Danish Renewables Giant Orsted to Build Large-Scale Solar Project in Texas

January 13, 2023

Danish renewable energy company Orsted on Friday announced plans to build a 471-megawatt onshore solar facility in Texas.

The 4,900-acre Mockingbird Solar Center will be able to generate enough clean energy to power more than 80,000 homes annually, making it the largest solar photovoltaic project in the company's portfolio, Orsted said.

The company has taken a final investment decision on Mockingbird and construction will start this month, with completion expected in 2024, it said.

"Adding almost half a gigawatt to our portfolio, the decision to build Mockingbird represents an important milestone for our onshore business and for our expansion in solar PV," David Hardy, CEO of Orsted Americas, said in a news release.

Dutch health and nutrition company Royal DSM will buy a share of the power from Mockingbird under a 10-year power purchase agreement signed in 2021, Orsted said.

The company also said that about 1,000 acres of land adjacent to the project will be donated to The Nature Conservancy to protect native prairie grasses in north-east Texas. Less than 1% of the original grasses of Texas survive today, and less than 5% remains nationally, it said.

Orsted has a growing global portfolio of wind, solar and clean hydrogen projects and is on track to reach 17.5 gigawatts of onshore capacity by the end of 2030.

It has an ambition of installing 50 GW of renewable energy by the end of this decade including 30 GW offshore wind.

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

© 2023 Oil Price Information Service, LLC. All rights reserved.

US Has Fewer Than 50K EV Charging Sites as Govt. Funding Begins Flowing

January 9, 2023

The U.S. has a fraction of the electric vehicle charging stations necessary to meet the Biden administration's goal of half a million public stations by 2030, but billions of dollars in federal funding is now being released to build out the charging infrastructure.   

The Department of Energy's Alternative Fuels Data Center's Alternative Fueling Station Counts by State, which was updated Thursday, shows there are 49,917 electric vehicle stations available to the public, providing 129,700 electric vehicle supply equipment (EVSE) ports. Of that total, 862 are Level 1 chargers,
101,359 are Level 2 chargers, and 28,002 are DC fast chargers.   

Add the numbers for private EV charging sites, and there are 53,669 U.S. stations, providing 144,355 EVSE ports. That includes 2,990 Level 1 chargers, 113,088 Level 2 chargers and 28,236 DC fast chargers, the data center's chart shows. The figures exclude residential chargers.  

DOE's historic data for the total number of EV charging stations shows the current total is up about 7% from 2021 at 50,054 sites but 69% from 2020 at 31,738, almost double the level in 2019 at 26,959 and roughly five times the total of 10,712 sites in 2014. As late as 2010 there were just a few hundred sites.   

California has by far the most public EV charging sites at 13,772. The second-largest state total is New York at 3,151 sites. Just three additional states – Florida (2,689), Texas (2,357) and Massachusetts (2,312) – offer more than 2,000 public charging stations. And only 10 more states – Colorado (1,681), Washington (1,618), Georgia (1,496), Maryland (1,261), Pennsylvania (1,244), Illinois (1,230), Ohio (1,183), Virginia (1,079), Michigan (1,075) and North Carolina (1,043) – provide more than 1,000 public charging sites.   

Four states – California (8,483), Florida (1,616), Texas (1,413) and New York (1,149) – provide more than 1,000 DC fast chargers, the data center chart shows. Those states provide 45% of the DC fast chargers available to the public.  

EV charging stations represent 36% of public alternative fueling sites. The U.S. has a total of 138,032 alternative fuel stations available to the public, including biodiesel, compressed natural gas (CNG), E85, EV chargers, hydrogen, liquid natural gas (LNG) and propane, the DOE's report shows. The states with the most public alternative fueling sites overall are California (38,522), New York (8,864), Florida (7,210), Texas (6,680) and Massachusetts (5,459).  

In addition to the EV public charging sites, there are 826 biodiesel (B20 and above), 744 CNG, 4,242 E85, 54 hydrogen, 51 LNG and 2,415 propane fueling sites available to the public across the country.   

The DOE chart shows the top states for alternative fuel sites are:

  • Biodiesel: Iowa (272), Minnesota (245), Illinois (104), Oregon (34) and Nebraska (24).
  • CNG: California (159, Oklahoma (93), Texas (53), Pennsylvania, and Wisconsin (33).
  • E85: Minnesota (427), Iowa (339), California (313), Illinois (279) and Wisconsin (257).
  • Hydrogen: California (53) and Hawaii (1). No other states have hydrogen sites accessible to the public, though eight additional states have one or two private hydrogen sites.
  • LNG: California (15), Texas (11), Georgia (4), Florida (2) and Alabama (2).
  • Propane: Texas (336), California (207), Florida (117), Oklahoma (99) and Illinois (80).   

--Reporting by Donna Harris, dharris@opisnet.com
--Editing by Michael Kelly, mkelly@opisnet.com

© 2023 Oil Price Information Service, LLC. All rights reserved.

Oilsands Producers Set to Start Evaluation of Proposed Carbon Storage Hub

January 4, 2023

The Pathways Alliance, a consortium of Canada's largest oilsands companies, will soon start a detailed evaluation of its proposed carbon storage hub in Alberta following an agreement with the provincial government, the group said Wednesday.

The alliance said in October that it would invest C$16.5 billion ($12 billion) by 2030 to build one of the world's largest carbon capture and storage (CCS) facilities in the province. It has also pledged to spend another C$7.6 billion on other emissions reductions projects.

"This agreement marks another significant milestone on the road to finalizing plans for our proposed CCS project in northeastern Alberta and achieving our goal of reaching net zero emissions by 2050 to help Canada meet its climate commitments," Kendall Dilling, president of the group, said in a news release.

The alliance, launched in 2021, is made up of Canadian Natural, Cenovus Energy, ConocoPhillips Canada, Imperial, MEG and Suncor Energy, which together operate about 95% of oilsands production.

The agreement with the government paves the way to start the detailed testing required to further assess carbon sequestration suitability, with field work set to start this winter, the group said.

This testing and existing information collected by member companies with operations in the area will help with field development plans to support the final application for a storage agreement and further regulatory approvals, it said.

The hub would be connected to a transportation network that would initially gather captured carbon dioxide from 14 oilsands facilities in the Fort McMurray, Christina Lake and Cold Lake regions. The plan is to grow the network to include over 20 facilities and to accommodate other industries in the region interested in CCS, the alliance said.

Alberta is Canada's top oil-producing province. In 2020, it produced 3.79 million b/d of crude, accounting for 80% of the country's total output.

It is also Canada's most polluting province, with emissions reaching 256.5 million mt of CO2 equivalent in 2020, according to the federal government.

Canada has set a goal of cutting emissions by 40% below 2005 levels by the end of this decade, ahead of reaching net zero emissions in 2050. It has been promoting carbon capture and storage as a key tool to reach it goals, offering investment tax credits to companies.

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

© 2023 Oil Price Information Service, LLC. All rights reserved.

World Bank Approves $311 Million for Renewable Energy Projects in Africa

December 29, 2022

The World Bank has approved $311 million for renewable energy projects in Chad, Liberia, Sierra Leone and Togo, the global financial institution said last week.

The money will go to the new Regional Emergency Solar Power Intervention Project, or RESPITE, which will seek to rapidly increase grid-connected renewable energy capacity in the four countries, the bank said in a news release.

It will finance the deployment of 106 megawatts of solar photovoltaic capacity and a 41 MW  expansion of hydroelectric capacity.

West Africa has one of the lowest electrification rates coupled with some of the highest electricity costs in sub-Saharan Africa, the bank said.

