Laurencin, Director of European Power and Renewables at IHS Markit, said.

When the crisis hit, the European Commission was in the midst of negotiations to get European Union countries on an energy transition pathway known as the "Green Deal."

The Green Deal aims to achieve net-zero carbon emissions by 2050 and to front-load some of this through to 2030.

The proposed "Climate Law" -- published in early March just days before the death toll in Italy began to rise -- was designed to pass this obligation into law.

The legislative step now looks set to be pushed to the backburner as EU ministers battle out the terms of a bloc-wide economic recovery plan.

"The health crisis will, at best, create a delay in the timing, or at worse, an increase in the likelihood that Europe will aim for a lower target than net zero carbon emissions in 2050," Laurencin said.

 

 --Reporting by Cuckoo James, cjames@opisnet.com;

--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

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Canadian Groups Urge Trudeau to Spend on Clean Energy Now to Ensure Growth

April 13, 2020

Twelve organizations from Canada's clean energy sector are urging the federal government to invest in the clean economy now in hopes it might grow when the coronavirus disease 2019 (COVID-19) pandemic ends.

In a letter last week to Prime Minister Justin Trudeau, the groups asked for continued support of federal climate policies, programs and regulations that send "important market signals" which will lead to "significant job creation and economic growth, in addition to reduction in carbon pollution."

According to research commissioned by Clean Energy Canada, one of the organizations that signed the letter, Canada's clean energy industry could employ more than a half million people by 2030 if federal policies supporting the sector are maintained and enhanced, playing a key role in stimulus and economic recovery efforts.

"Workers and their families are counting on new investments to allow Canadians to go back to work in stable, well-paid jobs," Advanced Biofuels Canada (ABFC) President Ian Thomson said in a statement. "Investors are counting on policy continuity and measures that clearly define 'where the puck is going' in our energy and climate policies."

The groups also underscored clean energy's importance to Canada's Paris Agreement commitment to reduce greenhouse gas (GHG) emissions 30% below 2005 levels by 2030, as well as to the country's goal of achieving net-zero emissions by 2050.

"We must ensure that these unprecedented [stimulus efforts] pave the way to a more sustainable, net-zero emission economy and avoid measures that lock us into a high-carbon future or risk stranded assets," the group told Trudeau.

"We strongly recommend that any relief for the fossil fuel sector and/or fossil fuel reliant platforms (e.g. gasoline-powered vehicles, diesel generators, heating oil furnaces), which are facing long-term structural challenges, must have stringent conditions to focus on workers, decarbonization and diversification, and not impede the transition to a clean energy economy."

The organizations recommended the government act quickly and said they would share specific "shovel-ready projects" to provide near-term economic stimulus.

 

--Reporting by Aaron Alford, aalford@opisnet.com;

--Editing by Jeff Barber, jbarber@opisnet.com

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Mooted CORSIA Rule Could Crash Demand for Carbon Offset Credits: Trader

April 9, 2020

A potential change in the Carbon Offsetting Scheme for International Aviation (CORSIA) rules to using only 2019 as the baseline for historic emissions could lead to fall in demand for offsets, Louis Redshaw, CEO and carbon trader at Redshaw Advisors, told OPIS on Thursday.

CORSIA, which is regulated by the United Nations' International Civil Aviation Organization (ICAO), has been set up to work under the principle of using carbon credits to offset the growth in emissions using the target baseline as an average of 2019 and 2020 aviation emissions.

However, the International Air Transport Association has asked ICAO to change the CORSIA emissions baseline to 2019 only amid an "unparalleled" drop in air traffic this year.

"The rule change could completely wipe out the need to buy any offset credits in the planned market if airline emissions remain below 2019 levels through 2023," Redshaw said, adding that it would put business plans at risk in the offsetting market.

ICAO has not said whether it will consider IATA's proposal specifically and has not responded to OPIS' request for a comment.

"While the COVID-19 impact on aviation traffic has been substantial, it's still not clear what the final results will be on 2020 air traffic. ICAO is closely following the COVID-19 impacts now being seen, and the CORSIA design elements already include the possibility for reviews, safeguards, and, if deemed necessary, adjustments to the scheme," the UN body said in a statement Monday, which was to announce that the West African State of Benin had confirmed its voluntary participation in CORSIA's pilot phase.

