Hertz's Tesla Move Likely to Have Impact Beyond Rental Market

October 26, 2021

The decision by Hertz to purchase 100,000 Teslas by the end of next year will not only boost the car rental company and electric vehicle manufacturer, but could also go a way toward advancing public interest and acceptance of EVs, according to an industry advocate.

Hertz announced the purchase Monday, saying it would allow the company to offer the largest EV rental fleet in North America and one of the largest electric vehicle fleets in the world.

The company also said it had ordered new EV charging infrastructure across its global operations.

Marc Geller, a spokesman for the Electric Auto Association, said Hertz's choice of Tesla -- which operates an extensive network of fast-charging stations -- will likely be key to the success of the company's initiative.

"It matters that it's Tesla, not a Nissan Leaf or a Chevy Volt, which might have some presence in the car rental market," Geller said. "With a legacy automaker electric vehicle, there are DC fast charging networks in most cities in the country, but they are not as robust and reliable as Tesla's suprercharger network. When you rent an electric vehicle, you want to know that you can easily charge it."

"The existence of Tesla's supercharging network, which works seamlessly, will lead to zero frustration," he said.

Geller said renting a Tesla from Hertz will likely mean the driver can use the Tesla network, with the charging fee included in the customer's final bill. The ease of charging will provide needed peace of mind to customers who have never driven an EV, even if they are unlikely to drive beyond the car's single-charge range or are staying at a hotel that offers on-site charging stations.

"As long as Hertz and Tesla work that out, this will go really, really well for both companies and lead to an experience for the driver that I fear would not be as seamless in a vehicle from a legacy auto maker," Geller said.

The order will also provide a benefit to Tesla, which in 2020 delivered about 500,000 vehicles, according to the company. Tesla says it has delivered about 380,000 vehicles in the first half of 2021.

"For Ford, 100,000 vehicles is one thing. For Tesla, it's another thing," Geller said.

The company's stock rose 12.66% on Monday following Hertz's announcement, pushing its price to about $1,024 per share and the company's market capitalization to more than $1 trillion.

Geller said he expects the infusion of a large number of Teslas into the car rental market will have an impact beyond travelers looking to book a memorable ride during a vacation or business trip.

Teslas are already popular on peer-to-peer car sharing networks such as Turo, as people who are considering buying their own EVs will rent a vehicle for a few days to see what the ownership experience is like before making a purchase.

Geller said he expects the Hertz acquisition will lead more people to try out how EVs fit into their daily lives and commutes.

"For someone who is thinking 'Do I really want a Tesla or an electric car,' this is a great way of trying it out. They could rent the car for two or three days and see if it is worth plunking down $40,000 for one of their own."

 

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

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

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Greenhouse Gas Levels Hit Record Highs in 2020, Says UN Agency

October 26, 2021

Greenhouse gas (GHG) levels reached record highs last year, putting global climate goals at risk, the World Meteorological Organization (WMO) said Oct. 25.

The United Nations agency said in its latest Greenhouse Gas Bulletin that the concentration of carbon dioxide (CO2), the single most important GHG, exceeded 413 parts per million in 2020 after breaching 400 ppm in 2015.

It said the increase in CO2 from 2019 to 2020 was slightly smaller than 2018 to 2019, but larger than the average annual growth rate over the past decade.

The increase in other heat-trapping gases such as methane and nitrous oxide was also higher than the average annual growth rate over the past 10 years.

The WMO said that the economic slowdown from the COVID-19 pandemic did not have any discernible impact on the atmospheric levels of GHG and their growth rates, although there was a temporary decline in new emissions.

The report said that from 1990 to 2020, the warming effect on our climate by long-lived GHG increased by 47%, with CO2 accounting for about 80% of this increase.

The bulletin was released ahead of next week's UN climate change summit, known as the Conference of Parties (COP26), in Glasgow, Scotland.

"The Greenhouse Gas Bulletin contains a stark, scientific message for climate change negotiators at COP26," WMO Secretary General Petteri Taalas said in a news release. "At the current rate of increase in greenhouse gas concentrations, we will see a temperature increase by the end of this century far in excess of the Paris Agreement targets of 1.5 to 2 degrees Celsius above pre-industrial levels. We are way off track."

The WMO estimates that about half of the CO2 emitted by humans is absorbed by oceans and land ecosystems, but it warned that the effects of climate change might reduce their ability to absorb CO2 and act as a buffer against larger temperature increase.

As an example, the organization cited the transition of parts of the Amazon rainforest from a carbon sink to a carbon source.

Ocean uptake of CO2 might also be reduced due to higher sea surface temperatures, it said.

"The last time the Earth experienced a comparable concentration of CO2 was 3 to 5 million years ago, when the temperature was 2 to 3 degrees C warmer and sea level was 10 to 20 meters (33 to 66 feet) higher than now. But there weren't 7.8 billion people then," said Taalas.

The WMO said that reducing atmospheric methane in the short term could support the achievement of the Paris Agreement and help in reaching many of the UN's Sustainable Development Goals due to multiple co-benefits of methane mitigation.

"But this does not reduce the need for strong, rapid and sustained reductions in CO2," the agency said.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Chevron Sets Net Zero Target by 2050

October 11, 2021

Chevron announced on Oct. 11 its net zero target for equity upstream Scope 1 and 2 emissions by 2050 and plans to reduce its Scope 3 emissions as well.

Chevron's announcement comes with the recent issuance of an updated climate change resilience report that further details the company's ambition to advance its lower carbon future.

The 75-page report details how Chevron plans to incorporate Scope 3 emissions into its greenhouse gas (GHG) emissions targets by establishing a Portfolio Carbon Intensity (PCI) target inclusive of all three scopes from the use of its products, it said in a news release.

The company has set a target of reducing Scope 3 emissions by 5% by 2028 when compared to 2016 standards.

"This target is aligned with Chevron's strategy which allows flexibility to grow its traditional business, provided it remains increasingly carbon-efficient, and pursue growth in lower-carbon businesses," Chevron said in the release.

Scope 1 emissions includes direct GHG emissions, while Scope 2 includes indirect GHG emissions from sources like imported electricity and steam and Scope 3 including other indirect emissions including the use of products.

"Solutions start with problem solving, which is exactly what the people of Chevron do -- and have excelled at for over 140 years," said Michael Wirth, Chevron's chairman and CEO, in the news release. "This report offers further insights about our strategy, how we are investing in lower-carbon businesses and why we believe this is an exciting time to be in the energy industry."

Chevron's announcement follows Phillips 66 saying at the end of September that it planned to reduce GHG emissions from its operations and energy products by 2030, setting goals of reducing Scopes 1 and 2 emissions intensity from operations by 30% and Scope 3 emissions intensity of its energy products by 15% below 2019 levels.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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EU Carbon Prices to 'Kaboom' by Mid-2020s, Swedish Bank Says

October 8, 2021

European Union emissions allowance (EUA) prices could "kaboom" and reach hundreds of euros by the middle of the decade as the number of EUAs in the cap-and-trade EU Emissions Trading System (ETS) falls, potentially getting ahead of the adoption of new carbon-abating technologies and necessitating market intervention by EU authorities, Swedish bank SEB has told OPIS.

The EU Commission's Fit for 55 package of climate change policy proposals released in July included a cut in the number of EUAs in circulation and a sharper fall in the annual issuance of allowances, but the scramble for supply by mid-decade could see the cost of carbon "rocketing," according to Bjarne Schieldrop, carbon markets analyst at SEB.

"We might thus get some circuit-breakers or safety valves against uncontrollable price rises installed in the EU ETS market before it happens," Schieldrop told OPIS on Thursday. "If not, I think we will get to a point of 'kaboom' in the EUA price," he suggested.

EUAs have already doubled in price this year to around 60 euros this week, making the cost of EU carbon compliance contracts the second most expensive in the world, with only U.K. emissions allowances issued under the country's new ETS pricing higher.

The Fit for 55 proposal released in July aims to cut EU emissions by 55% by 2030, and the package of measures envisages a lot of the heavy lifting in reductions by the 10,000 carbon-polluting installations subject to the EU ETS.

"The mind-blowing thing about the proposals from the European Commission this summer [is,] what does the [EU ETS] cap need to decline from 2021 to 2030? It needs to decline by 50%, and that's when my brain bubbles over," said Schieldrop at the Carbon Forward 2021 virtual conference held this week. "This is a political paper plan, and this is then going to happen in reality as well.

At some point in time, two or three years out [from now] this paper plan will crash with reality."

Schieldrop added that many countries will have challenges with the reductions goal because of the world's fossil energy dependent economy.

"Looking at the time frames of industrial abatement, [it takes] five-10 years to change. The speed of the reductions required are just mind-boggling.... We get to the crunch-time point where the CO2 prices go to 200 euros, 300 euros, which they don't do today because we have a huge reserve buffer amongst other things," said Schieldrop at the conference.

That "reserve buffer" was a reference to a surplus of EUAs that accumulated during the depths of the global financial recession in 2008-09 when industrial demand for EUAs plummeted, even as new supply hit the market, a legacy that pulled their prices down to less than 3 euros/mt by 2013.

The surplus of EUAs, also known as the Total Number of Allowances in Circulation (TNAC), totaled 1,579,000 tons at the end of 2020, but is set to be rapidly whittled away over the next few years because of the EU's Market Stability Reserve mechanism.

Morgan Stanley utilities and clean energy analyst Rob Pulleyn, speaking at the Carbon Forward conference, also pointed out the difficulties in achieving substantial emissions abatement by industries subject to the EU ETS.

"The pace of abatement we assume in the carbon system is optimistic given the initiatives so far," Pulleyn said. "Even with optimistic assumptions around abatement, what we're going to see is a very tight [EU] carbon market probably in the second half of the decade when the TNAC has been eroded to effectively zero. And the deficit in the traded market as free allowances are eroded and new sectors are added [to the EU ETS] is going to grow and grow.

"That effectively leads to more competition for securing these credits in the traded market at ever higher prices," Pulleyn argued. "That is to ensure that we get carbon prices which move beyond the abatement [from] coal to gas [fired electricity generation] switching and into industrial switching territory....

Carbon capture storage could be viable from 70 to 100 euros/mt, green hydrogen perhaps a notch higher than that to start with."

SEB pointed to the political response to the recent meteoric rise in European natural gas prices -- which rose to the oil equivalent price of almost $300/bbl earlier this week before crashing back -- as an augury of likely EU intervention in the workings of the ETS if EUA prices spike later in the decade. Several EU governments have been forced to take emergency measures to limit the hit to citizens' disposal income, with think tanks like the Brussels-based Bruegel Institute estimating that surging energy prices will result in EU consumers' energy bills being 100 billion euros higher this winter.

"The explosion in natural gas prices we have seen this year will have political consequences," Schieldrop told OPIS. "It is a very important reminder of what happens to the price of a commodity if it gets into a squeeze: boom! And then both consumers and industry suddenly have a big problem."

"With such a recent and dramatic experience at hand, I think that politicians might think that this could also happen to the EUA market at some point in time ... again, with dire consequences for the consumers of power," SEB suggested.

Nonetheless, the bank foresees short-term weakness for EUA prices.

"I think that as natural gas prices eventually fall back to normal again, we'll likely see a sell-off in the EUA price as well. If so, it would be a very good buying opportunity," Schieldrop said.

--Reporting by Anthony Lane, alane@opisnet.com;

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

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$1.2 Trillion Needed For Hydrogen Sector to Reach Net Zero by 2050, Says IEA

October 4, 2021

Putting the world on track for net zero emissions by 2050 will require $1.2 trillion of investment in low-carbon hydrogen supply and use through to 2030, according to the International Energy Agency (IEA).

To date, countries that have adopted hydrogen strategies have committed at least $37 billion, while the private sector has announced an additional investment of $300 billion, the IEA said in its Global Hydrogen Review for 2021 report published Monday.

In the main scenario of the IEA's Net Zero by 2050 report released earlier this year, hydrogen use extends to several parts of the energy sector and grows six-fold from current levels to meet 10% of total final energy consumption by 2050, all supplied from low-carbon sources.

In 2020, hydrogen demand stood at 90 million metric tons, produced almost exclusively from fossil fuels, resulting in almost 900 million mt of carbon dioxide emissions. However, the use of electrolyzers, which produce hydrogen from electricity, could help reduce this level of emissions, the IEA said.

"We estimate that $90 billion of public money needs to be channeled into clean energy innovation worldwide as quickly as possible - with around half of it dedicated to hydrogen-related technologies," the IEA said in the report released Monday. "While the adoption of hydrogen as a clean fuel is accelerating, it still falls short of what is required to help reach net zero emissions by 2050."

Global electrolyzer capacity reached just over 300 megawatts (MW) by mid-2021.

With all current projects under development, global hydrogen supply from electrolyzers could reach more than 8 million mt by 2030. But that's well below the 80 million mt required by that year to be on the trajectory for hitting net zero CO2 emissions by 2050 that was laid out in the IEA's roadmap for the global energy sector.

Additionally, one of the main stumbling blocks to producing low-carbon hydrogen is the cost gap with hydrogen produced from unabated fossil fuels. At present, generating hydrogen from fossil fuels is the cheapest option in most parts of the world.

Depending on regional natural gas prices, the levelized cost of hydrogen production from natural gas ranges from $0.50 to $1.70/kilogram. Using carbon capture, utilization and storage (CCUS) technology to reduce carbon emissions from hydrogen production increases the levelized cost of production to as much as $2/kg, while the use of renewable electricity to produce hydrogen can hike production costs to as much as $8/kg, according to the IEA.

The IEA suggests that there is scope for cutting production costs through innovation. In the IEA's Net Zero Emissions by 2050 Scenario (NZE scenario) the cost of hydrogen from renewables falls to as low as $1.3/kg by 2030. Under this NZE scenario, the costs of hydrogen produced from renewable electricity could fall to just $1/kg in the longer term by making hydrogen from solar power cost-competitive with hydrogen from natural gas -- even without the deployment of CCUS.

But while the adoption of hydrogen as a clean fuel is accelerating, it currently falls far short of what is needed to help reach net zero emissions by 2050, according to the IEA. Even if all of the plans announced by companies and governments are realized, total hydrogen demand would only grow to 105 million mt by 2030 -- below the 200 million mt outlined in the IEA's NZE scenario.

Low-carbon hydrogen production could reach more than 17 million mt by 2030 - but that's just one-eighth of the production level required in the NZE Scenario, the IEA said in the Global Hydrogen Review for 2021.

"Europe is leading electrolyzer capacity deployment, with 40% of global installed capacity, and is set to remain the largest market in the near term on the back of the ambitious hydrogen strategies of the European Union and the United Kingdom," the IEA said in the report. "But boosting the role of low-carbon hydrogen in clean energy transitions requires a step change in demand creation. Governments are starting to announce a wide variety of policy instruments, including carbon prices, auctions, quotas, mandates and requirements in public procurement...Their quick and widespread enactment could unlock more projects to scale up hydrogen demand."

--Reporting by Rob Sheridan, rob.sheridan@ihsmarkit.com;

--Editing by Anthony Lane, alane@opisnet.com

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Quebec's Financial Sector Unveils Plan to Accelerate Green Transition

October 4, 2021

Quebec financial institutions managing more than C$900 billion ($713 billion) in assets on Oct. 4 made a commitment to help tackle climate change through responsible financing.

Signatories of the Statement by the Quebec Financial Centre for a Sustainable Finance include the pension fund Caisse de depot et placement du Quebec (CDPQ), insurers Desjardins and IA Financial Group, banks Societe Generale Canada and BNP Paribas Canada and low-carbon investor Greater Montreal Climate Fund.

The statement was issued ahead of a summit hosted by Finance Montreal, an organization dedicated to making Montreal a world-class financial hub.

The signatories have pledged to strengthen the sustainable finance ecosystem by developing local expertise and bolstering disclosure and transparency.

They have also agreed to accelerate the integration of environmental, social and governance (ESG) principles into their operations.

"A very strong signal is going out today. Quebec's financial sector has a game plan to support a green, just and responsible transition for the Quebec and Canadian economies," Jacques Deforges, CEO of Finance Montreal, said in a news release. "This important engagement will help position Quebec as a center of sustainable finance excellence in North America."

Finance Montreal said it will monitor the implementation of the initiative.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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COP26: India Keeps the World Guessing on Net Zero Despite Solar Success

October 1, 2021

The famous greenery of Kerala is on full display as airplanes descend on Kochi, the most vibrant city in the southern Indian state.

But the coconut trees, after which the state is named, are not the only "green" sight that grabs attention from travelers.

Tens of thousands of solar panels are laid across fields near Cochin International Airport, generating enough electricity to run the entire operation of the airport, which handles more than 10 million passengers annually.

In August 2015, months before the landmark Paris Agreement was signed, Kochi became the first fully solar-powered airport in the world, reflecting India's embrace of renewable power.

Today, India is the fifth-largest solar power producer after China, the U.S., Japan and Germany. It has an installed capacity of 44.3 gigawatts (GW), according to the Indian Ministry of New and Renewable Energy.

In its "India Energy Outlook 2021" published in February, the International Energy Agency (IEA) said that the country "is on the cusp of a solar‐powered revolution."

The IEA projected that solar growth would match coal's share in India's power-generation mix within two decades in the stated policies scenario (STEPS), or even sooner in the United Nations Sustainable Development Goals (SDGs) scenario.

"As things stand, solar accounts for less than 4% of India's electricity generation and coal close to 70%. By 2040, they converge in the low 30%s in the STEPS, and this switch is even more rapid in other scenarios," the report said.

"This dramatic turnaround is driven by India's policy ambitions, notably the target to reach 450 GW of renewable capacity by 2030."

India also has other robust green energy programs, especially wind power.

Accounting firm Ernst & Young's 2021 Renewable Energy Country Attractiveness Index (RECAI) ranks India third behind the U.S. and China, up by one place from the previous ranking.

Net Zero Debate

Despite such achievements, the stark reality is that India remains the fourth-largest emitter of greenhouse gases (GHG) after China, the U.S. and the European Union (EU).

China has set a net zero goal of 2060 while the U.S. and the EU aim to achieve that in 2050, but India has yet to announce a deadline. On Wednesday, the IEA said in a new report that China could achieve carbon neutrality even before 2060.

China and India were also among countries that failed to submit new or updated climate plans known as nationally determined contributions (NDCs) to the UN as the deadline closed this summer.

India's first NDC set three goals: reduce emissions intensity by 33% to 35% below 2005 levels by 2030; achieve 40% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030; and create a carbon sink of 2.5 to 3 billion tons through new forest and tree cover, also by the end of this decade.

Now pressure is mounting on the country to set a net zero target ahead of the UN Climate Change Summit, known as the Conference of Parties (COP26), which opens Oct. 31 in Glasgow, Scotland.

U.S. Special Presidential Envoy for Climate John Kerry was in India recently, pushing the government to raise its climate ambitions but apparently with not much success.

India has refused to say whether it will announce a target before the summit because it is worried that any pledge to stop or reduce the use of fossil fuels could harm its economic growth.

Potential Trajectory

A highly respected former bureaucrat weighed into the debate last month, saying that technological developments now make it possible for India to offer a trajectory, which peaks emissions in the next decade and then reduces them to net zero over time.

"We could offer such a trajectory at COP26, provided other major countries make similar commitments," Montek Singh Ahluwalia said in "Getting to Net Zero: An Approach for India at COP26," a paper released by the New Delhi-based think-tank Centre for Social and Economic Progress.

The former vice chairman of India's Planning Commission under reformist prime minister Manmohan Singh said that studies reviewed in the paper suggest that India could reach a peak by 2035 and get to net zero sometime between 2065 and 2070.

He said India could even do better if some of the technologies currently under development become commercially viable earlier than expected.

"Diplomatic pressure cannot be a reason for adopting a course of action that is not in our national interest, but in this case, there are good reasons for changing our stand," the former World Bank economist wrote.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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China's Jiangsu Sailboat to Build CO2-to-Methanol Plant for EVA Production

September 28, 2021

Jiangsu Sailboat Petrochemical, a subsidiary of east China-based conglomerate Shenghong Group, signed an agreement on Sept. 27 with Icelandic Carbon Recycling International (CRI) to build a 150,000 mt/yr carbon dioxide (CO2) to green methanol plant, according to a Shenghong news release published on its social media platform on the same day.

The project set to be commissioned in 2022 will utilize CO2 captured from industrial waste gases, the company said, noting that its phase one investment costs near 300 million yuan ($46 million). The project will be able to indirectly reduce 550,000 tons of CO2 emission per annum once integrated into the downstream production and application, according to company estimates.

According to the project plan, green methanol produced will be fed into Sailboat's existing methanol to olefin (MTO) plant and downstream production facilities to produce 20,000 mt of photovoltaic (PV) ethylene vinyl acetate (EVA) resin. The PV EVA resin can be turned into 50 million square meters of PV films that can fulfil the requirement for a 5 gigawatts (GW) solar power generation facility that is the same amount of power generation from two million-kilowatt thermal power plants, according to Shenghong.

PV films offer protection to photovoltaic components. PV EVA resin is a core material to produce PV films and is most commonly produced through coal to chemical processes in China, according to the company.

CRI owns a proprietary Emission to Liquids (ETL) technology that coverts recycled CO2 and hydrogen into methanol. The company delivered in February the complete process design package for the first-of-its-kind 110,000 tons/year CO2 to methanol plant using recycled industrial waste gases to China's Henan Shuncheng Group in Anyang. The project is expected to be commissioned by end of this year, said CRI.

CRI also owns the George Olah plant in Iceland, currently the only commercial scale CO2-to-methanol plant in the world.

 

--Reporting by Lujia Wang, Lujia.Wang@ihsmarkit.com;

--Editing by Hanwei Wu, Hanwei.Wu@ihsmarkit.com

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Carbon Offset Market Could Grow 50-Fold by 2050: Bank of America

September 27, 2021

The global carbon offset market may expand by 50 times by 2050 as more companies voluntarily set net-zero targets, Bank of America said in a report released September 27.

The bank said in "Carbon Offsets: Volunteer Hero for Net Zero" that after more than two decades, the market remains "relatively small."

In 2020, offsets equivalent to 210 million metric tons of emissions removed or avoided were issued, accounting for just 0.4% of total global emissions, the report said.

The bank said reaching net-zero emissions would likely require around 7.6 gigatons of carbon dioxide offsets or removal, which could lead to a 50-fold increase in the size of the market. At the low end, offset demand would likely grow to at least four times its current size, it said.

"Either way, more offset supply will be needed and with some buyer preferences shifting toward higher-cost carbon recovery projects, prices may need to rise to ensure adequate supply," the bank said.

The bank also said that agreement on the contentious Article 6 of the Paris Agreement at November's United Nations Climate Summit (COP26) in Glasgow, Scotland, could lead to broader adoption of offsets. Article 6, the only section of the 2015 agreement that has yet to be settled, spells out three mechanisms, two of them based on markets and one on a non-market approach, to help countries achieve their emissions reduction goals, or nationally determined contributions (NDCs).

The bank said while many governments have aspired to reach net-zero emissions during the 2050-2060 timeframe, current policies remain insufficient to adequately incentivize the changes necessary to reach these lofty goals.

It said, currently, carbon offsets cost between $2 and 20 per metric ton, "a relatively cheap way to decarbonize."

The bank said global greenhouse gas (GHG) emissions have accelerated since the mid-1950s and reached more than 40 Gt per year in recent years. But current emissions trading systems (ETS) and carbon taxes cover less than 25% of global GHG emissions.

So, companies have taken initiative to set emissions targets voluntarily, paving the way for an expansion of the offset market, the bank said. Buyers primarily retired forestry and land-use offsets to meet voluntary and compliance targets, followed by renewables projects.

It said most sectors within the S&P 500 have significant commitments to non-net-zero emissions targets, but only the energy and utilities sectors have more than one-third of companies committed to net-zero targets.

The report comes two weeks after Ecosystem Marketplace said that a surge in corporate interest had triggered a spike in demand for voluntary carbon markets (VCM) this year.

The nonprofit said that the VCM is on track to hit $1 billion in annual transactions in 2021 if current levels of activity continue.

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Industry Leaders Call for Full Decarbonization of Shipping by 2050

September 22, 2021

More than 150 companies and organizations representing the entire maritime value chain on Sept. 21 called for decisive government action to enable full decarbonization of international shipping by 2050.

The Call to Action for Shipping Decarbonization initiative is spearheaded by the Global Maritime Forum (GMF), a nonprofit dedicated to promoting the sustainable development of the industry. It is supported by the World Economic Forum and other partners.

"Decarbonizing shipping should leave no country behind," GMF CEO Johannah Christensen said in a news release. "To make the transition to zero emission shipping and fuels equitable and inclusive, policy measures must make sure that decarbonizing shipping also brings jobs and opportunities to people in developing countries and emerging economies."

The signatories include shipping giants A.P. Moller-Maersk and Hapag-Lloyd; oil supermajors BP and Royal Dutch Shell as well as the Panama Canal Authority and the Port of Rotterdam.

Ships transport more than 80% of global trade and account for almost 3% of greenhouse gas (GHG) emissions, according to the International Maritime Organization (IMO).

In 2018, the United Nations agency adopted a climate strategy, which aims to reduce the industry's emissions by at least 50% from 2008 levels by 2050.

The signatories are urging world leaders to align shipping with the goals of the Paris Agreement -- limiting global warming to well below 2 degrees Celsius, and preferably to 1.5 degrees C.

They said the private sector is already taking concrete actions to decarbonize shipping. This includes investing in pilot projects, building carbon-neutral vessels and buying zero-emission shipping services.

"Now governments must deliver the policies that will supercharge the transition and make zero-emission shipping the default choice by 2030," the signatories said.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Climate Week NYC: Delta, PwC Join Coalition to Protect Tropical Forests

September 21, 2021

Two more companies have joined the LEAF Coalition, which plans to mobilize more than $1 billion by the end of 2021 for the protection of tropical forests, the U.S. nonprofit that coordinates the program said Sept. 21.

Emergent said on the second day of Climate Week NYC 2021 that U.S. carrier Delta Air Lines and accounting giant PwC will join 10 other companies and three governments in the Lowering Emissions by Accelerating Forest finance (LEAF) Coalition.

The initiative was launched by Norway, the United Kingdom and the U.S. at April's virtual climate summit of world leaders hosted by President Joe Biden.

Amazon, Airbnb, Bayer, Boston Consulting Group, E.ON, GlaxoSmithKline, McKinsey & Co., Nestle, Salesforce and Unilever are the other participants.

"This is just the beginning," Eron Bloomgarden, executive director and founder of Emergent, told a webinar at Climate Week NYC. "We need to go much bigger; we need to move faster; we need to massively increase ambition."

LEAF members are required to commit to deep voluntary cuts in their own emissions, and their contributions to the coalition are in addition to such reductions.

In March 2020, Delta Air Lines committed $1 billion over 10 years to mitigate all emissions from its global operations.

"And it is not an easy commitment for us. We are a hard-to-abate sector," said Amelia DeLuca, managing director of sustainability at Delta, at the webinar.

"We want to take action now because we don't want our consumers to have to choose between seeing the world and saving the world."

Wineke Haagsma, director of corporate sustainability at PwC, said the time is right for the company to join the coalition, which she called a "great fit for PwC."

Haagsma also noted that in September 2020 the company announced its commitment to reach net zero emissions by 2030.

"In the meantime, we want to mitigate the impact of our emissions today. So, we compensate our emissions through supporting high-quality carbon offsetting projects," she said.

Emergent said the response from tropical forest countries to the coalition's call for emissions reduction proposals has been very positive.

It said LEAF received proposals from more than 30 jurisdictions that together encompass more than 1.2 billion acres of forest, with potential volumes well in excess of LEAF's initial target of 100 million tons.

The coalition is expected to announce the first set of agreements by the end of the year, Emergent said.

Payments to countries will be made on an annual or biannual basis as reductions in deforestation are achieved in the years 2022 through 2026, it said.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Texas RECs Trade Continues to Flourish on Nodal Exchange

September 17, 2021

The Nodal Exchange has continued to see rapid growth in its Texas Renewable Energy Certificates (RECs) markets this year, with volumes growing exponentially over the same period a year ago.

Through Thursday, the exchange has had trade volumes of 42,674 lots so far this year, up over 400% for the same period in 2020 when Nodal had 10,273 lots. In September, the exchange has had trades totaling 7,634 lots, which is over 10 times more than the 600 lots that Nodal had in the first half of September 2020. Along with the growth in volumes, prices have also increased. For Texas CRS Wind V21 contracts, prices have ranged from $1.28/MWh to $7.35/MWh over the last year, with prices on Thursday settling at $4.80/MWh, according to Nodal.

The prices for Texas RECs continue to be much cheaper than prices for RECs in the NEPOOL and PJM regions, OPIS pricing data shows.

PJM Tri Qualified V22 RECs were assessed by OPIS at $16.525/MWh on Thursday, while NEPOOL Dual Qualified V22 RECs were assessed by OPIS at $38.25/MWh on Thursday.

IncubEx President and COO Dan Scarbrough said the continued growth in the Texas CRS wind and solar contracts is part of a larger trend as more entities push for net zero targets. IncubEx works with Nodal to market and grow the environmental markets.

"The continued growth of the Texas CRS wind and solar contracts is illustrative of the macro trends driving environmental markets -- the corporate push toward net zero and renewable goals and growing interest from compliance and trading entities seeking exchange benefits and capital efficiencies," Scarbrough said.

"We're also seeing growing interest in contracts for all environmental commodities. So we do see momentum continuing to build in the broader renewables and emissions space."

In addition to the Texas markets, Nodal pointed specifically to the NAR Registered RECs from CRS Listed wind energy facilities; NAR Registered RECs from CRS listed solar energy facilities; and M-RETS RECs from CRS listed wind energy facilities futures -- also known as M-RETS Wind futures -- as three markets that are attracting similar participants to the Texas markets.

--Reporting by Jeremy Rakes, jrakes@opisnet.com
--Editing by Kylee West, kwest@opisnet.com

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APAC Airlines Group Commits to 2050 Net Zero Target; SAF Is Key Component

September 16, 2021

The Association of Asia Pacific Airlines (AAPA) announced September 13 its commitment to net-zero emissions by 2050, a goal it said would depend heavily on sustainable aviation fuels (SAF) among other factors.

AAPA is a not-for-profit association representing 14 major airlines from across north, southeast and central Asia. Its net-zero emissions goal is more ambitious than that of the global trade association, the International Air Transport Association, which is targeting to half aviation emissions by 2050 relative to 2005 levels.

In the industry's efforts to reduce carbon emissions, SAFs would almost completely replace fossil fuels on commercial flights by 2050, AAPA said. "Significant quantities of SAF will be needed by the industry as 80% of emissions are from flights over 1500 km, for which aircraft powered by alternative energy sources such as electricity and hydrogen are not available," AAPA elaborated.

Asia-Pacific will make up around 40% of global SAF demand but production facilities in the region are lacking, said Subhas Menon, director-general of AAPA. Sufficient resources would have to be allocated to convert feedstock such as agricultural waste, waste oils and other biomass into SAF, he added.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) would also be important in helping AAPA achieve its target, Menon said. CORSIA is an United Nations-backed international carbon offsetting scheme, which Menon said AAPA fully supports and "will continue to encourage states to fully participate."

As for other solutions such as direct carbon capture and carbon sequestration, Menon said these investments, when viable, could complement other net-zero emissions efforts.

--Reporting by Hanwei Wu, hanwei.wu@ihsmarkit.com;

--Editing by Carrie Ho, carrie.ho@ihsmarkit.com

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Climate Change Could Displace 216 Million People by 2050: World Bank

September 16, 2021

Climate change could force 216 million people to migrate within their own countries by 2050 and migration hotspots could emerge as early as 2030, the World Bank warned in a report released September 13.

By 2050, sub-Saharan Africa could see 86 million internal climate migrants; East Asia and the Pacific, 49 million; South Asia, 40 million; North Africa, 19 million; Latin America, 17 million; and Eastern Europe and Central Asia, 5 million, the bank said in the report, "Groundswell Part 2: Acting on Internal Climate Migration".

The report, however, said decisive collective action could reduce climate migration sharply.

"It is important to note that this projection is not cast in stone," said Juergen Voegele, vice president of sustainable development at the World Bank. "If countries start now to reduce greenhouse gases, close development gaps, restore vital ecosystems and help people adapt, internal climate migration could be reduced by up to 80% to 44 million people by 2050."

The study builds on the first Groundswell report released in 2018, which covered sub-Saharan Africa, South Asia and Latin America.

By deploying a scenario-based approach, the latest report explores potential future outcomes, which can help decision-makers plan ahead.

"The approach allows for the identification of internal climate in- and out- migration hotspots, namely the areas from which people are expected to move due to increasing water scarcity, declining crop productivity and sea-level rise, and urban and rural areas with better conditions to build new livelihoods," the bank said in a news release.

Voegele said the report also clearly lays out a path for countries to address some of the key factors that are causing climate-driven migration

Its policy recommendations include:

--Reducing global emissions and making every effort to meet the goals of the Paris Agreement -- keeping global warming well below 2 degrees Celsius and preferably no more than 1.5 degrees C.

--Embedding internal climate migration in far-sighted green, resilient and inclusive development planning.

--Preparing for each phase of migration, so that internal climate migration as an adaptation strategy can result in positive development outcomes.

--Investing in better understanding of the drivers of internal climate migration to inform well-targeted policies.

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Saskatchewan's Carbon Capture Strategy to Focus on Enhanced Oil Recovery

September 8, 2021

The Canadian province of Saskatchewan on September 7 unveiled its carbon capture, utilization and storage (CCUS) strategy, saying it will prioritize projects involving enhanced oil recovery (EOR) despite warnings from environmentalists that such projects will delay the transition away from fossil fuels.

EOR is the process of pumping captured carbon dioxide (CO2) to depleted oil reservoirs to extract oil that would have otherwise remained underground. The CO2 is then sequestered in the ground.

"Saskatchewan is already a world leader in carbon capture, particularly with enhanced oil recovery, which leading environmentalists agree countries can't achieve Paris accord targets without," Energy and Resources Minister Bronwyn Eyre said in a news release. "EOR also emits 82% fewer emissions than traditional extraction methods."

Environmental groups have, however, voiced concern over the proliferation of carbon capture projects.

In July, more than 500 organizations urged Canada and the U.S. to stop pursuing carbon capture as a climate policy. They said almost all existing projects are tied to EOR, which is disastrous for the climate as it results in more oil extraction and more carbon emissions when that oil is burned.

In a separate letter in March, a coalition of 47 Canadian organizations had urged the federal government not to extend subsidies for EOR projects.

Eyre said the government wants to build on Saskatchewan's energy strength and make the province the most competitive jurisdiction in Canada to invest in CCUS technology and infrastructure.

The government anticipates that CCUS projects will attract investment of more than $2 billion and sequester over 2 million tons of CO2 annually.

Over the past 25 years, Saskatchewan EOR projects have sequestered more than 40 million tons of CO2. They have also resulted in over 100 million barrels of incremental oil production, the government said.

With its new strategy, Saskatchewan said it will aim to expand the province's Oil Infrastructure Investment Program (OIIP) to include CO2 pipeline projects and work with the energy sector to evaluate the EOR royalty regime to ensure that CO2 injection projects remain highly competitive.

The province will also advance the development of a CCUS greenhouse gas (GHG) credit generation program, recognized under Saskatchewan's emissions management framework.

"The Government of Saskatchewan continues to call on the federal government to engage with the province to advance these priorities, which will help meet federally mandated emission targets," the province said.

While the Canadian government is a strong supporter of carbon capture programs, EOR projects are not eligible for tax credits. Saskatchewan has called that "disappointing."

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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RGGI Prices May Surpass $23/st by 2030 with Penn. Participation: Report

September 8, 2021

Regional Greenhouse Gas Initiatives (RGGI) prices could climb as high as $23.10/st by 2030 with support from bullish financial players should Pennsylvania join the consortium, according to a report by analyst firm ClearBlue Markets.

Released September 3, ClearBlue's report said it expected RGGI allowance prices to reach $9.50/st by the end of 2021 as more financial players enter the secondary market.

"We then expect prices to rise to the level between $11.88 and $13.07 in 2025, before rising to a level between $18.37 and $23.10 by 2030," according to ClearBlue's report. "The high end of our price forecast is due to the effect of Pennsylvania joining RGGI in 2022 scenario."

Pennsylvania is currently working on joining the consortium and recently gained approval of its final form rulemaking from the Independent Regulatory Review Commission (IRRC) last week and the Environmental Quality Board (EQB) in July.

The state has been aiming to join RGGI since Pennsylvania Gov. Tom Wolf (D) signed an executive order in October 2019 ordering the state's Department of Environmental Protection (DEP) to draft rulemaking to begin participation in 2022.

Currently, RGGI is made up of 11 member states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia.

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

Should Pennsylvania overcome final hurdle of review by the state's office of the attorney general, it could also face opposition in the General Assembly if the Assembly adopts legislation to block entry into RGGI.

In June, House Bill 637 passed through the Environmental Resources and Energy Committee, which would prevent Pennsylvania from joining RGGI without approval from the General Assembly.

A similar bill, Senate Bill 119, would also require legislative approval before the state can join the consortium.

"Both Bills are making their way through the legislative process but won't see any updates until the State's General Assembly return from summer recess on September 27th," ClearBlue's report said. "In any case, even with the passage of the Bills, Governor Wolf can veto the Bills, which he did with asimilar Bill passed in 2020."

At the start of 2021, OPIS assessed RGGI prices for prompt delivery at $8.08/st which quickly strengthened by 86cts/st to $8.94/st while forward delivery began at $8.16/st and climbed by 84cts/st to $9/st in January.

Since that peak, RGGI prices fell over $1/st to $7.73/st for prompt delivery and $7.805/st for forward delivery in April before steadily increasing past $9/st for both timings in late August.

ClearBlue said financial entities without compliance obligations under RGGI were behind the strengthening prices and could continue to push prices past $23/st by 2030, should Pennsylvania join.

"The higher expected price outlook, despite the higher expected cumulative balance, is because of the anticipated continued influx of speculative volume into the RGGI market over the next decade," ClearBlue said.

On Wednesday, the day of the third quarter auction, the RGGI V21 December 2021 contract traded on the Intercontinental Exchange between $9.17/st and $9.30/st and on the Nodal Exchange between $9.15/st and $9.30/st by 1 p.m. CT. On Tuesday, OPIS assessed the RGGI V21 December 2021 price at $9.155/st.

 

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

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

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Pennsylvania's Regulatory Review Commission Approves Final RGGI Rule-making

September 1, 2021

The Pennsylvania Independent Regulatory Review Commission (IRRC) on September 1 approved (3-2) final form Regional Greenhouse Gas Initiative (RGGI) rule-making, clearing another hurdle for the state to join the multistate cap-and-trade consortium in 2022.

The state's Environmental Quality Board (EQB) last month voted to advance the rule-making to the IRRC.

The DEP drafted the RGGI regulation on the command of a 2019 executive order signed by Governor Tom Wolf (D). Pennsylvania has a climate goal to reduce CO2 emissions by 25% by 2025 and 80% by 2050, compared to 2005 levels.

Pennsylvania's RGGI participation would reduce 188 million tons of carbon dioxide (CO2) over a decade, according to the Department of Environmental Protection.

RGGI has 11 member states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia. Under the program, fossil-fuel power plants with more than 25 megawatts of generation capacity must offset emissions with either RGGI allowances or approved offset credits.

Before the vote Wednesday, RGGI secondary market prices strengthened 10.5cts/st for forward delivery on futures exchanges.

The Intercontinental Exchange (ICE) V21 forward December 2021 futures contract traded between $9.10/st and $9.20/st, up from the Tuesday OPIS assessment of $9.095/st. Meanwhile, the contract traded on Nodal Exchange at $9.10/st by 3:30 p.m. CT.

After the IRRC vote, the National Resources Defense Council said in a statement that the rule-making will meet additional regulatory obstacles before Pennsylvania joins RGGI.

"The Office of Attorney General has thirty days to review the legality of the IRRC's regulations and Pennsylvania's General Assembly could adopt a resolution to oppose the regulations," the group said.

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

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

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Indian Startup Floats New Mechanism to Monetize Unaccounted Carbon Sinks

August 30, 2021

An Indian startup is proposing a new mechanism called Net Sink Credit to tap into the vast and unaccounted carbon sinks held by individuals and entities to help nations meet their climate goals under the Paris Agreement.

At the center of Equator Geo's proposal is the monetization of Net Sink Credit, the net carbon credits owned by individuals, households, communities, governments and institutions, company executives said Friday.

The company believes trading in Net Sink Credit could be a game changer because it will accelerate the path toward net zero while compensating participants.

"Every stratum of society is benefited with this novel concept as the unaccounted carbon sinks are accounted and remunerated on an annual basis as they are selling their credits to the emitters or other well-wishers," CEO Manuel Thomas said in an interview. "The emitters and the Net Sink Credit holders are bound together by a monetary agreement, so the results are assured."

Recently, Equator Geo conducted a pilot study at an organic farm with a household of four members in the southern Indian state of Kerala. The study, which deployed remote sensing technology, found that the land sequestered 416 tons of carbon dioxide (CO2) while the family emitted a mere 4.5 tons, leaving a net sink of 411.5 tons, the company said, citing a perfect example for tradable Net Sink Credit.

Equator Geo's proposal was published earlier this month by the FACT Dialogue Collaboration Portal, hosted by the British government as part of its presidency of the 26th Conference of Parties (COP26) in Glasgow, Scotland, in November.

"Net Sink Credit is a unique product crafted for climate equity, which can be exchanged in the carbon market as an alternative for carbon credit," the company said in its submission.

It said current carbon trades are either allowance-based transactions for emissions trading or project-based transactions for emissions reductions.

"The developed countries are the main profit makers at the expense of developing countries in this market," it said.

Equator Geo believes Net Sink Credit will satisfy all the requirements of Article 6 of the Paris Agreement, which allows countries to use internationally transferred mitigation outcomes (ITMOs) to achieve their climate goals, or nationally determined contributions (NDCs).

It is one of three mechanisms outlined in the article, the only section of agreement that has yet to be settled. Article 6 is one of the main topics of discussion at COP26.

Thomas said, under Net Sink Credit, national governments can establish carbon e-markets where buyers and sellers can directly trade while an international carbon e-market can be set up and governed by the United Nations Framework Convention on Climate Change (UNFCCC).

"A carbon market based on Net Sink Credit trade will enable India to attain its NDC targets much easily and to declare a net zero target, which has not yet happened," Thomas said.