In addition to improving the reliability of electricity supply, RESPITE has developed a regional approach to enhance the potential of power trade in West Africa, it said.

"The project will encourage leading international private developers to enter smaller and more fragile economies and to also demonstrate the viability of competitively tendered grid-connected solar and battery storage in participating countries," the bank said in the Dec. 20 release.

The financing will be provided by the International Development Association, an affiliate of the bank, which offers grants and low to zero-interest loans to the world's poorest countries.

Since its establishment in 1960, the IDA has supported development work in 113 countries, with annual commitments averaging $21 billion over the past three years, the bank said.

--Reporting by Abdul Latheef, alatheef@opisnet.com; Editing by Barbara Chuck, bchuck@opisnet.com 

© 2022 Oil Price Information Service, LLC. All rights reserved.

Activist Investor Follow This Launches New Climate Campaign Against Big Oil

December 20, 2022

European activist shareholder Follow This has launched a new campaign against Big Oil, proposing resolutions calling on Shell, BP, ExxonMobil and Chevron to align their 2030 emissions reduction targets with the Paris Climate agreement.

The campaign is supported by investors managing more than $1.3 trillion in assets, Follow This said Monday in a statement posted on its website.

The resolutions focus on the oil and gas industry's Scope 3 emissions, caused by the burning of the products they sell to customers.

"The focus on Scope 3 by 2030 leaves the oil majors no wiggle room for smokescreens about 'net zero emissions by 2050' or reduction targets for operational emissions (Scope 1 and 2, around 5% of emissions)," Mark van Baal, founder of Follow This, said in the statement.

Despite 2050 net-zero pledges, none of the four oil companies is even close to Paris-aligned emissions reductions plans for 2030, the group said. The targets for 2050 have no consequences for medium-term strategies, it said.

Follow This has been at the forefront of shareholder activism at major Western oil and gas companies, targeting their annual general meetings demanding deep cuts in emissions.

In 2022, however, rebel votes decreased after the companies managed to convince shareholders that the energy crisis, sparked by Russia's invasion of Ukrain, should eclipse the climate crisis, it said.

"Nonetheless, shareholder rebellions of 15% at BP, 20% at Shell, 28% at ExxonMobil and 33% at Chevron voted in favour of Paris-aligned targets," Follow This said.

Investors co-filing the latest resolutions include Edmond de Rothschild Asset Management, Degroof Petercam Asset Management, Achmea Investment Management and Arjuna Capital, it said.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Michael Kelly, mkelly@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

European Union Lawmakers Reach Draft Agreement on Major ETS Reforms

December 19, 2022

European Union legislators have struck a draft agreement on consequential reforms to the EU Emissions Trading System (EU ETS), upping the ante to slashing greenhouse gas emissions by 62% by 2030 compared to 1990 levels and the phasing out of free allowances by 2034.

After a marathon session over the weekend, early Sunday local time EU lawmakers agreed on a series of reforms that will shape the EU ETS over the next decade. The reforms include increasing the rate at which EU emissions allowances (EUAs) auctioned on the market are reduced each year to 4.3%, starting in 2024 to 2027, from the current level of 2.2%. This rate will then increase to 4.4% from 2028 to 2030 as part of the draft agreement.

Free allowances, which are provided for hard-to-decarbonize industries like steel, cement, aluminum, fertilizers and others, will be phased out completely by 2034. These free EUAs will be reduced by 2.5% in 2026, up to nearly 50% in 2030 and then fully phased out by 2034.

Installations across the EU that receive free EUAs will be required to comply with certain conditions, including energy audits, and will need to abide by climate neutrality plans in the push to decarbonize over the coming years, according to the EU Council.

The EU's Innovation Fund - the bloc's financing arm for innovative low-carbon technology - receives funding from the sale of emission allowances and will help decarbonize hard-to-abate sectors in the coming years.

The EU ETS, which covers about 40% of the bloc's total greenhouse gas emissions from more than 10,000 installations, has been in operation since 2005. The EU's emissions have fallen by 41% since the carbon market's implementation, according to the EU Council.

Separate ETS for Buildings, Road Transport

A wholly separate ETS - known as the ETS II - will be implemented in 2027 and specifically aimed at pricing emissions from the buildings and road transport sectors, and the fuels the use, to foster the push for decarbonization. According to the EU, this ETS II will charge the "distributors that supply
fuels to the buildings, road transport and certain other sectors."

The ETS II will initially auction 30% of the allocated emissions in its first year and see its emissions reduced annually by 5.1% from 2024 to 2028. That rate is set to increase to 5.38% by 2028.

While the ETS II is scheduled for operation in 2027, EU legislators agreed to postpone this until 2028 in the case of exceedingly high energy prices. Additionally, once the system is operational, more allowances will be injected into the ETS II market if EUAs exceed €45 ($47.70)/metric ton.

The benchmark ICE December 2022 EUAs 2022 contract settled at €83.83/mt on Dec. 16, according to data from the Intercontinental Exchange. Earlier in August, EUAs reached an all-time high of €99/mt.

Dr. Peter Liese, climate rapporteur for the Parliament and member of the European People's Party (EPP), said in a statement that this was the most consequential legislative package addressing the EU's climate ambitions.

"[This deal] will give breathing space for citizens and industry in difficult times and provide a clear signal to European industry that it pays off to invest in green technologies," Liese said.

A €87 Billion Fund for EU's Vulnerable

Discussions over a Social Climate Fund (SCF) to help EU citizens have become a key component of EU ETS reform negotiations, particularly in the midst of an energy crisis that has seen record-high natural gas and electricity prices in the wake of Russia's invasion of Ukraine in February 2022.

The SCF is expected to become part of the EU budget and to include up to €87 billion in funding from the sale of allowances through the ETS II and from EU member states. The fund is to be established starting in 2026 and benefit from the sale of 50 million allowances on the original ETS that year.

The fund is meant to finance direct income support measures and long-term structural investments to buildings, decarbonization plans and the integration of low-emission vehicles in public transport. The SCF was crucial to the overall ETS reforms, according to Esther de Lange, a SCF rapporteur and member
of the European People's Party in the EU Parliament.

"With this agreement we aim to ensure a fair energy transition for everyone," de Lange said. "The SCF will help vulnerable households in the energy transition, for instance with insulation vouchers or moving towards greener transport options."

As with other deals made recently, such as the first-of-its-kind carbon border tax and the inclusion of the shipping sector under the EU ETS, the EU Parliament and Council are expected to formally approve the draft agreement in the coming weeks.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Rob Sheridan, rsheridan@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

IRA to Spur 8.3 GW/Year of New Renewable Capacity in PJM: Princeton ZERO Lab

December 13, 2022

The Inflation Reduction Act (IRA) passed in August is projected to incentivize the deployment of 8.3 GW of new renewable energy capacity per year in the PJM transmission region through 2030 and reduce emissions by 37% from 2019-2021 levels, according to a working paper published by Princeton University's ZERO Lab on Monday.

The PJM Interconnection serves as the regional energy transmission organization for a group of U.S. Mid Atlantic and Midwest states.

OPIS assessed PJM Tri Qualified V23 renewable energy certificates (RECs) at $28.42/MWh on Monday, an increase of 9.8% since the start of Q4 2022.

ZERO Lab projects that power consumption in the region will rise by 19% by 2030, led primarily by the electrification of transportation and heating.

Carbon-free power could meet 60% of total demand by 2030, and electricity costs for utilities are projected to drop to $40-45/MWh, compared to roughly $61/MWh in 2021.