ICAO estimated in 2019 that airlines would have to buy about 100 million carbon credits in the initial phase of the scheme.

CORSIA is scheduled to have three phases with the pilot phase starting next year in 2021.

Some sources are skeptical of a change in the CORSIA rules.

"CORSIA will likely continue on its regulatory timeline even as the COVID-19 pandemic's full impact on the global economy and global emissions remains unknown," ClearBlue Markets said in a note earlier this week.

 

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com;

--Editing by Patrick Gourlay, Patrick.gourlay@ihsmarkit.com

 

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Airlines Association Calls for Change in CORSIA Baseline Amid COVID-19

April 3, 2020

International Air Transport Association (IATA) is asking the UN aviation body ICAO to change the CORSIA emissions baseline to 2019 only amid "unparalleled" drop in air traffic this year as a fallout of the coronavirus 2019 disease (COVID-19) pandemic, the association told OPIS on Friday.

The of Carbon Offsetting Scheme for International Aviation (CORSIA), regulated by UN aviation organisation, International Civil Aviation Organization (ICAO), has been set up to work under the principle of using carbon credits to offset the growth in emissions using the target baseline as an average of 2019 and 2020 aviation emissions.

"Originally the baseline on which to measure growth in emissions from 2021 was to be an average of the CO2 emissions produced in 2019 and 2020. However, we believe that using a 2019 baseline rather than an average of the two years in which 2020 will see significantly lower emissions, is a more accurate and sustainable measure for the airlines," Andrew Stevens, spokesman for IATA told OPIS.

Stevens also said that it is "concerned that if the cost impacts of CORSIA are higher than forecast, some states may be less inclined to volunteer for CORSIA."

He added that current volunteers may "reconsider" participating in the pilot and first phase of CORSIA amid COVID-19.

Under CORSIA, the pilot phase (from 2021 through 2023) and first phase (from 2024 through 2026) would only apply to states that have volunteered to participate in them.

The second phase (from 2027 through 2035) would apply to all states that have an individual share of international aviation.

Currently, 83 states have signed up to participate in the voluntary phases for CORSIA beginning in 2021, including the USA and the UK.

IATA is expecting a decision by ICAO on the baseline change by end of June.

Last week, the trade association said that airlines may burn through $61 billion of their cash reserves during the second quarter, while posting a quarterly net loss of $39 billion, driven by a severe decrease in demand.

ICAO was not immediately available for comment.

--Reporting by Nandita Lal, nlal@opisnet.com;

--Editing by Lisa Street, lstreet@opisnet.com

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Trump Administration Unveils New Mileage, CO2 Standards

March 31, 2020

The Trump administration on Tuesday unveiled new vehicle fuel efficiency standards, rolling back stricter Obama-era regulations and setting up a fight with states and environmentalists.

The new Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule tightens corporate average fuel economy (CAFE) and maximum CO2 emissions by 1.5% each year from model years 2021 through 2026, according to an announcement by the U.S.

Environmental Protection Agency. That's significantly less stringent than the standards issued in 2012 by the Obama administration, which called for a 5% annual tightening of standards.

When announcing the new standards, Transportation Secretary Elaine Chao said the move does away with "costly, increasingly unachievable fuel economy and vehicle CO2 emissions standards."

Chao said the average American car is 12 years old, and the new rule would help reduce the price of new vehicles by about $1,000 apiece, encouraging greater turnover in the national passenger vehicle fleet.

"By making newer, safer, and cleaner vehicles more accessible for American families, more lives will be saved and more jobs will be created," she said.

The EPA announcement said the new rules will reduce regulatory costs by as much as $100 billion through model year 2029 and could lead to the purchase of an additional  2.7 million vehicles by 2029.

Under Obama-era rules, average fuel economy for passenger cars and light trucks had to climb to 46.7 miles per gallon by 2026 -- a standard that the Trump administration contended that most manufacturers could not meet. Under the new rules, that standard would be lowered to 40.4 mpg.

Even with the higher mileage, the Trump administration asserts that the new rules will be a net gain for the environment, because they could encourage people to purchase new vehicles and retire old cars and trucks that were significantly less fuel-efficient.

The new regulations also do away with states' ability to set their own mileage standards, providing " regulatory certainty by establishing one set of national fuel economy and CO2 emissions standards for passenger cars and light trucks," the announcement says.