Anju Lis Kurian, climate change mitigation research adviser at Equator Geo, said the company is seeking state and federal support for its initiative.

She said if the concept becomes part of the Indian government's proposals at COP26, then it would make a big difference.

Both Kurian and Thomas said that if Net Sink Credit becomes reality, it would be beneficial to large sections of society, especially in the developing world.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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UN Agency Managing REDD+ Program Reports Significant Progress

August 26, 2021

Despite the disruption caused by the COVID-19 pandemic, several countries have made significant progress toward implementing the REDD+ (Reducing Emissions from Deforestation and forest Degradation) program in 2020, the United Nations said in a report released August 26.

The UN-REDD Programme, which manages REDD+, said in its 12th Consolidated Annual Report that Argentina, Colombia, Costa Rica and Indonesia "achieved the milestone" of accessing result-based payments (RBPs), securing $286 million for emissions reductions from the forest sector.

They join Brazil, Chile, Ecuador and Paraguay as the frontrunners to be rewarded with a cumulative $497 million for avoided emissions totaling 102.6 million tons of carbon dioxide equivalent (MtCO2e), the report said.

The funds were disbursed by South Korea-based Green Climate Fund (GCF), an international agency established under the UN Framework Convention on Climate Change (UNFCCC).

"With UN-REDD support, more and more countries are implementing forest solutions, with the institutional systems and capacities in place to ensure that the reduction and removal of emissions from the forest sector are real, quantifiable, and verifiable," the report said.

It said in 2020, 10 partner countries and one region received customized UN-REDD support through national programs and technical assistance for REDD+ implementation.

Myanmar and Peru made notable advances with their national REDD+ strategies or action plans, bringing to 32 the number of UN-REDD partner countries that have finalized these strategic policies for nature-based emissions reductions from the forest and land use sector.

Since 2008, when the REDD+ framework was launched, the agency has supported more than 65 countries in designing national and sub-national REDD+ policies and on-the-ground interventions.

'Needle-Shifting Action' Needed

The report also warned that climate goals cannot be met without halting deforestation and forest degradation, which it said are continuing at alarming rates.

UN-REDD said forests have a massive climate mitigation potential, estimated in the range of 4.1 to 6.5 gigatons of carbon dioxide equivalent (GtCO2e) over the next decade.

"The mitigation potential of forests can only be fully realized by urgent and unprecedented multilateral consensus on a decade of needle-shifting action of drastically elevated ambition to turn the tide on deforestation," it said.

The agency said REDD+ is a critical element of the international climate commitments.

"Looking to the 2030 horizon, the goal of the UN-REDD Programme is to help fully realize forests' mitigation potential for at least 5 GtCO2e per year, with a mid-decade milestone of the first Green Gigaton of forest based GHG (greenhouse gas) emissions reductions, and enhanced removals, unlocked and financially rewarded."

The report, however, said quantity of mitigation results is not the sole dimension of UN-REDD's post-2020 ambition.

"The 2025 target of 1 GtCO2e will also need to demonstrate a trajectory of increasing quality, in terms of accuracy, certainty and permanence, commensurate with hikes in prices in emerging forest carbon markets necessary to incentivize REDD+ action at scale," it said.

In pursuing its mitigation goals, UN-REDD said it will continue to employ approaches to promote social inclusion and realize non-carbon benefits that have been a distinguishing feature of the program over the past 10 years.

Non-carbon benefits include safeguarding biodiversity, supporting local livelihoods and advancing the rights of indigenous peoples.

Climate Goals Fall Short

The report said REDD+ is now recognized as an effective climate mitigation strategy by countries to meet their climate goals or nationally determined contributions (NDCs) to the Paris Agreement.

The goals of the landmark 2015 accord are to keep global warming well below 2 degrees Celsius and preferably no more than 1.5 degrees C.

The report said current mitigation measures contained in the NDCs are inadequate to bridge the emissions gap to reach the Paris Agreement targets.

"For a 2-degree C limit to warming, the total emissions gap from current conditional NDCs is 13 GtCO2eq by 2030; for a 1.5-degree C limit, the gap is 29 GtCO2eq," the report said. "Strongly increased forest action is, therefore, a critical measure to remove CO2 from the atmosphere, at scale, to close the emissions gap prior to 2030."

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Canada Not Investing Enough in Green Projects Despite Lofty Goals: RBC

August 24, 2021

It could cost Canada C$70 billion ($55.4 billion) a year to meet its ambitious climate targets, but just C$10 billion ($7.9 billion) is being invested now, the Royal Bank of Canada (RBC) said in a recent report.

"A key problem (is) large-scale projects that could create meaningful change, for instance in heavy-emitting sectors, are often costly, come with higher investment risk and don't provide significant near-term financial returns," Canada's largest bank said in the report released last week.

"Boosting near-term financial returns from the most challenging projects could help attract more investment."

Canada aims to reduce its emissions by 40%-45% below 2005 levels by 2030 before reaching net zero in 2050.

The report said despite leadership on carbon pricing, Canada is devoting less effort to sustainable finance than its European peers. It said as a share of gross domestic product (GDP), Canada funds half as many green projects, in part because there is less policy clarity from Ottawa.

"Growing commitments by the U.S. and China will likely start to accelerate their green finance efforts, too, meaning Canada could fall even further behind."

The report said Canada faces two key challenges to deploying sustainable finance on the scale needed to get to net zero.

The first is few emissions-reduction projects generate sizeable, near- to medium-term financial returns. Building retrofits, for example, can take 20-plus years to reach positive cash flows, and that is a problem in attracting investors.

RBC said one way to entice shorter-term investors would be to pull forward the returns of long-term projects like building retrofits and industrial energy-efficiency measures by charging lower utility rates to entities that cut emissions.

The second hurdle is some projects are economically challenged even over the long term unless policy support plays a significant role.

The report said direct subsidies or contracts that provide certainty on the future carbon price can help generate returns where none exist today.

The bank said its analysis showed that the push for faster green finance had led markets to prioritize project-based funding, such as financing an existing factory's effort to reduce emissions.

But it said financing the broader transitions needed to reduce emissions in upstream oil and gas production and the manufacturing of cement and steel is proving more challenging.

"With a relatively large share of industrial emissions, including from the oil patch, Canada faces a challenge in ensuring that sustainable finance reaches all parts of its economy," the report said.

RBC noted that Canada is on a path to outlining how firms will be required to disclose climate risks, how banks will need to manage them and which activities are sustainable and aligned with its climate goals.

"But in isolation, even the best-designed disclosure, risk management, and labelling rules won't encourage enough more businesses to invest in emissions cuts," it warned.

"In crafting sustainable finance policy that will help Canada meet its climate goals, governments will also need to make sure the right investors are matched up with companies and the right incentives are in place to encourage abatement."

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Q3 CCA Auction Could Fetch Record $20-$20.50/mt Settlement Price: Analysts

August 16, 2021

The third-quarter California-Quebec cap-and-trade auction on August 18 is expected by analysts to be oversubscribed and reach a record $20-$20.50/mt settlement price, as financial players continue to amass California Carbon Allowances (CCA).

On Wednesday, Auction 28 will consist of 72.26 million vintage 2020 and 2021 CCAs for the "current" portion of the event and 8.3 million vintage 2024 CCAs for the "advance" portion. The auction will feature 14.25 million CCAs that were unsold during previous auctions.

Non-compliance participants such as hedge funds -- without obligations under the California Cap-and-Trade Program -- are expected to make an appearance in the upcoming event, CaliforniaCarbon Senior Analyst Anant Jain said recently during the firm's Q3 auction preview webinar.

"We find that fund managers are emerging as key traders in this market and they're likely to substitute for compliance entities (at auction) should the compliance demand weaken," Jain said. The fund managers are "really a strong rival for the current and advance auctions."

ClearBlue Markets analyst Anop Pandey on Monday agreed that the upcoming event will likely sell out of CCAs.

"As the recent rise in secondary market prices indicate continue interests in the CCAs, and the auction provides the opportunity for participants to acquire allowances at a lower price compared to the secondary market price," Pandey said.

Secondary market CCA prices are typically stronger than the quarterly auction price. Participants often purchase CCAs at auction and sell them in the more expensive secondary market.

Since the start of 2021, CCA secondary market prices gained $6/mt to $23/mt this week on the back of healthy participation from financial players, according to OPIS pricing data.

Pandey said the upcoming auction will likely include an increase in non-compliance entities, but compliance entities will still be the main participants.

"The May auction saw 20% of the current vintage being brought up by non-compliance entities. We expect this number to rise in the August auction," he said.

Jain said compliance entities reduced long and short positions in the secondary market by 17 million tons as of Aug. 3. Most compliance entities likely have ample supply CCAs for 2021 compliance, he said, noting that non-compliance entities have remained active and continued to purchase CCAs.

"Fund managers have been maintaining a bullish outlook so far," he said.

The 2021 auction reserve price (ARP) is $17.71/mt.

The previous auction in May sold out of 79.95 million CCAs. The current portion had 71.65 million allowances and settled at $18.80/mt, $1.09/mt over the ARP.

The advance portion sold 8.3 million allowances that settled at $19.04/mt, $1.33/mt over the ARP.

Jain said the auction this week will potentially settle at $20.50/mt, but Pandey said the Q3 auction should settle at about $20/mt.

"The secondary market price has since risen to $23.50. Given this development, we expect settlement price to be higher than $18.80, and could settle close to $20," Pandey said.

On Monday, the Intercontinental Exchange (ICE) CCA V21 August 2021 contract traded between $23.27/mt and $23.33/mt by 2:30 p.m. CT. On Friday, OPIS assessed the V21 August 2021 price at $23.24/mt.

 

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

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

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CEC Approves New Code to Lower Buildings' GHG Emissions

August 12, 2021

The California Energy Commission (CEC) approved a new building code August 11 which includes the standard use of high efficiency electronic appliances that will aim to steer new buildings and homes away from fossil fuels.

The 2022 Energy Code will require the use of an electric heat pump for heating water or space instead of gas-powered units in new construction projects.

"Buildings profoundly influence our health, environment and economy. Into the future they will use less energy and emit less pollution while still being comfortable and healthy," CEC Commissioner J. Andrew McAllister said in a release.

The CEC said in a release homes and commercial buildings use almost 70% of the state's electricity and made up 24% of California's greenhouse gas (GHG) emissions.

Currently, about 6% of new home construction have heat pumps, according to a CEC building code summary. In the future, the heat pumps will be required for single-family homes, apartment buildings and new business construction, according to the new code.

Single-family homes will be required to have electric circuits for heating space and water and other appliances such as stoves and clothes dryers under the new code. These new construction projects will also have circuits to convert to electric appliances from natural gas-powered units.

Stronger ventilation guidelines for gas stoves are also included in the building standards to improve indoor air quality.

The code will also introduce battery storage standards for multifamily homes like apartment buildings along with commercial buildings and expand standards for solar photovoltaic (PV) systems to decrease the demand on the state's electric grid.

The CEC updates the state's standards every three years to increase energy efficiency and lower buildings' GHG emissions of buildings, according to the release.

The code will go to the California Building Standards Commission (CBSC) in December for a vote and, if approved, it is expected to go into effect in January 2023 to give builders a year to prepare for the changes.

 

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

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Human Influence in Atmospheric, Ocean, Land Warming 'Unequivocal: UN Panel

August 9, 2021

Global surface temperatures will continue to rise until at least midcentury and are on pace to exceed 1.5-2 degrees C sometime during the 21st century without "deep reductions" in carbon dioxide (CO2) and greenhouse gas emissions within the coming decades, according to the Working Group I contribution to the United Nations' Intergovernmental Panel on Climate Change (IPCC)'s Sixth Assessment Report (AR6).

The Working Group I report assesses the physical science basis of climate change.

Various examples of weather and climate extremes are already evident on every region of the globe, including heat waves, droughts and tropical cyclones, and evidence linking these events to human influence has strengthened since the group's Fifth Assessment Report (AR5), the new report says. The fifth report was finalized in 2014.

"It is unequivocal that human influence has warmed the atmosphere, ocean, and land," according to the new report's "Summary for Policymakers."

"The scale of recent changes across the climate system as a whole and the present state of many aspects of the climate system are unprecedented over many centuries to many thousands of years," the report says.

Many greenhouse-gas-induced changes, including those in the ocean, ice sheets and global sea level, are irreversible for centuries to millenniums, the report warns. Increasing CO2 emissions would also make ocean and land carbon sinks ( natural reservoirs that absorb more atmospheric carbon than they release) less effective at slowing the accumulation of CO2 in the atmosphere, the IPCC projects.

Changes in climate impact drivers become more "widespread and/or pronounced" alongside incremental global temperature increases, the report says, noting that even global warming of 2 degrees would result in a greater level of change for climate impact drivers than an increase of 1.5 degrees.

"From a physical science perspective, limiting human-induced global warming to a specific level requires limiting cumulative CO2 emissions, reaching at least net zero CO2 emissions, along with reductions in other greenhouse gas emissions," the report summary for policymakers states.

The AR6 Working Group I report references over 14,000 scientific papers, and was composed by team of 234 lead authors, coordinating lead authors and review editors, according to the IPCC.

The AR6 Working Group II report, which will cover the impacts, adaptations and vulnerabilities of human societies and the natural world to climate change, is expected to be approved and released in mid-February 2022. The Working Group III report, which will assess progress in limiting emissions, and evaluating remediation strategies, is expected to be approved and released in March 2022.

The AR6 synthesis report, which includes the three Working Group reports in addition to findings from three cross-Working Group Special Reports prepared during this assessment cycle, is slated for approval and publication in late September 2022.

 

--Reporting by Kylee West, kwest@opisnet.com;

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

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ExxonMobil Reportedly Mulls Net Zero Pledge as Shareholder Activist Eyes AGM

August 5, 2021

The Wall Street Journal reported Thursday that ExxonMobil is considering making a pledge to hit net zero carbon emissions from its operations by 2050 - just as leading European shareholder activist group Follow This has told OPIS that it plans to table a resolution at ExxonMobil's 2022 annual general meeting demanding the company slashes its emissions.

The Wall Street Journal's sources said that no final decision had been made to align the company with the targets set by most of the world's leading industrial economies to reduce carbon emissions to net zero by 2050.

Such a pledge would mark a big departure for the company, whose chief executive officer Darren Woods last year referred to the carbon emission reduction goals of other oil majors as "a beauty competition."

ExxonMobil had not replied to a question about the report by the time OPIS went to press.

The report coincides with Follow This founder Mark van Baal telling OPIS that his campaign group has accumulated sufficient shares in ExxonMobil to target the company's annual general meeting next year and ask ExxonMobil shareholders to back a resolution demanding significant reductions in its carbon emissions.

"Most probably, yes," said Van Baal when asked by OPIS in an interview earlier this week whether Follow This was planning to file a resolution before the end of the year that would then be voted on by ExxonMobil shareholders at the company's AGM in the second quarter of 2022.

The Netherlands-based campaign group was partly responsible for what was quickly dubbed 'Black Wednesday for Big Oil,' when a Follow This resolution demanding Chevron reduce its carbon emissions was backed by 61% of shareholders.

The resolution was passed on May 26, which saw Royal Dutch Shell being ordered by a Dutch court to cut its net global carbon emissions by 45% by 2030 to comply with the Paris Agreement, the legally-binding international accord signed in 2016. The same day also witnessed activist hedge fund Engine No. 1 being backed by shareholders to install three directors on ExxonMobil's board, who support reducing the company's carbon emissions.

Van Baal said that Follow This had yet to formulate the exact wording of a forthcoming resolution for ExxonMobil's AGM, which must be submitted before the end of the calendar year.

The Follow This resolutions that were successfully passed at this year's Chevron, Phillips66 and ConocoPhillips AGMs demanded "substantial reductions in greenhouse gas emissions" including the carbon emitted by the consumers of those companies' products, known as Scope 3 emissions. Such proposals are less exacting than the demands made by Follow This's resolutions at the AGMs of European oil majors, which have asked companies like Royal Dutch Shell to hit specific reductions in carbon emissions by certain dates.

"We haven't decided yet to be honest," said Van Baal about whether its ExxonMobil resolution will be more aligned with its recent U.S. or European resolutions.

"In Europe since 2017 we specifically ask for emissions reductions in the short, medium and long-term in line with the Paris climate agreement."

"For next year we still have to decide how far we are going to bring the American resolutions to [align with] the European resolutions," said Van Baal, who was previously an engineer and sold refrigerator machines for shipping containers before becoming a journalist and then a shareholder activist in 2015.

"We still have to discuss that and discuss with American lawyers if mentioning the Paris climate agreement in the official part [of the resolution means] we don't run the risk that a 'no action' letter is accepted," said Van Baal.

No action letters sent by U.S. oil majors to the U.S. Securities and Exchange Commission in response to Follow This's proposed AGM resolutions were invariably successful before the advent of the Biden administration, Van Baal said.

"That was the big change this season, that we finally got our resolutions on the ballot in the U.S. We didn't succeed in that before during the Trump years when the no action letters saying that our resolutions were micro-management were accepted by the SEC," said Van Baal.

OPIS asked Van Baal whether Follow This was holding discussions with Engine No. 1 in advance of next year's ExxonMobil AGM.

"We are keen to talk with them about how our approaches can enforce each other. It would be great if they do the same with Chevron [by putting directors on its board], and I think it would also help their cause if we file a resolution at Exxon so the three [Engine No. 1-backed ExxonMobil] board members which are in a minority can say to their peers on the board, 'Look, our shareholders also want this'."

The campaign group has made significant headway in 2021 in garnering support from shareholders of several European oil majors for its resolutions demanding that companies set emissions targets that are consistent with the Paris Agreement. In 2018, 5.5% of Royal Dutch Shell's shareholders backed Follow This' AGM resolution, but that rose to 14% in 2020 and 30% this year.

Similarly, its resolutions at Equinor's AGMs were backed by 12% of shareholders in 2019 and 39% in 2021.

Follow This has just four full-time employees and operates on a shoe-string budget of just a few hundred thousand euros, according to a slideshow presentation at its own annual general meeting, which was held on June 30 and attended by OPIS. Grants to the campaign group in the 2020 financial year totaled 189,941 euros, while member fees and donations totaled 34,056 euros.

Its U.S. operations are led by a recent law graduate.

(OPIS's correspondent paid a one-off membership fee of 9 euros to attend Follow This' annual general meeting and learn more about its future goals. The correspondent did so with the prior knowledge and agreement of Follow This and on the written understanding that the correspondent would attend as a journalist and not as a supporter of the campaign group.)

 

--Reporting by Anthony Lane, alane@opisnet.com;

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

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Quebec Unveils Draft Protocol for Private Forestry Offset Projects

August 5, 2021

Quebec has released a draft forestry protocol for carbon sequestration projects on private lands, aimed at increasing the supply of offset credits in the Canadian province.

The draft was published Wednesday by the Ministry of the Environment and Fight Against Climate Change Quebec (MELCC) on its website. The public has until Sept. 18 to comment.

A key feature of the new regulation is that it makes afforestation and reforestation projects on land in the private domain eligible for offset credits.

It also applies the concept of aggregation, which will allow a promoter to group together several projects and benefit from the reduction of certain regulatory provisions, the ministry said.

In addition, the law takes a new approach to quantifying the effects of greenhouse gas (GHG) removals achieved by carbon sequestration.

Currently one credit is issued for 1 ton of carbon dioxide (CO2) removed, and the sequestrations must be maintained over 100 years after issuance.

Under the new method, the credits issued would correspond to the climate benefit achieved at the time of issuance, avoiding obligation to maintain the forest for more than a century, the ministry said.

The protocol would also reward carbon sequestered in wood products.

In April, Environment Minister Benoit Charette said the new protocol would set out a very innovative and rigorous approach for companies operating in the forestry offset sector.

Quebec has set an emissions reduction target of 37.5% from 1990 levels by 2030 before reaching carbon neutrality by 2050.

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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CME Group Officially Launches N-GEO Futures Contract

August 2, 2021

CME Group officially launched the Nature-based Global Emissions Offset (N-GEO) futures contract for trading on its exchange Sunday.

Evolution Markets said in a separate news release that it had brokered the first trade of the new contract, facilitating the trade for 200,000 offsets -- equivalent to 200 contracts -- for delivery in December at $5.40/mt between Hartree Partners and Andurand Climate and Energy Transition Fund.

"Carbon offsets originating from nature-based activities, such as improved forest management or land use, generate high-quality, high-demand carbon emission reductions," Evolution Markets President and CEO Andrew Ertel said in a news release. "This inaugural trade is another step forward in the development of risk management products for these types of carbon offsets. We congratulate Hartree and Andurand on this important, ground-breaking transaction."

Evolution Markets also brokered the first trade of the CME GEO contract in April between Hartree and Gazprom.

The N-GEO contract debuted April 16 on the Xpansiv Markets CBL platform, with first-day volumes of 131,215 metric tons of carbon dioxide equivalent (CO2e) traded between $4 to $5/mt, Xpansiv said at that time.

Since its inception, 2.93 million metric tons have traded via N-GEO, including 151,000 mt on Friday, Xpansiv said. For the year, nature-based credit volumes have grown to 18 million mt, up twelvefold compared to the full year 2020 totals, Xpansiv said.

The N-GEO comprises offsets from agriculture, forestry and other land use projects with additional climate, community and biodiversity accreditation.

The launch of the N-GEO contract on CME Group follows the launch of the CME Group Global Emissions Offset (GEO) futures contract in April.

GEO spot contract volumes on the CBL exchange have reached over 5 million metric tons year to date, including 15,000 mt Friday. The GEO also hit a record price at $3.30/mt Friday, said Rob Dalton, vice president of communications at Xpansiv.

The combination of the spot CBL contract and CME futures contract has resulted in increased participation in both trading markets as many participants are active on both exchanges, said Andy Bose, Xpansiv's head of ecosystems and partnerships.

"As of now, participation in the spot market reflects higher levels of activity with respect to transactions and volumes, but the CME contract is gaining momentum as the first two contract dates have settled and delivered without any issues," Bose said. "We'd expect increasing volumes and transactions in the CME contract going forward, and for the spot and futures volumes to be complementary, as they are in many other trading markets."

Bose declined comment on the prospects for the CME N-GEO contract, but did note how the spot market has increased volumes ahead of the futures contract launch, which is something the exchange believes is a strong indication of the market's interest in nature-based solutions.

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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Analysis: CCA-CCO Price Spread Widens to Record $10/mt

July 28, 2021

The price spread between California Carbon Allowances (CCA) and California Carbon Offsets (CCO) reached a record $10/mt this month following the disconnection of the California Cap-And-Trade Program compliance instruments, which historically traded within a narrower, more static range.

While the spread has widened this year from $4.56/mt in January, the CCA and CCO price divergence began in the second quarter of 2020, after COVID-19 social restrictions caused a precipitous fall of $2.70/mt for CCOs and $4.86/mt for CCAs, according to OPIS pricing data.

CCA secondary market prices have more than recovered those losses as opportunistic, financial players - looking to buy credits at a weak price point -- provided new demand in the secondary market, but CCOs did not keep pace or garner the same interest, ClearBlue Markets Analyst Tim Tursun said.

The CCA-CCO price spread reached its widest point on July 8, when OPIS assessed the CCA current vintage prompt price at $23.72/mt and Golden CCO at $14.10/mt,

CCO3 at $13.40/mt and CCO8 at $13.30/mt.

Cap-and-trade compliance entities may use offset credits to meet up to 4% of their obligations between 2021 to 2025 and 6% from 2026 to 2030. The offsets come in three different designations as Golden CCOs, which carry no risk of invalidation for the buyer along with CCO3s and CCO8s, which have a three and eight-year invalidation risk, respectively.

"(The) CCA/CCO spread has widened because of different investor profiles," Tursun said. "Specifically, (the) CCA price-run in 2021 has been driven by financial players-whose holdings in the WCI (Western Climate Initiative) are at an all-time high. CCOs, on the other hand, did not receive similar interest from the financials, as a result of low trading volume in the CCO futures, and quantitative usage limit for compliance. Thus, the main buyers of CCOs continue to be compliance entities."

According to analysts, the speculative participants took advantage of the COVID-19 weakness on futures contacts and bought CCAs after the crash. This caused an uptick in demand, and CCA prices strengthened at a fast pace. At the same time, CCO prices moved in a typical upward price trajectory as mainly compliance entities remained the main source of CCO demand.

"When the prices for CCO and CCA both crashed due to COVID, compliance entities scooped up CCAs at its lowest point-below the floor price-since CCAs have no usage limit for compliance or invalidation risks (unlike CCOs)," Tursun said.

"Historically only 48 companies (mostly large emitters) have utilized their full offset usage limit for compliance."

CCA/CCO Split Ways in Pandemic Fallout

In March 2020, before pandemic restrictions were put in place in California, the CCA and CCO price spread averaged about $2/mt, according to OPIS price history.

Before CCA prices fell, the CCA current vintage prompt price was $2.02/mt stronger than Golden CCO, $2.27/mt over CCO3 and $2.32/mt over CCO8 on March 11, 2020. On that date, OPIS assessed the CCA current vintage prompt price at $17.37/mt, Golden CCO at $15.35/mt, CCO3 at $15.10/mt and CCO8 at $15.05/mt.

CCA prices continued to plummet, trading as low as $11.05/mt and OPIS assessed prices bottomed out at $12.51/mt on March 23, 2020.

But on April 4, 2020, CCA current year prompt began an ascent, rebounding to $12.65/mt, while CCO prices further sank with Golden CCO at $12.10/mt, CCO3 at $12/mt and CCO8 at $11.90/mt.

By mid-October 2020, the CCA to Golden CCO price spread widened to $4.23/mt. On Oct. 15, the CCA current year prompt price surpassed its pre-pandemic level, assessed by OPIS at $17.37/mt while the Golden CCO was assessed at $13.15/mt.

CCO prices may have remained weaker than CCAs because compliance entities have not needed to purchase offsets ahead of the cap-and-trade compliance deadline in the fall, said Derek Six, chief business officer at ClimeCo, an environmental consulting firm that specializes in the offsetting in the California Cap-and-Trade Program.

"I cannot really explain why CCO price increases have lagged CCA price increases so much, other than to say that companies do not need CCOs until they need them on Nov. 1, 2021, so I can speculate that there may still be further price increases over the next three months as emitters turn their attention to their compliance obligations," Six said.

ClearBlue Markets noted that CCO prices have strengthened this year in preparation for the November deadline.

"We expect offset prices to continue to rise, as compliance entities will be taking advantage of the CCA/CCO spread for their compliance obligation," Tursun said.

CCO Buyers Navigate New DEBs Regulations

As of July 13, the California Air Resources Board (CARB) has issued 222.4 million offset credits, according to their data.

Starting this year, offsets designated as DEBS (having direct environmental benefits in the state) by CARB must make up at least 50% of the offsets submitted by covered entities under the state's cap-and-trade program.

But the introduction of DEBs in the market is not likely to affect the CCO price, sources said.

"DEBS are unlikely to play a role currently, as (the) DEBS rule does not start until next year's compliance period deadline," Tursun said. "Per our latest brokerage data, the spread between GCCO DEBS and Non-DEBs is currently between 10 and 25 cents. We expect this spread to increase, as the market will start adapting for future compliance requirements."

ClimeCo said the price difference between CCOs with or without DEBS has been narrow, and compliance entities could be holding onto DEBS for future compliance periods.

"Entities may be thinking about DEBs a bit this year, but there has not been much pricing difference for DEBS and non-DEBS yet, and no real increase in DEBS-specific requests that I have seen," Six said.

On Monday, OPIS assessed DEBS Golden CCOs at $14.85/mt, DEBS CCO-3 at $14/mt and DEBS CCO-8 at $13.90/mt, each at a 5cts/mt premium to the CCO price.

Earlier this month, analyst firm CaliforniaCarbon.Info said that CCOs with DEBS could face a shortage by 2025 and could reach a $10/mt price spread over non-DEBS CCOs.

CCOs Retired Voluntarily

Six also added that many of the CCOs that were voluntarily retired in 2021 were DEBS.

"We have seen an up-tick this year in voluntary retirements of compliance CCOs," he said. "Companies have been requesting CCOs for voluntary purposes, removing some from the available supply for compliance."

Tursun said large companies announcing carbon neutrality plans are using CCOs as part of their commitments.

"Per (California) ARB data, almost 1M of WCI eligible offsets credits have been voluntarily retired. Although this is a small amount compared to the over 200M WCI offsets credits released so far, we expect this amount to increase going forward," Tursun said. "If more large companies commit to offsetting their emissions, we could be observing a similar trend of additional WCI offset credit usage."

 

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

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

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China to Launch Pilot to Evaluate Carbon Emissions from Industrial Projects

July 28, 2021

China is preparing a pilot program to evaluate carbon emissions from key projects in designated industries in six provinces and a municipality, the country's Ministry of Ecology and Environment announced in an official notice published July 27.

The program will apply to the provinces of Hebei, Jilin, Zhejiang, Shandong, Guangdong, Shanxi and the municipality of Shanxi. Industries targeted vary in each area but they cover steel, electricity, petrochemicals, construction, non-ferrous metals, chemicals and coal. Other provinces and cities not selected at this stage can also apply to take part in the pilot.

The key emission gas to be evaluated is carbon dioxide but depending on the designated industries for the province, other gases covered in the pilot include methane, nitrous oxide, hydrofluorocarbons, sulfur hexafluoride, and nitrogen trifluoride.

The local environmental agency in each area is to submit the list of local projects covered in the designated industries by July 31, prepare a methodology for evaluating carbon emissions from these projects by Dec. 15, and submit the potential for emissions reductions at these projects by June 15 next year.

The ability to coordinate and manage the evaluation of carbon emissions is a key step in the country's fight against climate change, the ministry said in the notice.

China has pledged to have its carbon emissions peaked by 2030. It also launched earlier this month an emissions trading system (ETS) for its power generation sector, whereby designated sites are allocated carbon emissions allowances that can be traded. China has announced that the ETS will eventually be expanded to cover other sectors.

--Reporting by Hanwei Wu, hanwei.wu@ihsmarkit.com;

--Editing by Carrie Ho, carrie.ho@ihsmarkit.com

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Global Sustainable Investments Reach $35.3 Trillion: Report

July 19, 2021

Sustainable investments in five of the world's biggest markets reached $35.3 trillion at the start of 2020, or 36% of all assets under management in those regions, the Global Sustainable Investment Alliance said Monday.

The group said its Global Sustainable Investment Review (GSIR) 2020 brings together data from the U.S., Canada, Japan, Australasia and Europe.

It is the fifth such biennial survey published by the alliance, which tracks global sustainable and responsible investments.

"The report again demonstrates that sustainable investment is a major force shaping global capital markets, and, in turn is influencing companies and others seeking to raise capital in those global markets," according to the report. "Together, sustainable investment in these markets has reached $35.3 trillion in assets under management, having grown by 15% in two years."

The report's other key findings are:

--Sustainable investment assets make up 35.9% of total assets under management, up from 33.4% in 2018.

--Sustainable investment assets are continuing to grow in most regions, with Canada experiencing the largest increase in absolute terms over the past two years (48%), followed by the U.S. (42%), Japan (34%) and Australasia (25%) from 2018 to 2020.

--Europe reported a 13% decline in growth from 2018 to 2020 due to a changed measurement methodology, the report said.

--Canada is now the market with the highest proportion of sustainable investment assets at 62%, followed by Europe (42%), Australasia (38%), the U.S. (33%) and Japan (24%).

The report said the most common sustainable investment strategy is environmental, social and governance (ESG) integration.

The GSIR offers market insights from the United Kingdom, China and across Latin America, Africa and Asia.

"This year's report highlights an industry that is in transition, with rapid developments across regions that are resetting expectations of sustainable investment, with an emphasis on moving the industry towards best standards of practice," the report said.

The Global Sustainable Investment Alliance represents sustainable investment organizations from around the world.

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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China to Launch ETS in July; Pricing Independent of Other Emission Markets

July 14, 2021

China will launch its national emissions trading scheme (ETS) this month with its carbon pricing expected to be independent of other emissions markets, the country's Ministry of Ecology and Environment said during a press briefing on July 14.

The national ETS was initially marketed to launch in end-June, but the deadline lapsed without further official announcements until last week when both the Chinese Premier Li Keqiang and the MEE mentioned on separate occasions a July launch period. A purported provincial-level circular published on a Chinese social media platform appeared to suggest a July 16 launch date but this could not be confirmed.

When asked about a specific launch date during Wednesday's press briefing, Zhao Yingmin, the Vice Minister of Ecology and Environment, only committed to a July launch period, citing the decision made by the State Council on July 7.

In response to a question about the carbon price in China, Zhao noted that the national ETS has not yet been launched but that the weighted average carbon price is around 40 yuan ($6.18)/mt based on trading data from the country's seven pilot carbon trading markets over the last two years.

This was lower than carbon prices in other mature emissions markets, but Zhao also noted in response to a separate question that there are currently 31 emissions trading schemes and 30 carbon tax regimes worldwide, all of which operate and price carbon independently.

"Each carbon market has its own carbon price, which is normal," Zhao said, adding that there is no obvious influence from one market on another with regards to pricing. A multilateral approach to implementing climate change targets is key to ensuring progress, as opposed to a implementing a one-size-fits-all unilateral approach for all markets, Zhao said.

China's national ETS will first cover the power generation industry. About 4 billion tons of carbon emission would be included in the market for the first trading cycle from January 1 to December 31, 2021, making it the world's largest carbon trading market.

The ministry had earlier requested provincial environmental authorities to submit the list of designated entities for the power generation industry by June 30, with the emission allowance approvals expected by September 30.

Entities are expected to comply with the allocated quota by December 31.

China has tested carbon trading at provincial levels since 2011. Pilot markets have been set up in seven provinces and cities. The country has set a goal to reach peak carbon emissions peak by 2030.

With the launch of the national ETS, the country would not support any new local pilots but would allow existing pilot markets to "further their market development while preparing for the integration into the national market", said Li Gao, MEE's department head for Climate Change during the same press briefing on Wednesday.

Entities which participate in the national ETS will no longer participate in the local pilot markets, Li added.

The pilot markets cover over 20 sectors including electricity, steel, cement and close to 3,000 high-emission entities. Their cumulative volume reached 480 million tons of carbon dioxide equivalent (tCO2e) with a turnover of approximately 11.4 billion yuan ($1.76 billion), said Li.

The country will accelerate the revision of national standards and allowance allocation plans to include other sectors and incorporate them into the national trading system, said Zhao.

 

--Reporting by Patrick Han, Patrick.Han@ihsmarkit.com, Lujia Wang, Lujia.Wang@ihsmarkit.com;

--Editing by Hanwei Wu, Hanwei.Wu@ihsmarkit.com

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Time Running Out for Listed Companies to Meet Paris Agreement Goal: Report

July 12, 2021

The world's publicly listed companies must dramatically accelerate climate action if the 1.5-degree Celsius warming target set out in the Paris Agreement is to be met, global index provider MSCI warned in a new report released July 12.

The inaugural MSCI Net-Zero Tracker covers 9,300 companies on the MSCI All Country World Investable Market Index (MSCI ACWI IMI), accounting for 99% of listed equities.

"Companies in the MSCI ACWI IMI emit an estimated 10.9 gigatons of direct (Scope 1) greenhouse gases (GHG) annually, putting them on a trajectory to exceed their carbon budgets as soon as 2026," the report said.

It said the calculation reflects listed companies' share of the global budget, which is the total amount of GHG that humans can put into the atmosphere without undermining the Paris Agreement goal of keeping global warming well below 2 degrees C and preferably no more than 1.5 degrees C.

To limit warming to 1.5 degree Celsius by 2050, listed companies would need to collectively cap future direct emissions at 61.4 gigatons of carbon dioxide equivalent (CO2e), the report said. Without any change, the companies would deplete their remaining emissions budget in five years, eight months, the report said.

And to limit warming to 2 degrees C by 2050, listed companies would need to collectively cap future direct emissions at 233 gigatons of CO2e. Otherwise, they would deplete their remaining emissions budget in 21 years, five months, the report said.

"The MSCI Net-Zero Tracker is a progress report for whether the world can keep the global temperature rise below 1.5 degrees C," MSCI Chairman and CEO Henry Fernandez said in a news release. "Listed companies and other capital market participants have less than six years to meet that target."

The MSCI Net-Zero Tracker also identified companies with improved climate disclosures as well as those that lag.

State-owned Coal India, the world's largest coal producer, led the list of 10 laggards that have not disclosed their emissions. Russian oil company Surgutneftegas, American refiner PBF Energy and seven Chinese entities, including Shaanxi Coal and Chemical Industry Group and China State Construction Engineering Corp., are also on the list.

Among companies making progress were consumer products giant Procter & Gamble and Dutch semiconductor company ASML Holding. Both now report all emissions across most of the relevant categories.

European aircraft maker Airbus, Chinese technology company Baidu and British American Tobacco reported their indirect emissions for the first time but not all of the disclosures are comprehensive.

"The data in our inaugural Net-Zero Tracker shows the need for a dramatic acceleration in action from the world's public companies," Remy Briand, global head of ESG and climate at MSCI, said in the news release. "For those not matching their commitments or lagging, there should be nowhere left to hide."

MSCI said the Net-Zero Tracker will bring new levels of transparency to investors and policymakers regarding listed companies' action on climate.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Jeremy Rakes, jrakes@opisnet.com

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Global Banks Launch Blockchain-based Carbon Offsets Trading Platform

July 7, 2021

Four international banks are launching a blockchain-based offsets trading platform called Project Carbon to bring liquidity and transparency to the voluntary carbon market (VCM), the financial institutions announced July 7.

The banks behind the project are Canadian Imperial Bank of Commerce (CIBC), Itau Unibanco of Brazil, National Australian Bank (NAB) and NatWest Group of the United Kingdom.

"Project Carbon aims to support a thriving global marketplace for quality carbon offsets with clear and consistent pricing and standards and will provide a valuable pathway for our clients in their efforts to achieve a net zero goal," the banks said in a news release.

Blockchain solutions provider ConsenSys will build the platform, with a pilot beginning in August to demonstrate its operational, legal and technical capabilities, they said.

The consortium said the project will facilitate increased delivery of high-quality carbon offsets; a liquid carbon credit marketplace with price certainty and transparency; the creation of a strong ecosystem to support the offset market; and the development of tools to help clients manage climate risk.

The technology will offer buyers full traceability and linkage back to the source of the credit to reduce the risk of double counting, a notable concern among market stakeholders. Executed prices and trade sizes will be posted on the platform to support price discovery.

The release did not give details on the types of carbon offsets or crediting methodologies vetted for the platform, potential participants or buying and selling operations. CIBC did not immediately return a request for comment.

The banks said Project Carbon will be aligned with the objectives of the Taskforce on Scaling Voluntary Carbon Markets, a private-sector initiative led by Mark Carney, United Nations' special envoy for climate action and finance.

In January, the task force published its blueprint, saying a large-scale expansion of the VCM is critical to reaching the goals of the Paris Agreement, which seeks to limit global warming to well below 2 degrees Celsius, with an aspirational goal of 1.5 degrees C.

And in May, the task force said it is seeking feedback on its proposal for the creation of an independent governing body for the VCM.

"We are helping to find solutions and support our customers as they take action to transition to Net-Zero by 2050," the CEOs of the four banks said in a joint statement. "Project Carbon is a terrific example of how technologies such as blockchain can address existing barriers and make carbon offsets more accessible for our customers as part of their broader plans to reduce overall emissions and achieve their own targets."

The banks said they are keen to invite like-minded institutions to join the cohort to help deliver a shared service platform that the group believes will be fundamental to the scaling of the VCM.

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Net-Zero Asset Owner Alliance Calls for Global Carbon Price Corridor

July 6, 2021

A group of institutional investors managing $6.6 trillion in assets have called for a binding global carbon price corridor with a minimum price and a ceiling.

In a discussion paper published Tuesday, the United Nations-backed Net-Zero Asset Owner Alliance said the global carbon pricing landscape can and should be transformed in a matter of years.

The 43 members of the group have committed to transitioning their investment portfolios to net zero greenhouse gas (GHG) emissions by 2050 to limit global warming to 1.5 degrees Celsius, the aspirational goal of the Paris Agreement.

To achieve that target, the alliance proposed a hybrid carbon pricing mechanism between emissions trading schemes and taxes or levies, which it said will work as a price corridor.

"A minimum market price -- the floor -- can be set to provide certainty to investors and a guardrail against price crashes. A maximum market price -- the ceiling -- provides a guardrail against rapid increases in prices, preventing backlash that could undermine political support for carbon-pricing more broadly," the alliance said.

The group also said it expects both floor and ceiling to rise over time.

It cited a study from the Organisation for Economic Co-operation and Development (OECD) that said a carbon price of $147 per ton is required by 2030 to reach net zero emissions by 2050.

That would be almost treble the current price of $59 in the European Union's Emissions Trading System (EU ETS), the group said.

"A carbon price corridor giving a clear economic signal as well as more pre-visibility will provide the global environment necessary for companies to make sound investments decisions and for investors to support them in the decarbonization of the real economy," said Charles Emond, president and CEO of Quebec's pension fund, Caisse de depot et Placement du Quebec (CDPQ).

The group's call came just weeks after a paper prepared for the International Monetary Fund (IMF) said the creation of an international carbon price floor could help jump-start emissions reductions needed to meet the goals of the Paris Agreement.

Currently, there are 64 carbon pricing instruments covering just over 20% of global emissions, according to the World Bank.

While those instruments will generate $53 billion in revenues in 2020-21, they are not on track to meet the goals of the Paris Agreement, the bank said in its annual State and Trends of Carbon Pricing report released in May.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Exxon Lays Out Climate Stance After Damaging Greenpeace Video

July 2, 2021

ExxonMobil on Friday continued trying to contain the damage caused by the release of secretly recorded videos showing company lobbyists discussing its efforts to thwart action on climate change.

The oil major's statement from CEO Darren Woods laying out company positions on climate policy and climate change is its latest response to the videos released earlier this week by Greenpeace UK.

"The past few days have been disappointing for everyone at ExxonMobil and for me personally. A current and former member of our government affairs team were secretly recorded making disturbing and inaccurate comments about our positions on a variety of issues, including climate change policy, and our interaction with elected officials," Woods said in the statement.

Greenpeace UK secretly made video recordings of Zoom interviews with Keith McCoy, a senior director of federal relations at Exxon, and Dan Easley, a White House lobbyist who left the company in February, where the men discuss Exxon's strategies on climate and business legislation. The environmental group said the videos were recorded during what the men thought were meetings with a recruitment consultant looking to hire a lobbyist.