The paper, titled "Cleaner, Faster, Cheaper: Impacts of the Inflation Reduction Act and a Blueprint for a Rapid Decarbonization in the PJM Interconnection," explores a range of scenarios using GenX, an open-source power sector modeling tool developed by MIT. The first part of the paper models the effects of the IRA, while the second part explores what additional additions are needed for deep grid decarbonization.

"While IRA puts the PJM region on a path to lower-cost electricity and lower greenhouse gas emissions, the new federal policy is not sufficient to drive deep decarbonization of the PJM interconnection on its own," the authors write.

"Fortunately, by subsidizing the cost of all new carbon-free electricity resources, IRA also makes it cheaper and easier for PJM states to reduce emissions further while preserving affordability."

Per the authors' modeling, the rate of renewable energy capacity additions without the impact of the IRA is projected to average 7.6 GW/year through the end of the decade and cool off to about 3 GW/year between 2031 and 2035. Under the IRA, however, renewable capacity additions increase to 8.3 GW/year until 2030 and remain over 7 GW/year through 2035.

That breaks down into an additional 21 GW of onshore wind, 21 GW of distributed solar, and 65 GW of utility-scale solar compared to what was operational in 2021. The authors also note that, while the IRA does include provisions for offshore wind, their model predicts little additional deployment without the legislation. It does, however, make it less expensive for states to meet offshore wind mandates.

There are currently enough proposed projects in the PJM new services interconnection queue to satisfy these projections. "This expressed interest from developers indicates that the industry believes it is more than capable of deploying capacity at the rates modeled in this study," the authors write, "but reforms to accelerate the PJM interconnection and cost allocation process are likely necessary to realize this pace of growth and accelerate annual additions well beyond recent historical rates."

Assuming a medium cost of fuel and renewable energy development, the ZERO Lab modeling projects the IRA will bring the cost of electricity down to $44.7/MWh in 2035. (Costs were $61.30/MWh in 2021 and even higher in 2022.)

Much of the savings will derive from a lower cost in energy payment. RPS payments are also projected to be nearly eliminated. However, capacity payments are projected to increase.

One major variable remains in play. The IRA includes a production tax credit for existing nuclear through 2032. The ZERO Lab modeling assumes it will expire and, soon after, the PJM nuclear fleet will begin to be decommissioned. Under that scenario, capacity will need to be made up by a mix of renewables and natural gas, which will lead to an increase in emissions between 2032 and 2035.

--Reporting by Henry Kronk, hkronk@opisnet.com; Editing by Kylee West, kwest@opisnet.com 

© 2022 Oil Price Information Service, LLC. All rights reserved.

Renewable Diesel Could Top 80% of California Diesel Demand in 2025: Lipow

December 13, 2022

SAN DIEGO - A combination of renewable diesel and biodiesel may "almost completely" displace fossil fuel diesel in California in 2025, a panelist at
the OPIS LCFS & Carbon Markets Workshop said Thursday.

Andy Lipow, president of Lipow Oil Associates, said that he expects renewable diesel to make up about 80% of California diesel demand in 2025.

"I think that's very likely given the amount of renewable diesel capacity that's coming on in California," he said in an interview, "and it could even be higher.

"It really is just a simple matter of looking at the number of plants that are coming online between Global Clean Energy Holdings, Marathon, Phillips and their next-door neighbor, New Rise Renewables in Nevada."

In the first half of 2022, renewable diesel and biodiesel volumes that totaled 807.6 million gal accounted for about 44.1% of the 1.829 billion gal of blended diesel consumed in California, according to the most recent data from the California Air Resources Board (CARB). 

Separately, Lipow said that he believes that LCFS credit prices need to jump to $125 to $140 "to encourage the next tranche of investments." 

OPIS assessed the credits Wednesday at $65.25/credit.

"The market sees that the credit generation is far exceeding the deficit generation, he said. "I think it is a high probability that we will get back there because I think that CARB is going to be looking at all these balances...to figure out what is the price needed to encourage more investments."

Lipow also projected that renewable diesel exports to Canada will grow in the next three years.

"As more renewable diesel capacity comes online in the United States, not only in California but elsewhere, that will satisfy the Washington state, Oregon and California markets," he said. 

"As we have additional capacity over and above that demand, they will look northward to Canada as an outlet for their renewable diesel production as Canada offers an LCFS credit value."

--Reporting by Michael Schneider, mschneider@opisnet.com; Editing by Jordan Godwin, jgodwin@opisnet.com 

© 2022 Oil Price Information Service, LLC. All rights reserved.

Five Offshore California Wind Lease Sites Sell for $757.1 Million

December 13, 2022

Five companies, which bid a combined $757.1 million, have won contracts to develop floating wind farms on lease site offshore California, the Department of Interior said Wednesday.

RWE Offshore Wind Holdings, California North Floating, Equinor Wind US, Central California Offshore Wind and Invenergy California Offshore each provided a winning bid. The auction was held by the Interior's Bureau of Ocean Energy Management.

Lease sites ranged from 63,338 to 80,418 acres and received winning bids of between $130 million to $178.8 million. The combined site cover 373,268 acres.

"The Biden-Harris administration believes that to address the climate crisis head on, we must unleash a new era of clean, reliable energy that serves every household in America. Today's lease sale is further proof that industry momentum -- including for floating offshore wind development -- is undeniable," Interior Secretary Deb Haaland in a news release. 

"A sustainable, clean energy future is within our grasp and the Interior Department is doing everything we can to ensure that American communities nationwide benefit."  

Businesses received a 20% credit for including support for offshore wind workforce training or supply chain development in their bids. A total of $117 million from winning bids will go toward these efforts.

Bidders also were able to secure a 5% credit for entering into community benefit agreements with stakeholder groups, local communities and indigenous tribes. The government also stipulated that winning bidders must engage with tribes, local communities and other groups that may be affected by the wind development.

Offshore wind lease auctions have grown increasingly competitive in recent years. BOEM held its first sale for East Coast sites in 2013, when two leases for a total of 164,750 acres off the coasts of Massachusetts and Rhode Island sold for more than $3.8 million.

In the most recent Atlantic auction, six lease sites totaling 488,201 sold for $4.37 billion.

The Biden Administration has set a goal to develop 30 gigawatts of offshore wind by 2030 and 15 GW of floating offshore wind capacity by 2035. The leases awarded Wednesday could provide a total of 4.6 GW of capacity.  

--Reporting by Henry Kronk, hkronk@opisnet.com; Editing by Jeremy Rakes, jrakes@opisnet.com and Jeff Barber, jbarber@opisnet.com 

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP15 Preview: UN Conference Seeks Once-in-a-Decade Deal for Nature

December 7, 2022

Over 17,000 participants gathered in Montreal Wednesday for the 15th meeting of the Conference of the Parties to the UN Convention on Biological Diversity (COP15), where almost 200 nations are attempting to agree on a framework to stop a level of biodiversity loss unprecedented in human history.

The "post-2020 Global Biodiversity Framework" and its 21 separate targets to be negotiated over the next two weeks is being hailed by its advocates as biodiversity's "Paris Agreement moment," which will put reversing biodiversity loss on a par with fighting climate change.

As a result, the gathering has attracted an unusually high number of attendees from corporations and financial institutions scouting potential business opportunities and attempting to gauge the implications of calls to disclose information on their biodiversity impact.

On the eve of the conference, global leaders underlined the scale and effects of the biodiversity loss afflicting the planet, which the UN estimates has pushed one million of approximately 8.7 million known plant and animal species to the brink of extinction.