The Trump administration in September revoked a waiver allowing California to set its own emissions standards, sparking an ongoing court fight with the state.

The waiver had allowed California to set stricter air emissions standards, which were then adopted by other states. The administration has said the waiver allowed California to de facto set national standards, since automakers would not build different cars for different regions.

Tuesday's move is likely to spark further legal challenges.

"We're prepared to fight this in court," vowed the Environmental Defense Fund in a posting shortly after the new standards were announced.

"Doesn't this administration have more important things to do right now? Rather than focusing on fighting this global pandemic, it's undermining efforts to address another major health threat," said Gina McCarthy, president and CEO of the Natural Resources Defense Council. "We'll be seeing the Trump administration in court."

U.S. Rep. Debbie Dingell (D-Mich.) said the new rules will ultimately wind up hurting the U.S. auto industry and its efforts to be competitive globally.

"Around the world, countries are setting aggressive standards. If the United States is to be competitive, we have to stay at the forefront of innovation and technology, which will help us transition to the next generation of more fuel efficient vehicles," she said.

But John Bozzella, CEO of the auto industry trade group Alliance for Automotive Innovation, said that "the auto industry has consistently called for year-over-year fuel economy and greenhouse gas improvements that also recognize that the standards originally developed almost a decade ago are no longer appropriate in light of shifting market conditions and consumer preferences."

Americans, and much of the world, have embraced lower-mileage SUVs instead of higher-mileage vehicles. Bozzella said, "The greatest opportunity for environmental benefits will happen as we look to longer-term policies beyond 2026," and called for policy to support infrastructure improvements needed for light-duty vehicles to transition to lower-emissions in the future.

"Looking to the future, we need policies that support a customer-friendly shift toward these electrified and other highly efficient technologies," he said.

 

--Reporting by Steve Cronin, scronin@opisnet.com;

--Editing by Barbara Chuck, bchuck@opisnet.com

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ICAO Chooses Six CORSIA Programs, Restricts Offset Requirements to Post-2016

March 13, 2020

UN's aviation body ICAO has adopted the recommendations from its Technical Advisory Body for its CORSIA program, which means that it is choosing six carbon offset programs and restricting eligible emission-reduction activities to those undertaken between January 1, 2016 and December 31, 2020, the UN body said Friday evening in a statement.

Created through the UN's International Civil Aviation Organization (ICAO), Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) aims for carbon-neutral growth in global aviation using offsets and sustainable fuels, setting the baseline case of emissions in 2020. The pilot stage begins on January 1, 2021.

 

The six offset programmes chosen by ICAO are:

  • American Carbon Registry
  • China GHG Voluntary Emission Reduction Program
  • Clean Development Mechanism
  • Climate Action Reserve
  • The Gold Standard
  • Verified Carbon Standard Program

TAB recommendations, which were published in January, said that the Forest Carbon Partnership Facility and the Global Carbon Council should be "conditionally eligible, subject to further review by TAB of their updated procedures."

British Columbia Offset Program and Thailand Voluntary Emission Reduction Program were invited to re-apply.

Nori, myclimate, REDD.plus and The State Forest of the Republic of Poland were not assessed due to "either their early stage of development, or because key elements of an emissions unit's programme."

Under CORSIA, international flights between the 82 countries that have signed up to the UN scheme will have to offset their carbon emissions if they exceed the baseline case of 2020.

From 2021 until 2026, only flights between states that volunteer to participate in the pilot and/or first phase will be subject to offsetting requirements.

From 2027, all international flights will be subject to offsetting requirements

IHS Markit hosts three of the programs on its Environmental Registry, namely British Columbia Offset Program, Global Carbon Council, and REDD.plus.

IHS Markit is the parent company of OPIS.

 

--Reporting by Nandita Lal, nlal@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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U.K. Budget Promises "Ambitious" Carbon Pricing Strategy

March 11, 2020


Rishi Sunak, the new U.K. Chancellor of the Exchequer, has left the door open for the country's future carbon policy in his maiden budget today ahead of negotiations on the future trading relationship with the European Union.

Sunak said the government will legislate in the finance bill for 2020 to prepare for a U.K. carbon market, which could be linked to the European Union's cap-and-trade market (the E.U. Emissions Trading System) in the future.