The videos show McCoy saying that Exxon has voiced support for a carbon tax because the company knows such a tax would never receive enough votes to be approved. Such support provides Exxon with "an easy talking point," McCoy said.

The lobbyists also talk about how the company has been targeted by specific senators in an effort to win their support against climate and tax provisions of President Joe Biden's legislative agenda.

In a statement immediately after the videos were released, Exxon condemned the men's comments and said it was "deeply apologetic."

It said McCoy and Easley "were never involved in developing the company's policy positions on the issues discussed."

On Friday, Woods reiterated the company's support for a carbon tax and said it was also "actively and publicly discussing other options, including lower-carbon fuels and other sector-based approaches that would place a uniform, predictable cost on carbon."

He said the company supports the goals of the Paris Agreement and is working to reduce its greenhouse gas emissions.

"We have great respect for policy makers, elected officials and organizations across the political spectrum who are grappling to effectively address climate change, one of the greatest challenges of our time," Woods said. "ExxonMobil's position is clear: we want to be part of the solution while responsibly providing affordable energy required to power the economy."

On LinkedIn, McCoy said he was embarrassed by his comments and for being fooled by Greenpeace.

"My statements clearly do not represent ExxonMobil's positions on important public policy issues. While some of my comments were taken out of context, there is no excuse for what I said or how I said it," he wrote.

Release of the video came just weeks after the company lost a proxy battle sparked by its response to climate change and saw a small activist investment firm gain three seats on its board of directors.

The investment firm Engine No. 1 said the company needed to do more to prepare for a transition to cleaner energy in order to protect investor value.

 

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

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

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German Lawmakers Pass Climate Law Update to Reach Carbon Neutrality by 2045

June 28, 2021

The German parliament has passed changes to the federal climate protection law to speed up efforts to reach carbon neutrality to 2045, instead of 2050, the lower house reported after a vote June 24, which the upper house decided not to challenge.

The legal update raises the binding interim target for reducing greenhouse gas (GHG) emissions by 2030 to 65% against 1990, from previously 55%, and sets an 88% target for 2040.

It follows a ruling by the Federal Constitutional Court from late April, which asked for more specific climate objectives and actions to ensure that the burden of climate efforts is not left to future generations.

While upholding the system of annual emissions caps for individual sectors, the revised legislation adapts volumes to the new 2030 mitigation target.

The stricter national rules anticipate European Union (EU)-wide changes, given legislative moves to raise the bloc's 2030 carbon reduction target to 55% from at least 40%.

"Following the Federal Constitutional Court's ruling, the federal government decided not to wait with implementing the EU agreements, but instead anticipate it, with a view to updating it at a later stage if needed," the environment ministry commented Thursday on the changes. "This has the advantage that no time is being lost in the combat against climate change."

National law stipulates annual GHG emissions reduction targets for the 2030s, but individual sector allocations will only be made in 2024 when the EU framework has taken shape.

New in the national legislation are targets for the preservation and cultivation of natural sinks, such as forests and marshlands, to offset residual GHG emissions deemed as unavoidable, for instance, from farming or certain industrial processes.

The aim is to achieve "negative" GHG emissions by 2050 by embedding more GHG in natural sinks than are being emitted elsewhere.

The revised law further stipulates that the government's climate report elaborates -- from 2024, and thereafter every other year -- on the status and development of EU carbon pricing and its compatibility with national carbon pricing and climate targets.

To stimulate investments in climate measures, Berlin's draft budget for 2022 pledges an extra 8 billion euros ($9.5 billion) in fiscal injections. This comes on top of the more than 80 billion euros already earmarked for the climate protection (54 billion euros, over four years) and the economic stimulus program (26.2 billion, for the energy and climate fund EKF), the federal finance ministry said last Thursday.

The cabinet agreed to allocate the bulk of these extra funds to the building sector (5.5 billion euros) and the remainder to transportation (1.07 billion euros), the industry (860 million euros), energy, farming and others (580 million euros).

The energy and industrial sectors, which are the main emitters with the lowest abatement costs, will be most affected by the amended legislation.

Of the about 320 million mt of carbon dioxide equivalent (CO2-eq) emissions from stationary installations subject to the EU's carbon trading scheme, almost two-thirds stemmed from energy facilities and a third from industrial plants, according to the German Emissions Trading Authority (DEHSt), which compiles countrywide figures.

The 114 million mt CO2-eq emissions recorded in the industrial sector came mostly from iron and steel manufacturing processes (28%), followed by refineries (20%), cement clinker (18%) and chemicals (15%) plants.

Carbon emissions from fossil fuels in the mobility and heating sector are subject to a separate system, under which distributors are obliged to buy national certificates at an initially fixed price, of 25 euros/mt CO2-eq at present, rising to 55 euros/mt CO2-eq in 2025.

 

--Reporting by Inge Erhard, inge.erhard@ihsmarkit.com;

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

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Carbon Removal Startup Boomitra Plans to Enter VCM After Raising $4M

June 24, 2021

Boomitra, a Silicon Valley startup focused on removing atmospheric carbon through soil sequestration, is planning to grow quickly after raising a seed investment of $4 million, the company's founder and CEO said June 23.

"Boomitra plans to scale to many millions of tons of third-party certified carbon removal over the next several months," Aadith Moorthy told OPIS in an interview. "The partnerships on both demand and supply sides are already in place, the credits already 'exist' in the ground and now with our new capital raise, we hope to scale and reach those metrics, across Mexico, East Africa and India."

Moorthy spoke a day after the company announced a successful funding round led by Yara Growth Ventures, the venture capital arm of the Norwegian fertilizer giant Yara International. Other participants included Chevron Technology Ventures and Jerry Yang, co-founder of Yahoo.

Atmospheric carbon is absorbed by plants and stored in the soil. Farmers can increase soil carbon by adopting a variety of measures such as planting cover crops, avoiding tillage, composting and avoiding burning of stubble.

The United Nations has recommended soil carbon sequestration as one of best ways to remove carbon, but farmers face many logistical hurdles.

To address the problem, Boomitra has built a technology that uses satellites and artificial intelligence (AI) to measure soil organic carbon (SOC) remotely.

Moorthy said the raw data gathered by the satellites are converted by AI into "actionable estimates" of soil carbon.

Until now, measuring SOC has been a costly and time-consuming process that involved taking a soil sample and shipping it to a local lab for testing.

Moorthy said what also differentiates Boomitra from other soil carbon sequestration companies is that its proprietary technology will help it expand the operation globally.

"So, we were able to source very low-cost carbon removal from the developing world, both through our technology and also because of the (low) cost of labor," Moorthy said. "There are all sorts of low-hanging fruits in the developing world for sequestering CO2 fast."

Once the soil carbon level is measured and certified, the company will make credits available to clients through its marketplace. Moorthy said the company is collaborating with the carbon registry Verra to certify the credits.

Boomitra plans to sell the credits starting at $10/per ton, but the company believes the price will be eventually set by market conditions.

According to OPIS data, that price is relatively strong compared to other types of credits currently offered in the voluntary carbon market (VCM). On Tuesday, the OPIS CEO assessment, which represents a basic carbon credit, was assessed at $2.825/mt, while the OPIS Voluntary REDD+ Credit V20 average assessment, which represents an offset with additional societal co-benefits, was $7.125/mt.

The actual benefit for the farmer will depend on the location and the practices followed in the field. For example, a typical farmer in the tropics with five acres and at least two growing seasons could earn $150 in supplemental income per year if recommended best practices are followed, the company said.

Moorthy said Boomitra is trying to build up the volume for the VCM before entering the compliance market. "The volume in the voluntary market is exactly what regulators would like to see before allowing novel technologies like ours."As part of its expansion plans, the company intend to hire dozens of new employees and open offices in India and Israel.

"We have to grow as soon as possible, as quickly as possible and as big as possible," added COO Satya Satyamoorthy.

Erkki Aaltonen, head of Yara Growth Ventures, said in a statement that Boomitra's remote technology and marketplace have the potential to change the way agriculture carbon credits are monitored, packaged and sold.

Yara said Aaltonen will join Boomitra's board.

Aadith Moorthy said the funding is a chance for Boomitra, meaning Friend of Earth, to flip the script from agriculture being a net producer of carbon to a net carbon sink.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Shanghai Exchange Unveils Trading Rules on National Carbon ETS

June 23, 2021

Shanghai Environment and Energy Exchange (SEEE) announced on June 22 a set of trading rules for its Carbon Emission Allowance (CEA) ahead of the national Emission Trading System (ETS) launch that has been scheduled for an unspecified date in end-June.

The announcement came one month after the Chinese Ministry of Ecology and Environment (MEE) made effective from May 17 a set of management rules governing the trading, registry and settlement for the upcoming national ETS.

SEEE was appointed by MEE to be the interim operator of the national CEA central trading system before a national exchange is established.

The latest announcement laid out rules on the trading method, trading hours and price limits for CEA transactions.

According to the Shanghai Exchange, CEA trading could be conducted in the form of negotiated agreements, bidding on the exchange, or other approved methods.Transfers by negotiated agreements include listed and block trades, which are defined by the carbon emission amount in the transaction.

A listed agreement should not exceed 100,000 mt of carbon dioxide equivalent (CO2e) in a single transaction, while a block agreement requires a minimum of 100,000 mt, according to the exchange.

The listed price change should be capped within 10% of previous day's closing price while the block trade prices should be within 30% of its previous close.The trading hours are set at 9:30-11:30 and 13:00-15:00 (Beijing Time)for listed agreements and 13:00-15:00 for block agreements, from Monday to Friday, except public holidays.

For trades through the bidding route, the exchange allows participants to bid for CEAs offered on the exchange with the deal to be closed on the exchange itself within the stipulated time. Further details on this route, including on trading hours, are to be announced separately.

Since 2011, the National Development and Reform Commission (NDRC) has conducted trial carbon emission rights trading schemes in seven provinces and cities which include Beijing, Shanghai, Tianjin, Chongqing, Guangdong, Shenzhen and Hubei.

These regional carbon emission rights trading pilot schemes should be gradually incorporated into the national system, according to an interim carbon emission trading regulation issued in end-March by MEE that was open for public consultation due end-April.

MEE has also encouraged Beijing Free Trade Pilot Zone to establish a nationwide voluntary emission reduction trading center, according to a guidance issued on May 28.

 

--Reporting by Lujia Wang, Lujia.Wang@ihsmarkit.com;

--Editing by Hanwei Wu, Hanwei.Wu@ihsmarkit.com

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Intl. Monetary Fund Paper Calls for International Carbon Price Floor

June 21, 2021

The creation of an international carbon price floor (ICPF) could help jump-start emissions reductions needed to meet the goals of the Paris Agreement, the International Monetary Fund (IMF) said in a staff paper released June 18.

The ICPF -- which has yet to be endorsed by the IMF board of directors and member countries -- needs to be equitable, flexible and account for the differentiated responsibilities of countries given, among other factors, historical emissions and development levels, according to the paper.

To address these concerns, the staff proposed a three-tier price floor among Canada, China, the European Union, India, the U.K. and the U.S. with prices of $75, $50 and $25 for advanced, high and low-income emerging markets, respectively.

The paper said the scheme could help achieve a 23% reduction in global emissions below baseline by 2030, enough to bring emissions in line with keeping global warming below 2 degrees Celsius, the main goal of the Paris Agreement. The 2015 agreement also has an aspirational goal of limiting global warming to 1.5 degrees C.

"The arrangement could also accommodate countries where carbon pricing is not currently feasible for domestic political reasons, so long as they achieve equivalent emissions reductions through other policy instruments," according to the paper.

IMF Managing Director Kristalina Georgieva said Friday that limiting global warming to 1.5 to 2 degrees C. will require emissions to be cut by a quarter to a half by 2030, and this is unlikely to happen without measures equivalent to a global carbon price of around $75 per ton by the end of this decade.

"And we have long way to go. Yes, there has been progress, with over 60 national and subnational carbon pricing schemes around the world. But four-fifths of global emissions still remain unpriced and the global average emissions price is only $3 per ton," Georgieva told a climate conference at the Brookings Institution.

She, however, stressed that a carbon price floor arrangement is not a carbon tax as such. Georgieva said a price floor can work in conjunction with other policy measures such as regulation or emissions trading that achieve equivalent outcomes.

"A robust price on carbon can play a hugely important role and even more so when it is a product of an international agreement. We see an international carbon price floor as a viable option to reach such an agreement and will continue our work on it."

Georgieva said gradually increasing carbon prices will encourage innovation and transition to renewable energy, clean mobility and low-emission technologies.

Fifty-nine countries accounting for 54% of global emissions have committed to net-zero emissions by midcentury, but there is a need to ratchet up near-term climate ambition and match that with credible policy action, according to the IMF paper.

"An international carbon price floor offers a realistic prospect of catalyzing the needed global action in the next decade, and its success is in participants' individual and collective interests," according to the paper.

The proposal follows calls by German Chancellor Angela Merkel and former British Prime Minister Gordon Brown for a global carbon price to fight climate change.

The World Bank said in a report released last month that carbon pricing instruments now cover just over 20% of global greenhouse gas (GHG) emissions.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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IOC to Create 'Olympic Forest' in Western Africa to Offset Emissions

June 17, 2021

The International Olympic Committee (IOC) said June 17 it will plant 355,000 trees to create an "Olympic Forest" in the western African countries of Mali and Senegal as part of its efforts to become climate positive by 2024.

The organizer of the Olympic Games said a diverse range of native tree species will be planted in 90 villages, starting in the second quarter of next year.

The 5,200-acre forest is expected to sequester 200,000 tons of carbon dioxide equivalent (tCO2e), which is more than the IOC's estimated emissions for the 2021-24 period, the organization said.

The plan for the forest was first announced last month.

The carbon savings generated by the forest will be independently certified by the offset registry Plan Vivo.

The IOC said the forest is a contribution to the United Nations-backed Great Green Wall initiative, which restores degraded landscapes across Africa's Sahel region.

"Addressing climate change is one of the IOC's top priorities, and we are fully committed to reducing our emissions in line with the Paris Agreement," said IOC President Thomas Bach. "The Olympic Forest will support communities in Mali and Senegal by increasing their climate resilience, food security and income opportunities and will help the IOC become climate positive already by 2024."

To create the forest, the IOC said it will collaborate with the nonprofit Tree Aid, which has deep experience in tackling poverty and the effects of the climate crisis by growing trees and restoring land in Africa.

In its initial phase, the project will involve engaging with local communities to analyze their needs, identifying project areas, establishing a monitoring and evaluation plan and setting up plant nurseries.

The UN Environment Programme (UNEP) and the UN Convention to Combat Desertification (UNCCD) will both provide advice to the project, the IOC said.

While the initial project will last four years, the IOC said it plans to open it up in the future to other organizations so that they can contribute and grow the forest further.

Mali and Senegal are due to host the 2026 Summer Youth Olympics, officially known as Dakar 2026.

"With Dakar 2026, our goal is to go beyond sport and use the Games as an opportunity to raise young people's awareness about today's sustainability challenges and ways in which we can help address them," said Mamadou Diagna Ndiaye, president of the Dakar 2026 organizing committee.

The IOC announced last year that all Olympic Games will be required to be climate positive from 2030 onwards, removing more carbon from the atmosphere than they emit.

"Until then, organizing committees, including Tokyo 2020 and Beijing 2022, have committed to holding carbon-neutral Games, while Paris 2024 has recently announced its ambition to stage the first climate-positive Games," the IOC said.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Jeremy Rakes, jrakes@opisnet.com

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Panel Calls for Common Standard for Carbon Pricing in Canada

June 15, 2021

Canada must develop a common standard of emissions coverage for all jurisdictions to make carbon pricing more effective in reducing greenhouse gas (GHG) emissions, an independent panel recommended on June 14.

The Canadian Institute for Climate Choices said it was commissioned by the government to undertake an expert assessment of how each jurisdiction has approached putting a price on pollution.

"The nationwide assessment examined how distinct jurisdictional policy choices create varying incentives to reduce emissions and result in different impacts on people and businesses," the institute said. "The expert review did not assess the overall effectiveness of Canada's patchwork of carbon pricing systems."

Currently, five groupings of carbon pricing programs exist in the country: federal fuel charge and Output-Based Pricing System (OBPS); provincial fuel charge and large emitter program; hybrid federal/provincial fuel charge and large emitter program; carbon tax; and cap-and-trade system.

"Many design elements that governments have chosen to implement diminish the short- and longer-term effectiveness of carbon pricing to deliver emission reductions," the institute said.

The assessment found that, overall, carbon pricing has introduced incentives to reduce emissions across the country.

While less than 40% of emissions in Canada were subject to a carbon price before 2016, 78% of emissions were covered by some kind of carbon pricing policy in 2020, the institute said.

However, the assessment also identified several factors undermining the effectiveness of the programs:

  • Regional differences in which sources of emissions are covered by carbon pricing and which are exempt.
  • Misalignment among regions on the price applied to both consumer and industrial emissions.
  • Discrepancies in how industrial emissions are treated, which significantly dilutes long-term low-carbon incentives in most jurisdictions and creates risks to domestic competitiveness.
  • An overarching lack of transparency about design choices and outcomes, including how revenues are used.
  • A lack of clarity about how price signals will change after 2022.

To address these challenges, the panel said the government should take five steps, including the creation of a common standard.

"Such a standard would set a minimum level of coverage for emission sources, factoring in best practices for emission coverage currently applied within Canadian jurisdictions," the institute said. "At a minimum, such a standard would remove existing exemptions and ensure that energy, process, and fugitive emissions in the industrial sectors receive common treatment."

The institute's other recommendations are: remove point-of-sale rebates that are tied to fuel consumption; define a "glide path" to better align and increase average costs of large emitters; engage indigenous peoples in carbon pricing governance and policy and ensure continuous improvement through more transparency, more measurement and more stocktaking.

"Carbon pricing will be critical for achieving Canada's climate targets and attracting the financing necessary to transition to a competitive net-zero economy, but only if it is designed well," said Dale Beugin, vice president of research at the institute, a publicly funded but independent organization.

"Addressing the challenges we have identified through this assessment will make carbon pricing an effective backbone of Canadian governments' collective efforts to address climate change in the decade ahead."

Canada aims to reduce its emissions by 40% to 45% below 2005 levels by 2030 before reaching net zero in 2050. Carbon pricing is a key component of that plan.

The World Bank said in a report in May that carbon pricing instruments now cover over 20% of global GHG emissions, but efforts are not on track to meet the goals of the 2015 Paris Agreement.

That agreement seeks to limit global warming to well below 2 degrees Celsius, with an aspirational goal of 1.5 degrees C.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

--Editing by Jeremy Rakes, jrakes@opisnet.com

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Former British Prime Minister Gordon Brown Calls For Global Carbon Price

June 11, 2021

The U.K.'s former prime minister Gordon Brown said June 9 that a global carbon price must be introduced to fight climate change, echoing recent comments made by Germany's leader, Angela Merkel.

"We are going to need a [global] carbon price at some point. We can't go on just not enforcing a [global] carbon price," said Brown, who was the U.K.'s chancellor of the exchequer for ten years before serving as prime minister from 2007-2010.

Brown was speaking at an event hosted by the Guardian newspaper to promote his new book, part of which is focused on climate change policy. A few attendees, including OPIS, an IHS Markit company, asked him questions related to his views on climate change and carbon pricing.

His comments come in the wake of German leader Angela Merkel reiterating her belief in the need for a global carbon price.

"From my point of view, it would be very desirable if we also had a CO2 price worldwide, which would have to be introduced step by step," Merkel said at the virtual Petersberg Climate Dialogue last month.

Just 20% of global greenhouse gas emissions are covered by carbon pricing instruments, according to the World Bank's State and Trends of Carbon Pricing annual report released last month. Less than 5% of global emissions are priced in the $40-80/metric ton range that the World Bank deems necessary to put the world on a path to limiting global warming to 2 degrees Celsius above pre-industrial levels.

Instituting a global carbon price would have to overcome very large political hurdles as well as reconcile widely varying carbon prices across different emissions trading schemes (ETS). China launched a national ETS with its own carbon price earlier this year, covering around 4 billion metric tons of carbon dioxide emissions, or 40% of its overall emissions. However, the price of carbon allowances trading in China are roughly a tenth of the current 52 euro/mt price of carbon in the EU ETS.

Moreover, the U.S. has shown little enthusiasm to institute a single national carbon price, despite pioneering environmental cap-and-trade policies in the 1980s to fight acid rain pollution.

Brown expressed hope Wednesday that the European Union's carbon border adjustment mechanism (CBAM), set to be unveiled by the European Commission on July 14 and be operational by 2023, would act as a spur to greater international climate policy cooperation.

"Europe is going to have a carbon border adjustment mechanism, so things will start to change. I hope America, Europe and Asia will join in...On climate change, you can see America and China coming to some kind of agreement," said Brown. The CBAM would force exporters to the EU in some energy-intensive sectors such as steel, iron and cement to pay for the carbon they emit when creating products that are sent to EU markets. U.S. president Joe Biden's climate envoy John Kerry said in March that a CBAM should be viewed as a "last resort" but said in May that the EU's CBAM discussions had resulted in the U.S. examining the case for applying its own levy to some carbon-intensive imports.

Brown also said during the Guardian event on Wednesday that companies should be forced to disclose their carbon footprints.

"There are a lot of promises that have been made by companies - 'we're carbon-free, we're planting trees' - but there's no obligation to disclose in a way that is understood by everybody and is transparent," Brown said.

The current U.K. government announced plans in November last year that will mandate larger companies to disclose their carbon footprints by 2025. Brown also comes out in his book in favor of redistributing revenues from carbon levies to low-income households.

"Twice, in 2016 and 2018, in the U.S. state of Washington, proposals to tax emissions were defeated in referendums," writes Brown, referring to votes that would have diverted carbon revenues to cutting sales taxes and climate-friendly investments.

"But this policy is not fair to those with the lowest income. Unless we are to tolerate greater inequalities by raising prices for those who can least afford to pay, governments will have to agree to protect those most affected by mitigation by providing targeted cash transfers financed by carbon," Brown says in the book.

Brown continues to play an outsized role in British political debate compared to other former prime ministers and is an adviser to the current Leader of the Opposition, Sir Keir Starmer.

 

--Reporting by Anthony Lane, alane@opisnet.com;

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

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Canadian Oilsands Producers Form Net-Zero Alliance

June 9, 2021

Canada's largest oilsands producers have formed an alliance aimed at achieving net-zero greenhouse gas (GHG) emissions from their operations by 2050.

The Oilsands Pathways to Net Zero initiative was launched Wednesday by Canadian Natural Resources, Cenovus Energy, Imperial, MEG Energy and Suncor Energy, whose production accounts for about 90% of Canada's oilsands output.

At the center of their plan is a major carbon capture, utilization and storage (CCUS) trunkline connected to a carbon sequestration hub to enable multisector tie-in projects for expanded emissions reductions. The proposed CCUS system is similar to the multibillion-dollar Longship/Northern Lights project under development in Norway, the group said.

"The oilsands industry is a significant source of GHG emissions and the initiative will develop an actionable approach to address those emissions, while also preserving the more than C$3 trillion ($2.49 trillion) in estimated oilsands contribution to Canada's gross domestic product (GDP) over the next 30 years," the companies said.

As there is no single solution to achieving net-zero emissions, the group said it will incorporate several pathways to meet is goal.

In addition to the CCUS system, the alliance will reduce emissions through fuel switching and electrification. It will also accelerate adoption of potential emerging emissions-reduction technologies such as direct air capture and small modular nuclear reactors (SMRs).

The companies said they will work with the federal and Alberta governments to help Canada meet its climate goals.

Canada aims to reduce its emissions by 40% to 45% below 2005 levels by 2030 before reaching net zero in 2050.

The formation of the alliance follows government announcements of support programs for emissions-reduction projects.

In April, Canada said it will spend C$17.6 billion ($14.5 billion) on green recovery programs.

The programs include a 50% reduction in income tax rates for businesses that manufacture zero-emission technologies, accelerated investment in clean energy technologies and tax incentives for CCUS systems.

In a report released in April, the government said Canada emitted 730 megatons of carbon dioxide equivalent (CO2e) in 2019, about 1 megaton more than in 2018.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Carbon Offsets to Rise to $20-$50/Ton by 2030: Britain's UCL

June 7, 2021

An oversupply built over several years is keeping the cost of voluntary carbon credits unsustainably low, but prices will rise as more businesses adopt climate-friendly policies, according to an academic study released Friday.

The research was conducted by Britain's University College London (UCL) and the climate data analysis firm Trove Research.

The study, Future Demand, Supply and Prices for Voluntary Carbon Credits -- Keeping the Balance, said that without the excess of carbon offset supply, prices would be around $15 higher per ton of carbon dioxide equivalent (tCO2e), compared to $3-$5/tCO2e today.

But it said the surplus will not last forever, with demand for carbon credits expected to rise five- to tenfold over the next decade as more companies make net-zero commitments.

"This growth in demand should see carbon credit prices rise to $20-$50/tCO2e by 2030, as more investment is required in projects that take carbon out of the atmosphere in the long term," the report said. "With a further increase in demand expected by 2040 and 2050, carbon credit prices would rise in excess of $50/tCO2e."

It added that if governments successfully reduce emissions through domestic policies, fewer carbon credits will be available to businesses through the voluntary market, which would increase prices further, potentially reaching $100/tCO2e.

"If prices stay low, companies could be accused of greenwashing their emissions, as real emissions reduction and carbon removals are more costly than today's prices," the report said.

According to OPIS voluntary carbon market pricing data Friday, the OPIS CEO (CORSIA-eligible offset) assessment, which reflects a basic carbon credit, was assessed at $2.45/mt. The OPIS assessments for Voluntary REDD+ Credits Average, which reflects a credit with added social benefits, ranged from $6.708/mt and $7.60/mt for vintage years 2017-2021.

Guy Turner, CEO of Trove Research and lead author of the study, said it is encouraging to see so many companies setting net zero and carbon neutral climate targets.

"What this new analysis shows is that these companies need to plan for substantially higher carbon credit prices and make informed tradeoffs between reducing emissions internally and buying credits from outside the company's value chain."

Co-author professor Simon Lewis of UCL called for an independent regulation of the sector, saying the current market in carbon credits is the "Wild West."

"Overall, it will be cheaper in the long run to invest in moving to zero emissions rather than relying on offsets," Lewis said. "But for those emissions that remain, the true price of removing carbon from the atmosphere must be paid, as the alternative is greenwash."

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Global Energy Investment Rising; More Funds Needed for Net Zero: IEA

June 2, 2021

Global energy investment this year will increase 10% to $1.9 trillion as the economy further recovers from the pandemic, but the clean energy portion of $750 billion is well below the price tag to reach net-zero carbon emissions by 2050, the International Energy Agency (IEA) said Wednesday.

The IEA said that its forecast of a 7% rise in clean energy investment paled in comparison with the kind of increases in annual investment required to stabilize global temperatures.

"Clean energy investment would need to double in the 2020s to maintain temperatures well below a 2 degrees Celsius rise and more than triple in order to keep the door open for a 1.5 degrees Celsius stabilization," according to the IEA's World Energy Investment 2021 report.

The grim assessment was the Paris-based intergovernmental organization's third warning in three months about the trajectory of global carbon emissions and the scale of the challenge to achieve a net-zero carbon emissions scenario by 2050.

After forecasting a large 4.8% rise in global emissions in 2021, the IEA released in May its landmark Net Zero by 2050 report, which suggested that no new oil and gas projects yet to be committed should be developed and that "nothing short of a total transformation of the energy systems that underpin our economies" is required to stave off the worst effects of climate change.

The most recent IEA report also addressed spending by the oil and gas sector, where business models require radical overhaul to transition. "Investment spending on fuels appears caught between two worlds: neither strong enough to satisfy current fossil fuel consumption trends nor diversified enough to meet tomorrow's clean energy goals," it said.

The share of capital investment by oil and gas companies tracked by the IEA going to clean energy investments could rise to more than 4% in 2021 from 1% in 2020, the IEA said.

Upstream oil and gas investment is forecast by the IEA to rise by 8% to $350 billion in 2021, with state-owned companies leading the way.

"This remains far below 2019 levels," the report said, adding that "companies face multiple dilemmas" concerning future investment plans due to the energy transition, the duration of the pandemic and the consequent strength of the global economy.

"Prices and revenues have been higher in the first quarter of 2021, but it is far from certain that this will trigger additional upstream spending," said the report.

In the power sector, the IEA said renewables will account for 70% of the estimated $530 billion to be spent this year on new power generation capacity.

"Solar PV, rather than wind, is set to lead the growth in renewables spending in 2021, given its competitiveness and the existing pipeline of projects committed in tenders, auctions and corporate power purchase agreements," the IEA said. "Investments in solar PV [in 2021] are anticipated to grow by more than 10% in China, India, the United States and Europe."

However, the combined 270-280 GW addition the IEA foresees for solar PV and wind capacity in 2021 and 2022 is far below the exigencies of its net-zero roadmap, which calls for annual additions of 630 GW of solar PV capacity and 390 GW of wind capacity by 2030.

The IEA also noted a sharp economic improvement for renewables investments over the last decade.

"Thanks to rapid technology improvements and costs reductions, a dollar spent on wind and solar photovoltaic (PV) deployment today results in four times more electricity than a dollar spent on the same technologies ten years ago," the report said.

One of the report's key themes concerns the relative dearth of new clean energy projects to invest in, even as the global money supply has jumped by trillions of dollars due to money-printing by central banks during the pandemic. The surge in liquidity has benefited the stock prices of many clean energy companies, but channeling that money into new clean tech investment remains a tough challenge, the IEA said.

"Even if spending on clean energy is set to rise in 2021 by around 7%, financial flows have grown more rapidly than actual capital expenditures," said the IEA report. "There is a shortage of high-quality clean energy projects.

This is compounded by inadequate channels to guide available funds in the right direction and a lack of intermediaries capable of matching surplus capital with the sustainability needs of companies and consumers."

 

--Reporting by Anthony Lane, alane@opisnet.com;

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

Copyright, Oil Price Information Service


 

Financial Speculator Interest Drives RGGI Price Volatility in 2021: Report

May 28, 2021

Regional Greenhouse Gas Initiative (RGGI) secondary market price volatility has increased this year due in part to growing speculative interest from financial players, according to analyst firm ClearBlue Markets on May 28.

Those players currently hold about 10.5 million allowances, more than double their market share at the start of the COVID-19 pandemic in March 2020. At that time, the financial players held about 4 million RGGIs, ClearBlue said.

Meanwhile, RGGI compliance entities currently hold about 14.5 million allowances, up from about 11.9 million allowances before the pandemic.

"As speculators entered the market, compliance entities shrank their position," ClearBlue said.

Under the program, power plants that generate more than 25 megawatts of capacity must offset carbon dioxide (CO2) emissions with either RGGI allowances or approved offset credits.

RGGI has 11 member states, consisting of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia, which officially joined this year.

ClearBlue also noted in the report that the "entrance of new states -- New Jersey and Virginia -- into the system" enhanced price volatility.

"Given the current expectations on supply and demand side, we expect RGGI allowances to reach $8.49 by the end of 2021, before rising to $10.65 in 2025 and $16.00 in 2030," ClearBlue said.

On Friday, RGGI secondary market prices were assessed by OPIS at $7.98/st for prompt delivery and $8.075/st for forward delivery.

At the start of 2021, RGGI prices jumped and to a high of $8.94/st for prompt delivery and $9/st for forward delivery following U.S. President Joe Biden's inauguration and Democrats winning two senate seats in Georgia.

Prices then crashed below $8/st by late January and have seesawed between $7/st and $8/st, according to OPIS data.

This year, RGGI debuted an emissions containment reserve (ECR) in its quarterly auctions, allowing member states to withdraw allowances from circulation if prices fall below trigger prices. The ECR trigger price is $6/st this year and will increase by 7% every year to reach $11.03/st by 2030.

RGGI began implementing a cost containment reserve (CCR) in 2014, which allows states to reserve allowances if prices go beyond projected emission reduction costs. In 2021, the CCR price is $13/st and also increases by 7% each year. The CCR is made up of 10% of the annual yearly cap, which is set at 119.77 million allowances in 2021.

ClearBlue said it does not anticipate RGGI will trigger either the ECR or CCR and prices will remain below $9/st for 2021.

 

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

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

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NCX Creates the 'Largest' US Forest Carbon Project by Acreage

May 26, 2021

Natural Capital Exchange (NCX), a venture-backed climate company, said Wednesday it has created the largest forest carbon project by acreage in the continental U.S.

NCX, previously known as SilviaTerra, said in a news release that the forest stretches 1.17 million acres in 10 states.

The company said the initial buyers of carbon credits from the project included Microsoft, Swiss sustainability consultancy South Pole and Shell Environmental Products, a division of Royal Dutch Shell, following its listing in the Verra offset registry.

Founder and CEO Zack Parisa said NCX identifies forests that are likely to be harvested and rewards landowners who keep them growing.

"NCX puts carbon on the same economic footing as timber," said Parisa. "We've combined satellite imagery, forest economics and cutting-edge statistics to build a data-driven marketplace for landowners of all sizes."

Michael Malara, South Pole's senior business development and account manager for North America, said NCX has found an innovative way to overcome the obstacles that have kept small landowners out of the offset market.

"This solution will increase available offset projects in the U.S. and also make it possible over time for companies to support local offset projects, thus having an impact close to their operations."

NCX said it recently raised $20 million in Series A financing led by Time Ventures. Microsoft Climate Innovation Fund, Union Square Ventures and Version One Ventures also participated.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Jeremy Rakes, jrakes@opisnet.com

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Verra Issues First VCUs for Blue Carbon Conservation Project Type

May 21, 2021

A mangrove forest in Colombia's Caribbean coast has become the first blue carbon conservation project to receive verified carbon credits (VCUs) from Verra, the nonprofit told OPIS on Friday.

On May 20, Verra issued 59,363 VCUs for the project in the Gulf of Morrosquillo for vintage years 2015-18.

The credits were issued under the VM0007 methodology, which was amended in September 2020 to include blue carbon conservation and restoration activities. At that time, the carbon standards developer said the revision would unlock new sources of finance for tidal wetland conservation and restoration activities.

Verra has previously issued VCUs for five blue carbon projects using the AR-AM0014 methodology, but they were all mangrove afforestation/reforestation projects. Two additional blue carbon conservation projects are currently in the pipeline but have not yet completed validation under VM0007, it said.

The Colombian project was developed by the climate advocacy group Conservation International (CI) in partnership with several stakeholders.

CI announced earlier this month that carbon credits from the project could soon enter the global voluntary carbon market following a full and accurate accounting of the mangrove's carbon stores.

The group told OPIS at the time that it was too early to determine at what price the credits would be sold. CI did not immediately comment on Friday.

Carbon industry consultant ClearBlue Markets analyst Mourad Farahat said Friday that blue carbon credits could fetch a higher price than Reducing Emissions from Deforestation and forest Degradation (REDD+) carbon credits.

Voluntary REDD+ credits are widely considered to have a relatively high quality and therefore trade at a premium to carbon credits from other types of climate projects. On Friday, Voluntary REDD+ vintages 2017-2021 averaged $7.06/mt, according to OPIS pricing data.

"It's very tricky to try and estimate a price for them as they are such a young branch of offsets and volumes haven't come through, but I could easily see them being offered at between $15-$20," Mourad said in an email.

He also said blue carbon is becoming more appealing to developers, buyers and investors.

"For one, as shipping increases its presence in the offsetting market, we see that customers are looking for offsets that connect with their industry," he said.

Amy Schmid, manager for natural climate solutions development at Verra, said there has been a huge interest in the sector over the past few years.

"Now we are seeing more projects being developed to meet that demand," she said in an email. "There are a lot of co-benefits associated with blue carbon activities (communities, biodiversity, healthy fisheries, coastal resilience and adaptation to climate change)."

The Colombian mangrove is anticipated to remove about 1 million metric tons of emissions over 30 years, CI said.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Pennsylvania DEP Releases Final Rule Draft to Join RGGI in 2022

May 19, 2021

The Pennsylvania Department of Environmental Protection (DEP) has issued a draft of final rulemaking for the state's proposed participation in the Regional Greenhouse Gas Initiative (RGGI) to reduce power emissions as early as next year.

If Pennsylvania joins the cap-and-trade consortium by Jan. 1, 2022, the state's 2022 carbon dioxide (CO2) emissions budget for the power sector would be 78 million tons, according to the document released Monday. To account for a potential delayed start, the DEP also published separate yearly starting emissions budgets should the state join at other dates during 2022, including 57.95 million tons by April 1, 40.72 million tons by July 1 and 18.56 million tons by Oct. 1.

The budget, or emissions cap, will decline 2.49 million tons each year to reach 58.085 million in 2030, DEP said.

DEP's Environmental Quality Board will consider the final rulemaking in the third quarter, and the final rulemaking will be published in the Pennsylvania Bulletin in the fourth quarter, DEP said.

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. RGGI is made up of 11 member states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia. Virginia began participating this year.

Pennsylvania Governor Tom Wolf (D) signed an executive order in January 2019 to set state climate goals to reduce emissions by 26% by 2025 and 80% by 2050, compared to 2005 levels. Wolf later signed another executive order in October 2019 tasking DEP to draft regulation to join RGGI.

On Wednesday, V21 RGGI secondary market allowances were heard traded at $8.35/st for December delivery. The price was 20cts/st weaker than the Tuesday OPIS assessment of $8.55/st.

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

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

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U.K. Carbon Prices Surpass EUAs on First Day of British ETS Trading

May 19, 2021

The U.K.'s new Emissions Trading System (ETS) saw its first auction of carbon allowances and secondary market trading activity Wednesday, with U.K. emissions allowances (UKA) trading slightly above carbon prices in the European Union's ETS, which Britain left at the start of this year.

The benchmark ICE UKA December 2021 futures contract settled at 45.25 pounds/mt, or roughly 52.50 euros/mt, on the first day of secondary market trading, above the equivalent EUA, which settled at 49.68 euros/mt on the ICE exchange.

Most market participants and analysts had expected UK carbon prices to be slightly lower than EU emissions allowances.

"I am surprised that UKA is above EUA," one carbon markets trader told OPIS today, though the trader pointed out that "no one has UKAs yet, so all the trades from today are kind of 'blind' trades."

One possible explanation for the higher U.K. allowance prices could relate to the hedging strategies of British power plants. Many U.K.-based power plants previously subject to the EU ETS have continued to purchase EUAs this year to hedge their forward power sales while waiting for the UK ETS to start up. The companies operating those installations must sell their EUAs and replace those contracts with UKAs.

Demand was strong during the first auction of UKAs this afternoon on the ICE exchange, with a cover ratio of 4.84 for the 6.052 million UKAs on offer. The clearing price of 43.99 pounds/mt, around 51 euros/mt.

UKA auctions will have a markedly different rhythm to EUA auctions, with the former occurring once every two weeks, while the latter occur daily, reflecting the much larger size of the EU ETS. Around 1,000 carbon-producing installations will be subject to the UK ETS compared to roughly 10,000 installations in the EU ETS.

Analysts had previously suggested that the advent of the U.K. ETS might be marked by early volatility, making it hard to gauge likely how U.K. prices will trade relative to EUAs. Trading in both carbon markets Wednesday was marked by sharp sell-offs that afflicted a range of riskier asset classes and commodities.

The UKA December 2021 contract traded between 45.10 and 50.23 pounds/mt, while the EUA December 2021 contract fell from an intra-day high of 53.01 euros/mt to a low point of 48.61 euros/mt.

Wide differentials between the two ETSs could be short-lived if the British government and the European Union decide to link the two systems.

The U.K. and the EU pledged to give "serious consideration" to linking their carbon pricing systems in the document that finalized the terms of Britain's future post-Brexit trading relationship with the EU.

A coalition of 40 industry associations based in the U.K. and the EU also called last month for the two systems to link up, citing liquidity advantages and the creation of a level-playing field for installations across the EU and the U.K.

However, signs of potential divergence have already emerged, with the U.K. government keen to emphasize differences between the systems.

"The UK Emissions Trading Scheme is more ambitious than the EU system it replaces -- it will be the world's first cap and trade market aiming to eliminate carbon emissions altogether," a spokeswoman for the U.K's Business, Energy and Industrial Strategy government department said earlier this month.

"From day one, we will reduce the cap for the total levels of carbon emissions by 5% compared to what it would have been under the EU ETS," she said.

--Reporting by Anthony Lane, alane@opisnet.com;

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

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British Govt. Allocates 39.1 Million Free CO2 Credits Ahead of UK ETS Launch

May 12, 2021

The British government will distribute 39.1 million free emissions allowances to more than 400 carbon-producing installations in the U.K., as the country gears up for the inauguration of its new emissions trading system (ETS) next week.

The free credits – announced Tuesday – are for participants in sectors that are especially difficult to decarbonize.

The U.K.'s free allocations system is similar to that of the European Union ETS, from which the U.K. withdrew at the end of 2020.

In a typical ETS, some allowances are allocated to participants to guard against competitive disadvantages in dealing with foreign companies that are not subject to an ETS. Those credits, and emissions allowances purchased in the secondary market or in auctions, are surrendered to cover reportable emissions.

The recipients of the largest awards of U.K emissions allowances (UKAs) hail mostly from the steel, oil refining, fertilizer, cement and refining sectors. The top 20 participants will collectively receive 25,189,074 free allowances, representing 64.42% of the total.

The top five free allocations are as follows:

  • Tata Steel Port Talbot Steelworks, 5,768,015
  • Scunthorpe Integrated Iron & Steel Works, 4,132,569
  • Phillips66 Humber Oil Refinery, 1,820,582
  • ExxonMobil Fawley Oil Refinery, 1,509,112
  • Valero Pembroke Refinery, 1,392,097

Ahead of the start of the new ETS, analysts have predicted that the inauguration of UKA trading could experience early volatility and carbon prices differing to those in the EU ETS, which saw its benchmark ICE EU EUA December
2021 futures contract hit a record high on Wednesday of 55.47 euros/mt.

As is the case with the EU ETS, the U.K. system, that starts life on May 19, will include carbon emissions auctions and the trading of credits on a secondary market on the Intercontinental Exchange (ICE). Though the two cap-and-trade programs are comparable by design, the U.K. ETS is much smaller in scope, with 1,000 installations compared with the 10,000 installations subject to the EU ETS.