"We are treating nature like a toilet," said the United Nations Secretary General Antonio Guterres on Tuesday. "And ultimately, we are committing suicide by proxy. Because the loss of nature and biodiversity comes with a steep human cost. A cost we measure in lost jobs, hunger, diseases and deaths. A cost we measure in the estimated $3 trillion in annual losses by 2030 from ecosystem degradation." Current global economic output is approximately just under $100 trillion.

"Collapse of wild pollinator populations, marine fisheries and timber production alone could reduce global GDP by $2.7 trillion annually by 2030, with economic losses of up to 10% annually in vulnerable low- and lower-middle-income countries," said a group of international science advisors to COP15 on Tuesday, citing a 2021 World Bank study. Global wild animal loss is currently occurring at a rate of 2.5%, according to U.K.-based conservation charity the Zoological Society of London.

Environmental campaigners also say that in addition to species loss, there has been a precipitate decline in species abundance. There was "an average 69% decline in the relative abundance of monitored wildlife populations around the world between 1970 and 2018," according to the World Wildlife Fund's Living Planet Index, which tracks the abundance of 5,230 species of mammals, fish, reptiles, birds and amphibians around the world.

According to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, the principal driver of biodiversity loss is the changing use of sea and land followed by direct exploitation of organisms, climate change, pollution and the spread of invasive non-native species.

The post-2020 Global Biodiversity Framework seeks to slow the rate of biodiversity loss in the 2020s, stabilizing biodiversity levels by the end of the decade before increasing global biodiversity over 2030-2050.

The target in the framework that has received most attention in advance of the Montreal conference relates to the aim of protecting 30% of all land and sea areas in every nation by 2030 at a time when only 3% of land and 8% of sea areas are protected globally, according to the U.K.'s Wildlife Trusts, a group of conservation charities. A total of 114 countries have already agreed to the
"30 by 30" pledge.

Another target being negotiated at COP15 focuses on securing $200 billion per annum in financial flows from all sources for biodiversity projects.

In theory, if the framework were adopted in Montreal and both the 30 by 30 pledge and the $200 billion of annual funding were realized, a stream of cash could greet a mushrooming of biodiversity-related projects. It is partly for that reason that an array of actors, from the United Nations to big corporations, have this year talked up the possibility of creating biodiversity credits.

UN, WEF Back Biodiversity Credits

"Biodiversity credits, or biocredits, are emerging as a tradeable unit of biodiversity that can incentivize nature conservation and restoration," a report by the United Nations Development Program and the U.K.-based think tank the International Institute for Environment and Development said Monday.
"Biocredits could provide an option to encourage stronger private sector financial flows towards meaningful and well-designed biodiversity conservation and management."

Similarly, a World Economic Forum report on a potential biodiversity credit market released in September said: "Estimates for the amount of funding needed to halt biodiversity loss range between $722 billion and $967 billion per year.
In 2019, however, the total global flow of funds towards biodiversity protection amounted to approximately $124-143 billion annually.

"This biodiversity financing gap cannot be filled by public funds alone. Businesses have a key role to play ... one such opportunity comes in the form of biodiversity credits."

The British and Australian governments have already devised biodiversity offset credits to mitigate the effects of harm done to the natural environment by private sector companies like housebuilders, but Australian Prime Minister Anthony Albanese announced in August that his country will go further by developing the kind of tradable biodiversity credits envisaged by the UN that are unrelated to offsetting.

Several potential project developers and institutional investors have argued in advance of COP15 that private sector demand for future biodiversity credits does exist on a sufficient scale for such markets to rival the voluntary carbon market.

Robert Guest, investment director of the U.K.-based Foresight Sustainable Forestry fund, told online publication Environmental Finance in September that the biodiversity credit market has "the potential to be as big a market as the voluntary carbon market, if not bigger."

Verra, the world's leading carbon market standard setter, told the same publication last month that it will publish a standard for biodiversity credits toward the end of 2023.

Biodiversity to Rise Up Political and Corporate Agenda in 2023

An agreement in Montreal and Verra's creation of biodiversity credit standards at the end of next year could bookend a momentous 12 months for the development of biodiversity-related rules and calls to action on the part of businesses.

The Taskforce on Nature-related Financial Disclosures will release its final standards in September 2023. These standards are being developed for the world's financial institutions and relate first and foremost to biodiversity as well as other impacts on the natural environment beyond carbon dioxide emissions.

Similarly, the Global Sustainability Standards Board, which is responsible for global standards on sustainability reporting by organizations including businesses, is developing new biodiversity standards that will be published mid-2023.

In the U.S., the White House announced earlier this month that it will now require federal contractors with combined contracts of several hundred billion dollars per year to disclose environmental data to CDP, the U.S. non-profit environmental standards charity. This requirement, the Federal Supplier Climate Risks and Resilience Rule, will mandate large federal contractors to disclose information on their biodiversity impacts because CDP is changing its environmental data disclosure requests to include biodiversity for the first time.

Almost 19,000 businesses and organizations with a combined stock market capitalization of $61 trillion disclose through CDP, which said earlier this year: "In 2023, CDP will have new questions on biodiversity. CDP will begin scoring all companies against scientific benchmarks reflecting their historic, current and projected impacts; product portfolios; and investment and transition plans. This will provide a clear assessment of a company's ambition and how they are doing against targets."

Although the U.S. is not a party to the Convention on Biological Diversity negotiated in 1992 -- the treaty was never ratified because a two-thirds Senate majority was not obtainable for the Clinton administration -- the country has said that it wants to achieve the 30 by 30 conservation target.

In October, more than 330 corporations and investment funds in 56 countries called for mandatory requirements for all large businesses and financial institutions to assess and disclose their impacts and dependencies on biodiversity by 2030, and it is clear from the attendee list at COP15 that business interest in biodiversity has never been greater.

The leader of the Convention on Biological Diversity, Executive Secretary Elizabeth Mrema, told journalists in a pre-COP briefing: "You may be surprised:
in the history of our Convention ... as far as the registrations were received, the majority, the big percentage -- over 60% -- is from other stakeholders including business and financial institutions. It has never happened [before] in the history of the Convention."

Deal Far from Foregone Conclusion

For all the positive statements from governments and big businesses about finally grappling with biodiversity loss, a successful outcome to COP15 is far from certain.

The auguries have been mixed, say campaigners. Bernadette Fischler Hooper, head of international advocacy at WWF-UK, said in a press briefing Tuesday: "Here in Montreal on the eve of COP15 some countries are still hesitant to sign up to this challenge. We firmly believe that nothing less is required to pull our planet back from the brink. In short, the stakes are really high and time is running out."

The World Wildlife Fund criticized "a lack of progress during the Open-Ended Working Group" (OEWG-5) that convened negotiators for pre-COP15 technical talks Dec. 3-5.

A successful adoption of the post-2020 Global Biodiversity Framework could easily be scuppered by individual countries objecting to one of the 21 targets being negotiated in Montreal. The totemic 30 by 30 pledge on land and sea conservation is opposed by Turkey, according to a tabulation of COP15 negotiating positions on Carbon Brief's website, while big agricultural producers like Brazil and Argentina oppose including "agroecology" goals in Target 10, which would mandate countries to "ensure all areas under agriculture, aquaculture and forestry are managed sustainably, in particular through the conservation and sustainable use of biodiversity."

Ultimately, even if the framework is adopted, achieving its targets will require countries to summon up the political will to do so at a time of straitened public finances. Some Western nations such as the U.K. have cut the annual budgets of their government environmental departments and conservation agencies that will be tasked with implementing any COP15 agreement.