But the chancellor also said the government will legislate for a carbon emissions tax as an alternative carbon pricing policy and consult on the design of a tax in spring 2020.

Previously, the U.K carbon tax was mooted at £19/metric ton, which would be the equivalent of around 21.36 euros ton, as a replacement for regulation in Europe's carbon market following Brexit.

E.U. Allowances (EUAS), the main trading unit in Europe carbon market, the Emissions Trading Scheme (ETS), are settled at 23.92 euro/ton for December 2021 delivery on the ICE bourse on Wednesday.

The U.K. will remain part of the EU ETS until the end of this year.

Meanwhile, the U.K. government has frozen its carbon price floor called the Carbon Price Support (CPS), an additional tax on power generation, at £18 per ton until 2022.

However, Sunak pledged an "an ambitious carbon price" from 1 January 2021 to "support progress towards "reaching net zero emissions" by 2050, which became a legally binding target this year.

In addition to the carbon policy, the chancellor announced a carbon capture and storage (CCS) infrastructure fund of £800 million to establish at least two plants in the UK over the next decade.

A further £1 billion will be invested in green transport solutions.

However, at the same time, the Budget also froze duty of road fuels for the tenth year in a row.

--Reporting by Nandita Lal, nlal@opisnet.com;

--Editing by Paddy Gourlay, pgourlay@opisnet.com

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Oregon Cap-and-Trade Bill Dies As Short Legislature Session Ends

March 9, 2020

Oregon Governor Kate Brown is vowing to take executive action after the short legislative session ended on Sunday without a vote on a cap-and-trade bill intended to reduce greenhouse gas (GHG) emissions in the state.

Republican senators walked out in the middle of the 35-day short session on Feb. 24 after Senate Bill 1530 passed the Ways and Means Committee.

"The vast majority of Republican lawmakers have spent the last ten days on a taxpayer-funded vacation running down the clock. That's not how democratic representation works. Every time they don't like something, they just get up and leave. That's not compromise. It's holding Oregonians hostage to ultimatums and political posturing," Brown said in a statement.

Brown said that she intends to take executive action to lower GHG emissions, although a plan has not been released.

SB 1530 sought to reduce GHG by at least 45% below 1990 levels by 2035 and 80% below 1990 levels by 2050.

A previous version of a cap-and-trade bill had been introduced during the regular session in 2019, prompting 11 Republican senators to walk out in protest and deny a quorum.

The proposed legislation would have also included a carbon price on fuel that would have instituted in the Portland area for the first three years before all metropolitan areas would been subject to the tax.

According to a statement released by the Oregon Senate Republicans, legislators returned on Sunday to pass budget bills.

Republican Senate Leader Herman Baertschiger had previously stated before the session that the legislation should be decided by voters.

"It's been a very interesting session and if you think about it, the only thing we were asking for is to refer that bill to the people. That's all we're asking. We weren't saying, 'Kill it.' We weren't saying anything else," Baertschiger said during a press conference hosted on Thursday.

If the bill had passed, Oregon would have been the second state to have a cap-and-trade program that covered transportation fuel emissions.

Brown said she may special session, which she previously threatened to do after Republican walked out the during the regular session in 2019.

"I am open to calling a special session if we can ensure it will benefit Oregonians. However, until legislative leaders bring me a plan for a functioning session I'm not going to waste taxpayer dollars on calling them back to the State Capitol," she said.

 

--Reporting by Mayra Cruz, mcruz@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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Carbon Offsets an 'Interim Step' Towards 'Ground-Breaking' Tech: EasyJet

March 3, 2020

*EasyJet defends carbon offset use.

*CEO Lundgren sees SAFs, hydrogen, electric planes as long-term solutions.

*Airline association calls for full CORSIA implementation.

EasyJet Chief Johan Lundgren said Tuesday that carbon offsets are "an interim step" before they can start using ground-breaking technology like sustainable aviation fuels (SAF), hydrogen and electric planes.

"Aviation today doesn't have those technologies [like SAF, hydrogen and electricity] available. So, carbon offsets are an interim step that need to be in a context of getting ourselves to those very different technologies,"

Lundgren said at the Airlines for Europe (A4E) Aviation Summit on Tuesday in Brussels.