"There are no guarantees at the moment that the U.K. ETS is going to be smoothly sailing from day 1," environmental and cap-and-trade advisory firm ClearBlue Markets analyst Mourad Farahat told OPIS last week.

"Given the lack of a backlog of allowances that utilities can buy into as to hedge, [U.K.] auctioning kicking off quite late ... as well as the fact that the U.K. market is not nearly as long as the EU ETS, there is a very real chance that the UK ETS will be off to a bumpy start," Farahat said. "If this indeed occurs, then U.K. entities dumping EUAs is by no means a done deal."

In the absence of a functioning U.K. ETS until this month, many U.K.-based installations have purchased EUAs to cover their emissions and will be required to sell those EUAs at some point to buy UKAs, sources said.

Design similarities of the U.K. and EU ETS programs resulted last month in a coalition of 40 industry associations based in the U.K. and the EU calling for the two systems to link up.

"The advantages of linkage are clear in terms of liquidity, price discovery, and the ability to attract [carbon] abatement from across Europe rather than just the UK," the associations said in letters to U.K. prime minister Boris Johnson and European Commission president Ursula von der Leyen. "It would also create a level playing field in terms of carbon pricing, avoiding competitive distortions, and leading to aligned cost implications for industry."

The U.K. and the EU pledged to give "serious consideration" to linking their carbon pricing systems in the document that finalized the terms of Britain's future post-Brexit trading relationship with the EU, but signs of potential divergence have already emerged, with the U.K. government keen to emphasize differences between the systems.

"The UK Emissions Trading Scheme is more ambitious than the EU system it replaces -- it will be the world's first cap and trade market aiming to eliminate carbon emissions altogether," a spokeswoman for the U.K's Business, Energy and Industrial Strategy government department told OPIS Wednesday. "From day one, we will reduce the cap for the total levels of carbon emissions by 5% compared to what it would have been under the EU ETS."

--Reporting by Anthony Lane, alane@opisnet.com
--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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Japanese Utility Turns to Clean Ammonia to Decarbonize Power Production

May 11, 2021

Japan's largest power-generation company Jera said Tuesday it has agreed to collaborate with Norwegian ammonia producer Yara to develop blue and green ammonia projects in Japan.

Blue ammonia is derived from a carbon capture and storage (CCS) process while green ammonia is produced carbon free by using green hydrogen. They are also known as clean ammonia.

Jera said it expects the collaboration with Yara to lead to a stable supply of clean ammonia for power generation.

Japan recently announced plans to introduce ammonia into the fuel mix for thermal power generation as it does not emit carbon dioxide (CO2) when burned.

Tokyo-based Jera produces about 30% of Japan's electricity. It has pledged to establish green fuel supply chains to achieve zero CO2 emissions from its operations by 2050.

"This ground-breaking collaboration aims to decarbonize Jera's power production and provide Yara with a footprint in the strategically important Japanese market," said Svein Tore Holsether, president and CEO of Yara. "Building blue and green ammonia value chains is critical to enabling the hydrogen economy."

Based in Oslo, Yara produces roughly 8.5 million tons of ammonia annually. It recently established a new clean ammonia unit to meet growing demand.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Bridget Hunsucker, bhunsucker@opisnet.com

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California Injected $3.1 Billion in 2020 Climate Projects: Report

May 5, 2021

California funded $3.1 billion for 2020 projects aimed to mitigate air and water pollution in the state, according to a report released this week by California Climate Investments.

The $3.1 billion raised from the state's cap-and-trade program was spread over 51,000 projects throughout 2020 that included rebates for cleaner vehicles, transit projects, clean drinking water and protecting forests that are expected to reduce nearly 18 million metric tons of carbon dioxide (CO2), according to the report released Monday.

"The breadth and depth of the climate investment program helps to reduce California's greenhouse gas emissions, while benefiting every county in the state," California Air Resources Board (CARB) Chair Liane Randolph said in a release.

The funds generated by the California cap-and-trade quarterly auctions are deposited into a Greenhouse Gas Reduction Fund, which are used by state agencies on climate programs.

In 2020, California Climate Investments provided 40,000 rebates for consumers purchasing zero-emission and plug-in vehicles, preserved 128,000 acres of land and planted 500,000 trees, among other projects.

The cap-and-trade program has so far generated $14.9 billion for the fund and the California legislature has appropriated $14 billion to over 20 states agencies and 71 investment programs.

The cap-and-trade program had two undersubscribed quarterly auctions in 2020 due to lockdowns that shut down businesses and restricted travel to curb the spread COVID-19.

The first quarter auction of 2021 in February sold out of 63 million California Carbon Allowances (CCA) on offer. The auction settled at $17.80/mt, 9cts/mt above the auction reserve price (ARP) of $17.71/mt and generated $647 million in funds.

On Wednesday, the V21 CCA May 2021 contract was heard bid at $18.80/mt and offered at $18.93/mt by noon CT. On Tuesday, OPIS assessed the V21 CCA May 2021 price at $18.76/mt.

 

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

--Editing by Jeremy Rakes, jrakes@opisnet.com

Copyright, Oil Price Information Service

 


Canadian Govt. Inks Agreement for Technology to Decarbonize Power Plants

May 3, 2021

Aerospace and power-generation engineering firm Parametric Solutions said Monday it has entered into a Global License Agreement with Natural Resources Canada for decarbonization technology for power plants.

The agreement with Natural Resources Canada, the equivalent to the U.S. Department of Energy in Canada, will "commercialize a new low-cost, proprietary and patented G2 technology platform that 100% decarbonizes existing industrial, business and consumer electricity power generation sectors," Parametric Solutions said in a release.

The decarbonization technology is expected to be used in new power plants and new mobile plants constructed in the future "essentially eradicating the largest single obstacle to achieving global net zero emissions," the company said.

"It is extremely unrealistic -- some would say utter insanity -- not to anticipate that the current global level of fossil fuel electricity power generation will still be needed for the foreseeable future to meet the ever-increasing overall global demand for 24/7 affordable electricity," Parametric Solutions CEO Joel Haas said.

The U.S. Department of Energy recently awarded Parametric Solutions $16 million to extend the technology to accommodate syngas.

Existing power plants currently using natural gas, coal or oil can retrofit the initial G2 equipment system and technology. The pipeline-ready or pure carbon dioxide (CO2) capture yield is then available for current or future marketplace uses, storage and sequestration, Parametric Solutions said.

"Low-cost, efficient, and disruptive -- with easy-to-understand rapid product scalability -- we've developed and demonstrated a new critical technology item that combusts fossil fuels with oxygen under extreme high-pressure," Haas said.

Parametric Solutions is in the early process of securing a funding partner to commercialize and scale the initial G2 equipment system, witch expectations to have scaled commercialization within three years.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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Exxon Touts Climate Efforts in Response to Engine No. 1 Attacks

April 27, 2021

ExxonMobil Corp. on Tuesday struck back at an activist investor's claims the company is not doing enough to prepare for the energy transition with an investor presentation touting its low-carbon strategy and slamming critics as not understanding the energy industry or the company's plans.

The 84-page presentation is in response to a highly critical investor presentation by investment firm Engine No. 1, which is engaged in a proxy battle to seat four of its candidates on the Exxon board.

Exxon's presentation says Engine No. 1 "has not constructively engaged to seek a resolution" with Exxon despite the company's multiple attempts. It also claims the investment firm's board nominees lack the experience and skills needed for the Exxon board.

"Engine No. 1 has provided no plan to create shareholder value, and does not understand the industry or ExxonMobil's plan," the presentation said.

The presentation highlights Exxon's low-carbon solutions efforts, such as carbon capture and storage as well increased use of hydrogen and biofuels. The company contends that these efforts have the potential to provide big payback as "demand for these lower-emission technologies could create multi-trillion dollar markets by 2040."

The presentation also argues for the company's continued focus on oil and natural gas, which it says will remain an essential part of the world's total energy mix well into the future. The presentation argues that oil and gas will continue to be in demand in hard-to-decarbonize sectors, such as power generation, industry and heavy-duty transportation, as other low-carbon technologies are developed to meet those needs.

It highlights scenarios by the Intergovernmental Panel on Climate Change for meeting Paris Accord targets that project oil and gas will still constitute 48% of global energy mix in 2040, compared to 55% in 2019.

The company said its strategy is consistent with warnings by the International Energy Agency that an incremental $12 trillion investment in oil and gas will still be needed to meet Paris Accord goals.

Exxon maintains its current strategy has been beneficial to shareholders, claiming that "tough decisions to improve ExxonMobil's portfolio starting in 2017 with counter-cyclical investments; long-cycle actions" has led to the company's total shareholder return outperforming peer averages over the last six-month, one-year, two-year and three-year periods. The company said it had a 52% total shareholder return over the past year.

"ExxonMobil has laid a solid foundation for success," said company CEO Darren Woods in a statement announcing the shareholder presentation. "Our board and management have developed and are executing a strategy which has positioned us for future outperformance relative to peers. We are uniquely placed to help society meet its net zero ambitions, while capturing enormous future opportunities and delivering value for shareholders for many decades to come."

Release of the investment presentation comes as Engine No. 1 on Tuesday said the three largest U.S. pension funds are supporting their four board candidates.

The announcement said the California Public Employees' Retirement System, the California State Teachers' Retirement System and the New York State Common Retirement Fund "recognize that addressing the issues at ExxonMobil and positioning the Company for success in a changing industry and world requires new directors with decades of experience in value-creating, transformative change in the energy sector."

The Exxon shareholder meeting is scheduled for May 26.

--Reporting by Steve Cronin, scronin@opisnet.com 
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

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Panama Canal Targets Carbon Neutrality by 2030

April 26, 2021

The Panama Canal has begun the process of decarbonizing its operations with the goal of reaching carbon neutrality by 2030, its operator said Monday.

The Panama Canal Authority said in a news release it is creating the tools and identifying the changes needed to achieve efficiencies that will allow the waterway to reach its goal.

"This is a fundamental strategy for the waterway's long-term operation and sustainability," said Administrator Ricaurte Vasquez Morales. "This process will build on our long-standing efforts to minimize our environmental impact."

To kick off the transition to a greener canal, the authority has purchased four electric vehicles as part of a pilot program that will collect data to inform the migration of its entire fleet away from fossil fuel dependence.

The canal's plan also includes the deployment of tugboats that use alternative fuels, switching to renewal energy and ensuring that all facilities and projects are environmentally responsible and sustainable, the authority said.

The Panama Canal first began tracking its carbon footprint in 2013. In 2017, its plans were bolstered with the launch of the Emissions Calculator.

The tool not only allows shipping lines to measure their greenhouse gas (GHG) emissions per route, but also strengthens the canal's analysis of the emissions produced by its own operations, the authority said.

On Earth Day last week, the Panama Canal joined the declaration of the "50 First Carbon-Neutral Organizations," an initiative led by Panama's Ministry of Environment to integrate national efforts to accelerate measurable climate
actions.

As part of the initiative, the canal will develop an annual GHG inventory as well as an action plan with measurable targets to reduce emissions, it said.

In 2020, ships reduced emissions by more than 13 million tons of carbon dioxide equivalent (CO2e) by transiting the canal, the authority said.

Vessels sailing between the Atlantic and Pacific oceans can avoid about 9,000 miles by taking the 51-mile canal, instead of traveling around the southern tip of South America.

On May 18, 2021, OPIS will be holding an online roundtable discussion regarding the Panama bunker fuel market. One of the panelists will be Environmental Protection Specialist Alexis Rodriguez  with the Panama Canal Authority. Learn more and register here.

676090674-0421-MS-ENR-PanamaBunkerMarket-WebBanners-SI-530x100

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Lisa Street, lstreet@opisnet.com

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Earth Day Initiatives Roundup

April 20, 2021

Companies and organizations across the globe are marking the annual Earth Day, which is Thursday, with new initiatives and offers.

Here are a few highlights:

Al Gore to 'Make Case for Optimism' at Virtual Earth Day Event

Former U.S. Vice President Al Gore will join a virtual Earth Day event to discuss the role of technology and innovation in shaping the future of the planet.

Its organizers, Canadian nonprofit Elevate and asset manager Mackenzie Investments, say the event will teach participants why Gore believes that sustainability is history's biggest investment opportunity.

"Gore will make a case for optimism that will educate, challenge and inspire our viewers at a time when hope has never been more valuable," they said Tuesday in a news release.

The organizers are also "partnering with Tree Canada to sponsor a tree for the first 2,000 attendees," the announcement says.

In collaboration with the United Nations, Elevate offers year-round technology, innovation and sustainability programs.

Online Printer Offsets 100% Emissions Through RECs and Offsets

For U.S. online printer Smartpress.com, every day is Earth Day. The company announced Tuesday that it has bought renewable energy credits (RECs) and carbon offsets to match 100% of the company's emissions and those made by energy partners on their behalf.

Smartpress said its purchase of RECs alone had an impact similar to growing nearly 81,000 trees per year for 10 years.

The company also said it has reduced 100% of its direct carbon emissions by buying 788 metric tons of U.S. Landfill Gas Capture Carbon Offsets.

Smartpress is a 100% employee-owned company and home to one of the largest fleets of HP Indigo HD presses in the world, it said.

Canadian Charging Network Operator Offers Free Power

Canadian electric vehicle (EV) owners will get free charging sessions on Earth Day, courtesy of an EV network operator.

Electrify Canada said Tuesday that it would not charge EV drivers for sessions starting at midnight ET Thursday through to 3 a.m. ET Friday.

The company is also urging drivers to share their commitment to an electric lifestyle through social media by using the hashtag #ChargeOnEarth.

Electrify Canada has 22 charging stations in Quebec, Ontario, Alberta and British Columbia.

The company said it expects to have 32 charging stations with a total of 128 individual fast chargers by the end of 2021.

Firm Pairs Spring Water with Sustainable Packaging

The North American distributor of Danone Volvic water is launching bottles made from 100% recycled materials this week.

Brands Within Reach (BWR) said Tuesday that, with the introduction of recycled polyethylene terephthalate (rPET) bottles, it is offering American consumers the natural spring water paired with sustainable packaging.

"This move represents our commitment to a more responsible approach to nature for the benefit for our consumers," said BWR CEO Olaf Zachert.

The company says Volvic water comes from a well-protected natural volcanic ecosystem in the heart of the Auvergne Volcanoes Regional Park in France.

BWR has B Corp and carbon neutrality certifications from the sustainability firm Carbon Trust.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Global Energy-Related Carbon Emissions to Surge Nearly 5% in 2021, IEA Says

April 20, 2021

The world will see a sharp 4.8% rebound in annual energy-related carbon emissions in 2021, the International Energy Agency (IEA) said Tuesday, with emissions from coal, natural gas and China leading the surge.

Issuing what it called a "dire warning," the Paris-based intergovernmental energy agency said a global economic recovery this year would be accompanied by a 1.5 billion-ton increase in energy-related carbon emissions to 33 billion tons, close to the 33.4 billion-ton level in 2019.

The EIA expects rising global coal demand to increase emissions from coal use by 640 million tons this year to 14.8 billion tons, just 350 million tons below 2014's all-time record for annual emissions produced by the industry.

"Coal demand is on course to rise 4.5% in 2021, with more than 80% of the growth concentrated in Asia. China alone is projected to account for over 50% of global [coal] growth," according to the IEA's Global Energy Review 2021.

China's coal-fired fleet capacity increased by 29.8 GW in 2020 compared to a net reduction in the rest of the world's fleet capacity of 17.2GW, according to research published by U.S. think tank Global Energy Monitor.

"All fossil fuels should contribute to higher CO2 emissions in China in 2021, but coal is expected to dominate, contributing 70% to the increase" in Chinese emissions, the IEA said Tuesday.

China's strong and quick recovery from the COVID-19 outbreak meant that it was the only country to preside over an increase in its 2020 energy-related carbon emissions, the IEA said in February, with the country's annual emissions having risen in 2020 by 0.8%, or 75 million tons. The IEA forecasts that Chinese emissions will jump by almost 500 million tons, taking its emissions to 6% above 2019 levels.

The IEA's baseline forecast suggests that carbon emissions from natural gas will hit new highs this year.

"Carbon dioxide emissions from natural gas combustion are expected to increase by more than 215 million tons of CO2 in 2021 to reach an all-time high of 7.35 billion tons of carbon dioxide, 22% of global CO2 emissions," said the IEA.

"Gas use in buildings and industry accounts for much of the trend, with demand in public and commercial buildings seeing the greatest drop in demand in 2020 but the biggest anticipated recovery in 2021."

The IEA data on carbon dioxide emissions stemming from the use of natural gas comes at a sensitive moment in Brussels, where the European Commission, the executive arm of the European Union, on Wednesday is set to release its taxonomy that will define sustainable finance and economic activity. Including natural gas in the taxonomy would offer investors a green light to back large natural gas projects. EU commissioners have already given strong hints in recent months that natural gas will be allowed a presence in the taxonomy.

Europe's difficulties in overcoming the pandemic will mean that energy-related emissions produced across the European Union will rise by a relatively modest 80 million tons, just one-third of 2020's decline in emissions, the IEA said, forecasting overall EU emissions in 2021 at 2.4 billion tons.

"In the United States, carbon dioxide emissions in 2021 are expected to rebound by more than 200 million tons to 4.46 billion tons yet remain 5.6% below 2019 levels and 21% below 2005 levels," the IEA report says. "Oil use, the biggest contributor to carbon dioxide emissions in the United States, should remain almost 6% below 2019 levels, as transport activity remains curtailed across 2021."

The report is predicated on a strong rebound in global economic growth this year of 6%, and the IEA acknowledged the acute uncertainties inherent in any forecast given "the pace of global vaccine rollouts, the possible emergence of new variants of COVID-19, and the size and effectiveness of economic stimulus measures."

Surveying the likely rise in emissions this year, IEA Executive Director Fatih Birol said, "The economic recovery from the COVID crisis is currently anything but sustainable for our climate."

--Reporting by Anthony Lane, alane@opisnet.com;

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

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Morgan Stanley to Mobilize $750 Billion by 2030 for Low-Carbon Solutions

April 13, 2021

Morgan Stanley said Tuesday it was updating its commitment to support low-carbon solutions by mobilizing $750 billion by 2030.

The updated commitment is a three-fold increase on the initial commitment of $250 billion the U.S. bank announced in 2018 and builds on the company's commitment to net-zero financed emissions by 2050.

"The firm will achieve this commitment through increased activities such as clean-tech and renewable energy finance, green bond financing and other transactions that enable a transition to a low-carbon economy," Morgan Stanley said in a release.

The company's enhanced commitment is part of a larger goal of mobilizing a total of $1 trillion towards sustainability solutions in support of the United Nations' Sustainable Development Goals (SDG) by 2030. The SDGs provide a road map for some of the main societal developmental areas for investment.

"We are tripling our low-carbon commitment and increasing our SDG goals for the simple reason that there is no time to waste. As a leader in sustainable finance, it is our obligation to do more to support businesses, governments and individuals in securing a more sustainable world for future generations," Morgan Stanley Chief Sustainability Officer and CEO of the Institute for Sustainable Investing Audrey Choi said.

Morgan Stanley has mobilized $80 billion across the firm in the first two years of its low-carbon financing commitment. The company has supported green, social, sustainability and blue bond transactions worth approximately $83 billion over the last seven years, including the issuance of its own inaugural $500 million green bond in 2015.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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IFCHOR, ClearBlue Markets Launch Emissions Services for Shipping

April 13, 2021

Swiss shipbroker IFCHOR has set up a new venture with Dutch carbon market specialist ClearBlue Markets to offer emissions advisory services to the shipping industry, the two companies announced Tuesday.

IFCHOR ClearBlue Oceans, launched in late January, will help clients navigate changing legislation, source high-quality offsets as well as structure and execute projects and transactions, they said.

The venture is a response to growing demand for such services, and all offsets IFCHOR ClearBlue Oceans offers are accredited by either Gold Standard or the Verified Carbon Standard, they added.

Nicolas Girod, director of markets at ClearBlue Markets, told OPIS on Tuesday that the response from the shipping industry had been "very positive."

"We are seeing early movers trying to develop carbon strategies ahead of potential compliance markets as well as increasing stakeholder pressure," Girod said in an email.

He said high-quality offsets such as afforestation credits are popular with the industry. As of now, the cost is not being passed to the end consumer, he said.

IFCHOR ClearBlue Oceans will offer custom-made short- and long-term solutions.

In the short term, the partnership will focus on neutralizing carbon emissions through voluntary offsets.

Over the longer term, IFCHOR ClearBlue Oceans will assist clients to secure funding for, and implement, more permanent solutions. These include the use of renewable fuels and carbon capture and storage.

"It is IFCHOR ClearBlue Ocean's objective that its clients be at the forefront of the global transition toward a low-carbon future. While long-term solutions are on the horizon, present engagement and action is increasingly vital," the companies said in a joint statement.

The partnership will structure a variety of offset transactions, tailored to a shipping company's or charterer's specific needs, through its global network of offices and relationships with offset owners, suppliers and developers, they said.

"The combined strengths of a shipbroker and renowned carbon market specialist will help shipowners and charterers alike navigate their way through the complexities of carbon offsetting," said Trifon Tsentides, director of business development at IFCHOR.

"From creating plans and strategies, to executing and registering trades, we are providing clients with a complete set of actionable tools to reduce their operational carbon footprint."

In 2018, the last year for which data is available, the shipping industry accounted for 2.89% of global greenhouse gas emissions, according to the International Maritime Organization.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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North American RECs Market Prices Jump on Increased Interest

April 8, 2021

North American Renewable Energy Certificates (RECs) demand and prices have increased this year in part due to growing emphasis on carbon neutral and net-zero greenhouse gas emissions (GHG) commitments, according to RECs market sources.

The upward trajectory is expected to continue, they said this week.

Illustrating that demand, Nodal Exchange set new quarterly trading records in both environmental and power futures during the first quarter driven by increases in trade inquiry in the RECs markets, the company announced this week.

Working with IncubEx to grow and market its environmental financial contract offerings, Nodal's 56 REC futures and options volume surpassed 54,400 contracts in Q1, an increase of more than 111% from the first quarter of 2020. Meanwhile, RECs open interest at the end of Q1 increased to a record 117,463 contracts, up more than 113% from the year-ago quarter.

An REC is created when one megawatt hour (MWh) of electricity is generated and delivered to the electric grid from a renewable energy source, according to the U.S. Environmental Protection Agency (EPA). These credits are traditionally purchased to comply with policy-driven GHG reduction programs, but additional buying is expected by corporations who are more readily seeking to voluntarily erase their power emissions. In addition, demand has also increased on the back of proposed state legislation that could affect the Maryland Renewable Portfolio Standard and Tier 1 REC supply, RECs market sources said.

The U.S. Energy Information Administration (EIA) in its April Short-Term Energy Outlook said that renewable energy generation from wind would surpass 134,000 MW in 2021, an increase of 14% from 2020, and generation from large-scale solar would rise to more than 63,300 MW in 2021, a jump of 33% from 2020. EIA expects total renewable energy consumption to increase around 10% in 2021 compared to 2020.

PJM Tri-Qualified RECs, which can be used for compliance purposes in Pennsylvania, New Jersey and Maryland, had the most interest on Nodal in Q1, with open interest at the end of the first quarter at 22,100 contracts, up over 35% from the year prior. PJM Tri-Qualified REC Class I V22 futures traded at $11.90/MWh on the Nodal Exchange on Jan. 22 and rose throughout the rest of the first quarter, trading as high as $17/MWh on Nodal on March 26.

PJM Tri-Qualified REC Class I V22 was at $16.625/MWh on Wednesday, according to OPIS pricing data.

The PJM Tri-Qualified REC Class I V21 futures traded at $11.90/MWh on Nodal on Feb. 9 and rose to $16.725/MWh on Tuesday, according to OPIS pricing data. The contract traded between $16.40/MWh and $16.45/MWh on Intercontinental Exchange (ICE) on Wednesday.

Prices in other RECs and Solar RECs markets have also increased amid the stronger demand.

Nodal's first-quarter volumes for Pennsylvania Solar Alternative Energy Certificates rose to 12,400 contracts after not trading during the first quarter of 2020. Texas CRS volumes rose to over 6,700 contracts in the first quarter, up nearly 83% from the year earlier, while New Jersey Solar REC volumes soared to 6,100 contracts, an increase of almost 336% from the prior year, according to IncubEx spokesperson Jim Kharouf.

Open interest on Nodal for Pennsylvania Solar Alternative Energy Certificates in the first quarter was 20,600, up from 100 contracts at the end of the first quarter 2020, according to IncubEx. Texas CRS Wind open interest rose to 13,303 in the first quarter, an increase of over 336% year on year, and New Jersey Solar REC open interest increased to 16,612, up 117% from the year prior.

In total, Nodal also achieved a quarterly trading record in power futures with a volume of 559 million MWh in the first quarter and open interest at 1,041 million MWh per side at the end of the quarter, representing nearly 51% market share. For the month of March, power futures trading on Nodal set a record at 200 million MWh, an increase of 43% over March 2020. Nodal set records for monthly power futures traded volume market share with over 47% in the U.S. and 55.8% in the PJM market.

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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India Coalition to Build Hydrogen Economy and Supply Chain

April 6, 2021

U.S. hydrogen equipment manufacturer Chart Industries announced Tuesday it has launched an energy transition coalition with India's Reliance Industries to build a hydrogen economy and supply chain in the South Asian country.

The India H2 Alliance (IH2A) will commercialize hydrogen technologies and systems by collaborating with the government and private-sector partners, the company said in a press release.

Chart and Reliance, one of India's biggest corporations with interests in petrochemicals, telecommunications, textiles and entertainment, will act as steering group co-leads.

The coalition will work to:

  • Develop a national hydrogen policy and roadmap during 2021-30.
  • Create a national hydrogen task force in a public-private partnership format.
  • Identify large hydrogen demonstration-stage projects.
  • Help create an India hydrogen fund.
  • Create capacity, covering production, storage and distribution of hydrogen.

Chart said the alliance's focus will be on blue and green hydrogen, which is produced from natural gas and renewable energy, respectively.

In the February national budget, India's government proposed the launch of a "Hydrogen Energy Mission" in 2021-22 for generating hydrogen from green power sources.

Virtually all of the hydrogen consumed in India today is gray hydrogen, the production of which emits about 9 tons of carbon dioxide (CO2) per ton.

Unlike gray hydrogen, green hydrogen production results in zero emissions. For blue hydrogen, the CO2 emitted during production is captured and stored.

"Through India H2 Alliance, we will bring best-in-class hydrogen technology, equipment and know-how to create a hydrogen supply chain in India," said Jillian Evanko, CEO and president of Chart Industries. "By prioritizing national hydrogen demonstration projects, innovations to further reduce the cost of hydrogen will become prominent, locally."

Anurag Pandey, research and development team lead at Reliance Industries, said in the press release that India needs to identify and execute large-scale hydrogen demonstration projects if it wants to be part of the global supply chain for hydrogen.

The India coalition was announced a day after Chart teamed up with hydrogen fuel-cell maker Plug Power and oilfield services firm Baker Hughes to create the FiveT Hydrogen Fund, dedicated to delivering clean hydrogen projects at scale.

The companies will invest a total of 260 million euros ($307 million) in the project. The fund aims to raise a total of 1 billion euros ($1.18 billion) from investors.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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ABB Launches Drone Tool to Detect Natural Gas Industry's GHG Emissions

April 5, 2021

Technology giant ABB has launched a drone-based gas leak detection and greenhouse gas (GHG) measuring system called HoverGuard, the company announced late last week.

ABB claimed Friday the system can detect, quantify and map leaks up to 328 feet from natural gas distribution and transmission pipelines, gathering lines, storage facilities and other potential sources quickly, safely and reliably.

It said the cloud-connected, multi-gas solution is also the first drone-based system to quantify GHGs such as methane and carbon dioxide continuously while flying.

Shell announced in September an expansion in its methane leak detection and repair program in the Permian Basin through an agreement with Avitas, a Baker Hughes venture, for the usage of drones. Shell said they will conduct drone-based inspections utilizing optical gas imaging and a laser-based detection system across more than 500 sites, including about 150 sites that fall under the Environmental Protection Agency's (EPA) Clean Air Act reporting.

The U.S. oil and natural gas industry has been working to reduce emissions over the past two decades.

In 2018, the last year for which data is available, U.S. oil and gas companies emitted 175 million metric tons of carbon dioxide equivalent (CO2e), according to EPA. That's a 23.5% decrease from 1990 methane emissions of around 229 million metric tons, according to EPA.

Oil and gas production combined accounted for 67% of the total methane emissions, while transmission and storage were responsible for 19%. The rest came from processing and distribution.

Efforts are now underway to tighten the rules governing the operation of pipelines. The Biden administration has asked EPA to propose new regulations to establish comprehensive standards of performance and emission guidelines for methane by September 2021.

ABB says HoverGuard will allow scientists and researchers to reliably quantify GHG fluxes as it can detect methane 10 times faster than conventional tools while flying 130 ft above the ground at 55 mph.

Another advantage is that it can cover 10-15 times more land area per minute by operating on low-cost commercial drones capable of carrying a payload of 3 kg, the company said.

HoverGuard is in use in North America, Europe and Southeast Asia and scheduled to be deployed in China and the Middle East later in 2021, ABB's Global Product Manager Doug Baer said in an email to OPIS on Monday.

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

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

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Gunvor Group Outlines Plan to Cut Direct, Indirect GHG Emissions 40% by 2025

March 30, 2021

Global commodities trader Gunvor Group on Tuesday said it is aiming to reduce its direct and indirect carbon emissions 40% by 2025 and has formed a new subsidiary to invest in non-hydrocarbon projects.

The company said the new business unit, Nyera, which is Swedish for "New Era," will be funded with at least 10% of its net equity that, along with borrowing, is expected to total at least $500 million.

Nyera will focus on carbon capture and storage (CCS), renewable fuel, renewable power and alternative fuels, including hydrogen and ammonia, the company said in a statement.

Gunvor said its largest greenhouse gas (GHG) emissions sources are its European refineries and its directly owned and chartered shipping fleet. Under the initiative, it said it will take steps to reduce or compensate for direct (Scope 1) emissions and indirect (Scope 2) emissions by 35% and 95%, respectively, by 2025.

It said refinery emissions will continue to decrease from a 2019 baseline through efficiency projects and switch to renewable and carbon-neutral electricity.

Gunvor said it will review the potential for producing green hydrogen or biofuel from waste at its Ingolstadt refinery in Germany and is developing the capability of producing hydrogen co-processing vegetable oils at its Rotterdam refinery.

Further, Gunvor said it plans for all company-owned ships and 75% of its charter fleet to become "eco-vessels" by 2022, with a goal of reaching 100% by 2027.

It also said it is working to complete its assessment of indirect emissions that occur in its business operations (Scope 3), including those linked to traded commodities and voyage charters.

Gunvor said it will adhere to International Maritime Organization (IMO) efficiency improvements of 40% by 2030.

 

--Reporting by Jeff Barber, jbarber@opisnet.com;

--Editing by Jordan Godwin, jgodwin@opisnet.com

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Ontario Set to Withdraw From Federal Carbon Pricing System

March 20, 2021

Ontario will transition from the federal Output-Based Pricing System (OBPS) towards its own climate change plan that will be enacted Jan. 1, 2022, according to an announcement this week.

Ontario will begin transitioning away from the OBPS to its own Emissions Performance Standards (EPS) program, Minister of Environment and Climate Change Jonathan Wilkinson announced Monday.

"This follows the announcement in fall 2020 that the Government of Ontario's carbon pollution pricing system for industrial facilities met the federal government's minimum stringency benchmark requirements and that the federal OBPS would be stood down at a future date," according to an online announcement from the federal government.

The federal government accepted Ontario's EPS program in September 2020, which would allow it to exit the OBPS, which is also commonly referred to as a "backstop" plan.

Ontario will need to continue to meet its obligations for the compliance periods of 2019 to 2021 before leaving the OBPS, analyst firm ClearBlue Markets observed after the announcement.

"Ontario OBPS covered facilities will now likely see the establishment of the Federal GHG Offset System, which will provide additional compliance flexibility," ClearBlue Markets said in a Monday note.

Ontario was previously a part of the California-Quebec linked cap-and-trade program under the Western Climate Initiative (WCI) in 2018 before revoking its participation the same year.

On Thursday, Canada's Supreme Court ruled the federal government's Greenhouse Gas Pollution Pricing Act (GGPPA) was constitutional and could continue to be applied to provinces without a climate change plan.

The GGPPA, which was passed in 2018, set a carbon tax on fossil fuels which is currently at C$30 (U.S. $24) per ton of carbon dioxide equivalent (CO2e) and is expected to eventually reach C$170/CO2e by 2030.

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

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

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Interest, Prices in Texas RECs Heating Up: Trade Sources

March 25, 2021

Interest in Texas Renewable Energy Certificates (RECs) markets has been increasing over the last year, with expectations for the momentum to continue, multiple market sources told OPIS this week.

The rise in activity and prices have been attributed to the increase in demand for RECs from municipalities and corporations who are seeking to achieve carbon neutral or net zero goals, as well as an increase in participants including traders and investors, sources say.

In addition, the lower price for Texas compared to other regions could also be playing a role in the increase in activity and demand, sources said.

As defined by the U.S. Environmental Protection Agency, a REC is issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource.

Nodal Exchange saw steady growth in the Texas REC market in the first quarter, with a steady increase in price over that time, according to Jim Kharouf, Communications Director at IncubEx, which has helped develop a suite of environmental contracts on Nodal.

Nodal's Texas Compliance RECs from Center for Resource Solutions (CRS) Eligible Listed Facilities futures and options surpassed 25,000 total contracts in March since their launch in November 2019, while open interest is nearing 15,000 contracts, Kharouf said.

Each contract is equal to 1,000 RECs.

Nodal's Texas REC CRS futures are physically delivered RECs issued by the ERCOT Renewables Registry for qualifying wind energy production facilities listed with the CRS for its Green-e certification program, according to the exchange's website.

The V21 Texas REC CRS front half futures contract traded on Nodal on Wednesday at $2.70/MWh. For comparison, V21 PJM REC Tri Qualified Class I contracts traded as low as $16.35/MWh on Nodal on Wednesday and between $16.35/MWh and $16.52/MWh on the Intercontinental Exchange (ICE).

The Texas CRS contracts traded on Nodal are the only hybrid voluntary/compliance REC futures contracts offered on any exchange, and Nodal with partner IncubEx recently listed options on the wind contract and Texas Compliance Solar Renewable Energy Certificates (SRECs) from CRS Listed Facilities futures, with the first Texas solar CRS futures contract traded on Feb. 19, Kharouf said.

Prices for the Texas wind contract have also risen, with the V20 March 2021 contract on Nodal trading at $2.55/Mwh on March 19 after starting the year at $1.72/Mwh, he added.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

 

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Air Liquide to Invest $9.5 Billion in Low-Carbon Hydrogen

March 23, 2021

French industrial gases company Air Liquide said it will invest 8 billion euros ($9.5 billion) in low-carbon hydrogen by 2035 as part of a new environmental, social and governance (ESG) initiative.

The company also said in the news release Monday it aims to triple its hydrogen revenues to more than 6 billion euros ($7.1 billion) by 2035.

Air Liquide's new initiative, ACT for a Sustainable Future, comprises three elements -- the abatement of carbon dioxide (CO2) emissions for a low-carbon society, care for patients and trust as the base to engage with employees to build best-in-class governance.

"Not only do we intend to reach carbon neutrality by 2050 and harness climate change and energy transition with hydrogen playing a key role in our roadmap, but we also include healthcare, human resources and governance as part of our ESG objectives," said Benoit Potier, chairman and CEO of Air Liquide. "With this global ambition, Air Liquide is making the commitment to ACT today for a sustainable future."

To decarbonize its assets, Air Liquide said it will leverage on capturing CO2, accelerating low-carbon hydrogen production through electrolysis or by using renewable feedstock such as biomethane.

To reduce indirect emissions, it will focus on increasing energy efficiency and low-carbon electricity consumption.

In addition, Air Liquide said it will deploy a broad range of low-carbon solutions for its clients to help them decrease their CO2 footprint.

They include a plan to make low-carbon gases available, helping customers with industrial process transformation as well as an asset takeover strategy with an objective to decarbonize them, the company said.

A world leader in gases, technologies and services for industry and health, Air Liquide is present in 78 countries with about 65,000 employees. In 2020, it had revenues of more than 20 billion euros ($23.8 billion).

 

--Reporting by Abdul Latheef, alatheef@opisnet.com;

Editing by Jeremy Rakes, jrakes@opisnet.com

 

 

 

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Calif. Senators Ask Biden for US Ban on Internal Combustion Engine Vehicles

March 23, 2021

California's two U.S. senators are calling on President Joe Biden to follow their state's lead and set a date for a national ban on the sale of new cars with internal combustion engines (ICE).

In a letter to the president, Democrats Diane Feinstein and Alex Padilla also ask Biden to tighten federal fuel economy standards and to reinstate California's authority to set greenhouse gas and zero-emission vehicle standards.

Former President Donald Trump had loosened federal standards and stripped California of its ability to set its own environmental standards for vehicles, a move the state is fighting in court.

While Biden has said enacting stricter regulations to fight climate change is a priority of his administration, he hasn't committed to supporting a ban on ICE vehicles.

California Gov. Gavin Newsom in September 2020 issued an executive order requiring all new passenger vehicles sold in the state to be zero emission by 2035. However, a January report by the California Energy Commission said the state will need to add hundreds of thousands of new charging stations and make "significant public investment" over the next decade to meet Newsom's goals.

California alone would need about 1.5 million chargers by 2030 to support an estimated 8 million light-duty vehicles, and an additional 157,000 chargers will be needed to support 180,000 medium- and heavy-duty vehicles, according to the report.

This is significantly more chargers than the network of 500,000 chargers nationwide that Biden promised as part of the clean energy plan he released as a candidate.

Newsom is the target of a recall effort, and it's unclear what the future of his ICE vehicle ban is if he is removed from office.

Nonetheless, in their letter Feinstein and Padilla call on the president "to follow California's lead and set a date by which all new cars and passenger trucks sold be zero-emission vehicles."

"The automobile industry has shown it has the ingenuity and resources to reimagine our transportation systems in consumer-friendly ways," they wrote.

"We urge your administration to take advantage of this effort and make real progress in coordination with states, like California, that share your goals to aggressively fight climate change by eliminating harmful pollution from the transportation sector."

The senators also ask Biden to undo the Trump administration's Safer Affordable Fuel-Efficient (SAFE) Vehicles fuel efficiency rule and reinstate fuel economy standards set earlier under former President Barack Obama. The Trump rule tightens corporate average fuel economy (CAFE) and maximum CO2 emissions by 1.5% each year from model years 2021 through 2026. That's significantly less stringent than the standards issued in 2012 by the Obama administration, which called for a 5% annual tightening of standards.

The Trump administration argued that automakers couldn't meet the older standards, which also raised the cost of new vehicles.

In their letter, Feinstein and Padilla say they "support aggressive national standards for greenhouse gas emissions, clean transportation technology, and sensible fuel economy for passenger vehicles."

"We urge your administration to restore pollution standards that actually protect public health and welfare, set fuel economy standards at the maximum level feasible, and advance national standards for zero-emission vehicles and equipment to ensure the United States remains a leader in clean technology, engineering, and manufacturing," the senators wrote.

They say that "at an absolute minimum," national standards should mirror those included in an agreement finalized last year between California and several auto manufacturers, including Ford, Honda, Volkswagen, Volvo and BMW, that calls for cars and light trucks to obtain a higher fuel-efficiency beginning with the 2022 model year and reduce greenhouse gases by 3.7% every year over a five-year period.

Even without a national ban on ICE vehicle sales, many automakers are already moving toward a future in which they sell on electric vehicles (EVs). General Motors, for example, pledged in January to phase out ICE vehicle production by 2035, while other manufacturers are aggressively moving to expand their EV fleets.

 

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

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

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US SEC Seeks Comment on Climate Risk Reporting

March 16, 2021

The US Securities and Exchange Commission (SEC) is asking for comment on how it can obtain reliable and consistent reporting on risks posed by climate and environmental impacts, as it embarks on an effort to set up a comprehensive reporting regime for these risks.

The risks posed by climate as well as environmental, social and governance (ESG) factors that companies have been reporting have not been up to par, according to SEC Acting Chairwoman Allison Herren Lee, who discussed the request Monday during a discussion on "Meeting Investor Demand for ESG Information," convened by the Center for American Progress.

Investors need climate risk reports that are consistent, comparable and reliable so they can use them to price risk and allocate capital, Lee said.

Lawyers and analysts tracking the SEC developments say the agency is not waiting for the incoming nominee for chairman, Gary Gensler, to be confirmed before proceeding with President Joe Biden's government-wide approach to tackling the climate crisis. They also agree that the agency's request for comment won't cause companies to take any further action other than being vigilant.

"Not a week seems to go by without another major announcement," IHS Markit Head of Americas Regulatory Affairs Salman Banaei said. He added that the SEC actions indicate the importance the Biden administration has placed on "improving climate risk and ESG factor disclosure."

IHS Markit is the parent company of OPIS.

Ronald Mueller, partner with the Washington office of Gibson, Dunn & Crutcher, who advises public companies on a broad range of SEC disclosure and regulatory matters, said the agency's direct announcement will not require companies to take any action.

Rather, "it adds to the drum beat of SEC statements that should already have companies evaluating what they are saying in climate disclosures," said Mueller, who is a member of the company's ESG practice.

The SEC first identified climate impacts as a material risk affecting a company's investments in 2010 guidance, but at that time it did not establish any metrics or standards for reporting risk.

The SEC said it would accept comments for 90 days, or until June 13, 2021, on its request that contains more than half a dozen questions that try to tease out the approaches the agency could take to improve disclosures.

Mueller characterized the SEC's action as "jumpstarting" the rulemaking process.

"This is the type of questioning the SEC will often put out in advance of a rulemaking," Mueller told IHS Markit in an interview.

These include questions about the metrics that companies currently use to report Scope 1, or direct, greenhouse gas emissions from the source; Scope 2, or indirect, emissions generated as a result of transporting that product; and Scope 3 emissions, or the emissions resulting from the use of the end product.

IHS Markit's Banaei highlighted the following questions in a Monday note to clients: "What quantified and measured information or metrics should be disclosed because it may be material to an investment or voting decision? Should disclosures be tiered or scaled based on the size and/or type of registrant? If so, how? Should disclosures be phased in over time? If so, how?"

Responses that the SEC receives on its request will inform Gensler and his staff's thinking on what to propose in terms of new rules, Banaei said.