The last set of decade-long targets adopted by the COP10 conference in Japan, known as the Aichi Biodiversity Targets, were not realized over 2011-2020.
"None of these targets have been fully met," the UN Environment Program conceded last month.

Avoiding a similar scenario for targets coming out of a COP15 accord will require parties to agree to effective implementation of monitoring systems, say campaigners. But that too is likely to be a source of heated and frenzied negotiations over the next two weeks.

The Conference of Parties to the UN Convention on Biological Diversity (COP15) is taking place in Montreal Dec. 7-19.

--Reporting by Anthony Lane, alane@opisnet.com
--Editing by Michael Kelly, mkelly@opisnet.com

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COP15: United Nations Throws Weight Behind Biodiversity Credit Markets

December 5, 2022

The United Nations said Monday that creating biodiversity credit markets could channel private sector financial flows to fund ambitious global plans for the protection of the natural world that will be negotiated at the COP15 UN biodiversity summit in Montreal over the next two weeks.

"Biodiversity is degrading at alarming rates," said the report by the United Nations Development Program and the U.K.-based think tank the International Institute for Environment and Development (IIED). "Biodiversity credits, or biocredits, are emerging as a tradeable unit of biodiversity that can incentivize nature conservation and restoration."

Biodiversity credits represent a "credible option for delivering on international and national biodiversity frameworks and plans, such as the post-2020 Global Biodiversity Framework," said the report, adding that such plans "are often underfunded or compete for limited resources, and the private sector has struggled to find a clear entry point."

"Biocredits could provide an option to encourage stronger private sector financial flows towards meaningful and well-designed biodiversity conservation and management," the report said.

The post-2020 Global Biodiversity Framework will be negotiated during COP15 and is a once-in-a-decade plan that seeks a consensus between almost 200 countries. It asks nations to commit over the 2020s to slowing the trends exacerbating the current rate of biodiversity loss, which the UN estimates threatens a million plant and animal species with extinction.

The draft text of the post-2020 Global Biodiversity Framework asks nations to "increase financial resources from all sources to at least $200 billion per year, including new, additional and effective financial resources." The UN and IIED report published Monday argues that creating biodiversity credits can provide some of that financing.

The report drew a sharp distinction between tradeable biodiversity credits that have yet to be created as an asset class and biodiversity offset credits. The latter have already been devised by the Australian and British governments over the last few years and will enable private sector companies such as housebuilders to offset the environmental damage done by their on-site activities by supporting biodiversity projects.

The UN agency and the British think tank argued that biodiversity credits have clear environmental benefits, or additionality, in a way that biodiversity offsets do not.

"As a purely positive investment in nature, biocredits are distinct and are preferred to biodiversity offsets, which can cause net damage to biodiversity," said the report.

One of the key questions hanging over the nascent biodiversity credit market is whether demand for such credits can take off.

The report's authors suggested that demand for biodiversity credits could come from an array of actors: "Demand for biocredits can come from investors and private biocredit resellers and intermediaries, companies with commitments on corporate social responsibility (CSR) and committing to nature-related disclosures ... philanthropists and impact investors, and individuals interested in conservation.

"Private biocredit resellers and intermediaries may act as conveyors of demand. As with voluntary carbon markets, buyers will often be driven by corporate commitments to nature-positive targets," said the UN and IIED.

Several potential project developers and institutional investors have argued in advance of COP15 that private sector demand for future biodiversity credits does exist on a sufficient scale for such markets to rival the voluntary carbon market.

Robert Guest, investment director of the U.K.-based Foresight Sustainable Forestry fund, told online publication Environmental Finance in September that the biodiversity credit market has "the potential to be as big a market as the voluntary carbon market, if not bigger."

"Voluntary carbon is blazing the trail, it will break down all the barriers," said Guest. "The biodiversity market will follow in the slipstream and might catch up quite quickly."

Verra, the world's leading carbon market standard setter, told the same publication last month that it will publish a standard for biodiversity credits toward the end of 2023.

The difficulty in standardizing biodiversity credits is widely regarded by advocates as the thorniest issue facing the development of such markets, as biodiversity-related interventions cannot easily be standardized on the basis of an individual unit such as a metric ton of carbon, as is the case with carbon credits.

The UN and IIED report highlights the work of three "emerging biocredit scheme" providers -- Terrasos in Colombia, ValueNature, which is focused on African projects, and global climate organization Wallacea Trust -- that standardize their interventions and methodologies on the basis of a physical area: "For the market to function, there must be clear and accepted metrics underlying biocredits. The three existing schemes examined within this report all work on a spatial quantity indicator (e.g. hectare or 10 square meter plot)."

The report concedes that biodiversity credit methodologies will require a degree of wiggle room as the market develops: "Importantly, the metrics must be flexible enough to evolve with improved understanding of what quality biodiversity means and with revisions to frameworks such as the International Union for Conservation of Nature's Red List of Threatened Species and the Global Biodiversity Framework.

"Quantifying biodiversity is a challenge in itself, but defining a unit of biodiversity in such a way that is marketable and tradable, while providing additionality, is even more difficult," the report admits.

The UN and IIED report also offers a potential classification that differentiates between three forms of future biocredits, dividing interventions between those that "avoid biodiversity loss; measure improvement; or reward successful management of pristine sites."

The Conference of Parties to the UN Convention on Biological Diversity (COP15) will take place in Montreal December 7-19.

--Reporting by Anthony Lane, alane@opisnet.com
--Editing by Michael Kelly, mkelly@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

Coalition for Rainforest Nations Negotiates REDD+ Mechanism Into COP27 Plan

November 30, 2022

The Coalition for Rainforest Nations (CfRN) reaffirmed REDD+ as the global initiative for tackling deforestation under the Paris Agreement by renegotiating the mechanism into the COP27 Sharm-El Sheikh Implementation Plan, the U.S.-based not-for-profit said Wednesday.

The REDD+ mechanism was removed from the implementation article of Paris Agreement - also known as Article 6 - at last year's COP26 climate change summit. It was added back into the plan during last-minute negotiations at COP27, held earlier this month, CfRN said in a news release.

The REDD+ framework was adopted at COP19 in 2013 "and provides the complete methodological and financing guidance for the implementation of REDD+ activities," according to the United Nations Framework Convention on Climate Change (UNFCCC), which approves so-called sovereign carbon credits under the program. The sovereign REDD+ credits are counted toward Nationally Determined Contributions (NDC) for emissions reductions.

REDD+ was reinstated into section 16 of the implementation plan.

"The Plan finally puts to bed years of misinformation that UNFCCC REDD+ wasn't intended for companies or carbon markets. The private sector has always been welcomed to support the efforts of rainforest nations," Kevin Conrad, executive director of the Coalition for Rainforest Nations, said in the release. "REDD+ sovereign carbon credits are of the highest environmental integrity and include some of the most incredible biodiversity on the planet."

Honduras and Belize are expected to issue 5.6 million and 7.7 million tons of REDD+ sovereign carbon credits, respectively, in the first quarter of  REDD+ 2023 for reducing emissions and protecting the Central American Jaguar corridor. Papua New Guinea is expected to issue over 90 million tons of REDD+ credits in 2023 as well, according to the release.

Earlier this month, the UNFCC approved Gabon for 90 million tons of emissions reductions for slowing deforestation between 2010-2018.

CfRN was established by forested tropical countries to collaboratively reconcile forest stewardship with economic development. The coalition helps tropical governments and communities to responsibly manage their rainforests under the UNFCCC. Earlier this month the European Energy Exchange (EEX) announced a partnership with CfRN to cooperate on the establishment of a market platform for REDD+ sovereign carbon credits.

