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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