Lee's announcement is the latest example of the Biden administration's more rigorous approach to corporate risk disclosure. It follows on the heels of a March 10 announcement by the U.S. Department of Labor that it will not enforce two rules written under the Trump administration that would have discouraged investment advisors from using corporate ESG factors as part of their risk assessments.

On March 4, the SEC set up an enforcement task force that is charged with identifying "any material gaps or misstatements in issuers' disclosure of climate risks under existing rules."

For companies, that means they should double check and make sure they preserve information that supports their statements, according to Mueller, who doesn't see any of the SEC actions on climate risk disclosure as warnings.

On March 15, in a letter to the SEC, the U.S. Chamber of Commerce warned the SEC about its "enforcement-first approach" to ESG and climate change even though the agency has yet to complete its review and updates to the 2010 guidance, which it said many see as a predicate to further guidance and rulemaking.

Aside from the request for comment, Lee used the opportunity to address a public forum to float a number of ideas about how to improve disclosures, which included asking investors to comment on the potential need to bring in external auditors to attest current voluntary reports.

She also asked whether the Public Company Accounting Oversight Board (PCAOB) should be asked to set better standards or guidance for how auditors are currently addressing climate- and ESG-related financial disclosures. The PCAOB is a private sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee the auditors of publicly traded companies and protect the interests of investors by ensuring that audits are performed in a fair and informative fashion.

Although acknowledging that the SEC does not regulate credit rating agencies, which say that they consider ESG in their assessments of companies' risks, Lee asked how the SEC could encourage "enhanced transparency" by those rating agencies.

Lee also said the SEC may revisit rules to make sure that smaller shareholders would get some consideration when voting on ESG and climate matters. "They have a right to know where their money is being invested," she said.

Lee acknowledged that the SEC's list is "by no means exhaustive," as the risks and opportunities related to climate and ESG cut across all manner of boundaries.

But, she added, the SEC must do its part in partnership with market participants and regulators around the globe to address these issues, otherwise "the lack of common benchmarks and standardized language will continue to inhibit to some degree competitive dynamics around managing climate and other ESG risks."

 

--Reporting by Amena Saiyid, amena.saiyid@ihsmarkit.com;

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

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RGGI Adjusts Allowance Cap by 19 Million for Next Five Years

March 16, 2021

The Regional Greenhouse Gas Initiative (RGGI) will eliminate 19 million carbon dioxide (CO2) allowances a year over a five-year period to account for a bloated bank of allowances held in private accounts.

RGGI announced this week details for its third banked allowances adjustment, which will eliminate 95.45 million allowances held by investors and compliance entities, over a five-year period of 2021 to 2025. Stakeholders previously voted to adjust the allowance cap in August 2017.

"The third adjustment for banked allowances attempts to correct the oversupply of allowances issued -- that the system inherited from the previous compliance periods -- by reducing the number of allowances that will be distributed through auctions for future years. So, it essentially reduces the cap," Clear Blue analyst Tim Tursun said Tuesday.

"The adjustment essentially forces market participants, on a collective basis, to procure allowances which are currently banked by the private entities," Tursun said.

For 2021, 119.76 million allowances from participating states will be adjusted to 100.67 million allowances while in 2025, 105 million allowances will be adjusted to 86 million allowances, according to RGGI.

RGGI previously made two adjustments for banked allowances in 2014 resulting from a program review done in 2012. The first and second adjustments covered banked allowances between 2014 to 2020.

"Given the magnitude of the RGGI allowance surplus, this adjustment for banked allowances is a prudent and transparent way to re-align the RGGI market with the emission-reduction goals of the participating states," Acadia Center Carbon Programs Director Jordan Stutt said Tuesday.

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

RGGI member states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, New Jersey, Rhode Island and Vermont.

RGGI secondary market participants can expect RGGI prices to increase gradually because of the impending squeeze on available credits, but "this should not shock the secondary market, as the RGGI states committed to this adjustment through the 2017 RGGI program review, and the data needed to calculate the allowance surplus through 2020 is publicly available," Stutt said.

On Tuesday, RGGI secondary market current vintage forward-timing prices strengthened 6.5cts/st Tuesday and OPIS assessed the blended V20/V21 December 2021 assessment at $8.005/st. It was unclear if the price increase was in response to the adjustment announcement.

RGGI prices have hovered around the $8/st mark since February after reaching an all-time high of $9/st following the results of two Senate races in Georgia that were won by Democrats. RGGI prices previously climbed to $8/st by December 2020, following Virginia's announcement in July 2020 it would join the program.

RGGI prices for forward-timing prices traded between $3.35/st and $4.60/st when the last allowance cap adjustment was voted on in August 2017.

This year, RGGI instituted the emissions containment reserve (ECR), which allows member states to withdraw allowances from circulation if prices fall below a trigger price. This year, the ECR trigger price is set at $6/st and will increase by 7% every year, reaching $11.03/st in 2030.

"Going forward, the RGGI states should seek to prevent another major allowance surplus from forming by lowering the emissions cap and increasing the ECR price trigger," Stutt said.

 

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

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

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Company to Pay $3 Million Penalty for Selling Emissions Defeat Devices: EIA

March 9, 2021

A U.S. aftermarket auto parts company will pay $3 million in clean air act penalties for selling emissions-control defeat devices, according to the U.S. Environmental Protection Agency.

In an announcement Tuesday, EPA said that between January 2017 and February 2019, Premier Performance of Rexburg, Idaho, and three of its related companies sold more than 64,000 parts of components that bypass vehicle emission devices.

The company -- which EPA characterized as "one of the nation's largest sellers of aftermarket automotive parts" -- agreed to pay the penalty and to also stop manufacturing and selling products that violate the federal Clean Air Act, the agency said.

The parts were designed for use on diesel pickup trucks and engines manufactured by General Motors and Ford as well as Cummins Inc. and FCA US LLC, according to EPA.

Premier Performance has also instituted procedural safeguards to prevent the sale of defeat devices, EPA said.

When announcing the agreement, EPA said it estimates that removing emission controls from one truck has the same impact on oxides of nitrogen (NOx) emissions as putting about 300 new pickup trucks on the road. EPA said the agreement will prevent the release of approximately 3.5 million pounds of air pollution per year.

Premier did not respond to a request for comment by publication time.

EPA said its investigation of Premier was part of its ongoing initiative to stop the sale of aftermarket defeat devices. The effort was first implemented in 2020 and EPA resolved 31 cases during the year, the agency said.

When releasing a November 2020 report on the environmental impact of diesel truck defeat devices, EPA said federal enforcement efforts are generally focused on upstream manufacturers and suppliers of aftermarket defeat devices.

The agency relies on individual states to enforce their own laws against tampering, operating tampered vehicles, or selling tampered vehicles.

In the report, EPA cites estimates from its Air Enforcement Division that emissions controls have been removed from more than 550,000 diesel pickup trucks over the last decade. That's equal to about 15% of the national fleet of diesel trucks originally certified with emissions controls, according to the report.Defeat devices include a variety of aftermarket auto parts as well as hardware and software intended to override installed emissions controls systems.

Tampering with emissions controls allows owners to avoid the costs of maintaining vehicle systems and can increase fuel economy and/or power, the EPA report said.

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

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

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IHS Markit to Launch Meta-Registry for Global Carbon Credits

March 9, 2021

IHS Markit announced plans Tuesday to launch a Meta-Registry to track, trade, manage and account for new and existing carbon credits generated from mitigating climate change across independent carbon markets and registry systems around the world.

The IHS Markit Meta-Registry will serve as a "global online ledger" that will "allow seamless connections among independent carbon markets and registries around the world, reducing the risk that credits are counted or claimed twice different markets or programs," the company said in a news release.

It will also enable companies, governments, traders and brokers to access information on carbon projects and credits across jurisdictions, programs and standards, the company said.

IHS Markit is the parent company of OPIS.

"This Meta-Registry that underpins the global carbon markets will provide clarity and accountability for participants, increase liquidity, transparency and strengthen the all-important trust in these markets," IHS Markit's head of environmental solutions, Kathy Benini, said in the release.

In addition, Benini told OPIS on Monday that the "Meta-Registry is a critical piece of infrastructure to support the scaling of voluntary and emerging national markets. The risk of double counting and double claiming is one of the key challenges for growth in carbon markets which we believe can be mitigated by the Meta-Registry."

The Meta-Registry will launch in the coming weeks, with initial member programs including Global Carbon Council, Gold Standard, UK Woodland Carbon Code, UK Peatland Code and Verra. The five programs were responsible for 77% of credit issuances in the voluntary markets in 2020. Additional participants will be added in the future, IHS Markit said.

Benini said in an interview that added transparency and connectivity from the Meta-Registry "will enable more seamless carbon unit transactions globally."

Initially, the Meta-Registry will record Internationally Transferred Mitigation Outcomes (ITMO) for country-to-country transfers. Over time, "we would provide standards and programs the option to offer their participants access to a variety of services including facilitating OTC position and cash settlement, as well as routing to exchanges and auction platforms for liquidity," she said.

The Meta-Registry will not track carbon credit pricing at launch, but the "feature is included in the product road map," Benini said.

Global voluntary carbon markets are a vital tool that allow companies and countries to meet net-zero greenhouse gas commitments through the purchase and retirement of credits to offset emissions.

Evolution Markets Executive Director Evan Ard said Monday that the firm's "carbon market clients are seeking more efficiencies in how carbon offsets are created, traded and retired. This initiative has the potential to address some of those needs."

Brokerage firm Evolution Markets has been engaged in global carbon markets in New York and London for more than two decades.

As carbon offset markets become more active and new products are developed by regulated and unregulated markets, the need for coordination among registries is increasingly more important, Ard said. And if done right, the Meta-Registry can "increase liquidity in carbon markets and maybe open the market to more participants, especially as more and more companies are taking on carbon reduction targets," he said.

To make sure that the Meta-Registry meets its goals, IHS Markit also set up a Meta-Registry Advisory Board comprising representatives from the public and private sectors, plus non-governmental organizations. These include Bank of America, Chevron, Environmental Defense Fund, Gold Standard, Global Carbon Council, Goldman Sachs and the International Emissions Trading Association.

The World Bank will be an observer on the advisory board, and IHS Markit said its registry would act as a complement to the World Bank's Climate Warehouse initiative to create a public infrastructure for tracking and reporting of carbon assets.

ClearBlue Markets analyst Mourad Farahat told OPIS on Monday that "the more information that is centralized, the better -- especially as this could help ensure that market fragmentation reduces over time."

The Meta-Registry "could help overcome double crediting issues; with more markets, there is a higher risk of double crediting, and thus having a meta-registry could help reduce this risk," he said, adding that more risk mitigation is needed as participation in the voluntary carbon market expands.

"With that being said, a critical mass of signatories is needed for such a meta-registry to become effective -- and as such it is especially noteworthy that Gold Standard and Verra support this," he said.

Since the beginning of 2021, counterparties in the voluntary Reducing Emissions from Deforestation and forest Degradation (REDD+) credits market reported transactions to OPIS for 14.4 million credits issued under Verra's REDD+ methodologies.

On Monday, OPIS prices for Voluntary REDD+ Credits in the Tier 1 category, which represents transactions for credit volumes of more than 350,000, were assessed at a range of US$2.25-$6.25/mt across the 2013-2021 vintages individually assessed. OPIS prices for Tier 2 Voluntary REDD+ Credits, representing transactions between 50,000 to 350,000 credits were assessed at a range of US$2.85-$7.375/mt across the vintages assessed. OPIS prices for Tier 3 Voluntary REDD+ Credits, representing transactions between 2,000 to 50,000 credits, were assessed at a range of US$4.25-$8.25/mt across the vintages assessed.

All voluntary REDD+ credits eligible for inclusion in the OPIS price assessment process must also carry Climate, Community and Biodiversity Standards (CCB) certification. The CCB criteria, which is managed by Verra, identifies land management projects that create additional benefits to local climate change mitigation, communities and biodiversity.

The OPIS CORSIA Eligible Offsets price assessment, used to gauge the cost for voluntary compliance with the program, was at US$2.45/mt Monday. Prices for offsets eligible for the CORSIA program have climbed recently following the launch of the CME Group's Global Emissions Offset futures contract, but face resistance, however, due to an abundance of low-priced carbon credits generated by renewable projects as well as a lack of solid demand tied to the several years before mandatory compliance for CORSIA takes effect for many entities, voluntary carbon market sources told OPIS.

 

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com, Kylee West kwest@opisnet.com, and Amena Saiyid, amena.saiyid@ihsmarkit.com;

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

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Verra Updates REDD+ Project, Jurisdictional Standards to Align Initiatives

March 5, 2021

A set of updates to carbon standards setting non-profit Verra's flagship forestry accreditations are meant to harmonize and leverage the strengths of REDD+ jurisdictional programs and independent forest conservation
REDD+ projects - two groups that often occupy the same space with isolated initiatives.

"We've seen countries taking a lot of different approaches to how to incorporate project activities, and this gives them really concrete tools and a really consistent, transparent approach, which should help reduce any conflict," Verra Chief Program Officer Naomi Swickard said Thursday.

Her comments came during a virtual press conference to announce revisions to the global credit register's reducing emissions from deforestation and forest degradation standards for the Jurisdictional and Nested REDD+ (JNR) and the Verified Carbon Standards (VCS) frameworks.

"Together they set out the framework for how we actually hope help to preserve and restore forests around the world," Verra CEO David Antonioli said during the conference. "We need to ensure that REDD+ is operational at every scale. It needs to operate at the project level, meaning projects on the ground. But it also needs to operate at the government level, or what is known in the sector as jurisdictional efforts."

The updates - to be published at the end of the first quarter -- were made to integrate jurisdictional and project-level emissions accounting and reflect the latest scientific best practice.

For the standards, a risk map and new allocation tool will set project baselines using a top-down instead of a bottom-up approach. To that end, countries will start with a deforestation "reference level" Verra said. In addition, deforestation information will be updated more recently that in the past when many years of back data were required, Verra said.

The updates also align with the UNFCCC decisions on REDD+ and other major greenhouse gas (GHG) programs including national REDD+ frameworks.

ClearBlue Markets voluntary carbon market analyst Mourad Farahat told OPIS that frequent disclosures on baselines and better understanding of high-risk areas would likely result in positive collaboration between the jurisdictional and independent REDD+ stakeholders.

"By clearly delineating emissions rights, and ordering emissions reductions priorities according to their risk, for example, a more cohesive overall strategy can be developed, where responsibilities and emissions reductions claims can be laid out ex ante," Farahat said. "Thus, in addition to accounting for legacy projects on the part of private developers, such an integrated framework could enable 'deeper nesting' by not only encouraging mutual co-operation, but also more clearly rewarding it."

Verra's chief program officer Swickard said that while separate in approach, jurisdictional and project-level REDD+ projects "can be extremely complimentary to deliver integrated ways of addressing deforestation, and this really provides the basis for that happening more efficiently."

In a briefing document made public Thursday, Verra said that governments "are best placed to create enabling environments and the right incentives on the ground for forest protection. For their part, developers of REDD+ projects tend to be more nimble and effective at delivering services to local actors, including communities, and addressing local drivers of deforestation."

Verra's CEO Antonioli said that aligning two REDD+ sectors will "make sure we have conservation and restoration activities happening all throughout the economy," he said. "We also need to get many more resources than we have ever dedicated to this problem."

In addition, it will facilitate more private-sector REDD+ project finance - money imperative to scale the market to reach global climate change goals, Verra said.

"The real interest here is in ensuring that we can scale ... ensuring that we can address deforestation, which is absolutely critical to our future as a planet. And to leverage markets in a way that helps drive finance to deforestation," Swickard said.

Corporate commitments are going to help save forests, "while we are working as a planet and as a people to decarbonize our economies over time," she added.

ClearBlue Markets analyst Farahat agreed that Verra's updated approach to the standards would enable the voluntary carbon market to scale.

"The way we see it, if the market has better understanding of what objectives a jurisdiction will pursue, more clarity on how it will pursue it, and better ways of verifying that these goals are to be met, then it can make more informed decisions on investments at a larger scale," Farahat said. "In that regard, we believe that putting up stricter criteria for what would qualify under the new JNR and augmenting this with more frequent and informative disclosures could help capital flow in more freely."

Citing a McKinsey & Company report published in April 2020, Antonioli said that to keep global warming below 1.5 degrees C -- the climate change goal of the Paris Agreement - the current deforestation trajectory must be stopped by at least 77%.

"Regardless of how the other sectors perform stopping deforestation is an absolute critical thing we need to do to achieve the 1.5 degrees world," he said.

Since the beginning of 2021, counterparties in the voluntary REDD+ credits market reported transactions to OPIS for 14.4 million credits issued under Verra's REDD+ methodologies.

On Thursday, OPIS prices for Voluntary REDD+ Credits in the Tier 1 category, which represents transactions for credits of more than 350,000, were assessed at a range of US$2.25-$6.375/mt across the 2013-2021 vintages individually assessed. OPIS prices for Tier 2 Voluntary REDD+ Credits, representing transactions between 50,000 to 350,000 credits were assessed at a range of US$2.85-$7.375/mt across the vintages assessed. OPIS prices for Tier 3 Voluntary REDD+ Credits, representing transactions between 2,000 to 50,000 credits, were assessed at a range of US$4.25-$8.375/mt across the vintages assessed.

All voluntary REDD+ credits eligible for inclusion in the OPIS price assessment process must also carry Climate, Community and Biodiversity Standards (CCB) certification. The CCB criteria, which is managed by Verra, identifies land management projects that create additional benefits to local climate change mitigation, communities and biodiversity.

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com
--Editing by Lisa Street, lstreet@opisnet.com

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CERAWeek 2021: Acting CFTC Chair Sees Calls for U.S. Carbon Tax to Heat Up

March 2, 2021

A proposed U.S. carbon tax legislation requiring market participants to pay for their greenhouse-gas (GHG) emission could gather momentum in Congress as demand to confront climate change intensifies, Commodity Futures Trading Commission's (CFTC) Acting Chairman Rostin Behnam told the CERAWeek 2021 by IHS Markit virtual conference on Tuesday.

Behnam said that he is encouraged by the efforts by President Joseph Biden's administration which has incorporated tackling climate change around all government strategies. He expects conversations to heat up in Congress on drafting and implementing legislations on carbon pricing, and more specifically, carbon tax.

"Certainly, I think carbon tax is one of the high-level topics of discussion in the coming weeks or months," Behnam said.

A U.S. federal carbon pricing policy enacted by the Congress has been talked among lawmakers for at least a decade. There were at least two bills introduced by U.S. lawmakers since 2010 to create a federal cap-and-trade market but both failed to gather mass support at the Capitol.

Currently, the U.S. is behind other developed economies in having a federal carbon pricing policy. California is by far the leader among 50 states to build a well-developed carbon market with multiple carbon allowances and credits, while 11 U.S. Northeast states have set up the Regional Greenhouse Gas Initiative (RGGI) which is a cap-and-trade program.

The European Union has established its emission trading system (EU ETS), and 11 out of 13 Canadian provinces and territories have carbon taxes in place (imposed by the federal government in 4 of them), and 2 have cap-and-trade programs, according to trade group American Council for an Energy -Efficient Economy.

Both carbon tax and cap-and-trade programs would aim to reduce GHGs and encourage participants to develop low-carbon technologies. A carbon tax tends to offer more price stability but less certainty on emission-reduction targets compared with cap-and-trade.

Luis Cabra, executive managing director of energy transition, sustainability and technology and a deputy CEO at Spanish energy major Repsol, said at the same panel that consumers will eventually pay for the higher price of carbon.

Therefore, it's important to have clear disclosure on how carbon costs are being transferred down and companies should know how those costs would affect their profit margins for them to stay competitive, Cabra said.

In September 2020, the CFTC's climate-related market risk subcommittee, sponsored by Behnam, issued a report with a list of 53 recommendations to mitigate the risks to financial markets posed by climate change. The report's No. 1 recommendation is that the U.S. should establish a price on carbon.

That top recommendation by the subcommittee -- comprised of 34 members including financial firms, energy and agricultural companies, exchanges and non-governmental organizations -- aims to bring the public cost of climate change into a cause, providing an incentive to price carbon, according to Behnam.

"Because as long as it's something that's free, certainly it's not going to help to address climate change," Behnam said.

Benham was elected by other CFTC commissioners as acting chairman on Jan. 20, 2021. Biden has yet to nominate a new chair but Chris Brummer, an international economics professor at Georgetown University is considered a leading candidate, according to news reports.

CERAWeek 2021 by IHS Markit, the parent company of OPIS, is being held virtually through Friday.

 

--Reporting by Frank Tang, ftang@opisnet.com;

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

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CME GEO Futures Contract Launches; CORSIA-eligible Offsets Trade above $2/mt

March 1, 2021

The CME Group Global Emissions Offset (GEO) futures contract launched Monday, and several trades were done for CORSIA-eligible carbon credits at between US$2/mt and $2.40/mt.

The first trades were facilitated by brokerage Evolution Markets at an average of $2.05/mt, with 10,000 credits delivered in June and 10,000 delivered September, according to Evolution Markets and CME trade data.

The "partial strip" deal involved Hartree Partners, Mercuria Energy America and Vitol SA as counterparties, according to an Evolution Market press release issued Monday.

"Each firm has been at the forefront of carbon markets, and we've been right there with them," Evolution Markets President and CEO Andrew Ertel said in the release. "The CME futures contracts represent an important step toward managing risk in the fast-growing carbon offset market."

Later Monday morning, the CME GEO December 2021 futures contract traded twice at $2.40/mt. Each trade had a volume of 10,000 credits.

On Friday, OPIS assessed the CORSIA Eligible Offsets (CEO) price assessment, used to gauge the cost for voluntary compliance with the CORSIA program, at US$1.605/mt.

The CEO assessment has nearly doubled from around 80cts/mt at the start of 2021, in part due to CME's announcement of new GEO contract in late January, sources have said.

The CME GEO contract is physically settled with delivery of carbon credits that are eligible for the Carbon Offsetting and Reduction Scheme for International Aviation. The credits are for projects that are registered on Verra (Verified Carbon Standard), American Carbon Registry and the Climate Action Reserve.

Physical deliveries for voluntary offsets underlying the CME GEO are facilitated through Xpansiv's CBL. CORSIA aims to lower global aviation emissions by requiring airlines to purchase carbon credits and move toward the use of sustainable aviation fuels.

For eligibility, carbon credits must adhere to the UN's International Civil Aviation Organization's program standards, including a restriction on vintages before 2016.

During CORSIA's pilot phase (2021-2023) and phase 1 (2024-2026), flights between voluntary countries will be subject to offsetting requirements. So far, 87 countries will participate in the voluntary phase. From 2027, all international flights will need to follow offset requirements.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com, and Bridget Hunsucker, bhunsucker@opisnet.com;

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

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Carbon Offset Platform Developer Patch Raises $4.5 Million in New Financing

25 February 2021

Emissions-matching platform developer Patch Technologies said Wednesday it has raised $4.5 million in a new round of financing, taking the total investment to $5.7 million.

The company said in a news release that the latest round was led by Andreessen Horowitz, with VersionOne, Pale Blue Dot and Maple VC participating.

Patch's platform allows businesses to both calculate their carbon footprint and find corresponding carbon offsetting projects.

For example, the startup said its platform can track business flights of company employees, recommending and facilitating the purchase of carbon removal to the businesses that employ them.

The company projects it will facilitate the removal of hundreds of thousands of tons of carbon from the atmosphere in the first half of 2021 alone.

"Businesses need to focus on both rapidly decarbonizing their operations and compensating unavoidable emissions," said Aaron Grunfeld, co-founder and president of Patch.

"We built Patch to be the most effective and responsible way to accomplish the latter, so that companies can put the majority of their internal efforts towards decarbonization."

Patch said it has 11 carbon removal suppliers on its platform, with 10 more planned to onboard in the first quarter. Major clients include TripActions, EQT, Bus.com, Equilibrium, Dynamhex and CarbonZero, it said.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Kylee West, kwest@opisnet.com

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CARB Should Better Measure Program Impact to Reach State CO2 Goals: Audit

25 February 2021

The California Air Resources Board (CARB) needs to better track how its regulatory and incentive programs overlap and accurately measure their results or risk not reaching the state's greenhouse gas (GHG) reduction goals, according to an audit released this week.

CARB "has overstated the GHG emissions reductions its incentive programs have achieved, although it is unclear by how much," California State Auditor CPA Elaine Howle wrote in a letter dated Tuesday to Gov. Gavin Newsom (D) and the California State Legislature. "Given the ambitious nature of the State's climate change goals and the short time frame to meet them, California is in need of more reliable tools with which to make funding decisions."

The audit recommended that CARB develop processes to "define, collect, and evaluate data on the behavioral changes that result from each of its incentive programs" by August, as well as identify by February 2022 how its incentive programs overlap and share the same targets.

The audit -- ordered in February 2020 by the legislature's Joint Legislative Audit Committee -- reviewed 10 CARB incentive programs totaling $2.24 billion in funding for 2020, ranging from carpooling to financial assistance to purchase electric vehicles. The audited funds are proceeds from the state's cap-and-trade program, the audit said.

According to a 2020 CARB report, GHG generated from transportation make up about 40% of California's emissions, with passenger vehicles making up 28% of the state's emissions and heavy-duty vehicles like trucks and buses contributing 8%.Other transportation emissions come from aviation, rail and ships.

California is aiming to dropping emissions to 260 million metric tons (MMT) by 2030 or by 40% under 1990 levels.

The audit found CARB has collected limited data on the outreach for its incentive programs. For example, it has collected information through its Clean Vehicle Rebate Program on how buyers could be influenced to select an EV or lower-emissions vehicles, but has failed to do similar work for other programs, the audit said.

Other incentive programs like carpools, equipment purchasing financial equipment and medium or heavy-duty vehicle purchases did not have information collected by CARB.

In addition, CARB's annual emission reductions reports for the California State Legislature currently obscure incentive programs' cost-effectiveness and do not include accurate information in guiding lawmakers' decisions on GHG reduction investments, according to the audit.

"Specifically, if the annual reports contained accurate information, these reports could better help the Legislature make decisions about whether to continue funding a given program at its current level, decrease the funding and use those resources elsewhere, or significantly increase funding. Further, improved and clear metrics will help CARB to know when its incentive programs have successfully achieved their goals of helping low and zero emission vehicle technology become sustainable," according to the audit.

CARB has also "been slow" at collecting information on jobs its programs create or support and not kept detailed information on the benefits of "job-training activities that its own guidelines require."

In response to a draft of the audit, CARB Executive Officer Richard Corey responded in a letter on Feb. 3 that the agency would implement the measures to collect information on the effectiveness of its programs.

"CARB has already started implementing a number of steps to address these recommendations and will be taking future steps as described in the attachment consistent with direction from the Legislature," Corey wrote in a letter to Howle.

Following the recommendations from the audit, CARB will begin to document how its incentive and regulatory programs overlap, he said.

The agency has also begun work on developing a process to "define, collect, and evaluate data on the behavioral changes that result from each of its incentive programs," according to the letter.

CARB is expected to provide new data on its programs in its 2022 report to the legislature.

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

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Voluntary REDD+ Credits Volume Reaches Near 5 Million in Net-Zero Trading

24 February 2021

OPIS confirmed trading activity for nearly 5 million voluntary REDD+ credits Wednesday over the span of four separate deals struck for a project located in Asia, marking the highest single-day trade volume on record to date.

OPIS confirmed trades for REDD+ V15 credits at $3/mt and $3.50/mt as well a separate trade for REDD+ V16 credits at $4/mt in the Tier 1 volume category.

Another Tier 1 trade for REDD+ V17 credits was confirmed at $8.50/mt.

OPIS classifies Tier 1 trading activity in the voluntary REDD+ credits market to be inclusive of deals for 350,000-plus credits in a single transaction.

Voluntary REDD+ credits produced by projects located in Asia have been trading at a higher value to projects located in Africa and South America due to the quality of the credits' additional benefits to improving community and biodiversity in the region, market sources said.

"Some projects in Asia have exceptional co-benefits, and we are starting to see purchaser intelligence for credits that have vigorous standards. They are willing to pay for it," one REDD+ credit seller told OPIS.

In contrast, projects located in Africa "have a stereotype to overcome," he said.

Separately, demand from corporates to reduce their carbon footprint in the region in which they operate is contributing to higher valued REDD+ credits in Asia, the seller added.

"Companies care about where their footprint and handprints are," he said.

Separately, market sources have told OPIS that newer-year REDD+ vintages are perceived as having more value by buyers and therefore receive a premium to relatively older vintages.

One REDD+ seller said that V15 credits are currently undervalued in the marketplace compared with V17 credits and that liquidation of older credits is taking place as buyers eye newer vintages.

OPIS assessments for voluntary REDD+ credits mostly increased in value across the volume tiers Wednesday based on net-zero buyer commitment to purchase Tier 1 V17 REDD+ credits at $8.50/mt. OPIS mean prices for Tier 1 REDD+ credits ranged from $3.25/mt to $6.125/mt across the vintages assessed. OPIS Tier 2 REDD+ credits mean prices ranged from $4.50/mt to $7.125/mt, and OPIS REDD+ Tier 3 credits mean prices ranged from $6/mt to $8.125/mt across REDD+ vintages assessed.

--Reporting by Lisa Street, lstreet@opisnet.com, and Bridget Hunsucker, bhunsucker@opisnet.com
--Editing by Kylee West, kwest@opisnet.com

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Analysis: EU Gears Up for Carbon Border Adjustment Mechanism Fight

16 February 2021

The European Union has been knocked sideways by the impact of COVID-19, a slow vaccination rollout and a 7% economic contraction last year, but, undaunted, the world's climate policy heavyweight is squaring up for a major battle in 2021 by proposing a carbon border adjustment mechanism (CBAM) that risks the ire of its trading partners and exporters to the 27-nation bloc.

The CBAM scheduled for announcement by the European Commission in June would force exporters to the EU in some energy-intensive sectors to pay for the carbon they emit when creating products that are sent to EU markets.

That would confront the main drawback of the European Union's Emissions Trading System (ETS): It puts a price on carbon emitted by more than 11,000 carbon-producing installations across the EU, forcing the operators of those sites to buy emissions allowances, but it puts those European businesses at a competitive disadvantage compared to exporters outside of the bloc.

Policymakers in the European Union fret that it has consequently been a victim of its own considerable success story due to the ETS. Greenhouse gas emissions across the EU have been on a gentle slide to 79% of 1990 levels by 2018, according to the Brussels-based Bruegel Institute think tank, whereas the carbon generated by its imports has grown by an estimated 28% over the same period, including a big swing higher in the middle of the last decade.

Some of that rise in carbon imports has been due to "carbon leakage," in which carbon-producing companies in the European Union have upped sticks and moved their operations outside of the bloc to remain unencumbered by the ETS. One solution is a CBAM, an idea that has been floating around for more than a decade but would be implemented by 2023 under proposals already outlined by the European Commission, the executive branch of the European Union.

In theory the commission is still debating one of three main forms that a CBAM could take: an import tax, a new excise duty or a levy based on the price of allowances trading in the EU ETS.

However, most readings of the Brussels tea leaves strongly suggest that the commission is minded to opt for the ETS-based CBAM system that would force exporters to the EU to buy allowances technically outside of the EU ETS but based on its prices.

It was notable that when outlining those three options for a CBAM at a European Roundtable on Climate Change and Sustainable Transition event last month, Gerassimos Thomas, the European Commission's director general for taxation and the customs union, spent little time talking about an import tax or excise duty but expounded at length on how an ETS-based CBAM would work.

"The idea is to have a CBAM that interacts with the ETS in terms of being a price taker from the ETS," said Thomas. "It also supports the overall mechanism of the ETS, it is complimentary to the ETS, but the difference is that it would not require importers to acquire and surrender actual ETS allowances but notional ETS allowances. Therefore, it will remain as a parallel system."

Brussels-based think tanks -- often good bellwethers for the thinking going inside the European Commission -- have hosted several events in recent weeks featuring ETS-based CBAM proposals. One such event hosted by the Bruegel Institute think tank saw Spanish economist and Member of the European Parliament (MEP) Luis Garicano outline how the thorny issue of measuring EU carbon imports could be addressed.

"Obtaining the actual level of carbon emissions for every imported product is unfeasible," said Garicano. But a reasonable approximation can be created to measure the carbon content of imports by "using the weight of the raw material embedded in the product and multiplying them by a default carbon intensity value," argued Garicano, who is also the vice president of Renew Europe, a centrist group of MEPs in the European Parliament.

The potential for a CBAM to spark fisticuffs with the rest of the world is high, but one advantage of an EU ETS-linked CBAM is that exporters to the EU would have a harder time arguing that such a CBAM falls foul of World Trade Organization (WTO) rules designed to stop protectionist measures. Those exporters to the bloc would be paying the same carbon price as EU-based emitters that are subject to the ETS.

"If a CBAM is to be implemented in line with WTO rules, the same carbon price has to be paid by EU producers and non-EU producers alike," Mourad Farahat, a carbon markets analyst at environmental cap-and-trade advisory firm ClearBlue Markets, told OPIS.

"A link between the EU ETS and the [CBAM] seems inevitable at the current moment," he added. "A notional 'pool' of allowances that mirrors EU-ETS prices but is separate from it ... makes sense, as it will not only ensure that the same price is paid, but could theoretically also offer producers outside the EU the same opportunities to hedge the carbon value of their production."

The European Commission has nailed its colors to the mast with respect to the June deadline and is unlikely to backtrack, says Farahat: "The market is now anticipating the Commission to meet the June deadline, and the Commission knows this. Given that credibility is everything, especially when it comes to the roll-out of something of this scale, we now think that they should have a proposal out by then."

The least clear aspect of the European Commission's forthcoming CBAM proposal concerns the economic sectors likely to be subject to it. MEPs sitting on the European Parliament's Committee on Environment, Public Health and Food Safety backed a maximalist approach at the start of February. The parliamentarians voted by 58 to 8 earlier this month in favor of a CBAM that is applied to imports across the cement, power, steel, oil refining, aluminum, paper, glass, chemicals and fertilizer sectors.

The MEPs also backed an ETS-linked CBAM and the 2023 starting date.

Thomas, the commission's director general for taxation and the customs union, struck a more cautious note in January. "There might be several steps.... There might be very few sectors initially," he said at the European Roundtable on Climate Change and Sustainable Transition event.

But he left the European Union's trading partners in no doubt about its determination to implement a CBAM. "We are raising the level of ambition, and this will have consequences," said Thomas. "I accept that on bilateral trade relationships there will be consequences.... We should not be afraid of change."

That ambition will likely face a fierce backlash later this year. But with its forthcoming CBAM plans just months away, the commission looks set to transform the EU Emissions Trading System, the jewel in the crown of EU policymaking, into a carbon-fighting kraken whose tentacles could be stretching around the world in just a few years' time.

 

--Reporting by Anthony Lane, alane@opisnet.com;

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

Copyright, Oil Price Information Service


Feature: Carbon Conscience Inspires Unique Business Ideas

12 February 2021

While global and corporate leaders monopolize the spotlight with big climate change action, tradespeople across the world are discovering creative ways to combine goods and services with carbon reduction.

From an ecological death-care provider sequestering carbon in compost to a chocolate company touting carbon "insetting" from regenerative farming, announcements of similar climate niche activity have increased recently.

With the slogan "Become soil when you die," Washington state-based Recompose is promoting sustainable death through America's first human composting operation.

Some might call it the ultimate carbon offset.

"Thanks to the carbon sequestration, which occurs throughout the process, we estimate that between 0.84 and 1.4 metric tons of carbon dioxide will be saved each time someone chooses organic reduction over cremation or conventional burial," the company says on its website.

Its first facility outside Seattle began accepting bodies in December 2020, six months after the state approved the project and almost a decade after the idea was floated by designer Katrina Spade, who now heads the company.

The price for enrollment is $5,500, which can be paid up front or in monthly installments.

Recompose says its method is more environment friendly than traditional burial or cremation. The reason for that is, the process transforms the organic material in human bodies into soil, it said.

Meanwhile, an Indian startup is using carbon black from discarded tires to make handcrafted tiles, creating what it calls a "positive impact."

Mumbai-based Carbon Craft Design is working with pyrolysis plants to repurpose recovered carbon black (rCB) as a building resource for the tiles, a company spokesman said Wednesday in an email to OPIS.

"Every square foot (of tile) is equivalent to preventing the effect of 25 kgCO2e, according to our calculations based on the GEF (Global Environment Facility) report on black carbon," he said.

The tiles are available in several patterns, but the company also makes custom tiles, with a lead time of 40 days. Prices start at 300 rupees ($4) per square foot. Carbon Craft Design believes the project is commercially viable, and plans are underway to expand the business.

Still in Asia, Japan Airlines (JAL) is taking sustainability to new heights. On Feb. 4, the Japanese flag carrier operated a commercial flight, using sustainable aviation fuel (SAF) made from used clothing. The fuel was blended with jet kerosene, a news release said.

The Boeing 787-8 flew from Tokyo's Haneda International Airport to Fukuoka, a two-hour flight to the south of the country.

The airline said the fuel was produced from 250,000 pieces of clothing with technology developed by the Research Institute of Innovative Technology for the Earth (RITE), a think-tank devoted to reducing pollution.

JAL became the first airline to conduct a flight in Asia using SAF in 2009, but that Boeing 747-300 carried no passengers or cargo. Boeing made the world's first commercial flight using 100% sustainable fuels in 2018.

In another transport initiative, yachting enthusiasts can also enjoy a sustainable voyage, thanks to a program announced this week by a yacht dealership in New York state.

Under the program, The Fog Warning of Westhampton, New York, will buy carbon credits on behalf of the yacht owners. The credits will fully offset the carbon released into the environment by the vessels' diesel engines, the company said.

Complete carbon-neutral yachting use will be available to customers for as long as they own their yachts.

"It is not a difficult program to manage," said company owner Dave Mallach. "We ask our owners to send us their fuel receipts at the end of their boating year.

We then purchase sufficient carbon credits to offset the entirety of their use.

It's a complete win-win solution."

For carbon credit purchases, The Fog Warning will focus on programs relating to healthy marine environments, the company said. "By planting and nurturing coastal sea grass acreage, shorelines are preserved, and additional carbon is naturally absorbed," the company said.

While the boating industry concentrates on coastal preservation, many jewelers are seeking sustainable diamond procurement.

The jewelry brand Vrai, which sells lab-grown diamonds, is one of them. Vrai is a division of Diamond Foundry, whose investors include actor Leonardo DiCaprio.

"Our diamonds are sustainably grown above ground in America's beautiful Pacific West, powered by the Columbia River," Diamond Foundry says in a promo posted on its website.

Cultured diamonds are popular among millennials who prefer "guilt-free" gems over traditionally mined diamonds, and the world's largest producers are feeling the heat.

Early last year, the organization formerly known as the Diamond Producers Association (DPA) relaunched itself as the Natural Diamond Council (NDC). It aims to promote "the desirability of natural diamonds," it said.

Another business making headline is Alter Eco, a sustainable chocolate-centric food company based in California, which is investing in regenerative farming in Ecuador.

Instead of pursuing carbon offsetting, the company is promoting carbon insetting through its charitable arm.

"The mission of the newly established Alter Eco Foundation is to make the company's agroforestry model available to the entire cacao industry, expediting adoption within global supply chains through advocacy and education," the company said in a release.

The foundation will work directly with the farmers to help them transition their crops to regenerative agriculture. Four hundred of the 1,800 farmers Alter Eco sources cacao from have already transitioned to the dynamic model, it said.

The foundation estimates its program will help carbon sequestration by 83 metric tons per acre over 20 years.

"These numbers show that at scale, about 2.5 gigatons of CO2 would be sequestered from the atmosphere over 20 years if the global cocoa industry transitioned its approximately 30 million acres to our dynamic agroforestry model," the company said.

--Reporting by Abdul Latheef, abdul.latheef@ihsmarkit.com;

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

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Enacting Climate Agenda Before 2022 Elections Likely a Biden Admin. Priority

9 February 2021

The Biden administration will likely use the next 18 months to enact regulations that will impact transportation and energy use for coming decades, with both the current pricing climate in energy and Democratic majorities in Congress helping him in his efforts, according to Kevin Book, who heads the research team at Clearview Energy Partners.

Speaking at the OPIS Fuel Price and Profitability Outlook virtual event Tuesday, Book said President Joe Biden is likely to move to enact policies, regulations and laws aimed at combatting climate change before the midterm congressional elections in 2022.

While past government efforts have aimed at improving vehicle efficiency and promoting biofuels, Biden's efforts will be more focused on decarbonization of transportation and promoting electric vehicle use, he said.

Biden's efforts are likely to be aided by the current low prices for gasoline and other fuels, Book said. When looking at gasoline costs as a share of a family's disposable income, prices today are about half what they were in 2012, Book said.

Policy makers, he said, are not worried about the pump price, "which means they are at liberty to address things that could potentially influence it," he said.

The low prices have given Biden the ability to talk about a vigorous and aggressive climate strategy, "one far more green and far broader than any proffered before," Book said.

Book said he expects the Biden administration to pursue tough standards for regulating the environmental impact of fossil fuels and accelerating the transition to the electrification of transportation. He noted that on his first day in office, Biden ordered the review of more than 100 rules promulgated by the Trump administration, including changes Trump ordered in fuel economy standards.

With Obama-era efficiency standards in place, Clearview expects gasoline demand to return to pre-pandemic levels in 2023, but then start to decline due to government-ordered increases in vehicle mileage. Under Trump's SAFE vehicle standards, demand would decline by about 12 billion gallons per year while under Obama-era CAFE standards, the annual decline would be about 18 billion gallons.

Efficiency standards included in a 2019 deal between the state of California and automakers would see the annual decline fall about midway between the Obama-era and Trump standards, and that deal is likely to serve as the framework for interim standards adopted by the Biden administration, Book said.

Meanwhile, the relatively small percentage of electric vehicles in the U.S. fleet means that increased adoption is unlikely to have a large impact on fuel savings.

But, increasing EV adoption is more important when it comes to efforts to decarbonize transportation and reduce greenhouse gases, particularly as U.S. electric generation reduces its carbon footprint, Book said. Even when using electricity generated by coal-fired plants, a Tesla still performs better than ICE passenger vehicles, Book said.

The generation of green jobs figured prominently in the 2009 economic recovery, and Biden's plans for a recovery from the COVID-19 pandemic also relies on creating new, green jobs, Book said.