On Tuesday, OPIS' Voluntary REDD+ credits averages ranged from $6.768/mt for V16 to $14.423/mt for V21.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, was held in Sharm-El Sheikh, Egypt from Nov. 6-18.

--Reporting by Jeremy Rakes, jrakes@opisnet.com
--Editing by Bridget Hunsucker, bhunsucker@opisnet.com, and Michael Kelly, mkelly@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

US Green Hydrogen Production Costs Set to Fall Below $2/kg.

November 22, 2022

The capital and operating costs of green hydrogen production in the United States will fall below $2/kg (€1.9/kg), which is four times cheaper than EU production costs, participants at the Clean Hydrogen webinar, organized by U.K. based think tank Carbon Tracker said Tuesday.

This could create an export channel between the US and the rest of the world and European policymakers should adopt policies to protect their markets, they said.

The US recently introduced the Inflation Reduction Act (IRA) which reduces the capital cost of new green hydrogen assets in the US alone. The scheme subsidizes the cost of all new green hydrogen assets by $3/kg, meaning that green hydrogen can now be produced at costs lower than $2/kg.

According to Tessa Weiss, Senior Associate at clean energy non-profit RMI, reports indicate that Europe can produce up to 40 percent of the green hydrogen capacity needed. All the rest will come from imports.

The European Commission published its hydrogen strategy for a climate-neutral Europe in July 2020, with a three-pillar roadmap aiming to scale up carbon neutral hydrogen to 20 million metric tons/year by 2030, coming from both European production and overseas imports.

"We expect that European manufacturers are looking to produce clean hydrogen in the US at cheaper prices, and then transport it back into the continent," Weiss said.

However, moving around hydrogen will increase carbon emissions significantly, so we will have to change the way we transport, speakers mentioned.

"Europe will need to build transportation and conversion infrastructures, new storage, and pipeline infrastructures. Existing gas pipelines could be retrofitted for hydrogen transport," they said.

Countries worldwide such as Australia, Egypt, Chile, Namibia, and others, are competing to become exporters of hydrogen or hydrogen derivatives. China is beginning to challenge Western technologies on cost and could take a significant share of the market, Hydrogen Europe mentioned in its latest report.

--Reporting by Benita Dreesen, bdreesen@opisnet.com
--Editing by Yazdi Merchant, ymerchant@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: Week 2 Roundup

November 18, 2022

Here are a few stories you might have missed from this week, the final week of COP27 climate summit in Sharm El Sheikh, Egypt ...

Africa Could Prevent 880,000 Deaths Annually by Curbing Pollution: Report

Africa could prevent 880,000 deaths per year by 2063 by acting on air pollution and climate change, a study said Thursday.

The report, Integrated Assessment of Air Pollution and Climate Change for Sustainable Development in Africa, was released at COP27 by the Climate and Clean Air Coalition, the United Nations Environment Programme and the African Union Commission.

It shows how African leaders can act quickly across five key areas - transport, residential, energy, agriculture and waste - to fight climate change, prevent air pollution and protect human health.

By following the report's recommendations, African governments could prevent
200,000 premature deaths per year by 2030 and 880,000 deaths per year by 2063, it said.

The report warned that the cost of inaction would be high. It projects that, without changes in policy, greenhouse gas emissions will triple by 2063, causing about 1.6 million premature deaths per year. Globally, air pollution kills about 7 million people each year.


US Unveils Initiative to Cut Emissions From Government Operations

The Biden Administration has launched a new initiative at COP27, inviting governments to lead by example and achieve net zero emissions from their operations by no later than 2050.

The Net-Zero Government Initiative was unveiled Thursday by the U.S. delegation, and 18 countries have already agreed to join.

They are Australia, Austria, Belgium, Canada, Cyprus, Finland, France, Germany, Ireland, Israel, Japan, Korea, Lithuania, Netherlands, New Zealand, Singapore, Switzerland and the U.K.

"The Net-Zero Government Initiative demonstrates that there is a growing global consensus about the role of governments in the transition," U.S. Special Presidential Envoy for Climate John Kerry said in a news release.

By joining the initiative, countries are collectively underscoring the critical leadership role governments can play, the administration said.


Asian Development Bank Launches New Transition Platform

The Asian Development Bank (ADB) has launched a new platform to ensure that the benefits of the transition to low carbon economies are shared equally and no one is left behind.

The Just Transition Support Platform aims to build the capacity of ADB's developing member countries to plan, implement and finance transition and to manage any negative impacts, the bank announced at COP27 on Monday.

"This platform will help to build inclusive and equitable action toward achieving net zero in Asia and the Pacific, while maximizing the gender, social and economic outcomes of climate action," Bruno Carrasco, director general of ADB's sustainable development and climate change department, said in a news release.

The Asia-Pacific region accounts for more than half of all global greenhouse gas emissions and is simultaneously highly vulnerable to the impacts of climate change.

In 2019, multilateral development banks including ADB pledged to support countries as they transform their economies toward climate-resilient development. This week's launch of the platform shows how ADB is taking steps to implement its pledge, the bank said.

Ellie Goulding Makes Impassioned Plea to Save Coral Reefs

Singer-songwriter Ellie Goulding has made an impassioned plea at COP27 to protect coral reefs, saying more needs to be done to save the vibrant ecosystem.

A goodwill ambassador for the United Nations Environment Programme (UNEP), Goulding issued the call Tuesday, just days after diving into the Red Sea to witness the resilience of the coral reefs off Sharm El Sheikh.

Citing a report from the Intergovernmental Panel on Climate Change, she said 70 to 90% of all coral reefs would be lost with a 1.5-degree Celsius global warming, and at 2 degrees, 99% would be lost. Limiting warming to 1.5C is the aspirational goal of the 2015 Paris Agreement.

"Humanity has never been on the verge of losing an entire ecosystem before,"
Goulding says in a video of her dive posted by the UNEP on its website. "But we have also never had the opportunity to save one either."

Globally, coral reefs support more than a quarter of all marine life and underpin the safety and economic security of hundreds of millions of people, according to Global Coral Reef Monitoring Network. In a report released in October 2021, the group documented the loss of 14% of the world's coral reefs since 2009 due to bleaching.

Esri Partners With Microsoft on African Sustainable Agriculture Initiative

American mapping company Esri is collaborating with Microsoft on a sustainable agriculture development initiative in Africa.

The companies will create technology solutions enabling organizations in the continent to perform crop mapping at scale to improve agricultural management, Esri said Monday.

At the Microsoft booth at COP27, Esri demonstrated how geographic information system, or GIS, is fundamental to achieving sustainable farming.

"Crop patterns and health can be identified, extracted and monitored seasonally by combining Esri's geospatial artificial intelligence capabilities, satellite imagery as well as Microsoft's infrastructure and AI devices," Esri said in a news release.

The collaboration follows the recent launch by Esri of a program that offers geospatial tools to government agencies in Africa at discounted rates.

Open Letter Calls on World Leaders to End Factory Farming

More than 200 high-profile individuals have called on world leaders attending
COP27 to end factory farming and transform the global food system.

In an open letter issued Thursday, they said action must be taken now to end industrial animal farming.

Its 208 signatories include celebrities, academics as well as business and religious leaders. Actors Brian Cox, Alan Cumming, Steve Coogan and Eva Green are among them.

"Take a closer look at almost any global challenge, and you will find food at its core. A system based on overproduction and unhealthy food is propped up by intensive farming methods," the letter said.