London-based budget airline carrier easyJet is part of A4E -- Europe's largest airline association.

"If you are using the high qualified standardized offset projects like the gold standards and the VCS (Verified Carbon Standard) they will do what it says on the tin. These are one of the few available scientifically proven methodologies available today," he said via live broadcast. The airline industry doesn't have "the luxury today to exclude any technology that is out there."

EasyJet began offsetting all of its emissions in November last year.

In a note today, the airline association called for a "full and swift" implementation of CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), the initiative adopted by the International Civil Aviation Organization (ICAO) in 2016.

"The EU must also step up its climate diplomacy efforts to ensure more reluctant countries such as China, Russia, India and Brazil join the CORSIA system by 2021," the statement said.

The statement also called for a dedicated EU industrial policy for SAFs, which could have "the potential to reduce CO2 emissions from aviation by up to 85%."

ICAO Council Meeting Begins

ICAO's council session began in Montreal, Canada, on Monday.

The Council will be sitting through March 20 "in order to review an ambitious agenda, a major highlight of which will be its discussions and expected agreement on the eligible emission units to be included under the ICAO CORSIA offsetting framework for international flights."

Environmental think tank Carbon Market Watch said last week in a statement that "some countries and industry representatives are pushing for ICAO to give a blank cheque to all offset programmes, including the controversial UN Clean Development Mechanism (CDM)."

"They claim that otherwise there will not be enough credits for the airlines to buy. This is nothing but scaremongering.  As our recent analysis shows, the existing number of credits from the three voluntary programmes alone (without the CDM) would be enough to cover CORSIA demand until 2025. It is therefore of utmost importance that the ICAO decision is based on ensuring that only high-quality credits from new projects will be eligible under CORSIA," the think tank said.

Under CORSIA, international flights between the 70 countries that have signed up to the UN scheme will have to offset their carbon emissions if they exceed the baseline case of 2020.

From 2021 until 2026, only flights between states that volunteer to participate in the pilot and/or first phase will be subject to offsetting requirements.

From 2027, all international flights will be subject to offsetting requirements.

 

--Reporting by Nandita Lal, nlal@opisnet.com;

--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Shell Says Multifaceted Approach Needed for Net Zero Emissions

February 25, 2020

LONDON -- Shell sees a multipronged approach to reaching net zero emissions by 2050 that addresses both the growing global demand for energy with the rising population and the necessity to hold the global temperature increase to below 2 degrees Celsius of pre-industrial levels, said Sinead Lynch, Shell's U.K.
country chair, on Tuesday at IP Week's forum on clean energy transition.

Shell plans to target widespread electrification around the world to satisfy the company's course on the energy map, but also agrees that radical improvements to resource and energy efficiency are needed, Lynch said.

Additionally, the oil industry needs to focus low-carbon technologies and delivering renewable fuel solutions to customers such as solar, wind and biofuels, Lynch said.

Her colleague Paul Bogers, vice president, fuel technology at Shell, said the company is "bullish about technology" in enabling the clean energy transitions.

He gave the example of Shell investing in all-electric world of Formula E car racing.

Shell has a net carbon footprint ambition that will reduce the carbon intensity of its products by 50% by 2050, Lynch said.

Government also has a role to play in the transition to net zero emissions by establishing economywide carbon pricing mechanisms, she added.

As of April 2019, there were 57 carbon pricing initiatives implemented or scheduled for implementation around the world in a mixture of emissions trading systems (ETS), carbon taxes, or both, according to a carbon study by World Bank Group. Global carbon pricing mechanisms raised $44 million in revenues during 2018, the study said.

However, even with success in those market-based solutions, the oil industry must go even further to solve the climate equation, Lynch said.

"Shell thinks we need to do more. We need to invest as society in natural ecosystems in preserving, restoring and generating forests and wetlands. And we need to invest in technologies like carbon capture and storage," she said.
"Both of these take carbon emissions out of the atmosphere to address sectors that are difficult to decarbonize."

The challenge for the oil industry remains in transparency and identifying alignments with climate policies as well as listening to society's expectations and needs during the energy transition, Lynch said.

According to think tank Carbon Tracker Initiative, out of the global publicly listed oil companies Shell's portfolio is "most aligned" to the Paris Agreement. However, the company would need to cut its oil production by 10% by
2040 to be compatible with the climate change agreement.