While Book said he expected Democrats to use existing congressional rules to force through legislation aimed at promoting green jobs and targeting carbon emissions, he said it remained to be seen if they would take the extreme step of eliminating filibuster rules in Congress to stop Republicans from blocking environmental initiatives.

 

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

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

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Canada Must Play 'Safe Bets,' 'Wild Cards' for Net Zero CO2 by 2050: Report

8 February 2021

Canada must enact "safe bets" and "wild cards" climate policies to achieve net zero carbon emissions by 2050, according to a report published Monday.

"Our research indicates it is doable but getting there will require implementing policy well beyond anything seen to date in Canada," the according to the Canada's Net Zero Future report, from the Canadian Institute for Climate Choices. "It will also require navigating significant complexity and uncertainty."

Canada in November 2019 adopted a 2050 target for net zero emissions.

The goal requires shifting to technologies and energy systems that do not produce greenhouse gas (GHG) emissions, while removing remaining and storing GHG from the atmosphere.

"There are many potential pathways for Canada to reach net zero by 2050, but reaching it depends on increased policy ambition from all orders of government," according to the report.

Success will rely on advancing two distinct types of climate solutions -- "safe bets" and "wild cards," it says.

So-called safe bets are commercially available, cost-effective technologies such as electric vehicles, heat pumps in buildings and smart power grids.

The study found that safe bets will generate at least two-thirds of the GHG reductions required to hit Canada's interim 2030 climate target of cutting emissions to 30% below 2005 levels.

But Canada must massively scale up these safe-bet solutions to achieve its climate commitments, it says.

Success also requires so-called wild-card solutions, including advanced biofuels, zero-emission hydrogen and some types of engineered negative emission technologies that are not yet commercially available.

"Governments should manage the risks and opportunities posed by wild-card solutions through a portfolio approach, backing multiple potential solutions to mitigate their high risk," according to the report.

It also called for robust climate accountability frameworks and targeted support to make sure that the transition does not impose disproportionate costs or exacerbate existing barriers for different regions, sectors, workers, communities and income groups.

"For Canada to prosper on the path to net zero, governments and private sector leaders need to navigate complex changes to our policy and energy landscapes, while acting decisively on the solutions and insight available today," said the president of the Canadian Institute for Climate Choices, Kathy Bardswick, in a news release Monday.

"Canada has significant advantages compared to our peers, but as technological disruptions and global markets shift the ground beneath us, decision makers will need to manage uncertainty while adapting to seize emerging opportunities."

The institute is a publicly funded but independent organization.

For the report, the institute analyzed more than 60 modeling scenarios and undertook supplementary research and consultation to reach the conclusions.

 

--Reporting by Abdul Latheef, abdul.latheef@ihsmarkit.com;

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

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Bluesource, Locus Agriculture Aim to Create Farming Carbon Credits in US

February 3, 2021

Bluesource and Locus Agriculture Solutions are working together to create carbon credits in American farming, the companies said Wednesday in a news release.

The recently formed carbon initiative will work to financially pair voluntary carbon credit buyers with farmers to implement farming practices to speed up atmospheric carbon removal, the companies said.

Bluesource has developed and sold carbon credits representing the removal or avoidance of more than 150 million tons of carbon dioxide equivalent emissions over the last 20 years. This is the company's first foray into agriculture carbon, a decision motivated from the size of the farming industry, which represents an opportunity for large-scale carbon removal.

Locus is an agriculture technology startup known for its CarbonNOW program and soil "probiotic" technologies. The program was the first to get a farmer a substantial carbon credit, according to the release.

The CarbonNOW program uses a two-step process to implement regenerative growing practices and monetize carbon reductions through premium carbon credits before using soil technology that accelerates atmospheric carbon removal to grow more crops.

"The U.S. has millions of acres of farmland that can store a large amount of additional carbon in the soil through a combination of sustainable practices and Locus AG's innovative soil technology," Bluesource Vice President Ben Massie said in the release.

The program is recruiting farmers with hundreds of thousands of acres of cropland, and voluntary carbon offset buyers will assist the farmers by purchasing carbon credits generated through the program.

The companies said in the release that the carbon credit purchases could help buyers meet sustainability demands and fast-track zero carbon commitments in addition to staying ahead of any possible future government carbon regulations.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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Brussels Gives Nod to $3.5B State Aid for 2nd Pan-European Battery Project

February 3, 2021

The European Commission is planning to turn the European Union into a "global hotspot for battery investments," allowing 12 member states to grant up to 2.9 billion euros ($3.5 billion) in combined state aid to 42 entities involved in creating a sustainable battery value chain by 2028, the EU's executive arm said Jan. 26.

The European Battery Innovation collaboration marks the second pan-European research and innovation project, which obtained the status of an "Important Project of Common European Interest" (IPCEI) in the battery sector.

IPCEIs refer to private innovation initiatives of "strategic significance," with positive spillover effects across the 27-member bloc, which would fail without state backing. They are exempt from state aid restrictions, with a view to using public resources to fill funding gaps and "crowd in" private investment.

Expected to draw in a further 9 billion euros in private funds, the pan-European cooperation -- which is to extend beyond the industry to scientists -- will focus on the next generation of batteries, to make the EU autonomous in a sector seen as vital for the green transition.

The project covers the entire value chain: raw and advanced materials; design and manufacturing of battery cells and packs; battery systems; and recycling and disposal.

It is to complement the first battery IPCEI, approved in late 2019, by developing new technologies or processes, and to share the results with the scientific community and industry in Europe.

The project is to contribute to powering 6 million electric cars per year by 2025, as well as to provide storage solutions in the energy sector.

"Some three years ago, the EU battery industry was hardly on the map. Today, Europe is a global battery hotspot," the EC said in last week's statement.

"The batteries value chain plays a strategic role in meeting our ambitions in terms of clean mobility and energy storage. By establishing a complete, decarbonized and digital battery value chain in Europe, we can give our industry a competitive edge, create much needed jobs and reduce our unwanted dependencies on third countries."

Aid to individual companies is limited to what is deemed "necessary, proportionate and does not unduly distort competition." It comes was a claw-back mechanism, under which large projects that turn out be "very successful" and generate extra net revenues will be obliged to return part of the aid received to the respective member state.

Participating states are Austria, Belgium, Croatia, Finland, France, Germany, Greece, Italy, Poland, Slovakia, Spain and Sweden.

The 42 direct participants include well-known names such as BMW, Tesla and Borealis, alongside small and medium enterprises and start-ups.

The EC's wider efforts to build up a sustainable battery sector originated in the launch of the European Battery Alliance in 2017, which was followed up by its Strategic Action Plan for Batteries in 2018.

The proposed Sustainable Batteries Regulation also reflects its aim to make batteries more sustainable throughout their life cycle.

 

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

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

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BP Officials Defend Pace of Company's Energy Transition

February 2, 2021

A year after announcing plans to achieve net-zero emissions within 30 years, BP officials defended taking a fast pace to transitioning the company from one focused on fossil fuels.

Speaking during an earnings call Tuesday, CEO Bernard Looney said he's feeling "incredibly encouraged" about the direction the company has taken, particularly as other energy companies have also announced plans over the last year to cut their carbon footprint.

"This world is changing. It continues to change around us. We need to keep in step," Looney said. "I like the strategy that we have. I do believe that it's increasingly being understood and embraced."

Looney's comments came as the company reported a full-year underlying replacement cost loss of $5.7 billion for 2020, compared to a $10 billion profit in 2019. The company said the loss was driven in large part by the impacts of the COVID-19 pandemic, including lower oil and gas prices, decreased demand, and lower refining margins.

"This has certainly been a challenging quarter, at the end of a difficult year, but today's presentation shows just how far we have come in reinventing BP," Looney said.

Looney acknowledged polls of investors have shown that 40% said the company's goals were too ambitious, with about half of the remaining respondents saying its targeted timeline was too slow while the other half said the pace of change was correct.

Looney said his conversations with large fund managers and global politicians leave him "feeling incredibly encouraged about the direction that we're taking."

"I certainly don't walk away thinking that it's too aggressive," he said.

Throughout the call, BP officials touted the performance of their green energy efforts and said retail convenience offerings provide the company with income growth opportunities in the coming years. Between 2014 and 2019, the convenience and mobility sector delivered EBITDA growth of 7% per year, Looney said. In 2020, the company saw a record year for its convenience business, with its convenience gross margin growing by 6% to a record $1.3 billion, he said.

By 2030, BP hopes to nearly double the $5 billion of EBITDA the convenience and mobility sector delivered in 2019, Looney said.

During 2020, the company more than doubled the number of retail sites it operates in what it considers growth markets to about 2,700. It also increased its offering of electric charge points to more than 10,000 globally, including the roll-out of ultra-fast charging stations in the United Kingdom and Germany.

The company added 300 new locations to bring the number of "strategic convenience sites" to 1,900 worldwide. It plans to grow the network by an additional 10% in the coming year, he said. It also plans to further increase its number of ultra-fast charging stations and to enhance the company's digital and loyalty offers.

The increasing installation of fast chargers in the U.K., Germany and China is expected to support increased retail margins in coming years, said Murray Auchincloss, BP's chief financial officer.

"When you can get a five-minute charge on your electric vehicles ... you can go get a coffee ... go get a snack. And that's where you make the money for a business such as ours," he said.

The company is also focused on entering into fleet agreements with ridesharing services such as Uber and DiDi, which Auchincloss said should also provide strong growth for the convenience sector in the future.

DiDi has just developed a vehicle exclusively for ride-hailing, and Looney said he expects fleet agreements will become increasingly important as vehicle usage moves more toward a ride-hailing model and becomes less focused on individual ownership.

"I think those fleet deals we do are super, super important and maybe not something some of the other guys are talking about," Auchincloss said. "It's a higher growth rate. We can couple it with our fuel for now and convenience offers. And that will make great money and great growth."

When discussing gasoline usage and sales, Looney said he expects to see a gradual improvement in refining margins in the coming year due to increased demand, a drawdown in existing inventory levels and other companies announcing refinery closures. In the last quarter of the year, BP's refineries operated at around 85% of capacity, compared to 78% or so seen at other refineries, he said. Looney acknowledged that while the company saw profits in the marketing sector, despite a downturn in demand, "it's been a difficult quarter in the refining industry."

"We believe that there is more that we can do around availability and cost in those refineries to make them even better," he said. "Obviously, given the environment, we're very focused on that today."

Given the company's commitment to reducing its climate impact, Looney said he was "obviously delighted" the United States under President Joe Biden was rejoining the Paris climate agreement.

He said it's still too early to tell how Biden's decision to pause new oil and natural gas leases on federal lands and waters will impact BP's drilling operations, particularly in the Gulf of Mexico.

"In terms of the near term impact, we don't expect any. We've got enough ...permits to do what we need to do over the next one year to two years," he said.

In June, Looney said the company would be reducing its global workforce by about 10,000 people due to the financial impact of the COVID-19 pandemic and as part of its energy transition. On Tuesday, he said that, so far, more than half that amount have left the company. The remaining employees are located mostly in Europe, and the company expects to complete the job reductions this year.

 

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

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

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Shell to Buy Major European Public, On-Street EV Charging Network ubitricity

January 25, 2021

Royal Dutch Shell Plc said on Monday it agreed to buy 100% of ubitricity, a leading European on-street electric vehicles (EV) charging network, citing the oil major's push to support drivers' switch to low-carbon transport.

Berlin-based ubitricity works with local authorities to integrate EV charging into existing street infrastructure such as lamp posts and bollards. Ubitricity has partnered with German conglomerate Siemens AG on EV chargers in London since 2017, the company said.

Ubitricity offers charging service for anyone who wants to charge their EV while it is parked on the street, which is useful for people who lack a private driveway but want to charge their EV overnight, it said.

Ubitricity has over 2,700 public EV charge points, or over 13% market share, in the U.K., and it has installed 1,500 private charging points for fleet customers within Europe. The German company has also established emerging public charging positions in Germany and France.

Shell said the acquisition helps it expand into the fast-growing on-street EV charging market. The Anglo-Dutch energy major currently has over 1,000 ultra-fast and fast charging points at about 430 Shell retail sites, plus worldwide access to over 185,000 third-party EV charging points at a range of public locations including forecourts (of gas stations) and highway service stations, it said.

"Working with local authorities, we want to support the growing number of Shell customers who want to switch to an EV by making it as convenient as possible for them," said István Kapitány, Shell Global Mobility executive vice president.

Shell has previously announced a plan to become a net-zero emissions energy business by 2050, or sooner.

The Shell-ubitricity deal is expected to be completed later this year, subject to regulatory clearance.

In 2018, BP Plc bought Chargemaster, another major U.K. EV charging network. BP also partners with M&S stores in the U.K. to allow the department-store customers to shop while their EVs are being topped up by 50 kW rapid chargers.

The British oil major is planning to increase its EV charging points to more than 70,000 in 2030 from 7,500 currently.

Last week, Microsoft Corp. entered a long-term partnership with Cruise and General Motors Corp. to develop self-driving vehicles for commercial uses on Microsoft's Azure cloud platform. Cruise is GM's project to build self-driving, all-electric, shared vehicles.

 

--Reporting by Frank Tang, ftang@opisnet.com;

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

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Verra Approves dynaCERT's Concept for VCS Carbon Credit Methodology

January 25, 2021

Voluntary carbon standards firm Verra has accepted the "concept note" of dynaCERT, the first step in developing a Verified Carbon Standards (VCS) methodology to create credits from carbon reduction technology in internal combustion engines, dynaCERT announced Monday.

The technology used by dynaCERT is its HydraGEN and HydraLytica Telematics, which reduces fuel costs, lowers emissions, increases torque and extends engine oil life, the company said in a press release.

The HydraGEN technology is an additive that reduces hydrocarbons and carbon dioxide "due to the absence of carbon in hydrogen fuel and also due to better combustion of diesel fuel with the aid of hydrogen which has a higher flame speed," according to the company's website. It creates hydrogen and oxygen on-demand is designed for use in diesel engines, including on-road vehicles, off-road construction, mining and forestry equipment, marine vessels and railroad locomotives.

"This concept note approval by Verra is unique because no such similar methodology is in use globally for mobile transportation vehicles," dynaCERT said in its release.

According to Verra, after the concept note is accepted, the developer prepares and submits documentation for the methodology. Next, Verra reviews the methodology and conducts a 30-day consultation. An approved verification body assesses the methodology, which Verra approves for use if it meets the VCS Program requirements.

Verra manages the world's largest greenhouse gas (GHG) program known as VCS.

The program provides a pathway for carbon projects to achieve certification through a third-party audit process.

Verra and dynaCERT did not immediately return requests for comment on details regarding the potential volume of carbon credits potentially created through the new methodology.

 

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

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

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U.S. President Biden to Continue Climate Policy Work: South Pole

January 21, 2021

Swiss carbon finance consultancy South Pole expects the newly installed U.S. President Biden administration to make additional environmental policy changes during the next four years, following the signing Wednesday of climate-focused executive orders.

South Pole said in its February newsletter that it expects Biden's administration to establish in its first year agenda an energy efficiency and clean electric standard for utilities and grid operators, which will include the capture of carbon dioxide from power plant exhaust and cheaper grid-scale storage among other policies.

On his first day in office, Biden signed executive orders to reenter the United States into the Paris Agreement on climate change and rolled back some of former President Donald Trump's environmental actions by enacting a moratorium on drilling in the Arctic National Wildlife Refuge and revoking the permit for the Keystone XL pipeline.

The administration is also expected to target emissions from the airline industry, begin the reduction of the carbon footprint in U.S. buildings by 50% by 2035 and accelerate the deployment of electric vehicles by restoring the federal electric vehicle credit, South Pole said.

A federal price on carbon is also a possibility, but when and how it would happen is uncertain, South Pole said, adding Biden expressed initial support for carbon pricing during his campaign. Biden later focused his campaign on economic stimulus, clean energy investments and sector-specific decarbonization standards.

The administration is likely to deploy millions of dollars into renewable energy throughout U.S. military bases and expects new regulations for automobile fuel standards and a mandate for public companies to disclose climate risk, South Pole said.

The company notes it might be difficult to achieve every climate priority.

"Biden's plan will need approval from Congress, which will likely draw resistance from Republicans and make some aspects of the climate agenda difficult to pass," South Pole said.

Biden's climate policy plan is expected to cost $1.7 trillion over the next 10 years.

 

-Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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UN Agency Seeks Climate Adaptation, Nature-Based Solutions Funding Boost

January 20, 2021

A substantial ramping up of climate adaptation funding and planning, especially for nature-based solutions (NBS), is needed to slow climate change as costs rise, according to the UN Environment Programme (UNEP).

The UNEP Adaptation Gap Report 2020, the multilateral agency's fifth such report, found that although planning by countries has advanced, gaps remain in the financing for developing countries and bringing adaptation projects to the stage where they offer "real protection" against climate impacts such as droughts, floods and rising sea levels.

UNEP defines climate adaptation as "the process of adjustment to actual or expected climate and its effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention may facilitate adjustment to expected climate and its effects."

But as climate change accelerates "adaptation costs are increasing at a higher rate than adaptation-oriented financial flows. This suggests that the adaptation finance gap seems to be widening, despite the increasing levels of funding to support adaptation planning and implementation," it said.

Annual adaptation costs in developing countries are estimated at US$70 billion.

This figure is expected to reach $140 billion-$300 billion in 2030 and $280 billion-$500 billion in 2050, UNEP said.

UNEP provides funding for adaptation projects, but the private sector needs to be encouraged to ramp up its efforts, Patrick Verkooijen, CEO of the Global Center on Adaptation, said during a briefing coinciding with the report's launch.

Companies are increasingly including NBS into their planning, including French energy companies Total and EDF, which are members of the act4nature coalition.

NBS such as watershed restoration, agroforestry, rehabilitation of rangelands and coastal marsh management need to play a stronger role in planning, especially in nationally determined contributions (NDCs) and national adaptation plans (NAPs), UNEP said. It added that the NBS finance base needs to be amplified, strengthened and diversified by deploying innovative mechanisms that combine different funding sources.

Successful implementation of NBS requires effective governance and institutions to manage public goods, frequently related to secure land tenure and access rights, it said.

The COVID-19 pandemic has diverted government and agency attention away from climate change in the past 12 months, but stimulus packages offer an opportunity to regain momentum, according to officials.

There is no vaccine for climate change, said Inger Andersen, UNEP executive director, but "nations must prioritize a green post-pandemic recovery."

"Let's be sure we put the [stimulus] money to work in climate adaptation areas ... [we're] seeing it in places, but not enough ... let's not miss this opportunity," she added during the Jan. 14 briefing.

However, so far, "dirty initiatives" have outnumbered green initiatives by a factor of 4 to 1 in post-pandemic responses, said Verkooijen, and all interested parties "need to make up for lost ground" caused by the pandemic.

The trillions of dollars set to be spent on recovery are a "once in a lifetime opportunity" to use climate adaptation measures, he said.

NBS for adaptation can cost less than hard engineered approaches -- such as coal-fired power plant closures or carbon capture and sequestration projects -- for addressing climate hazards and generate substantial economic benefits, according to UNEP. When well-designed and implemented, they have the potential to generate larger returns in a broad economic sense because of the multiple societal benefits they deliver in addition to reducing climate risk, it said.

Nature-based solutions play a vital role in creating multiple co-benefits for disaster risk reduction, gender equality and sustainable livelihoods, as well as for building climate resilience, according to the report, adding that NBS support ecosystem services and complement decarbonization.

 

--Reporting by Keiron Greenhalgh, keiron.greenhalgh@ihsmarkit.com;

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

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Global Methane Emissions Must Drop 70% by 2030 to Sustain Climate Goal: IEA

January 19, 2021

Methane emissions from global oil-and-gas production would need to drop by 70% from current levels by 2030 to offset the harmful effects of greenhouse gas (GHG) emissions on climate change, according to the International Energy Agency (IEA).

In its updated Methane Tracker released on Monday, the IEA said methane emissions from the global oil-and-gas industry fell by 10% to 70 million metric tons in 2020 year on year as producers slashed output in response to COVID-19, which is equivalent to about 2.1 metric gigatons of carbon dioxide (CO2) in the atmosphere.

Even though methane was just 5% of global energy-related GHG emissions last year, that's roughly equivalent to the total energy-related CO2 emissions from the entire European Union, the IEA said.

While methane has a much shorter atmospheric lifespan of around 12 years compared with centuries for CO2, it absorbs much more energy in the atmosphere.

The agency estimates methane is around 30 times more potent than CO2 as a GHG leading to global warming.

Oil production is responsible for around 40% of methane emissions, with leaks across the natural gas value chain accounting for the remaining 60%.

In IEA's sustainable development scenario that is aligned with the Paris Agreement on climate change, the world requires a "steady and rapid" decline in methane emissions to 20 million metric tons by 2030, which is 70% lower than the 2020 level. That reduction would be equivalent to eliminating CO2 emissions from all cars and trucks across Asia.

The IEA analysis shows that the drop of methane emissions in 2020 was simply because oil-and-gas producers were producing less, rather than their taking more care to avoid methane leaks from their operations.

Therefore, there is clearly a risk that the downward trend will be reversed by an increase in production to fuel a rebound in global economic activity, IEA said.

"Alongside ambitious efforts to decarbonize our economies, early action on methane emissions will be critical for avoiding the worst effects of climate change. There has never been a greater sense of urgency about this issue than there is today," said Fatih Birol, IEA's executive director.

The IEA's new how-to guide, features sections on a regulatory road map and a toolkit and says that reducing methane emissions from oil-and-gas operations is among the "most cost effective and impactful" actions that governments can take to achieve global climate goals.

"Unlike CO2, there is already a price for methane everywhere in the world -- the price of natural gas. This means the costs of improving operations or making repairs to prevent leaks can often be paid for by the value of the additional gas that is brought to market," IEA said.

The agency said there are increasing signs that consumers are starting to look carefully at the emissions profile of different sources of gas when making decisions on what to buy.

"A gas producer without a credible story on methane abatement is also one that is taking commercial risks," the IEA said.

 

--Reporting by Frank Tang, ftang@opisnet.com;
--Editing by Barbara Chuck, bchuck@opisnet.com

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California Leads Dozen States in Challenging US Aircraft GHG emissions

January 15, 2021

California is leading a dozen states in challenging a U.S. regulation aimed at limiting U.S. aircraft greenhouse gas (GHG) releases, arguing it is a rubber stamp of international aviation standards that will barely make a dent in total emissions of these pollutants.

The lawsuit comes on the heels of the Jan. 11 publication of the U.S. Environmental Protection Agency rule, adopting the International Civil Aviation Organization's (ICAO) fuel-efficiency-driven carbon dioxide standard, and it won't be enforced until 2028. The EPA said its goal was to maintain international uniformity of airplane standards and allow U.S. manufacturers of covered airplanes to remain competitive in the global marketplace.

But states disagree with EPA's adoption of the ICAO approach instead of using at as a floor to seek more stringent cuts.

"The aviation industry is a significant source of greenhouse gas emissions, yet the EPA has set standards here that are the equivalent of doing nothing," California Attorney General Xavier Becerra (D) said in a Jan. 15 statement announcing the lawsuit's filing.

Largest Global Emissions Source

Given that the aviation sector is the largest source of unregulated transportation GHGs, and the U.S. itself is the leading GHG emitter from this source, the coalition of states is asking the U.S. Court of Appeals for the District of Columbia Circuit to review the regulation. The suit's goal is to either get the District of Columbia Circuit to vacate the rule or to remand it to the agency for a rewrite.

The EPA's most recent estimates, which date to 2018, show that U.S. aircraft, engaged in domestic and international flights, were responsible for 3% of total U.S. GHG emissions of about 6.67 billion metric tons of carbon dioxide equivalent emissions (mt of CO2e).

The states, however, noted that the U.S. was responsible for a quarter of global GHG emissions from this sector, making it the leading emitter.

With more countries committing to net-zero carbon goals to meet the 2015 Paris Agreement to reduce emissions and limit global temperature increase below 2 degrees Celsius, every industry sector is being scrutinized for emissions cuts.

The aviation sector is no exception, as California notes that global GHG emissions from this sector are expected to increase threefold and the U.S. emissions to grow by 43% by 2050.

The ICAO's aircraft engine efficiency standard was introduced in 2017, and aligned with latest available technology, a standard that IHS Markit in an August 2020 report termed "weak" because it prevents backsliding in efficiency gains rather than driving market innovation.Becerra filed the lawsuit on behalf of California and the state Air Resources Board. He was joined by 11 other states and the District of Columbia. Excluding Pennsylvania, the remaining states and the District of Columbia also objected to the rule in a joint comment letter to the EPA when the rule was proposed in August 2020.

In that letter, the states maintained their concerns that the EPA regulation violates Section 231 of the Clean Air Act, which is the key U.S. law governing air pollution limits and national air quality standards. They said the law requires EPA to issue appropriate emissions standards for dangerous pollutants from aircraft engines based on a reasonable assessment of aircrafts' contribution to GHG emissions and the technological feasibility of emissions controls.

"If EPA were to adopt only what ICAO adopts, or even consider only what ICAO considers, it would fail to exercise the discretion Congress invested in it and fail its mandate to reduce pollution to the full extent practicable and necessary," the states wrote in October to EPA.

These states contend the EPA has acted unlawfully as well as arbitrarily and capriciously in requiring any emissions controls beyond improving the efficiencies of fuel burns.

"In fact, the EPA has not even considered any form of emission control that would reduce GHGs, despite its determination that these emissions endanger public health and the environment," the states declared Jan. 15.

The IHS Markit study Reinventing the Aircraft and the Ship suggested that while the establishment of a first aircraft engine efficiency standard was a step forward in addressing emissions, engine standards alone would far from sufficient to meet industry GHG reduction targets. "Engine design is just one of several pathways, there is no silver bullet in the aviation sector. We looked at operational and airspace efficiencies, different types of sustainable aviation fuels, the use of offsets ... engine technology is just one of many considerations," said Louise Vertz, IHS Markit senior director who was involved in the study.

Vertz also observed that California's challenge, if successful, could very well spur groups outside the U.S. to question the ICAO standards.

The ICAO's CO2 emissions certification standard, which varies by the aircraft's fuselage and is based on the aircraft's performance during the cruise phase, applies to new designs starting in 2020, and existing aircraft designs in 2023 but compliance doesn't begin until 2028.

However, the International Council on Clean Transportation has indicated that the ICAO's 10% fuel efficiency standard is not any more aggressive than the efficiency levels that manufacturers were likely to meet without the standard in place.

 

--Reporting by Amena Saiyid, amena.saiyid@ihsmarkit.com;

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

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Climate Policy Attitudes Improve Over Last Decade: Resources for the Future

January 12, 2021

Attitudes supporting climate policies have become more positive over the last decade in the United States and China and remained strong in Sweden, with a greater willingness to pay to reduce greenhouse gas (GHG) emissions in all three countries, according to a survey by Resources for the Future published Tuesday.

The survey, "The Climate Decade: Changing Attitudes on Three Continents," compared attitudes regarding climate policies in the three countries from 2009 to 2019.

Results of the American nongovernment organization study showed that 79% of participants polled in the United States in 2019 thought their country should reduce emissions even if other countries did not, an increase of 11% from a decade before.

In Sweden, 73% of people surveyed thought their country should reduce emissions, a decrease of 8% from 2009, while 89% of Chinese citizens thought their country should reduce emissions, an increase from 77% a decade earlier.

China and the United States are the world's largest carbon emitters, with China accounting for two-thirds of global emissions growth over the past decade.

Under President Donald Trump, the U.S. withdrew from the Paris Agreement on climate change, but President-elect Joe Biden has said that the country would join the agreement again.

"The election outcome may well be one of the most significant factors in addressing global climate change during the coming decade," Resources for the Future said.

In all three countries surveyed, the willingness to pay per ton of carbon dioxide increased, with people in Sweden willing to pay $129/t in 2019 to reduce GHG emissions by 30%, an increase of $44 from 2009. Americans were willing to pay $31/t, $13 more than in 2009, and Chinese citizens willing to pay $44/t, up 400% from 2009.

To reduce the emissions, people in China were willing to pay a greater share of their income at 0.9%, while people in Sweden were willing to pay 0.8% and Americans were willing to pay 0.6%.

More people in the United States and China also believed in prioritizing the environment even if it meant losing jobs, up by 20% to 60% and up 7% to 82%, respectively, between 2009 and 2019.

In Sweden, people who would prioritize the environment even if jobs were lost decreased 6% to 55% during the same period.

Meanwhile, climate change "deniers" decreased by 8% to 16% in the United States, while Sweden increased slightly to 7% and China decreased to 3%.

 

--Reporting by Jeremy Rakes, jrakes@opisnet.com;

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

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Forest Finance, Offset Credits Important to Net-Zero Goals: Think Tank

January 11, 2021

Finance to protect and restore tropical forests, including purchases of high-integrity jurisdictional-scale carbon offset credits issued by Architecture for REDD+ Transactions (ART), will be of "utmost importance" to reduce carbon emissions to net zero as needed to achieve the goals of Paris Agreement, Germany-based climate think tank MCC Berlin said in a blog post Monday.

A recent study by MCC in cooperation with the U.S. Environmental Defense Fund (EDF) found that every $1/mt invested in tropical rainforests saves $5.40/mt being spent on other climate protection measures. The study has been published in the journal Global Sustainability, the blog said.

Over the rest of the century, a total cost of $2.7 trillion for anti-deforestation measures and a further $3.5 trillion on restoration for the period 2030 to 2070 would save $33.5 trillion in economic costs compared to a case without REDD+ investment, according to the study.

According to EDF, Norway and Gabon announced in 2020 an agreement stipulating that the Central African Forest Initiative (CAFI) trust fund will guarantee a minimum price of up to $10/mt for national scale credits approved via ART's The REDD+ Environmental Excellency Standard (TREES) for up to $150 million REDD+ over 2016-2025. It was the first time an African country was rewarded in a 10-year deal for reducing its greenhouse gas emissions from deforestation and degradation in the past and the future.

UN's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program recently also allowed the use of jurisdictional REDD+ carbon offset credits.

The governing Council of the UN body International Civil Aviation Organization (ICAO) said in November that REDD+ jurisdictional programs -- Architecture for REDD+ Transactions (ART) and Verra's Verified Carbon Standard REDD+ Jurisdictional and Nested REDD+ (JNR) methodology -- will be eligible under CORSIA.

CORSIA aims to lower global aviation emissions by requiring airlines to purchase offset credits and move toward the use of sustainable aviation fuels.

OPIS volume-weighted average assessments for voluntary REDD+ credits under Verra was at $6.33/mt for vintage 2020 on Friday. Meanwhile OPIS assessment for CORSIA eligible offsets (CEOs) was at $0.80/mt on Friday, with renewable projects under the UN's Clean Development Mechanism and Verra setting the price for CEOs so far, according to sources.

 

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

--Editing by Lisa Street, Lisa.Street@ihsmarkit.com

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ExxonMobil Debuts Indirect Emissions Data From Consumption of its Products

January 6, 2021

ExxonMobil Inc. has moved to disclose indirect emissions data resulting from the consumption and use of its fuel products for the first time, citing growing interest expressed by its stakeholders.

The so-called Scope 3 emissions from the global energy major's petroleum product sales were equivalent to 730 million metric tons of carbon dioxide in 2019, according to ExxonMobil's Energy & Carbon Summary report released on Tuesday.

That represented about 15% of the total U.S. energy-related carbon-dioxide emissions at 4,800 metric tons during 2019, or a quarter of all those from the European Union including the U.K. at 2,900 metric tons, according to estimates by the International Energy Agency.

The Irving, Texas, company also said that its Scope 1 (upstream production) emissions were equivalent to 570 metric tons of carbon dioxide in 2019, of which 190 metric tons were from natural gas production, and 380 metric tons were from crude output. Also, ExxonMobil's Scope 2 (refining throughput) emissions were 630 metric tons.

ExxonMobil has been reporting its Scope 1 and Scope 2 greenhouse gas emissions (GHG) for years. The company said, however, it now plans to also provide Scope 3 data on an annual basis, due to apparent growing pressure from institutional investors such as BlackRock and CalSTRS to demand energy majors to focus on environmental, social and corporate governance (ESG) issues.

Unlike its upstream production and refinery emissions, ExxonMobil said Scope 3 emissions were less consistent because it includes the indirect emissions resulting from the consumption and use of a company's products occurring outside of its control.

"Furthermore, Scope 3 emissions do not provide meaningful insight into the Company's emission-reduction performance and could be misleading in some respects," the company said.

For example, increased natural gas sales by ExxonMobil that reduce the amount of coal burned for power generation would result in an overall reduction of global emissions but would increase its reported Scope 3 emissions, the company said.

ExxonMobil has pledged to achieve net-zero emissions by 2050, as it is focusing on developing technologies that could reduce emissions from the three sectors that emit 80% of all energy-related GHG, namely power generation, industrial processes and commercial transportation.

 

--Reporting by Frank Tang, ftang@opisnet.com;

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

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EU Needs Separate 2030 CO2 Removal Plan for Climate Policy: Research Group

January 6, 2021

Breaking out the European Union's carbon dioxide (CO2) removal targets from the greater 2030 emissions reduction plan would provide clarity to carbon project developers and ensure that environmental and sustainability standards are upheld, according to the research group NEGEM.

NEGEM is a multiyear project funded by the European Commission to assess the potential of carbon dioxide removal and its contribution to climate neutrality.

The European Commission has started the process of making detailed legislative proposals by June to implement and achieve increased emission reductions by 2030. It must decide if CO2 removals targets should be included in the plan or should be addressed separately. The EC is responsible for planning, preparing and proposing new European legislation. Once the EC tables a proposal, it must be adopted by both the European Parliament and the Council of EU Member States before it becomes a law.

In October 2020, the European Parliament supported a 60% target for emissions reduction by 2030 without carbon dioxide removal. In December, the European Council agreed to a 55% target that includes carbon dioxide removals.

"It will therefore be necessary to reconcile the two approaches," NEGEM said in the Nature Climate Change journal this week.

David Reiner, Ph.D., of the University of Cambridge, who is part of the NEGEM group, told OPIS that carbon dioxide removals refer to the full range of options that can remove CO2 from the atmosphere including bioenergy with carbon capture and storage (BECCS), afforestation, soil carbon sequestration, enhanced weathering, biochar and direct air capture with CO2 storage.

 

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

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

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Boeing Buys 1.5M Mt of Carbon Offsets For its Scope 1, 2 Travel Emissions

December 29, 2020

Boeing bought nearly 1.5 million mt of carbon credits/offsets in 2020 to neutralize its Scope 1, Scope 2 and travel greenhouse gas emissions, the U.S. based aircraft manufacturers recently said.

Boeing said last week that it based its offset purchase on preliminary emission estimates for 2020 of 572,887 mt for the activities at work sites, such as using natural gas and fuel in test flights (Scope 1 GHG emissions), 649,159 metric tons from electricity purchases (Scope 2 GHG emissions), and 263,802 metric tons from business travel (a component of Scope GHG emissions).Boeing also said that it became an official partner in the Aviation Carbon Exchange (ACE), a partnership between the International Air Transport Association (IATA) and XCHG company CBL Markets.

ACE is a trading platform where participants can purchase carbon offsets eligible for the UN's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and voluntary offsets outside of CORSIA.

CORSIA aims to lower global aviation emissions by requiring airlines to purchase offset credits and move toward the use of sustainable aviation fuels.

On Monday, the OPIS CEO assessment, which reflects carbon offset credits eligible under CORSIA, was $0.805/mt.

"We have prioritized actions to reduce emissions in a responsible way," said Gary Londo, Boeing energy management leader. "And because of what we build and some materials we use -- such as refrigerants -- we cannot yet get to zero emissions without trusted and transparent offsets that meet the highest standards of the aviation industry." Over time, Boeing expects to increase renewable energy use and rely less on offsets.

Boeing said it reduced greenhouse gas emissions by 10% in 2020 by procuring more renewable energy. "Boeing is a big fan of wind and is warming up to solar power," the company said.

By expanding conservation and renewable energy use and purchasing offsets for the remaining GHG emissions, Boeing said it achieved net-zero emissions at manufacturing and worksites in 2020.

 

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

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

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Japan Unveils Green Strategy Targeting Carbon Neutrality By 2050

December 29, 2020

Japan plans to replace gas-powered vehicles with electric vehicles (EV) by the mid-2030s and step up its renewable energy use as part of a "green growth strategy" released by the Japanese government on Friday.

New car sales beginning in 2030 will be required to be EVs, according to the plan. The government will also assist in the price reduction necessary for more widespread EV adoption by aiming to reduce the battery price to 10,000 yen ($96) or less by kilowatt hour by 2030 and improving energy storage.

The strategy is meant to provide a blueprint to achieve Prime Minister Yoshihide Suga's pledge in October for Japan to have net-zero carbon emissions by 2050. The plan estimates it will generate 90 million yen ($870 billion) by 2030 and 190 trillion yen ($1.8 trillion) by 2050 through tax incentives and support for investments in environmental technology and endeavors.

The plan also calls for a research and development fund of 2 trillion yen ($19 billion) for green technology.

The strategy outlined 14 industries that would receive tax incentives and government support, including hydrogen, shipping, ammonia, nuclear and car manufacturing.

The plan documents also call for decarbonizing the power sector and increasing the use of renewable energy by 50%, to 60% by 2050.

The plan estimates electricity demand will increase between 30% to 50% from an estimated current 1.3 to 1.5 trillion kilowatts annually.

The unveiling of the strategy comes after Japan's Thursday announcement that its carbon dioxide (CO2) emissions would be under 1 gigaton in 2021.

 

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

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

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Voluntary REDD+ Project Developers Look to Price Transparency for Support

December 28, 2020

On the periphery of an urgent, public cry to scale-up global Voluntary Carbon Markets (VCM) to reach Paris Agreement goals, REDD+ offset project developers are seeking price transparency in a quest for fair-market value and financial support, they told OPIS.

Dozens of Reducing Emissions from Deforestation and Forest Degradation (REDD+) market participants surveyed by OPIS during the past 14 months described an opaque trading environment where long-term contracts are often structured without a fair-value vantage point.

"We use a formula or a fixed price," a REDD+ project developer told OPIS in September, noting that the development of a daily REDD+ price index would be used to accurately price long-term contracts using the current price as the basis. "As a seller, looking at long-term transactions, we don't want to get ripped off, and our buyers want to lock in a price over time."

On Monday, OPIS launched 27 daily voluntary REDD+ credit price assessments -- the first of its kind to bring a measure of transparency to the VCM.

The new OPIS price index "will formalize our industry," a REDD+ credit retailor told OPIS in November.

REDD+ project developers agreed in various conversations that the index REDD+ will bring a new level of security in the market and aid in securing investments for new emissions reduction projects.

The daily OPIS Voluntary REDD+ Credits assessments include credits certified by Verra (VCS) and validated under the Climate, Community & Biodiversity Standards (CCB). Last year, about 71 million REDD+ units were issued on the Verra registry, according to IHS Markit

OPIS evaluates trade information for voluntary REDD+ credits with vintages that are one to eight years before the current year (currently 2012 to 2019) that deliver within 12 months and credits with a current year vintage (currently
2020) that deliver in the next 24 months. REDD+ trades must have a minimum volume of 2,000 for inclusion in the OPIS price assessment process.

Since Nov. 23, more than 2.1 million REDD+ credits traded within the parameters of the OPIS Voluntary REDD+ Credits methodology, according to data submissions to OPIS from global carbon offset credit stakeholders. Those credits averaged US$5.38/mt -- the mean of a range of deals done at a low of US$3.06/mt and a high of US$7.20/mt.

While the range is notably wide, it is a clear depiction of the current price spreads between bids, offers and trades in the voluntary REDD+ credit market.

For instance, one project developer told OPIS earlier this month that he received a bid at US$1/mt for 2017 vintage REDD+ credits -- a market that is well under value within the scope of OPIS voluntary REDD+ credit price assessments.

Despite the market's general price disconnection, OPIS' year-long deep-dive into REDD+ prices overturned some common trends in transaction volumes and price spreads. Due to this information, OPIS Voluntary REDD+ Credits price assessments are categorized not only by vintage but also by volume. In reviewing the data, three distinct volume-tiered submarkets became clear and are as classified as: Tier 3 - Retail (2,000 to 49,000); Tier 2 - Wholesale
(50,000 to 249,000); and Tier 1 - Net zero buyers/financials (350,000+).

Most of the deals collected by OPIS were classified as Tier 3 for the assessment process. Voluntary REDD+ credits sold as retail are on average between US$2/mt and US$3/mt more expensive than the credits sold as part of bigger clips -- like those purchased by corporations looking to become net-zero emissions in coming years, according to REDD+ industry stakeholders and submitted trade data.

"The demand and interest of corporate buyers is generally increasing," a carbon trader said. "The prioritization of the nature-based solutions just makes sense as companies are looking to support initiatives with great added value for biodiversity and communities, which are very rich in nature-based projects."

Massive potential for upcoming voluntary carbon credit demand from corporations is the backdrop for the phenomenon surrounding the Institute of International Finance (IIF) Taskforce on Scaling Voluntary Carbon Markets. The group of 40 leaders from six continents next year will present a blueprint of actionable solutions to scale up the VCM.

The Taskforce's November 2020 Consultation Document estimated that voluntary carbon markets need to increase by at least 15-fold to meet the growing demand from companies with carbon neutrality goals. It said that the voluntary carbon over-the-counter (OTC) market would benefit from price transparency provided by a price reporting agency.

IHS Markit is a member of the IIF Taskforce on Scaling Voluntary Carbon Markets and the parent company of OPIS.

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com
--Editing by Lisa Street, lstreet@opisnet.com

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3 US Eastern States, District of Columbia Sign On to Regional Cap-Trade Plan

December 21, 2020

A trio of Northeastern states and the Washington, D.C., are moving ahead with plans for a long-discussed regional cap-and-trade program that's expected to cost energy users more than $3 billion over 10 years.

On Monday, Massachusetts, Connecticut, Rhode Island and Washington, D.C., became the first states to sign a memorandum of understanding on the Transportation and Climate Initiative Program (TCI), which aims to cut greenhouse gas pollution in the region by 26% by 2032.

The states are only a small portion of the 11 Northeastern and Mid-Atlantic states that have been involved in planning for the TCI. Instead of agreeing to sign on to the agreement, the remaining eight states -- Delaware, Maryland, New Jersey, New York, North Carolina, Pennsylvania, Vermont and Virginia -- issued a statement Monday pledging "continued collaboration and individual actions" to reduce vehicle emissions and combat climate change. Those states could choose to join the TCI at a later date.