The campaign was organized by Compassion in World Farming, a movement dedicated to ending factory farming and achieving humane and sustainable food.

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

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: EU Agrees to Loss and Damage Fund with Conditions as Summit Extends

November 18, 2022

SHARM EL SHEIKH -- As nearly 200 countries race to finalize an agreement on what is supposed to be the last day of the COP27 climate summit, the European Union backed a plan proposed by developing countries to establish a loss and damage fund for countries afflicted by serious climactic events -- representing a potential breakthrough in the stalled negotiations.

Frans Timmermans, the EU's climate policy chief, told the media on Thursday evening and during an COP27 closing plenary early Friday morning that the EU would support a loss and damage fund but with two conditions: that any such fund prioritizes financial aid to the most vulnerable populations and that the fund will rely on a broad donor base.

"[This fund] should take into account the economic situation of countries in 2022 and not [their situation] in 1992, which is the proposal of the G77," Timmermans said, noting that in the last three decades, several countries have improved their economic position and would thus need to contribute a proportionate amount towards any loss and damage fund.

The G77, a bloc of developing countries that include China and 130 other countries, had proposed earlier this week a 'loss and damage fund' to be established in 2023. However, Timmermans took issue with the G77's proposal to limit the donor base to certain countries depending on their economic situation as of 1992.

The discussion around loss and damage -- a term used for irreparable climate damage -- has become a salient point at COP27. Activists in Sharm El Sheikh are wearing bandanas and shirts calling for concrete plans like a fund or financial contributions from rich countries toward poorer nations.

This is the EU's final offer, Timmermans said, adding that the 27-member state bloc still had to see how other countries like China, the United States and others would react to the proposal.

Representatives from developing countries like Ralph Revenganu, Vanuatu's minister of climate change adaptation, told reporters Thursday afternoon that a loss and damage fund must be established by the end of the climate summit.

"1.5 degrees Celsius is the ultimate red line, the existential threshold we cannot cross," Revenganu said. "The 1.1 degrees Celsius of warming that we have locked in means that loss and damage is existential now."

New Draft Text Published early Friday as Negotiations Intensify

At 9 a.m. local time in Egypt, the Egyptian presidency released another draft text detailing the summit's overarching decision. The 10-page document had been narrowed down from Thursday's 22-page behemoth that led to more intense negotiations between delegates on Thursday and Friday morning.

The text released Friday has a placeholder item for the "funding arrangement responding to loss and damage." An "adequate and effective response to loss and damage is of great importance to the continued credibility" of all climate summits after COP27, the draft text stated.

The draft text reaffirms points from last year's climate summit in Glasgow and emphasizes the need to abide by the Paris Agreement's target of staying within the 1.5 degrees Celsius threshold needed to avoid the worst consequences of climate change.

"Reaffirms the Paris Agreement temperature goal of holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels," the draft text said.

Negotiations have continued into the final official hours of COP27, and reports on social media say that delegates are preparing to remain in the resort town of Sharm El Sheikh until Sunday to nail down an agreement. Shuttle and transportation between hotels and the climate summit conference center have been prolonged over the weekend, reports say.

Agreeing on a funding arrangement or clear guidelines for a loss and damage fund have become one of the most important points at COP27.

Nabeel Munir, a Pakistani ambassador, told delegates that a successful COP27 would hinge on whether or not there was a concrete outcome on loss and damage.
"We urge all our partners, and I emphasize, all our partners, to look at what needs to be done."

A representative for Barbados said in the early morning hours of Friday that including loss and damage in the official agenda for the first time was not enough.

"We would not wish to come out of this COP without a clear definitive language within the text and the cover text that addresses loss and damage," the Barbados representative said.

Timmermans said he was reluctant about a fund, saying it would take time to establish and supply, and argued that other existing measures could be used immediately to support vulnerable populations.

However, loss and damage has become an increasingly salient topic of discussion, with developing countries suggesting that agreement cannot be reached unless rich nations supported this type of fund. An informal plenary meeting Friday afternoon, Sherry Rehman, Pakistan's climate change minister, said that she supported the creation of a loss and damage fund to assist developing countries and that postponing it to next year's COP or establishing funding arrangements were "not tenable".

"If that is the only way we can get an agreement, we can live with a fund," Timmermans told reporters on Friday morning next to the EU pavilion at the climate summit. "We remain reluctant about a fund, but it's our proposal to compromise."

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: EU Pledges $62.4m to African Union For Climate Loss and Damage

November 17, 2022

SHARM EL SHEIKH -- The European Union and the African Union announced a plan on Wednesday at the COP27 climate summit to enhance a partnership that combats the effects of climate change in Africa, with the EU pledging €60 million ($62.4million) for loss and damage.

Creating a dedicated facility for loss and damage -- a general term for the consequences of climate change that cannot be mitigated or adapted to -- has been the source of the most protracted and heated discussions at COP27, threatening to delay a wider summit agreement that nearly 200 countries are racing to conclude by the end of the week.

The €60 million pot of money promised by the EU was not pledged to such a facility but was instead part of a €1 billion package consisting of new and existing climate change adaptation programs that will reinforce policy dialogues between the two blocs to finance the AU's climate disaster preparations and risk strategies.

Timmermans Cautious on Loss and Damage Facility

Announcing the package of measures, Franks Timmermans, executive vice president of the European Commission, said in a speech that: "You know the hot topic this week is loss and damage...The climate crisis is already here, causing disastrous floods, severe droughts and massive heatwaves across the world.

"To tackle the climate crisis and all that goes with it such as loss and damage, we need a mosaic of solutions. And we will present some ideas today on how to take the talks forward in a more realistic way than some of the proposals we've seen floated so far," said the European Union's lead negotiator at an EU side event on Wednesday.

Timmermans made clear that the EU's preference was to make ad hoc loss and damage-related contributions rather than focus on a dedicated facility that he said could take years to create. By contrast, existing financial instruments for loss and damage can be mobilized immediately, he argued.

He earlier told reporters: "You have seen a change in many many European countries on loss and damage...We want to be bridge builders. We are open for this facility, but under certain conditions, and we need to discuss this.

"Everybody should be brought into the system on the basis of where they are today. China is one of the biggest economies on the planet with a lot of financial strength...Why should they not be made co-responsible for funding loss and damage?" asked Timmermans.

For the first time, loss and damage was included on the official agenda for a COP, meaning that reference to the issue should appear in the text of a final agreement. But the U.S. and other developed nations are wary of creating a dedicated facility into which they would pay.

"It's not fully defined, what is a facility," said John Kerry, the U.S.'s presidential envoy, earlier this week in Sharm El Sheikh. "There are all kinds of different views on what it could be. No one can sign up to something on it, not yet...We are not at the [financial] facility discussions yet."

Henrik Eriksen Hallgrim, Norway's chief climate negotiator, said Monday that the lack of an agreement on loss and damage was holding back progress with negotiations on other issues at COP27.

As OPIS went to press, United Nations secretary-general Antonio Guterres warned that: "COP27 is scheduled to close in 24 hours -- and the Parties remain divided on a number of significant issues. There is clearly a breakdown in trust between North and South, and between developed and emerging economies."

Loss and damage was one "critical area" that needed urgent progress, Guterres said.

"The most effective way to rebuild trust is by finding an ambitious and credible agreement on loss and damage and financial support to developing countries...No one can deny the scale of loss and damage we see around the globe...We cannot continue to deny climate justice to those who have contributed least to the climate crisis and are getting hurt the most," said the UN secretary-general.