Shell peers such as Exxon and ConocoPhillips would need deeper cuts of 85% and 55%, respectively. Oil majors would need to cut group production by an average of 35% by 2040 to align with the Paris Agreement, according to the think tank.

--Reporting by Lisa Street, lstreet@opisnet.com;

--Editing by Nandita Lal, nlal@opisnet.com

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Airlines, Offset Producers, Brokers Prepare for Imminent CORSIA Guidelines

February 20, 2020

The United Nations aviation body is expected next month to select which carbon offset validation programs will qualify for the flight emissions program CORSIA, answering a key question that has hung in the air for years: which units will measure up?

The International Civil Aviation Organization (ICAO) ratified The Carbon Offset Reduction Scheme for International Aviation in 2016 but left the dialogue running as to what units will be deemed CORSIA-eligible and in line with the program's emissions unit criteria.

Players in the business of producing, marketing and trading carbon offsets picked up the conversation and ran with it to make CORSIA's big unknown variable a leading industry discussion.

Meanwhile, participating airlines pondered how best to prepare for international flight emissions reduction costs. Around 80 ICAO member states covering 77% of aviation activity have agreed to cap international flight emissions as part of CORSIA in coming years.

CORSIA aims for carbon neutral growth in global aviation, setting the baseline case of emissions in 2020. Next year, the scheme begins a pilot phase for voluntary airline participants. From 2027, all international flights will be subject to the requirements.

The CORSIA scheme is a potential boon for offset credit production as another outlet outside of established carbon compliance programs such as California's Cap-and-Trade market and a large increase in recent years of global companies purchasing voluntary offsets to become carbon neutral, sources have said.

Many global airlines already set out to erase emissions voluntarily purchasing offsets ahead of the CORSIA starting bell. OPIS sources have said that the voluntary offset markets are opaque and deal prices can vary widely due to differing perceived values of the unit. This results in a challenge for airlines that need to source the correct CORSIA-eligible offsets, which are thus far undecided.

The decision will likely come sometime during the ICAO Council's 219th session, scheduled to run March 2-20, Anthony Philbin told OPIS Wednesday.

"The order of business for this session isn't final yet, and depending on how other discussions go, various topics could end up earlier or later in the schedule than they may originally be slated for," he said. "Otherwise, though, yes, these topics are expected to be covered by Council sometime between 2 and 20 March when it is next in session."

Last summer, an ICAO technical advisory board received 14 responses to a call for applications to become a CORSIA-eligible Emissions Unit Program, which ICAO defines on its website as a company that administers standards and procedures for developing activities that generate offsets and verifying and issuing offsets as created by those activities. Some of those companies are well-established carbon industry options, such as the VCS program, which is managed by Verra.

According to a timeline listed on ICAO's website dated May 19, 2019, the board should make recommendations to the ICAO Council before the end of this month.This "decision could make or break international efforts to reduce aviation's climate footprint," the Environmental Defense Fund said in a story posted on its website Friday. The non-governmental organizations of the ICAO "are urging Council members to bar old, questionable carbon credits, ensure carbon credits aren't double counted, and make ICAO's decisions process transparent, "the group said.

Earlier this month, Environmental Exchange CBL Markets Head of Global Carbon Markets Rene Velasquez told OPIS that CORSIA compliance needs should result in a robust over-the-counter market. His comments came after his company announced a new CORSIA-based offset trading platform called ACE.

Backed by Xpansiv CBL Holding Group (XCHG) and the International Aviation Transport Association (IATA), the innovative Aviation Carbon Exchange fully launches this summer as a centralized, price-transparent marketplace for greenhouse gas offsets eligible under CORSIA.

The partners said in a joint news release that ACE will serve as a "secure, intuitive destination for airlines to access real-time data with full-price transparency" to purchase offsets for the Carbon Offset Reduction Scheme for International Aviation.

CBL Markets runs an environmental commodity trading exchange with more than 1,500 voluntary carbon market participants registered, Velasquez said. IATA's nearly 300 members will use the system for free to boost liquidity, Velasquez said. "It will be open to all variety of buyers, sellers, project developers, and intermediaries," he said of ACE. "It will draw upon our existing voluntary exchange platform but limited to CORSIA-eligible units."