The TCI has been opposed by a variety of business groups, and on Monday a trio of organizations representing fuel marketers -- the National Association of Truck Stop Operators, the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America -- issued a statement calling on the states to reconsider the plan "and instead focus on climate change policies that will achieve more meaningful environmental benefits without imposing exorbitant costs on low- and middle-income Americans."

"The TCI program, as currently constructed, will not work. The program will result in higher costs without any meaningful environmental benefit," the groups said in a joint news release.

The groups argue that the plan will increase fuel prices without making alternative fuels, including electricity, more desirable for consumers. The groups also say the increased cost of fuel will come at a time when many in the region are trying to recover from the economic impact of the COVID-19 pandemic.

The only fuels affected by the TCI agreement are gasoline and diesel, with "state fuel suppliers" required to purchase allowances to cover CO2 emissions from the fuels. Industry groups have estimated that a goal of reducing emissions by 25% would lead to about 17cts/gal in new taxes on gasoline.

The agreement calls on states, at their discretion, to use money raised by the taxes on projects to reduce greenhouse gases generated by transportation. It also calls for states to use at least 35% of the money on clean transportation projects and programs for "overburdened and underserved communities."

Taxes for the TCI will be on top of existing gasoline taxes in the states. As of July, Massachusetts residents already paid 44.94cts/gal in state and federal taxes, according to the American Petroleum Institute. Connecticut residents paid 54.15cts/gal, while Rhode Island residents paid 53.4cts/gal. Washington, D.C., motorists paid 41.9cts/gal.

The Massachusetts Fiscal Alliance said the agreement comes at "a very high economic cost and minimal environmental benefit."

"Polling consistently shows voters rejected it when asked to weigh it with cost," the group said.

In a note to members, Michael J. O'Connor, president of the Virginia Petroleum and Convenience Marketers Association, said the small number of states signing onto the TCI was a "colossal failure by the Georgetown Climate Center," which had championed the proposal. O'Connor said his group had spent "many months" discussing the plan and its impact with state leaders.

The U.S. Climate Alliance, made up of governors from 25 states who support taking action to combat climate change, congratulated the states for "adopting an historic regional cap-and-invest program to clean up our transportation system,"

Connecticut Gov. Governor Ned Lamont said the pact "accomplishes environmental goals we have set for Connecticut for years," while Lynn Scarlett, chief external affairs officer of the Nature Conservancy environmental group said Monday's agreement is "a significant advancement in the conversation about transportation, our communities, and climate change."

States in the Northeast joined together to plan the TCI in 2010. The memorandum of understanding was supposed to be released earlier this year, but was delayed because of COVID-19. Critics of the plan say the effort to implement a TCI have not been transparent and accuse proponents of downplaying the costs to motorists.

Earlier this month, the Our Transportation Future (OTF) coalition released the results of polling it conducted that found 70% of U.S. voters in 11 Northeastern and Mid-Atlantic states and the District of Columbia say they support the TCI as a way to jumpstart the economy in the wake of the pandemic.

But, speaking at the Eastern Energy Expo this fall, Ellen Valentino, CEO of the Mid-Atlantic Petroleum Distributors Association Inc., said that politicians in many of the states that originally supported the TCI have begun to back away from the plan once the cost became clear.

"Part of its undoing was that the program was devised by a group of academics and unelected bureaucrats working in secret," O'Connor said in his note.

 

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

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

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Founded by an Oil Legend, Rockefeller Foundation Divesting From Fossil Fuels

December 18, 2020

The Rockefeller Foundation, founded more than a century ago by one of the United States' most famous oil tycoons, on Friday announced it was divesting from fossil fuels while moving forward with efforts to encourage clean energy technologies.

About 2% of the foundation's $5 billion endowment is currently invested in fossil fuels. In the announcement, the foundation said its investment team will take steps to bring that down to less than 1% "in the near future."

The decision is in keeping with the foundation's founding purpose of promoting the well-being of humanity, said foundation President Dr. Rajiv J. Shah.

"This is still our mission, and since the science is clear on the harm caused by fossil fuels, it was time that we officially aligned our internal investment strategy with our external values and mission," he said.

In October, the foundation said it was committing $1 billion over the next three years to help spur a green recovery after the COVID-19 pandemic. The commitment is part of the foundation's decade-long effort to provide sustainable electricity as a way to lift communities from poverty.

The foundation has already been taking steps to reduce its investments in fossil fuels, cutting the endowment's exposure to companies associated with fossil fuels from 4% in 2014 to 2%.

"We actively narrowed the resources portfolio to less than a handful of managers who place strong focus on ESG [environmental, social and governance] integration and avoided dedicated investments in the heaviest emitting fossil fuels," said Chun Lai, the foundation's chief investment officer. Over the course of those six years, the endowment generated average annual returns of 8.3%, according to the announcement.

The foundation started in 1913 with a $100 million endowment from Standard Oil founder John D. Rockefeller. The foundation is not the only group associated with Rockefeller walking away from fossil fuel investments. In 2014, the Rockefeller Brothers Fund, another philanthropic group, said it would divest from fossil fuels. That fund's exposure in fossil fuels has gone from 6.6% in 2014 to about 0.4%, according to its website.

News of the foundation's decision to divest from fossil fuels comes just over a week after New York state announced a plan to transition its $226 billion pension fund from fossil fuels with a goal of net zero greenhouse gas emissions by 2040. The Natural Resources Defense Council said that plan is one of the largest pension fund divestments in the United States.

Energy companies have been under increasing pressure from investors to address climate change.

In January, BlackRock Investing, the world's largest asset manager, said it would make sustainability a key part of its investment strategy. Last December, The Hartford insurance group and Goldman Sachs Group Inc. announced self-imposed restrictions on investing in energy projects and companies.

 

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

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

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Norway Goes Ahead With Europe's 1st Large-Scale CCS Plan 'Northern Lights'

December 16, 2020

The Norwegian government has decided to co-fund Europe's first commercial-scale Carbon Capture and Storage (CCS) project on the Norwegian Continental Shelf, which will have an initial capacity to handle 1.5 million mt of carbon dioxide (CO2) per year, according to a joint statement by partners Equinor, Total and Shell and separate comments from Oslo on Tuesday.

The "Northern Lights" infrastructure plan is part of a wider state-backed scheme - dubbed "Langskip (Longship)" - to create a full-scale CCS value chain in Norway by 2024, which will be open to third-party users. It is crucial for ambitions to produce "blue" hydrogen from natural gas, with carbon being captured and stored.

The Norwegian state covers about two thirds of costs (16.8 billion Norwegian Krone) for the wider 25.1-billion-Krone ($2.9 billion) scheme. Total costs comprise 17.1 billion Krones of investments and 8 billion Krones of running expenses over ten years, the country's petroleum and energy ministry said in a media release.

When sanctioning funding on Monday, Norway's parliament (Storting) had emphasized "cost control, risk management and benefit realization," the ministry added.

This validates the energy-major trio's own conditional investment decision from May, which had hinged on state subsidies (see OPIS alert from May 18, 2020).

Under the wider plan, CO2 from industrial capture sites -- initially waste-to-energy and cement plants in eastern Norway -- will be liquefied and pressurized for shipment on bespoke vessels to a temporary storage facility on the west coast. The receiving terminal is in the Naturgassparken industrial area of the Oygarden municipality, northwest of Bergen.

From there, the CO2 will be pumped through a 100-km pipeline to a subsea structure at the seabed, southwest of the Troll field, and injected into a geological formation (Johansen) -- about 2,600 meters below the seabed -- for permanent storage.

The "Northern Lights" collaboration provides the infrastructure element of the chain, taking on transportation and permanent sequestration of the CO2 in the reservoir.

Slated to be operational in 2024, the facilities will serve industrial plants in Norway and other parts of Europe, in sectors where carbon emissions are hard to abate.

"Northern Lights is designed to provide a service to industrial emitters who can now take action on emissions that can't be avoided," according to the joint statement by the energy groups.

"The development of the carbon capture and sequestration value chain is essential to decarbonize Europe's industries ... CCS is key to achieving carbon neutrality in Europe."

"This can then form the starting point for a market for storage of CO2," a project description on Shell's website suggests.

The partners are in the process of setting up a joint venture to run the activities, subject to merger clearance. "With all necessary approvals in place, we are ready to start construction," according to the statement.

Capacity is expandable to 5 million mt CO2/year if the customer base grows and additional phases are developed.

The government's recommendations for the wider scheme will be discussed by the Storting in January, before a decision on the plan for development/installation and operation (PDO/PIO) is made.

 

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

--Editing by Yazdi Merchant, ymerchant@opisnet.com

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UK Emission Trading System to Launch Jan. 1, 2021: British Govt.

December 14, 2020

The U.K. is set to launch its own emissions trading system (ETS) on Jan. 1, 2021, coinciding with the country's exit from the European Union (EU) ETS, the British government announced in a whitepaper issued Monday.

The announcement addresses uncertainties about the fate of the country's carbon pricing mechanism post-Brexit. The U.K. left the EU at the beginning of 2020, and it will leave the EU ETS at the end of year.

The system will be "the world's first net zero carbon cap and trade market, and a crucial step towards achieving the U.K.'s target for net zero carbon emissions by 2050," the government said in a press release.

"The scheme is more ambitious than the EU system it replaces -- from day one the cap on emissions allowed within the system will be reduced by 5%, and we will consult in due course on how to align with net zero. This gives industry the certainty it needs to invest in low carbon technologies," the release said.

Regulations underpinning the new system are largely in place, but more preparation is expected before the launch. Initially, the program will cover emissions from energy-intensive industries, electricity generation and aviation. The country will explore opportunities to expand the U.K. ETS to cover the two-thirds of remaining uncovered emissions, according to the white paper.

The U.K. is open to linking the system internationally "in principle." It is considering options for linkage with other emissions trading systems, "but no decision on our preferred linking partners has yet been made," the paper said.

The country's decision to launch an ETS was quickly lauded by the International Emissions Trading Association (IETA), a proponent of carbon pricing solutions to combat climate change.

"The announcement of a new U.K. ETS is a bold step in the right direction toward climate neutrality," said IETA EU Policy Director Adam Berman in a separate release Monday. "Choosing a carbon pricing system that can be truly aligned with net-zero sends a strong message that the U.K. is serious about action on climate change."

But there is one key element missing from the U.K. ETS: a supply adjustment mechanism that "will be required to meet the revised 2030 target," IETA said in the release.

"IETA strongly encourages the Government to consider implementing such a mechanism which can reduce surplus allowances if the market becomes oversupplied. This has been shown to be an effective mechanism in the EU's Emissions Trading System and will be critical to maintaining a robust price signal in the U.K. ETS," the group said.

The British government earlier this year announced its Ten Point Plan for a Green Industrial Revolution, focusing on clean power through offshore wind farms, nuclear power plants and investment in new hydrogen technologies, carbon capture mechanisms and "green" public transport such as zero-emission buses, cycling and walking. The plan also ends the sale of fossil-fuel powered cars in the U.K. by 2030.

 

--Reporting by Kylee West, kwest@opisnet.com;

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

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Move to E15 Would Boost US Carbon Reductions, Growth Energy Says in Study

December 8, 2020

A nationwide transition E15 would speed the U.S. along its path to achieving its climate goals, according to a study released Monday by ethanol industry group Growth Energy.

The EPA has already approved the higher ethanol/gasoline blend, which is marketed at the pump as Unleaded 88, for use in all light-duty vehicles model year 2001 and later, Growth said in a Monday statement, adding that those vehicles account for about 95% of vehicles on U.S. roads today.

Adopting E15 would reduce GHG emissions by about 17.62 million tons/year beyond reductions already delivered by E10, according to Air Improvement Resources (AIR), the research firm that authored the report. AIR said this reduction is the equivalent of removing about 3.85 million vehicles from roads.

A move to E15 would cut carbon emissions by 1.8 million tons/year in California alone, according to the study.

Growth said 98% of all gasoline at U.S. pumps contains about 10% ethanol, but more than 2,000 retail locations now offer E15. The group noted that E15 offerings have increased 10% in 2020 despite challenges of COVID-19.

"The incoming [Biden] administration, along with climate leaders in the House and Senate, have all recognized the importance of low-carbon biofuels as part of any successful effort to combat climate change," Growth CEO Emily Skor said in a statement. "This new report underscores how E15 can turbo-charge our climate progress, while supporting job growth in rural communities and offering consumers a cleaner, more affordable choice for vehicles on the road today."

Growth said AIR's study used data from EPA, the U.S. Department of Agriculture (USDA) and Argonne National Lab's Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) Model.

 

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

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

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LCFS Program Could Help Nevada Hit GHG Reduction Targets: State Agencies

December 8, 2020

Adopting a low carbon fuel standard (LCFS) could get Nevada back on track to hit its greenhouse gas (GHG) reduction targets, according to a climate strategy released by state agencies.

The State of Nevada Climate Initiative last week delivered to Gov. Steve Sisolak (D) its State Climate Strategy, an economy-wide framework intended to help policymakers shape the state's climate agenda.

Nevada is not on pace to hit any of its near- or long-term GHG reduction targets, the group said in its report, which recommended the state consider adopting an LCFS program as one way to reduce GHG emissions from the transportation sector, which is Nevada's largest source of carbon emissions.

"Achieving Nevada's net-zero GHG emissions by 2050 goal will require major changes to the state's transportation systems," the Climate Initiative said on its website. "Other states are already navigating these issues and succeeding in building modern, low-emissions, climate-resilient transportation systems while accelerating consumer adoption of clean vehicles and alternative transportation options."

The framework refers frequently to existing LCFS programs in Oregon and California, noting the ways in which those states have assessed the carbon intensity (CI) of fuels and established compliance mechanisms and credit trading systems.

"In the first eight years of its program (2011-2019), California saw a 6% decrease in carbon CI," of transportation fuels, the group said. "If this trend continues, the policy could be considered more successful than anticipated.

However, overcompliance in a market system with credits also creates a potential ability for the market to use credits rather than meeting new, tighter CI standards in the future."

The group said more analysis is needed to determine the viability of a Nevada LCFS, adding that "regionally, it would need to be decided if the program was bound only to Nevada or if we would join another state's program."

The framework also encourages state policymakers to consider low- and zero-emissions vehicle standards, a clean truck program, a "Cash for Clunkers" system and the closing of emissions loopholes for classic cars license plates.

"As a living document, the Strategy will be adapted and updated as the impacts of climate change evolve and new climate-friendly technologies become available," the group said.

The state's Climate Initiative, which is led by Nevada Department of Conservation and National Resources and the Governor's Office of Energy, was launched by Sisolak in August.

In addition to its net-zero 2050 target, Nevada has committed to reducing GHG emissions 28% by 2025 and 45% by 2030. Both targets use 2005 levels as a baseline.

Nevada is on pace to fall short of the 2025 GHG reduction goal by about 4% and miss its 2030 goal by about 19% based on existing state and federal policies, the Climate Initiative said in a statement.

Nevada in 2019 joined the United States Climate Alliance (USCA), a group of states committed to implementing policies in accord with the Paris Agreement with the aim of reducing GHG emissions by at least 26%-28% below 2005 levels by 2025.

 

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

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

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Georgia Man Pleads Guilty to Bilking $1.7MN in Carbon Offsets Scheme

December 2, 2020

The president of an Atlanta-based environmental commodities business pleaded guilty this week to conspiracy to commit wire fraud after defrauding investors of $1.7 million in a carbon offset credits scheme, according to a release from the U.S. Department of Justice (DOJ).

World Wide Carbon LLC President Mark Loewen pleaded guilty Monday in the Virginia Eastern District Court to misusing client funds that were meant to purchase carbon offsets, according to a plea agreement.

"Loewen and his co-conspirators misled investors regarding WWC's use of investor funds, return on investment, and risks of the carbon offset credit investment. In total, seven victims, including some in the Eastern District of Virginia and some who were elderly, invested $1,749,990 in WWC investments," according to a DOJ press release.

Court documents said Loewen deceived World Wide Carbon LLC clients between 2013 to 2018 by depositing their investments into the firm's operating account.

Loewen also pocketed $310,000 in investor funds and provided false account statements of carbon offset credits to investors who were promised a profit of up to 20%.

Loewen faces up to 20 years in prison when he is scheduled to appear before a federal district court judge on April 6, 2021.

 

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

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

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Amazon's 2040 Net-Zero Carbon Climate Pledge Signatories Rise to Eighteen

December 2, 2020

Five more companies, JetBlue, Rivian, Boom Supersonic, Cabify and Uber have now signed up to Amazon's Climate Pledge commitment to be net-zero carbon by 2040, a decade ahead of the Paris Agreement's goal of 2050.

That brings the number of signatories to the initiative to eighteen, Amazon said in a press release Wednesday. They are Amazon, Best Buy, Boom, Cabify, Henkel, Infosys, JetBlue, McKinstry, Mercedes-Benz, Oak View Group, Real Betis, Reckitt Benckiser (RB), Rivian, Schneider Electric, Siemens, Signify, Uber, and Verizon.

U.S.-based JetBlue is the first airline to join the Climate Pledge. JetBlue achieved carbon neutrality for all domestic flights in July 2020 by using offsets and expects to ramp up to offsets for over 7 million metric tons of carbon dioxide emissions each year. That's the equivalent of removing more than 1.5 million passenger vehicles from the road each year.

JetBlue bought Verified Carbon Units (VCU) carbon offsets registered under the Verra Program from the Larimar Wind Project in Dominican Republic on the newly-launched Aviation Carbon Exchange (ACE) platform last week. It was the first transaction on ACE, owned by the International Air Transportation Association (IATA) and operated by spot carbon offset trading platform provider CBL.

The construction of the first phase of the Larimar Wind project started in early 2015, and operations began in August 2016. The project's start date qualifies it for compliance in the pilot phase of the UN's aviation decarbonization scheme known as CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation).

IATA did not confirm the price for the VCUs bought by JetBlue. The last trade for a CORSIA-eligible carbon credit on the ACE platform was made at $0.77/mt on Wednesday, according to the CBL platform.

Boom Supersonic also plans to use carbon offsetting and sustainable aviation to reach the goals of the Climate Pledge. Cabify is an urban mobility app in Europe and Latin America, already carbon neutral through offsetting. Both Cabify and vehicle hire company Uber seek to achieve the Climate Pledge goal through electric vehicle use.

Signatories to the Climate Pledge agree to implement decarbonization strategies in line with the Paris Agreement through efficiency improvements, renewable energy, materials reductions, and other carbon-emission elimination strategies, neutralizing any remaining emissions with carbon offsets, Amazon said Tuesday.

 

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

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

 

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U.K. Government Prefers Emissions Trading System Linked to EU, Says Minister

December 1, 2020

An U.K. emissions trading system linked to that of the European Union is the current "preferred option", Exchequer Secretary to the U.K. Treasury Kemi Badenoch told Parliament Tuesday, adding that it was the option on which the government hopes it can negotiate.

The U.K. will remain part of the EU ETS until the end of this year, in line with its Brexit transition period.

"We legislated for a UK-linked ETS as well as a carbon emissions tax, and we will be announcing shortly which of those options we will be taking," Badenoch said. Badenoch, a minister of the ruling Conservative party, was asked about the U.K.'s carbon policy future by the Labour party's Matthew Pennycook.

"A robust carbon price is essential to achieving a net zero carbon economy, yet despite the transition period ending in just 30 days' time, companies still have no precise idea what will replace the EU emissions trading system, which the U.K. will cease to participate in at that point," Pennycook said.

Industry experts unanimously voiced support for a U.K. ETS linked with the EU ETS back in October during the U.K. Energy, Business and Industrial Strategy Committee meeting that included representatives from BP and Energy U.K.

However, a U.K.'s parliamentary committee said in a letter to Department of Business, Energy and Industrial Strategy minister Kwasi Kwarteng in October that the current uncertainty about the new carbon policy regime was hindering the ability of businesses to hedge against the risks of price fluctuations.

Such uncertainty also undermined the case for new investments, with knock-on effects for the competitiveness and carbon-intensity of U.K. industry.

Despite the lack of clarity that remains over Brexit, EU allowances prices, the main unit of trade in the EU ETS have strengthened recently, amid expectations of cold weather and other bullish factors, according to a market report.

"The rising fuel prices, the fears of reduced French nuclear availability during the winter and the postponed 2021 auctions are all bullish for the carbon market," trading house Energi Danmark said in the note Tuesday.

The ICE EUA December 2020 futures contract traded at a high of 30 euros ($36.12)/mt during its trading session on Tuesday. The last time it settled over 30 euros/mt was on September 14, with an all-time high settlement of 30.47 euros/mt.

 

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

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

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U.K. Will End Sales of New Petrol, Diesel Cars by 2030 in Ten Point Plan

November 18, 2020

The U.K. will end the sale of new petrol and diesel cars and vans by 2030, ten years earlier than planned, the government said Wednesday as part of its Ten Point Plan for a Green Industrial Revolution.

The decision to ban fossil-fuel powered cars followed an "extensive consultation with car manufacturers and sellers," the government said in a press statement.

As a part of the plan, U.K. prime minister Boris Johnson wants to back what he referred to as "world-leading" car manufacturing bases throughout the country to accelerate the transition to electric vehicles, and transform the nation's infrastructure to better support electric vehicles.

The Ten Point Plan for a Green Industrial Revolution promises to focus on offshore wind, hydrogen, nuclear energy, cycling and walking, "jet zero and greener maritime," carbon capture, "greener" buildings, nature, innovation and finance and electric vehicles.

The U.K. had already accelerated its proposed phase-out of new petrol and diesel cars and vans to 2035 from 2040 earlier this year. The government announced the new goal in February 2020, revising policies originally set forth in 2017 and 2018 to end the sale of new conventional gasoline and diesel cars.

Other European countries already have policies in place to speed up the electric car revolution. Norway's 2025 target is the most ambitious for phasing out combustion-engine vehicles, according to the NGO International Council on Clean Transportation. Denmark, Iceland, Ireland, the Netherlands, Slovenia and Sweden also have a 2030 target.

The U.K. will serve as the presidency of the United Nation's Climate Change Conference COP26 next year in Glasgow, Scotland. About 200 countries signed the Paris Agreement on climate change, which aims to lower greenhouse gases by 28% of 2005 levels by 2025 to slow the effects of global warming. The landmark agreement was agreed upon at COP21 in 2015.

The U.K. passed a law earlier this year to become net zero emissions by 2050, aligning itself with the Paris Agreement goals.

"This [Ten Point Plan] marks the beginning of the U.K.'s path to net zero, with further plans to reduce emissions whilst creating jobs to follow over the next year in the run up to the international COP26 climate summit in Glasgow next year," the government said in the statement Wednesday.

 

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

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

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Quebec Bans the Sale of Gasoline-Powered Vehicles Starting in 2035

November 18, 2020

Quebec will not allow the sale of new gasoline-powered vehicles beginning in 2035 as part of a climate plan to lower carbon dioxide (CO2) emissions that the Canadian province announced this week.

Quebec unveiled its Plan for a Green Economy 2030 on Monday to invest $6.7 billion to combat climate change and lower emissions by 37.5% under 1990 levels by 2030 along with a carbon neutrality goal by 2050.

Of the $6.7 billion investment, the province plans to spend $3.6 billion to cut transportation greenhouse gas (GHG) emissions, which currently account for 43% of GHG emissions.

"The heart of our project is the electrification of our economy. This invaluable asset of hydroelectricity, combined with wind power and other forms of clean energy, will allow us to significantly reduce our greenhouse gas emissions while creating more wealth," said Quebec Premier Francois Legault in a press release.

The Plan for a Green Economy 2030 will be implemented from 2021 to 2026 that will target the electrification of public and private transportation. The plan aims to have 1.5 million electric vehicles (EV) by 2030 and will incentivize EV purchases with rebates as well as constructing a charging station infrastructure for drivers.

Quebec will join California in requiring all new passenger vehicle sales to be zero-emission by 2035. In September, Calif. Gov. Gavin Newsom (D) signed an executive order to phase out gas-powered passenger vehicles.

Quebec's plan also calls for investing $768 million to reduce industrial emissions and $550 million for cutting emissions from residential, commercial and instructional buildings from heating.

The provincial government will also target an emissions reduction in its buildings by 60% under 1990 levels by 2030 and will also convert all government-owned cars, vans and SUVs, along with 25% of its pickup trucks to EVs by 2030.

 

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

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

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Ford Announces $100 Million Investment for Construction of E-Transit Van

November 10, 2020

Ford Motor Co. on Tuesday said it will spend $100 million at its Kansas City Assembly Plant to allow for manufacture of an electric version of its popular Transit van.

The company also said it would invest $150 million in the Van Dyke Transmission Plant in Sterling Heights, Michigan, which will make motors and transaxles for new electric vehicles while it is also increasing production for the electric version of its popular F-150 at its Rouge Plant in Dearborn.

The announcements comes as Ford has said it plans to spend $11.5 billion through 2022 to increase electrification of its fleet.

The company said it will reveal its E-Transit van on Thursday. The company in September announced plans for the electric F-150, while an electric version of its popular Mustang sports car arrives in dealerships next month. The F-150 is expected to hit showrooms in mid-2022, while the E-Transit van is expected to reach the market late next year, the company said.

Ford has been positioning itself as a manufacturer of affordable electric vehicles for all consumers. Speaking during a recent earnings call, Ford CEO Jim Farley said the company was focusing on offering electric vehicles in the $20,000 to $70,000 price range. That strategy was echoed Tuesday by Kumar Galhotra, president of Ford's Americas and International Markets Group.

"Ford's strategy is different -- we are delivering affordable, capable electric vehicles in the heart of the retail and commercial market rather than six-figure status vehicles," Galhotra said.

In addition to building and retooling facilities in the United States for electric vehicle production, Ford in September also committed to spending C$1.8 billion (US$1.38 billion) to retool its Oakville Assembly Complex in Ontario to build battery-electric vehicles. Manufacturing at that site is expected to begin in 2024.

 

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

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

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'Significant Obstacles' In Way Of Voluntary Carbon Market Growth: Taskforce

November 10, 2020

Voluntary carbon markets (VCM) need to overcome "significant obstacles" to mature into advanced markets such as corn, metals, and power, according to a private-sector led taskforce Tuesday.

The Taskforce on Scaling VCM, which was launched by UN Special Envoy for Climate Action Mark Carney, released its initial blueprint on Tuesday.

A public feedback period on the initial blueprint is open until Dec. 10. The taskforce will issue a final report in January.

Quality of carbon credits/offsets remains an issue for buyers despite more than 90 percent of credits adhering to the most common standards for verification: Verra, the Gold Standard, American Carbon Registry and the Climate Action Reserve, the taskforce said.

There was also a lack of a "resilient, secure, scalable trade and post-trade infrastructure," the taskforce said.

The blueprint Consultation Document offers seventeen recommendations for the VCM, which include establishing core carbon principles and taxonomy for carbon credits developing a spot and futures market for carbon credits.

"The over the counter market [for carbon credits] would greatly benefit from increased transparency, one way to achieve this could be the entry of price reporting agencies," the taskforce said.

Carney said Tuesday in a news release that as more corporates commit to net zero goals, they will increasingly need to show how they plan to meet their net zero targets through an "appropriate" mix of emissions reductions and carbon credits.

"This presents an enormous green investment opportunity, which can help generate large flows of private capital from advanced to developing economies, and help fund projects from nature-based solutions to technological solutions like carbon capture and storage," he said.

Carney has previously said that the voluntary carbon offset market is currently only worth only $300 million per year and has the potential to grow to "tens of billions of dollars per annum."

The Taskforce comprises more than 40 leaders from six continents and includes Kathy Benini, managing director and global head of environmental solutions, IHS Markit. 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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California Cap & Trade CO2 Falls 2.7% in 2019, Signals System Success: Analysts

November 6, 2020

California state data showed this week that cap-and-trade participants' carbon emissions fell 8.69 million metric tons to 311.2 million metric tons in 2019 compared with 2018 - a signal that the market-based program is working as expected, and the state is on track to achieve a reduction in emissions to 40% below 1990 levels by 2030, industry analysts said.

"The 2019 drop is closely aligned with our expectations for the cap-and-trade program," IHS Markit Principal Research Analyst Patrick Luckow said. "It represents an acceleration from the prior year (when covered emissions barely changed), but emissions will have to continue to fall at a rapid pace to meet the state's 2030 goals."

Cap-and trade covered emissions are a subset of those reported yearly to California under the Regulation for the Mandatory Reporting of Greenhouse Gas Emissions (MMR), which captures about 80% of the GHGs included in the state's total inventory. The MRR program requires annual reporting of GHGs by industrial sources that emit more than 10,000 metric tons of carbon dioxide equivalent, transportation and natural gas fuel suppliers and electricity importers.

"Total 2019 GHG emissions reported under MRR decreased by approximately 6,867,000 metric tons of carbon dioxide equivalent (CO2e), or 1.9 percent, in comparison to 2018," the California Air Resources Board (CARB) said in a report Wednesday.

Of the total emissions reported, the electricity sector showed the greatest decline in 2019, falling about 4.703 million metric tons CO2e or 7.4% year-over-year, the data showed. Tailpipe emissions from transportation fuels also declined, falling 1.7% or 2.915 million metric tons of CO2e in 2019 relative to 2018, CARB said.

ClearBlue Markets analyst Anop Pandey said that the reduction in transportation sector emissions is "a positive sign" for the cap-and-trade program.

"The power sector also continues to see reductions, and overall, no sectors seem to be lagging. While some of these emissions reductions can be attributed to other factors, this shows that the cap-and-trade system is helping reduce emissions," Pandey said.

Fuel distributors emissions declined by 3.4% in 2019 compared with 2018, "in line with lower gasoline and diesel sales during the year, with higher use of ethanol and renewable diesel coming into play," Pandey said.

"Given the reduction in the [power and fuel distributors sectors], we think California should be on the road to reach its emission reduction goals for 2030. Although we will need to see if the rate of reduction slows down, as all the low hanging fruits might have been plucked and further reduction could be harder," Pandey added.

Given a 10-year time frame to reach a goal of about 260 million metric tons by 2030, the "state will have to reduce an average of 5.1 million metric tons of emission each year," Pandey said.

CCAs Oversupply to Continue

Though Luckow said emissions would need to be reduced about 9 million metric tons per year for 11 years to reach closer to 200 million tons in 2030, compliance entities under the cap-and-trade program should achieve the goal by retiring a "significant existing bank" of California Carbon Allowances (CCA), even if actual emissions are slightly higher.

"I don't see major impacts from the 2.7%" cap-and-trade emissions decline in 2019," Luckow said. "... the real challenge to the market will be if they can maintain this rate of emissions reductions over the coming years. We think it will rapidly get harder as more reductions have to come out of other sectors (like transportation and natural gas consumption) where reductions are harder to come by or more expensive. As a result, it will rely on overlapping emissions mitigation policies, like the [Low Carbon Fuel Standard], and a drawdown of banked allowances."

The cap-and-trade program and the LCFS are both emission reduction systems under California's Assembly Bill 32 (AB 32) Climate Change Scoping Plan, which identified how the state should reach its 2030 climate target and advance toward a 2050 goal to reduce emissions by 80% below 1990 levels.

Pandey said that the 2019 decline for cap-and-trade emissions "means that less CCAs will be surrendered this year. With an oversupply of CCAs in the market, this could be bearish for CCA prices, but this was largely already priced in by the market."

CaliforniaCarbon.info analyst Anant Jain agreed the 2019 covered emissions drop "would lower the (CCA) demand in an already oversupplied market," but noted that the impact on demand will happen in the months after the [MRR] result, where entities will update their future estimates and their purchasing requirements."

COVID-19 Restrictions Pause California Emissions

According to OPIS observation and pricing data, CCA demand unexpectedly deflated this year following COVID-19 travel bans and business shutdowns in California. In mid-March, CCA secondary market prices fell by more than $5/mt and bottomed to as low as $11.05/mt. Last month, CCA prices increased to pre-COVID levels and back in line with the program's policy design of strengthening prices to incentivize entities to make operational emissions cuts instead of buying CCAs to meet compliance obligations.

Because of an expected cut in 2020 emissions due to COVID-19 restrictions, the second- and third-quarter joint California and Quebec cap-and-trade auctions were undersubscribed, and both settled at the Auction Reserve Price of $16.68/mt.

On Friday in the secondary market, current-year vintage CCAs with prompt November delivery were valued at near $17.29/mt, where OPIS assessed the market on Thursday.

"Ultimately the [2019 emissions] change is tiny compared to the wrench that COVID throws into the market," Luckow said. "We expect transportation emissions to fall significantly in 2020, which has the potential to push back the year in which the market begins to tighten (and CCA prices begin to rise)."

Pandey said that ClearBlue expects California's 2020 total emissions to be 278.2 million metric tons, or a reduction by 10.60% compared with 2018.

"This is mostly driven by the fuel sector, which was heavily impacted by the current crisis. Other sectors are less impacted like for example electricity that could see its emissions increase due to lower hydro production (due to California's drought) and the fact that more people working from home is supporting the demand," Pandey said.

The MRR emissions program does not capture agricultural emissions, high global warming potential gases, emissions from landfills and composting, and select fugitive emissions are not captured under the MRR program, according to CARB.

IHS Markit is the parent company of OPIS.

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

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US Exits Paris Agreement; 'We Are In' Signers Committed to Climate Cause

November 4, 2020

The United States officially left the Paris Climate Agreement on Wednesday, after serving a one-year notice to the United Nations last November. However, many U.S.-based businesses, investors, cities, counties and universities remain committed to the cause.

"We Are In" signatories, which include tech giants like Apple, Microsoft, Facebook and 10 U.S. states like California and Oregon, said Wednesday in a news release that the country has a responsibility to rejoin the Paris Agreement.

"Ultimately, the United States has a responsibility to the world to rejoin the Paris Agreement and put forth a bolder, stronger national target. How soon the U.S. rejoins will depend on the outcome of yesterday's presidential election. The votes are still being tallied, but regardless of who will be in the White House, the coalition intends to accelerate local climate action in 2021 and into the next decade," the group said.

Presidential candidate Joe Biden has pledged to rejoin the Paris Agreement "on day one of a Biden administration." Meanwhile, The Trump administration decided over two years ago to withdraw from the Paris climate accord "to protect America and its citizens" from the "draconian financial and economic burdens" it allegedly imposes. It formally began the process of leaving the Paris Agreement in November 2019.

Limiting GHG concentrations to a level consistent with a global warming of well below 2 degrees Celsius above pre-industrial levels is the core objective of the Paris Agreement on climate change, which was signed in 2015 at the Sustainable Innovation Forum COP21 and ratified by 189 countries.

"On December 12th, the world will celebrate the five-year anniversary of the Paris Agreement's adoption. American leaders from local governments, the private sector, and other institutions will mark this milestone by articulating a vision for non-federal climate action in 2021 and beyond," the group added.

California Carbon Allowance prices for the state's Cap-and-Trade Program were quiet Wednesday morning, and no trades were made by 8:35 a.m. CT. The Intercontinental Exchange (ICE) CCA V20 December 2020 contract had a bid at $17.16/mt and offered at $17.35/mt. On Tuesday, OPIS assessed V20 December 2020 CCAs at $17.30/mt.

 

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

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

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Forest-Related Carbon Removal Market Could Swell to $800 Billion by 2050: UN

October 29, 2020

Demand from Big Oil and Big Tech, the world's leading oil and tech companies, for forest-related carbon removal could generate $800 billion in annual revenues by 2050, according to a study by the United Nations-supported body Principles for Responsible Investment (PRI) published Monday.

The value of forest-related carbon removal demand is currently worth a market capitalisation of $1.2 trillion, surpassing that of many oil and gas majors. By comparison, the value of forestry and land-use-related credits traded in the voluntary offset market was $172 million in 2018, said the UN-supported study.

"Big Tech and Big Oil have already started to channel their resources into forest-related nature-based solutions to achieve new net-zero targets - and in turn this is driving demand for nature based solutions (NBS) carbon credits," the PRI said.

Corporate net zero commitments will continue to drive demand for natural carbon removal technologies, as more companies commit to climate goals. The number of companies committed to net zero jumped to 1,541 in 2020 from 500 recorded in 2019, according to the PRI.

"We can't achieve net zero without nature-based solutions. The pandemic has supercharged the investment case, especially in forestry," said PRI CEO Fiona Reynolds in the study.

"With more and more companies setting net zero targets, investors also need greater transparency about the negative emission technologies businesses will rely on to get there. Afforestation activities are the most viable first move, but to ensure success actors must simultaneously focus on ending deforestation," she added.

Carbon offsets or carbon credits are usually issued by international crediting mechanisms such as the United Nations Clean Development Mechanism or independent crediting mechanisms, such as Verra, for emissions reduction or carbon removal activities. Participants such as corporations, governments and individuals include carbon offsets within their climate strategy to reach net zero goals. These are purchased credits representing a certified unit of emission reduction or carbon removal carried out by another actor.

The average price for vintage 2012 to 2020 REDD+ (reducing emissions from deforestation and forest degradation) carbon credits certified by Verra is $3.28/metric ton, the middle of a REDD+ price range of $1.75/mt and $5.90/mt, according to OPIS pricing data.

 

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

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

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India Energy Forum: Prime Minister Juxtaposes Climate Goals with Energy Security

October 26, 2020

Speaking to international investors at the India Energy Forum by CERA Week, Indian Prime Minister Narendra Modi reiterated his government’s commitment to Paris climate goals, while drawing attention to the developing nation’s growing energy demand.

“We will make efforts to continue to fight climate change. India’s energy plan aims to ensure energy justice, but fully following our global commitments for sustainable growth.”

Modi showcased his government’s push for carbon reduction, particularly via the smart LED streetlights initiative and a goal to expand its share of renewable power from 175 gigawatts by 2022 to 450 gigawatts by 2030.

Talking to delegates at the online conference hosted by IHS Markit, Modi juxtaposed India’s emissions reduction drive with its expanding refining and natural gas sectors.

“We plan to grow our refining capacities from about 250 to 400 million metric tons per annum by 2025.”

Modi said domestic gas production and price transparency were critical to developing its nascent gas markets. “We plan to achieve a one-nation one-gas grid.”

The premier highlighted the launch of the Indian Gas Exchange (IGX) earlier this year to promote price transparency in spot and forward markets trading for imported gas.

Accelerating the move towards a gas-based economy will sit alongside a cleaner use of petroleum and coal, and a greater reliance on domestic biofuels.

An expanding role for electricity in transport and the adoption of new fuels like hydrogen into the energy mix will also form part of India’s energy policy.

“Energy security is at the core of our efforts,” Modi said.

 

--Reporting by Cuckoo James, cuckoosusan.james@ihsmarkit.com 

--Editing by Karen Tang, karen.tang@ihsmarlit.com

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REDD+ Project Planned in Paraguay to Issue First Carbon Credits in 2022

October 14, 2020

A new project to reduce emissions from deforestation and forest degradation (REDD+) is being planned in Paraguay's Chaco forest, and it is expected to generate voluntary carbon credits, a senior trader at Quadriz told OPIS Wednesday.

Quadriz, a carbon offset trading house based in Europe, has partnered with Ostrya Conservation for the project.

"We expect to issue the first badge of VCUs (verified carbon units) in spring 2022, with first vintage being 2021," Christian Nielsen, Senior Trader, Environmental Commodities at Quadriz, said. Quadriz is expecting to get the project verified under Verra's Verified Carbon Standard (VCS) and the Climate, Community and Biodiversity Standard (CCBS), he said.

The project expects to mitigate 2 million tons of carbon dioxide over the first 10 years of the project.

REDD+ is one of the world's largest voluntary carbon market sectors.

The wide majority of voluntary REDD+ credits are housed on the Verra registry under the instrument label VCU.

The average price for vintage 2012 to 2020 REDD+ VCUs is $3.28/mt, the middle of a REDD+ price range of $1.75/mt and $5.90/mt, according to OPIS pricing data.

 

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

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

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FORUM: China's Net-Zero Emissions 2060 Pledge Reinforces Growing Role of Gas

October 13, 2020

China's announcement of a 2060 carbon-neutrality pathway does not undermine, but instead underscores its commitment to gas, a panel of speakers at the online Energy Intelligence Forum said on Tuesday.

"It is very politically appropriate timing, before the U.S. political elections, and it is definitely a message to EU countries," Hiroki Sato, an executive at Japan's largest power generation company JERA, told the panel.

Chinese President Xi Jinping told the UN General Assembly on September 22 the country aims to have a peak in carbon dioxide emissions before 2030 and to achieve carbon neutrality before 2060.

The announcement came as a surprise to many in the energy industry and was widely perceived as politically motivated.

There are also those who took the announcement as a sign of China's commitment to move away from coal to gas power generation.

Andrew Seck from French oil major Total, another panellist at the liquefied natural gas (LNG) session held as part of the digital Energy Intelligence Forum, acknowledged that the decision was political, but that it also reinforced the growing role gas will have in China.

"I've been bullish about gas in China for the last decade, and we've seen over this past decade a massive rollout in construction of new terminals," said Seck.

However, the unexpected move to carbon neutrality would force natural gas and LNG down a more competitive path with renewables than previously anticipated.

"So there will be price sensitivity, but gas will continue to play much greater role in China," Seck added.

Tom Earl, COO of Venture Global LNG, noted China was continuing to expand its gas terminals.

"You see several new terminals that are being permitted in 2019 and 2020. China has been very active throughout 2020 as well in terms of its positioning for, not only its short and medium term, but also its long-term energy imports," he said.

Earl also reminded the audience that Indian Petroleum Minister Dharmendra Pradhan had in an earlier session outlined his vision for a billion-dollar gas economy for India. "It's not only China, but huge pockets of demand growth out of India as well," said Earl.

--Reporting by Cuckoo James, cjames@opisnet.com
--Editing by Rob Sheridan, rsheridan@opisnet.com

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IETA Pushes Back Against Post-Brexit Carbon Tax Instead of ETS in the U.K.

October 12, 2020

Should the U.K. government favour a post-Brexit carbon tax rather than an Emissions Trading System (ETS), then this would send troubling signals ahead of next year's United Nations Climate Change Conference (COP 26), the International Emissions Trading Association (IETA) said Monday.

The UK Government may now favour a post-Brexit carbon tax according to the London-based Times newspaper on Friday.

"A carbon tax may look appealing when government seeks to raise revenues, but the environmental reality may disappoint," Adam Berman, EU Policy Director at IETA said in a statement. "Struggling to implement a carbon tax months before the UK hosts COP 26 would send a troubling signal to the international community," Berman said.

The 2021 United Nations Climate Change Conference is the 26th United Nations Climate Change conference. It is scheduled to be held in Glasgow, Scotland, from November 1 to November 12, 2021.

"The UK remains a vocal proponent for climate action, particularly through market co-operation under Article 6 of the Paris Agreement. By adopting a carbon tax instead of an ETS, the UK would find it harder to provide market linkages with international partners," Berman added.

Limiting greenhouse gas (GHG) concentrations to a level consistent with a global warming of well below 2 degrees Celsius above pre-industrial levels is the core objective of the Paris Agreement on climate change, which was signed in 2015 at COP21, and ratified by 189 countries.

In June, the U.K. announced its intention to establish an emissions trading system in 2021 that would either be a standalone scheme or would be linked to the EU's ETS, which the U.K. intends to leave at the end of this year. The government said that if a U.K. ETS cannot be implemented, a carbon emissions tax would serve as an alternative.

The U.K. Treasury, the country's finance ministry, was not immediately available to comment to OPIS.

Uncertainty about the U.K.'s post-Brexit carbon policy led to auction clearing prices fall to 25.54 euros ($30.16)/metric ton on Monday on Germany's EEX exchange, a low not seen since mid-October.

 

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

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

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17 Large Trading Firms Join Effort to Cut C02 Emissions From Shipping

October 7, 2020

A coalition of large trading companies have said they will work together to disclose the climate impact of their shipping activities.

In the announcement, 17 of the largest energy, agriculture, mining and commodity trading companies said Wednesday that they were signing on to the Sea Cargo Charter, which commits them to "assess and disclose the climate alignment of their shipping activities."

While the announcement said the plan to increase transparency in reporting CO2 emissions "is consistent with the policies and ambitions adopted by member states of the UN's International Maritime Organization," it shows private industry coming together and moving forward faster on the issue than the IMO.

The companies committing to the charter are Anglo American, ADM, Bunge, Cargill Ocean Transportation, COFCO International, Dow, Equinor, Gunvor Group, Klaveness Combination Carriers, Louis Dreyfus, Norden, Occidental, Orsted, Shell, Torvald Klaveness, Total and Trafigura.

Grahaeme Henderson, global head, Shell shipping and maritime, said in the announcement that collaboration by members of private industry is "vital in the pursuit of the technological advances needed to unlock decarbonisation solutions, and in building industry support for regulation which can create an ambitious but level-playing field under which to invest."

The shipping industry is under increasing pressure to reduce carbon emissions.

The IMO has set a 2050 deadline to reduce by 50% from 2008 levels the greenhouse gas emissions caused by the shipping industry. In December, the organization proposed a $5 billion plan to spur research aimed at reducing maritime CO2 emissions and meeting international goals to battle climate change. That plan would be financed through a $2 per ton surcharge on marine fuel. That surcharge will generate about $5 billion over 10 years, the IMO said.

But some industry players are calling for an even more aggressive effort to rein in emissions. Earlier this month, Trafigura proposed a levy of $250-$300 per metric ton of CO2 equivalent to quickly cut marine-related greenhouse gas emissions.

While its proposed levy is significantly higher than similar proposals, Trafigura argues that with greenhouse-gas emissions rising and the world unlikely to meet reduction goals included in the Paris Agreement on climate change, urgent action is needed to forestall "significant disruption to the industry" in the future.

Signing on to the charter appears part of the strategy to hasten the pace of change.

"The shipping industry as a whole needs to adopt a transparent approach, advocated by the Sea Cargo Charter, in order to fully understand the sector's overall greenhouse gas footprint and for us to collectively rise to the challenges faced," said Rasmus Bach Nielsen, Trafigura's global head, fuel decarbonization, in the announcement.

The move by shippers comes as top banks are already working to pressure the shipping industry to address greenhouse gas emissions. In June 2019, 11 banks that account for 20% of all lending to shipping sectors, signed on to the Poseidon Principles, which calls for them to incorporate carbon intensity into their lending decisions.

"Last year we launched the Poseidon Principles as a decarbonization framework for shipping financiers. Today the Sea Cargo Charter does the same for shippers," the group said Wednesday.

A recent analysis by IHS Markit, parent company of OPIS, noted that while the IMO has targeted emission reductions, the shipping industry is not expected to meet goals set in the Paris Agreement for reducing greenhouse gases. The analysis said the IMO appears "to have set the bar for efficiency too low, since existing ships ... met the standards well before the standards came into effect."

Since the IMO's targets are limited to new ships, reductions in emissions relies upon the pace of fleet turnover, according to the IHS Markit analysis.

About 90% of global trade is handled by international shipping, according to the International Chamber of Shipping. Shipping accounts for about 3% of global greenhouse gas emissions annually, according to the International Council on Clean Transportation.

The shipping of crude oil, coal, iron ore, grain and other bulk commodities similar to those traded by Sea Cargo Charter signatories make up over 80% of global seaborne trade, the group said.

 

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

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

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GEO Credits Aligned to CORSIA Parameters Trade on CBL Markets

October 5, 2020

Global Emissions Offsets (GEO) -- which can be used for the international aviation carbon reduction program known as CORSIA -- traded twice Friday on the CBL Markets platform, CBL Markets parent company XCHG announced Monday.

The trades were made at US$.85/mt and US$.81/mt, XCHG Head of Ecosystems and Data Partnerships Andy Bose told OPIS Monday. Bose declined to comment on the trades' volumes, but said GEO bids and offers during the day Friday were for volume ranges between 5,000 and 30,000 contracts.

The trades were done by counterparties Macquarie Group Limited and AitherCO2, according to a press release.

In August, XCHG announced that the GEO contract was based on the International Civil Aviation Organization's (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The GEO contract will set a price on carbon based on real-time transactions and scale the global voluntary carbon market following CORSIA's guidelines, the Monday release said.

"GEO pricing is set by trades on CBL Markets, which reflect the real costs of abating emissions. As a result, the GEO enables meaningful price discovery, which will drive greater participation across all sectors in the offset market," XCHG Chief Commercial Officer Ben Stuart said in the release.

On Monday, the CBL Markets GEO contract was bid at US$.80/mt for 5,000 contracts and offered at US$.85/mt for 20,000 contracts.

XCHG said Monday that GEO was created with feedback from project developers, non-profit organizations, trading firms and carbon-standard organizations.

CORSIA aims to lower global aviation emissions by requiring airlines to purchase offset credits and move toward the use of sustainable aviation fuels.

During CORSIA's pilot phase (2021-2023) and phase 1 (2024-2026), flights between voluntary countries will be subject to offsetting requirements. So far, 87 countries will participate in the voluntary phase. From 2027, all international flights will need to follow offset requirements.

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

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Net-Zero Portfolios Should Emphasize Offsets From Carbon Removal: Study

September 29, 2020

Carbon offset buyers with net-zero goals should purchase more credits created from carbon removals than those made from emissions reductions, according to a study published Tuesday by the University of Oxford.

"Users of offsets must increase the portion of their offsets that come from carbon removals, rather than from emission reductions, ultimately reaching 100% carbon removals by mid-century to ensure compatibility with the Paris Agreement goals. Creating demand for carbon removal offsets today will send a signal to the market to increase supply," the study, "The Oxford Principles for Net Zero Aligned Carbon Offsetting," says.

Carbon offsets are either generated by carbon removals or emissions reductions in line with the associated carbon project. Carbon removals offsets are generated by projects that remove carbon dioxide directly from the atmosphere like biological carbon sequestration (planting trees, soil carbon enhancement, etc.), bioenergy with carbon capture and storage (BECCS), direct air capture with geological storage (DACCS) or converting atmospheric carbon back into rock through remineralization. Emissions reduction offsets are generated by projects that avoid emissions, such as the deployment of renewable energy to replace planned fossil fuel power plants, programs to update inefficient cooking stoves, installing Carbon Capture and Storage (CCS) on industrial point sources or gas power stations.

Currently, most carbon offsets available are emission reductions, which are necessary but not sufficient to achieve net-zero emissions in the long run, the university said.

"An immediate transition to 100% carbon removals is not necessary, nor is it currently feasible, but organisations must commit to gradually increase the percentage of carbon removal offsets they procure with a view to exclusively sourcing carbon removals by mid-century," according to the study.

Further, the study says that the portion of carbon removal offsets that offer long-lived carbon storage, such as DACCS, BECCS and mineralization, should be increased over time rather than short-lived storage like afforestation, reforestation and soil carbon enhancement.

Carbon offsets or carbon credits are usually issued by international crediting mechanisms such as the United Nations Clean Development Mechanism or independent crediting mechanisms, such as Verra, for emissions reduction or carbon removal activities. A number of actors, like corporations, governments or individuals, include carbon offsets within their climate strategy. These are purchased credits representing a certified unit of emission reduction or carbon removal carried out by another actor.

The average price for vintage 2012 to 2020 REDD+ (reducing emissions from deforestation and forest degradation) carbon credits certified by Verra is $3.28/mt, the middle of a REDD+ price range of $1.75/mt and $5.90/mt, according to OPIS pricing data.

 

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

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

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Ford Commits to C$1.8B Plan to Retool Canadian Plant for BEVs

September 28, 2020

Ford Motor Co. of Canada on Monday announced plans to spend C$1.8 billion to retool its Oakville Assembly Complex in Ontario to build battery-electric vehicles (BEVs).

The agreement was part of a new three-year contract with members of the Unifor union and will make the company the first to build fully BEV vehicles in the country, Ford said.

The company said it expected BEV manufacturing at the site to begin in 2024.

"This agreement is an important step toward building a stronger future for our employees, our customers and our communities," said Dean Stoneley, president and CEO, Ford of Canada. "By introducing battery electric vehicle production at Oakville Assembly Complex, we are cementing our Canadian operations as a leader in advanced automotive manufacturing."

Union leaders said the agreement provides long-term security to members while also strengthening the Canadian auto sector.

"This agreement is perfect timing and positions our members at the forefront of the electric vehicle transformation, as the Oakville plant will be a key BEV supplier to the North American and European Union markets," said Jerry Dias, Unifor national president.

The agreement could not only impact Ford's production of BEVs in Canada.

Earlier this month, Unifor announced it was selecting Ford as the first automaker in its negotiations with Canadian automakers this year. The union typically chooses one automaker as the first it will negotiate with. The union uses those negotiations to win a pattern agreement for the other contracts. At the start of negotiations, Dias had said winning guarantees to bring EV production to Canada would be one of the union's goals in negotiations.

"Worldwide we have seen more than $300 billion announced for electric vehicle production and not one dime is destined for Canada. Our members want that to change," he said at the time.

Unifor represents 6,300 workers at Ford Motor Co., 9,000 workers at Fiat Chrysler Automobiles and 4,100 at General Motors.

Earlier this month, Ford broke ground on a new electric-vehicle manufacturing center in Michigan. In addition to other models, that plant will manufacture a BEV version of the company's popular F-150 pickup truck.

Ford has said it will invest $11.5 billion through 2022 to electrify new vehicle models, such as the Mustang Mach-E, which will be launched later in 2020 as well as the Escape, Lincoln Aviator and Transit.

The Unifor agreement also calls for Ford to spend $148 million for to upgrade Windsor powertrain facilities as well as a 5% wage increase for union members over the life of the pact and bonuses and other payments.

 

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

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

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China's Net Zero Pledge Seen the Most Important "in History": IHS Markit

September 23, 2020

China's pledge to reach carbon neutrality by 2060 is the most important commitment to climate change in history, according to research and analysis director at IHS Markit Steven Knell Wednesday.

The pledge, announced Tuesday by Chinese President Xi Jinping at the UN general assembly will require a total transformation of the way China produces and consumes energy, said Knell, adding that it meant that a peak in emissions before 2030 in China is plausible.

"This is the most important national climate change policy announcement in history," Knell told OPIS. "China and the EU are now moving forward in Paris Agreement implementation, isolating the U.S., which is scheduled to complete its withdrawal from the Paris framework in November."

President Xi Jinping's net zero pledge came after the address from U.S. President Donald Trump. The Trump administration officially began the process of leaving the Paris Climate Agreement last year. President Xi's announcement also coincided with the ongoing Climate Week NYC (New York City) and was welcomed by the President of the European Commission Ursula von der Leyen.

"I welcome China's ambition to curb emissions and achieve carbon neutrality by 2060. It's an important step in our global fight against climate change under the Paris Agreement. We will work with China on this goal. But a lot of work remains to be done," von der Leyen said Wednesday.

The European Commission officially tabled a proposal earlier this month to tighten EU climate goals of net reduction in greenhouse gases by at least 55% by 2030 compared to 1990 levels.

The Commission will present legislative proposals by June 2021 in order to strengthen the overall cap of the EU ETS Emissions Trading System, by extending the EU ETS to maritime, building and road transport sectors, integrating emissions from the combustion of all fossil fuels and include a carbon border adjustment mechanism.

China was set to start its national emissions trading system (ETS) by the end of 2020, which would initially cover coal- and gas-fired power plants. Rules for China's national ETS are still under development while the eight Chinese ETS pilots continue to expand and refine their systems, according to a World Bank Carbon Pricing report published in May.

 

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

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

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John Kerry on Paris Agreement: 'We Were Betting on the Private Sector'

September 21, 2020

The Paris Agreement on climate change was intended as a signal to the global marketplace to shift investment capital toward sustainability, former U.S. Secretary of State John Kerry said Monday in keynote remarks during a virtual summit for the launch of the KFA Global Carbon ETF (KRBN) on the New York Stock Exchange.

The event took place during the annual New York Climate Week, which is being held virtually this year due to COVID-19.

"We were betting on the private sector," Kerry said of the Paris Agreement, signed in 2016.

"What I said at that meeting in Paris I believe stands today. None of us were thinking it, or believed that we were doing enough to hold the earth's temperature to the level that scientists told us we needed to. What we were doing, was in fact betting on the marketplace," Kerry said.

"We believed that when 196 countries all determined simultaneously to do the same thing, which is reduce their emissions, you're sending a signal globally to the marketplace that should have an impact on the allocation of capital. And that is precisely what happened. In the years since Paris, more money has been put on the table invested into alternative renewable energy and sustainable development than has been put in fossil fuel," Kerry added.

Kerry is the chairman of the Climate Finance Partners Advisory Board (CLIFI), the sub-advisor to KRBN.

The fund is benchmarked to IHS Markit's Global Carbon Index. IHS Markit is the parent company of OPIS.

The index tracks the largest and most liquid tradable carbon markets in the world, including the California Cap-and-Trade Program, the Regional Greenhouse Gas Initiative (RGGI) and the European Union Emission Trading System (EU ETS). Along with OPIS pricing data for North American markets, the index is calculated using ICE EUA futures pricing.

While the IHS Markit Global Carbon Index weighted average price is currently around US$21/mt, it is expected to rise, said Eron Bloomgarden, founder of CLIFI and sustainable finance lecturer at Columbia University's Earth Institute, during today's event.

"We know that according to the International Energy Agency and the World Bank, the global carbon price will need to be at least $75-$100 over the next decade to effectively reduce emissions in line with the temperature goals of the Paris climate agreement," Bloomgarden said.

Historical performance of the index has been "quite strong" with returns for the index since its inception to the most recent month-end, Aug. 31 of nearly 210%, or just over 20% on an annualized basis, said Nicholas Godec, index product manager of tradable indices at IHS Markit.

However, the more interesting feature is its risk profile in correlation to other asset classes, Godec said.

"Since its inception, [the index] has exhibited little correlation to equities or high-yield bonds and exhibits significantly lower correlation than that observed between stocks and bonds. Global carbon has just over a 5% correlation with stocks, and just over a 10% correlation with high-yield bonds versus a correlation between stocks and bonds of over 70%." The carbon credit prices used in the index are also highly uncorrelated themselves, he explained.

Having such an uncorrelated asset may improve portfolio Sharpe ratios, Godec added.

Today's virtual event during New York Climate Week, which will end Sunday, concluded with Kerry ringing the closing bell at the New York Stock Exchange today.

--Reporting by Kylee West, kwest@opisnet.com
--Editing by Lisa Street, lstreet@opisnet.com

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US Should Triple Spending on Clean Energy Innovation, Think Tank Says

September 15, 2020

The United States should triple its spending on clean energy innovation over the next five years, a move that would not only combat climate change, but also create 1 million jobs and position the country for long-term economic growth, according to a report released Tuesday by Columbia University.

The report, prepared by the Center on Global Energy Policy at Columbia, says the U.S. government currently spends less than $9 billion per year on energy innovation. That's less than one-fourth of what it spends on health innovation and less than one-tenth of its spending on defense innovation, the report said.

By investing $25 billion annually by 2025, the U.S. "can jumpstart private innovation and sustain one million jobs over the long run," the report said.

"Innovation is key to combating climate change, achieving a more secure and clean energy future, and maintaining American leadership in the growing energy industries of tomorrow," said Jason Bordoff, founding director of the center. "Although the case for energy innovation is clear, the question for policymakers remains: how best to accomplish it?"

The Columbia report lays out three steps the U.S. should take in 2021 to jumpstart an increased effort to promote innovation: a Presidential Policy Directive announcing the National Energy Innovation Mission, establishing energy innovation as a national priority; setting a goal of tripling federal funding for energy innovation in five years; and creating a White House task force to coordinate among agencies and speed implementation. It also calls for a sharp increase in federal funding for research and development of clean energy technologies. It also calls on the U.S. to "immediately reassert its international leadership" in advancing energy technologies.

The report warns that China is the leader in clean-energy-technology exports and said the United States needs to "get back in the game" to position itself for long-term economic growth as it emerges from the financial hit caused by the coronavirus disease 2019 (COVID-19).

The center's road map for action says efforts to increase innovation should focus on 10 "technology pillars," including clean electricity generation, advanced transportation systems and buildings, clean fuels, modern electric power systems and industrial decarbonization.

The release of the Columbia University recommendations comes days after the International Energy Agency issued its own report calling for a "major effort" to develop clean energy technologies and bring them into use worldwide.

In its "Energy Technology Perspectives 2020" report issued Sept. 10, the IEA said that efforts to transition the power sector to clean energy will get the world only one-third of the way to the goal of net-zero carbon emissions.

The IEA called for increased efforts to reduce emissions from the transport, industry and buildings sectors. These sectors currently account for about 55% of CO2 emissions from the energy system, the agency said.

The IEA warns that a "blistering pace of technological transformation" will be needed for the world to reach a goal of net-zero emissions by 2050 and said "governments need to play an outsized role in accelerating clean energy transitions towards meeting international goals."

--Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com

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EU Parliament Votes to Extend EU ETS to Shipping Sector

September 15, 2020

The European Parliament has adopted a proposal from Member of Parliament Jutta Paulus to extend the EU Emissions Trading System to the shipping industry from January 2022, Paulus told OPIS Tuesday.

"We hope that negotiations with Council and Commission will start as soon as possible," she added.

The proposal is also asking for a reduction in carbon intensity of 40% from the shipping sector by 2030, compared to 2018-2019 baseline levels.


Wijnand Stoefs, policy officer at NGO Carbon Market Watch said that they were calling on the German presidency of the Council "to kick-start the negotiations" with the Parliament and Commission as soon as possible.

The non-government organisation Transport and Environment said it was urging President Ursula von der Leyen's European Commission to "quickly propose" both the carbon dioxide limits from shipping that the parliament has demanded, as well as the inclusion of the sector in the ETS.

The European Commission is responsible for planning, preparing and proposing new European legislation. It can also respond to invitations to do so from the European Parliament. Once the European Commission tables a proposal, it must be adopted by both the European Parliament and the Council of EU Member States before it becomes a law.

The inclusion of international shipping into the EU ETS would lead to regulation of vessel operations on several of the world's seas and oceans, including areas adjacent to those non-EU nations undermining global efforts to reduce greenhouse gas emissions, according to the shipping association World Shipping Council.

Numerous less-developed countries would face an extra charge on trade simply because their goods are routed through the EU, and an EU ETS with extraterritorial effect would harm the prospects for a solution through the International Maritime Organization (IMO), the Council said last week.

Further development of the proposals is expected to take place at the next IMO intersessional working group in October.

--Reporting by Nandita Lal, Nandita.lal@ihsmarkit.com
--Editing by Rob Sheridan, rob.sheridan@ihsmarkit.com

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US Needs Economy-Wide Carbon Price to Reach Emissions Reductions: CTFC

September 10, 2020

The United States should prepare to go "beyond net-zero" by establishing an economy-wide carbon price and reduce emissions to a level consistent with the Paris Agreement Climate Goals, the Commodity Futures Trading Commission (CFTC) said in a report published Wednesday.

Enacting a federal carbon price would be the "single most important step to manage climate risk and drive the appropriate allocation of capital" to effectively reduce emissions, according to the report titled "Managing Climate Risk In the U.S. Financial System" and authored by Climate-Related Market Risk Subcommittee members, like energy major BP and commodity trader Cargill.

"In the absence of such a price, financial markets will operate suboptimally, and capital will continue to flow in the wrong direction, rather than toward accelerating the transition to a net-zero emissions economy," the report said.

One subcommittee member, Environmental Défense Fund (EDF) Senior Vice President for Climate, Nathaniel Keohane said Wednesday in a press release that "This report sends a resounding message to Wall Street and Main Street: unchecked climate change threatens the stability of our financial system."

According to the report, "prudent risk management calls for immediately implementing carbon pricing globally to quickly reduce GHG emissions and to try to get the planet to net-zero emissions as soon as possible while ensuring that the costs are shared equitably across society and that the distributional impacts are not regressive. Of course, policy should respond to new information over time, and it is very likely that circumstances will require that we need to go beyond net-zero and pull greenhouse gases out of the atmosphere."

According to the report, the carbon price should adhere to the true social cost of emissions, but also reflect future expenses associated with the expensive process of removing and sequestering carbon from the atmosphere, the report said.

"If we knew today what it would cost to pull carbon dioxide out of the atmosphere at industrial scale in the not too distant future, the present value of that cost would give us a good sense of an upper bound on where we should price carbon today," according to the report. "But, because the future is very uncertain, society today should err on the side of caution. In the context of pricing climate risk, that implies imposing a higher price than what models used to calculate the social cost of carbon currently suggest."

Carbon Cap Management hedge fund manager Michael Azlen said in a statement Thursday that carbon has a "very real price" and the "costs are extremely large. Putting a price on carbon emissions is a powerful method to stimulate both emissions reductions and innovative low carbon options.

Azlen pointed to established U.S. emissions trading systems - Regional Greenhouse Gas Initiative (RGGI) and the California Cap-And-Trade Program - as successful carbon pricing frontrunners.

Since 2014, California and Quebec have been linked as a cap-and-trade programs trading California Carbon Allowances (CCA). On Wednesday, OPIS assessed the ICE CCA V20 prompt September 2020 contract at $16.965/mt and the ICE CCA V20 forward December 2020 contract at $17.115/mt.

RGGI is made up of 10 member states - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, Vermont and New Jersey. Virginia is set to join RGGI in 2021, the state announced in July. Pennsylvania is also attempting to join the consortium for 2022. On Wednesday, OPIS assessed the ICE RGGI V20 prompt September 2020 contract at $6.71/st and the ICE RGGI V20 forward December 2020 contract at $6.745/st.

The United States formally indicated its intention to withdraw from the Paris Agreement in November 2020. Limiting GHG concentrations to a level consistent with a warming of well below 2 degrees Celsius above pre-industrial levels is the core objective of the Paris Agreement on climate change, which was signed in 2015, and ratified by 189 countries.

The EU is already pledged to reduce emissions by 40 percent below 1990 levels by 2030 and is now moving forward with policies to increase that reduction target to 55 percent, which is expected to be formally tabled by the European Commission this month.

Prices in the EU ETS which is the main instruments of EU's climate policy touched an almost all time high of 31 euro/mt in July, ICE data showed. The ICE EUA December 2020 benchmark futures contract settled at 27.20 euro/mt on Wednesday.

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

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

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European Carbon Prices to Climb in 2021, 'Tread Water' Until End-2020: Bank

September 8, 2020

European Emissions Trading System (EU ETS) carbon prices will "tread water" until the end of the year before climbing in 2021 "thanks to an ambitious [EU] climate policy," Germany's Commerzbank said in a report Friday.

EU Allowance (EUA) prices are expected to rise to average 31 euro/mt next year from an average of 28 euro/mt in the current quarter, the bank said.

The ICE EUA December 2020 futures contract settled at 26.79 euro/mt on Tuesday.

Commerzbank said a potentially higher 2030 EU climate target will lead to an increase in the ETS Linear Reduction Factor (LRF), the rate by which EUAs are reduced annually in the EU ETS. It is currently at 2.2%.

"We do not think, however, that the [European carbon] market will completely ignore all bearish factors in the near future," the bank said. "On the one hand, the higher [EUA] auction volumes starting this month are a damper. On the other hand, the difficult economic environment is a strain."

The European Commission (EC) will present its impact assessment on how to increase the 2030 target to 50%-55% compared to 1990 in "a month or two," the EC advisor on European and international carbon markets, Damien Meadows, said Tuesday during an International Emissions Trading Association's (IETA) webinar.

On Monday, German newspaper FAZ (Frankfurter Allgemeine Zeitung) said in a story that the presentation would be on Sept. 16 during the Commissioner Ursula Von Der Leyen speech on the European State of the Union.

Currently, the EU aims to achieve a 40% reduction by 2030.

 

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

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

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Private Sector Initiates Task Force to Scale up Voluntary Carbon Markets

September 2, 2020

The Taskforce on Scaling Voluntary Carbon Markets was launched by UN Special Envoy for Climate Action Mark Carney and is chaired by Standard Charter Group Chief Executive Bill Winters.

"Since the Paris Agreement was signed five years ago, one of the key elements to support its goals, an effective international carbon market, has been missing," Winters said in the release. "By scaling voluntary carbon markets and allowing a global price for carbon to emerge, companies will have the right tools and incentives to reduce emissions at least cost."

The task force comprises more than 40 leaders from six continents and includes Kathy Benini, managing director and global head of environmental solutions, IHS Markit. IHS Markit is the parent company of OPIS.

"We are excited to participate in this important Taskforce with so many thought leaders across the globe," Benini said. "IHS Markit is a huge proponent that infrastructure and data will help support and propel the growth and scalability of developing carbon markets."

Other participants include carbon market infrastructure providers, and buyers and suppliers of carbon offsets.

"The financial sector can use their expertise in building market infrastructure to create a carbon offset market which connects this demand with supply,"
Carney said in the release.

The task force will take stock of existing voluntary carbon markets and efforts to grow these markets, identify key challenges and impediments, build consensus on how best to scale up voluntary carbon markets and finally, present a blueprint of actionable solutions, the release said.

One of the world's largest market voluntary offset market sectors is REDD+ (reducing emissions from deforestation and forest degradation) credits. Prices for these credits remain opaque within the general voluntary market space, resulting in the need for participants to gain transparency, according to sources.

The wide majority of REDD+ credits are housed on the Verra registry under the instrument label VCU. Most of these credits also include a co-benefit label under the Climate, Community and Biodiversity Standards (CCB). Among other requirements, CCB methodology identifies projects that simultaneously address climate change, support local communities and smallholders, and conserve biodiversity.

According to OPIS pricing data, the average vintage 2012 to 2020 REDD+ credit certified by Verra and CCB (VCU+CCB) is US$3.28/mt, the middle of a price range of US$1.75/mt and US$5.90/mt.

In addition, the forthcoming Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is expected to bring additional demand to the voluntary offset markets. CORSIA-eligible carbon offset prices range between $0.5-$12/mt, according to OPIS pricing data. The wide price range is in part a reflection of the value of varying offset project types and locations, sources said.

--Reporting by Nandita Lal, nlal@opisnet.com; and Bridget Hunsucker, bhunsucker@opisnet.com

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

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CARB Invalidates One-Third of Wisconsin Offset Project CCO Credits

September 1, 2020

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

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

CARB announced it was invalidating 4,896 total offset credits generated from the project after the investigation found that four quarterly samples taken in 2018 from a test well showed ammonia nitrogen exceeded levels set by the Wisconsin Department of Natural Resources (WDNR).

"The Project was not operating 'in accordance with all local, state or national environmental and health and safety regulations' during the time of methane destruction events relevant to this investigation from January 18, 2018 to March 31, 2018," 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.

Invalidating offsets is rare for CARB as the agency 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 waste disposal federal guidelines.

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

Participating offset producers are required to monitor, report and verify greenhouse gas (GHG) reductions for each project.

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

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

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CBL Markets Platform to Offer Global Emissions Offset Product in Sept.

August 27, 2020

A new Global Emissions Offset (GEO) product will begin trading next month on the CBL Markets platform, parent company XCHG announced Thursday.

GEO credits align with the types of offsets available for compliance under the forthcoming Carbon Offsetting and Reduction Scheme for International Aviation, the company said in a release.

"The CORSIA-approved assets underpinning the GEO eliminate much of the cost of trading offsets, because buyers can trust that they're purchasing offsets with proven provenance," according to the release.

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.

CORSIA-eligible offsets can be sourced from various types of offset projects, including methane capture, wind energy, forestry, clean cook stoves and other avoidance or emissions-reducing projects.

"Researching every offset project is costly and inefficient," XCHG President and COO John Melby said in the release. "The GEO unlocks liquidity that makes it easier for project developers to finance their products, and drives toward a benchmark price for carbon, by which other offset projects can be priced."

GEO was developed with input from market stakeholders such as financial institutions, project developers, NGOs, carbon standards, corporations and industry associates, according to the release.

CBL officials did not immediately return a request for comment.

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

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

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US Energy-Related CO2 Emissions in April Hit Record Low: EIA

August 24, 2020

US energy-related carbon dioxide (CO2) emissions in April deteriorated to 307 million metric tons -- the lowest monthly level since recording began in 1973, the US Energy Information Administration (EIA) said in its Today in Energy report Friday.

Measures to mitigate the spread of coronavirus 2019 (COVID-19) caused "sudden and significant changes in energy consumption," the EIA report said.

The transportation sector had the largest emissions decline in April, according to the EIA. Motor gasoline consumption emissions fell to a record-low of 59 million metric tons. In April 2019, those emissions were 91 million metric tons. In 2019, motor gasoline consumption accounted for 57% of transportation sector emissions.

CO2 emissions from jet fuel also fell to a record low of 8 million metric tons in April, down from 21 million metric tons in April 2019, according to EIA data. Jet fuel accounted for 13% of sector emissions in 2019.

"Consumer responses to the coronavirus, stay-at-home orders, and other travel restrictions that were in place throughout the country in April reduced consumption of motor gasoline (the most-consumed petroleum fuel in the United States) and jet fuel (the third-most consumed petroleum fuel)," the EIA report said.

According to the exclusive OPIS Demand Report with inputs from over 15,000 gas stations, average US station gasoline volumes during the week of April 11 cratered to record lows at nearly half (down 49.1% y/y) of the fuel retailers' sales at the same week in 2019. Since then, gasoline demand has clawed back some losses, but the pace of recovery has slowed in July as some states hit the pause in reopening, OPIS data showed.

EIA said that total petroleum consumption C02 emissions declined 25% from March to April to 102 million metric tons. In April 2019, the same emissions were 152 million metric tons.

In the US electric power sector, emissions also decreased to the lowest monthly level on record in April, EIA said.

"Total electricity generation was 7% lower in April 2020 than in April 2019, but energy-related CO2 emissions were 16% lower," EIA said. "As coal-fired power plants have retired or been used less often, a larger share of electricity generation has been coming from lower-emitting combined-cycle natural gas-fired power plants, as well as power plants fueled by nuclear, solar, and wind, which do not emit any CO2 as they generate electricity."

Total energy-related CO2 emissions are expected to decrease 11.5% in 2020, the EIA said in its Short-Term Energy Outlook released Aug. 11.

"This record decline is the result of less energy consumption related to restrictions on business and travel activity and slowing economic growth related to COVID-19 mitigation efforts," the EIA said in the STEO report.

 

--Reporting by Bridget Hunsucker, bhunsucker@opisnet.com and Frank Tang, Ftang@opisnet.com;

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

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Tightening 2030 Climate Targets 'Technically, Economically' Possible: Study

August 24, 2020

EU's plan for raising the 2030 climate goal to achieve a 55% reduction in greenhouse gas emissions by 2030 compared to 1990 is technically and economically possible, according to a study published by think tank Agora on Monday.

Currently, the EU aims to achieve a 40% reduction by 2030. The European Commission (EC) will present its impact assessment on how to increase the 2030 target to 50%-55% in September.

Raising the EU's GHG emissions reduction target for 2030 to 55% would require a revision of the EU Emissions Trading System.

The Linear Reduction Factor (LRF), the rate at which the supply of carbon permits (EU allowances) fall under the ETS, will need to change from dropping by 2.2% a year currently to between 2.69 and 5.41% a year.

The study further said that an inclusion of transport and buildings in the EU ETS or a separate ETS for transport and/or buildings could "only work effectively and efficiently as part of a well-designed broader policy mix, safeguarding existing and new climate measures, e.g. ambitious CO2 standards for cars and trucks, heating system regulations, building codes, road pricing, fuel taxes, etc."

The study also examined the reductions required of individual EU member states to lower greenhouse gas emissions by 55% across Europe.

Some member states have already adopted targets and measures in line with a stricter EU climate target, in particular the Nordic member states, according to the study.

Currently, the EU ETS applies to power sector and heavy industry.

According Steven Knell, senior director at IHS Markit, the parent company of OPIS, a 55% cut compared to 1990 levels will not "come easily."

"The IHS Markit 2020 Autonomy (climate) scenario, assumes more aggressive policies to reduce emissions across the European economy, projects a 55% reduction in GHGs compared to 1990 levels so that path ahead to hit a tougher target is both clear and plausible," he said Monday.

In July, EU leaders reached an agreement on the EU's 1 trillion euro 2021-27 budget and on a 750 billion euro COVID-19 recovery plan. According to the agreement, the EU envisioned a new carbon border adjustment mechanism (CABM) and a revised EU emissions trading system (ETS) extended to the aviation and maritime sectors.

Following that, the European Commission (EC) launched a public consultation creation of a CBAM in July and is expected to officially propose it next year.

Hans van Cleef, senior economist at Dutch bank ABN Amro, expects EUA prices to range between 23-30 euro/mt in the "near term," depending on EC's impact assessment findings for the 2030 Climate goal.

"If the EC decides to adopt the 55% reduction target, the number of EUAs will be reduced at a faster pace [in the Phase IV of the ETS (2021-2030)].

Especially in the beginning (meaning in the weeks after the announcement) this could lead to extra price support as market participants may want to buy emission rights at current prices for hedging some of the lower availability of emission rights from 2021, or from a speculative point of view. Since 50% seems to be priced in already, that decision could lead to some profit taking and add some price pressure," he told OPIS last week.

The ICE EUA December 2020 futures contract settled at 25.65 euros/mt Friday.

 

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

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

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Verra Seeks Input on 'Article 6' Label for C02 Offsets to Avoid Double Count

August 18, 2020

The world's largest carbon credit issuer, Verra, is seeking feedback on a new "Article 6" label to designate Verified Carbon Units (VCU) associated with so-called Corresponding Adjustments (CA), a method used to avoid double counting, the organization announced Tuesday.

"To support efforts to fight climate change at a global level, Verra seeks to ensure the Verified Carbon Standard (VCS) Program is aligned with the various emerging mechanisms being developed around the world, including the Paris Agreement, which sets out a global framework for avoiding dangerous climate change," Verra CEO David Antonioli said in an email. "One key aspect of the Paris Agreement rules on carbon markets is the concept of Corresponding Adjustments (CAs), an accounting approach designed to ensure that emission reductions are counted only once in the context of the agreement."

Under the Paris Agreement, potential double counting of offset credits in Article 6 must be avoided by the use of CA, which means that when a country sells emissions reduction offsets, it must adjust its Nationally Determined Contributions (NDC) accordingly. Without a CA, an offset could be counted twice -- once by the buyer and once by the seller. This information is especially important to buyers when choosing how to use the offset.

"For example, some buyers want to continue to claim emission reductions and removals against their own footprint or the footprint of their products," Antonioli said. "Other companies may want to purchase credits without CAs because they want to contribute to the host country's Nationally Determined Contributions (NDCs). And others may want to finance units that contribute to the NDCs of the host country without claiming an offset or using the unit for neutrality purposes."

The label will also support buying preferences for voluntary offsets.

"Voluntary buyers would be able to select either a unit that is labelled as Article 6-compliant (or other labels like CORSIA, the Carbon Offsetting Scheme for International Aviation), or could select a VCU that does not have a CA, depending on which claims they seek to make," according to the announcement.

Verra will receive comments from the public through Oct. 17. There will be two webinars to present the concepts for the new label: one on Sept. 9 at 11:30 a.m. Eastern Daylight Time and the other on Sept. 10 at 3 p.m. EDT, Verra said.

Verra's proposal followed a similar announcement of new labels made last month by credit issuer Gold Standard. If there is a risk of double counting or a lack of CA, then the Gold Standard's Verified Emission Reductions (VERs) will have a claim of "finance" rather a claim of "offsetting," Owen Hewlett, chief technical officer, said in a Gold Standard webinar on July 22.

 

--Reporting by Nandita Lal, nandita.lal@ihsmarkit.com; and Bridget Hunsucker, bridget.hunsucker@ihsmarkit.com;

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

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CARB Finalizes Agreement With Automakers to Reduce Greenhouse Gas

August 18, 2020

The California Air Resources Board (CARB) has finalized agreements with major automakers based upon a framework unveiled last year to reduce annual greenhouse gas (GHG) from vehicle tailpipe emissions, ignoring ongoing actions by President Donald Trump's administration to roll back pollution standards for light-duty cars and trucks.

In a statement posted on CARB's website on Monday, the automakers which adhered to the latest agreements are BMW of North America (including Rolls Royce), Ford Motor Co., Honda Motor Co., Volkswagen Group of America (including VW and Audi), and Volvo Cars, which is owned by China's Geely Holdings.

In July 2019, CARB and the auto companies agreed to a framework to reduce GHG and other pollutants with BMW, Ford, Honda and Volkswagen. Volvo joined those automakers in the latest finalized agreement.

On Monday, CARB said that group of automakers have committed to support continued annual reductions of vehicle GHG through the 2026 model year, encourage innovation to accelerate the transition to electric vehicles, provide industry the certainty needed to make investments and create jobs, and save consumers money.

According to the California state environmental regulator, the auto companies will stay on course to make cleaner cars consistent with their individual production plans to substantially electrify their respective fleets and cut GHG emissions.

The other U.S. states that had previously adopted California's cleaner vehicle standards have notified each of the automakers by letter that the states will also support the agreements, according to CARB.

Under the agreements, gasoline and diesel cars and light trucks will get cleaner through 2026 at about the same rate as the former Obama-era program, preventing hundreds of millions of tons of GHG emissions over the lifetime of the agreements, CARB said.

In September 2019, the U.S. Environmental Protection Agency formally revoked California's Clean Air Act waiver for California's more-stringent Zero Emission Vehicle program to reduce GHG, prompting California and 23 other states to file a lawsuit against the Trump administration's attempt to bypass the state's authority to maintain longstanding car standards.

 

--Reporting by Frank Tang, ftang@opisnet.com;

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

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CARB to Fund $27M From VW Trust to Replace Older Trucks With ZEVs

August 10, 2020

The California Air Resources Board (CARB) next week will make available $27 million to replace higher-polluting trucks with zero-emissions vehicles (ZEVs) owned by public and private entities, according to a press release from the agency Monday.

To receive funding, eligible "vehicles must be engine models 1992 to 2012, in compliance with all applicable regulations, and scrapped in exchange for a zero-emission replacement vehicle," the release says.

In addition, the new and old trucks must be operated at least 75% of the time in California, and maximum funding is $200,000, CARB said. Applications will be accepted beginning at 1 p.m. Pacific Daylight Time on Aug. 18.

The funding is the first installment from $90 million allocated for freight trucks, waste haulers, dump trucks and concrete mixers under the Volkswagen (VW) Environmental Mitigation Trust program.

The state's VW trust holds $423 million for projects that mitigate excess nitrogen oxide (NOx) emissions in California caused by vehicles included in a VW settlement made several years ago.

"Beginning in model year 2008, VW sold about 600,000 2.0 liter and 3.0 liter diesel passenger vehicles with illegal software in the United States. 87,000 of those cars were sold in California," according to CARB's website.

In 2018, CARB approved a mitigation plan for how to spend California's slice of a larger national VW trust.

The announcement Monday comes after CARB voted in June 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.

 

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

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

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EU Considers Sustainable Fuels Quotas to Decarbonize Aviation Sector

August 10, 2020

The European Union (EU) could adopt sustainable aviation fuels (SAF) quotas for airlines as part of their efforts to decarbonize the sector and reach greenhouse gas (GHG) emission-reduction targets set under the European Green Deal, the European Commission (EC) said in a consultation launched last week.

"To achieve the targets of the European Green Deal, the transport sector will need to reduce its emissions by 90%," EU Commissioner for Transport Adina Vǎlean said in a Thursday statement. "All transport modes are expected to contribute, including aviation."

The public consultation, which the EC issued on Wednesday, proposes a blending mandate that would increase gradually over time. The European market already has drop-in SAF options that are compatible with existing infrastructure, but the EU says their use is "still negligible."

SAF currently has a 0.05% market share, the EU said, adding annual SAF production from the "handful" of EU SAF producers likely does "not exceed 100,000 tons."

"The potential of SAF to reduce aviation's GHG footprint is yet largely untapped," the consultation says. "The aviation sector lacks immediate alternatives for commercial aircraft propulsion. New clean aircraft technologies such as electric- or hydrogen-powered aircraft are not expected to be mature enough to play a significant role in commercial aviation in the next decades."

The EC acknowledged that the cost to produce SAF is at least twice that of conventional jet fuel and said the EU could incentivize producers by modifying existing renewable energy policies to favor SAF. Other options include instituting a central auctioning mechanism, funding SAF projects and facilities, and creating a kerosene tax.

The consultation is the latest stage of the ReFuelEU Aviation initiative, announced in December as part of the European Green Deal. The commission seeks to adopt new SAF policy by the end of 2020.

"In the past months, the aviation sector has been heavily hit by the coronavirus pandemic," Vǎlean said. "The objective of our ReFuelEU Aviation initiative is to use the recovery as an opportunity for aviation to become greener and help to reach the EU's climate targets by boosting the largely untapped potential of sustainable aviation fuels."

The consultation will be open until Oct. 28 and is available here: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12303-

 

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

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

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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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