ACE begins a pilot phase this quarter for airlines that want to start offsetting voluntary credits before it launches in June. Trading on the platform will be supported by the IATA Settlement System and Clearing House, "offering seamless and risk-free settlement to airlines, including non-IATA airlines," the release said.

ACE will list the CORSIA-related units as soon as they are published by ICAO, the release said.

The new platform is designed to close a commerce gap between CORSIA-covered airline operators and voluntary carbon offset project developers, who typically operate in separate business arenas.

Leading offset product developer ClimeCo Chief Business Officer Derek Six said this month that offset "product developers and investors are looking forward to receiving clarity as soon as possible on what registries and vintages will be eligible for airlines to use for CORSIA. Until those parameters are announced and we understand the potential breadth of the market, it is hard to comment on the utility of, or need for, this new platform."

--Reporting by Bridget Hunsucker, bhusucker@opisnet.com

--Editing by Kylee West, kwest@opisnet.com

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BP Sets Net-Zero Carbon Goal by 2050, Dismantles Upstream-Downstream Model

February 12, 2020

BP Plc will target net zero greenhouse gas from its operations as well as oil-and-gas production by 2050 or sooner, joining a chorus of other energy producers that set out goals to eliminate future carbon emissions, as the 110-year-old company is reorganizing its business segments by dismantling the existing upstream and downstream model.

The global giant also pledged to cut 50% in carbon intensity of products it sells by 2050, reduce methane intensity of operations by 50%, and increase the proportion of investment into non-oil and gas businesses over time, BP CEO Bernard Looney said in announcing the company's new ambition in a meeting Wednesday.

BP said its net-zero goal covers the greenhouse gas emissions from its operations worldwide, currently estimated at around 55 million tons of CO2 equivalent (MteCO2e) a year, and the carbon in the oil and gas it produces, currently equivalent to about 360 MteCO2e emissions a year -- both on an absolute basis.

Taken together, delivery of these aims would equate to a reduction in emissions to net zero from what is currently around 415 MteCO2e a year, said London-based BP.

"This is what we mean by making BP net zero. It directly addresses all the carbon we get out of the ground as well as all the greenhouse gases we emit from our operations. These will be absolute reductions," Looney said.

The company said it aims to halve the carbon intensity of its products by 2050 or sooner, by offering customers more and better choices of low- and no-carbon products. In addition, it also aims to install methane measurement at all its existing major oil-and-gas processing sites by 2023, reducing the methane intensity of its operations by 50%.

"We expect to invest more in low carbon businesses -- and less in oil and gas
-- over time," Looney said.

In a Q&A session with analysts and shareholders, Looney said BP will produce lower carbon emissions and decarbonize to achieve its net zero goal by 2050, which is done by not only using carbon capture but also other initiatives such as natural climate solutions.

BP said it will dismantle its existing, largely autonomous upstream and downstream business segments, and reorganize into a more focused and integrated entity, comprising four business groups: Production & Operations; Customers & Products; Gas & Low Carbon Energy; and Innovation & Engineering.

"BP is the first supermajor to set a net-zero carbon target," Pavel Molchanov, energy analyst at U.S. investment bank Raymond James in Houston, told OPIS.

In a 2018 sustainability report, BP previously outlined that it planned to have zero net growth in emissions in its operations and planned to have a GHG reduction of 3.5 million tons by 2025. It also announced that it had reduced its GHG emissions by 2.5 million tons from 2016 to 2018.

The report also announced how BP had acquired Chargemaster, a U.K.-based electric vehicle charging network and invested $500 million in businesses such as EV charging company FreeWire and energy monitoring system company Voltaware.

BP joined a list of at least seven other large-cap oil and gas companies, which are mostly Europe-based, because of mounting environmental, social and governance investor pressure, Molchanov said.

Other companies that have previously pledged to achieve net zero targets include Italy-based Eni, Norway-based Equinor, Sweden-based Lundin Petroleum AB, Denmark-based Orsted, U.S.-based Occidental Petroleum, Spain-based Repsol, and Canada's Canadian Natural Resources and Cenovus Energy.

--Reporting by Frank Tang, ftang@opisnet.com and Mayra Cruz, mcruz@opisnet.com

--Editing by Barbara Chuck, bchuck@opisnet.com

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