Effects of €1 billion EU-AU Package

This enhanced funding arrangement announced Wednesday will include investments in upgrading early warning systems, providing climate-vulnerable populations with access to insurance and protection funding, and mobilizing international climate finance from both the public and private sectors.

Amani Abou-Zeid, African Union energy commissioner, said that developed countries had made several financial pledges to aid developing countries but that more international support was needed to help the AU in the coming decades.

"Adaptation and resilience to climate change has to be the priority for all of us and also for all the partners who are working with us and our governments," Abou-Zeid said.

African countries could see around $50 billion in costs from climate impact alone by 2050, the EU Commission said in a news statement, adding that financial aid is necessary to avoid the worst case scenarios.

Th EU's announcement is part of the bloc's efforts to bolster its Global Gateway Investment Package (GGIP) with the AU, a partnership between the two blocs to aid the AU's transition toward cleaner sources of energy and increased digitalization. The GGIP includes an aspirational target of €150 billion, which would come from the EU and accompanying financial institutions in the form of grants and loans.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: VCM Requires Centralized Data, Transparency to Meet Demand: Experts

November 16, 2022

SHARM EL SHEIKH, Egypt -- The voluntary carbon market is projected to have a market size of $50 billion by 2030, according to estimates by consultant firm McKinsey, but growing pains, especially the absence of a uniform carbon credit registry or centralized data platform, will complicate that transition, speakers said at the International Emissions Trading Authority (IETA) at the COP27 summit on Wednesday.

The supply and demand sides of the voluntary carbon market have ballooned in the last decade, changing from what used to be a market for major oil and natural gas companies to a more fragmented market that now includes retailers and other end consumers, according to Svenja Telle, a director at Base Carbon, which produces and commercializes verified carbon credits.

Different certification processes and standards for carbon credits can cause confusion and prevent a unified market on both the supply and demand side, speakers said. There is a need for a "common language" around certification and verification standards to scale up to accommodate a growing audience, they added.

"Price transparency is an issue for more and more players in the market," Telle said. "There is a lack of data around transactions. ... we don't have incentives to submit price data into markets because it's fragmented."

Hugh Salway, head of environmental markets with Gold Standard Foundation, a carbon credit certificating non-governmental organization, said that while Article 6 of the Paris Agreement has set the guidelines for the creation of global carbon markets, many of the systems registering transactions in the voluntary carbon market are manual.

"You're dealing with some really manual systems that are potentially quite unreliable," Salway said.

Having a common taxonomy to secure transaction data on a digital platform would give carbon credits the credibility and value that a growing number of participants are searching for, according to Chandra Shekhar Sinha, a climate change group adviser with the World Bank.

"The current infrastructure for the carbon market does not live up to the standards for the financial systems at stake," Sinha said.

Digitalization of carbon credits was also a topic at the IETA side event.

Consumers currently entering the voluntary carbon market for the first time sometimes lack an understanding of what a carbon credit is, fragmenting the demand side of the market, Telle said.

Any proposal to tokenize carbon credits would need to happen at the onset of the verification and certification process, said Telle, especially as new technologies like ocean-based removals and carbon capture and storage (CCS) continue to change and provide more venues for different types of carbon credits.

"We can increase trust on the buy side," Telle said. "The carbon market begins with the part of the market that is happening before the first credit has been issued."

The strategy of offsetting carbon emissions through retiring carbon credits has grown in recent years to finance climate projects and reach net-zero and Paris Agreement-aligned goals. The fast-growing global voluntary carbon market reached the $2 billion mark this summer.

According to OPIS pricing data, the Voluntary REDD+ Credits V21 average price was $14.008/metric ton on Tuesday, up from $12.658/mt on Jan. 3, 2022.

OPIS carbon reports increase transparency in the voluntary carbon markets, with assessments and data reflecting confirmed bids, offers and trades reported by approved traders, brokers and electronic platforms.

OPIS Voluntary REDD+ Credits (OPIS REDD+) assessments are vintage-specific and reflect carbon offset credits certified by Verra and validated under the Climate, Community & Biodiversity Standards (CCB). OPIS began publishing REDD+ and CORSIA eligible offsets (OPIS CEO) prices in December 2020 in its Global Carbon Offsets Report.

To support nature-based carbon removals project development and voluntary carbon market growth, OPIS launched daily price assessments in June for afforestation/reforestation (OPIS ARR) and Blue Carbon (OPIS Blue) credits as well as more co-benefits standards. OPIS's comprehensive suite of voluntary carbon credit indexes also includes OPIS Core Carbon Credits (OPIS CCP), which reflect the price for standard carbon credits, including CORSIA-eligible credits, REDD+ credits and other forestry credits.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com and Michael Kelly, mkelly@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: Regulatory Framework and Methodology Necessary for Global CCS Market

November 15, 2022

SHARM EL SHEIKH, Egypt -- As more countries look to establish compliance carbon markets, a trusted independent methodology and regulatory frameworks are needed to make carbon capture and storage (CCS) technology a financially viable voluntary solution for hitting net zero, speakers said Tuesday at an International Emissions Trading Association (IETA) event at the COP27 climate summit.

Jean-Philippe Brisson, a partner at law firm Latham & Watkins LLP, said that CCS project costs can vary between a wide range of $500 million and $5 billion, making it crucial for private investors to have clarity about long-term risks including carbon removal certifications and potential liabilities.

"The need to manage and reduce gas emissions makes CCS projects an option [for companies]," Brisson said, noting that in order to meet net zero climate goals by 2050, companies will see CCS projects as an opportunity.

Maris Densmore, a director with the American Carbon Registry, emphasized that the absence of a regulatory structure is the foremost challenge that CCS technology is facing in order to scale up at a regional or global level.

"We can support and help with the development...but it's something we're going to struggle with, to deploy [CCS projects] in these places," Densmore said at the IETA event on the role of financial organizations and carbon markets in accelerating CCS deployment.

Dirk Forrister, chief executive officer of IETA, added that parties still needed to engage in discussions stemming from Article 6 of the Paris Agreement and its incoming rules for the trading of carbon credits.

A certification mechanism for CCS projects and any credits that recognize the emissions withdrawn from these are necessary to bring in the financing for large-scale CCS projects, Forrister added. An independent standard would facilitate access to the voluntary carbon market and ensure integrity within the market.

"Voluntary [carbon] markets are the only ones that are truly global right now...what we're seeing is a voluntary market that can service the needs of voluntary or compliance purchasers," Forrister said.

"The market wants assurance that [carbon credits] can be transferred, [carbon credits] need integrity," Forrister said. "Can you cancel a dollar after you issue it? [Investors] need stability within this system."

Developing countries will face a tougher time in commencing CCS projects within their borders, particularly on the feasibility of scalability and funding, according to Fatih Yilmaz, a fellow at King Abdullah Petroleum Studies and Research Center (KAPSARC).

In Europe, the European Union Emissions Trading System (EU ETS) currently does not consider negative emission technologies and is unlikely to change in the coming years, said Esther Badiola, a senior economist at the European Investment Bank.

However, the EU Commission is looking at these types of technologies and particularly the certification processes in order to create a framework and a demand for related certificates in the future, Badiola pointed out.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com

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COP27: India Releases Decarbonization Plan To Meet 2070 Net-Zero Goal

November 15, 2022

The world's third-largest greenhouse gas emitter, India, has laid out its long-term plan to meet its target of net-zero emissions by 2070 at the COP27 summit in Egypt --with an eye on reducing domestic demand, scaling hydrogen and carbon capture technology, and phasing out its coal production.

The country earlier committed to cut its emissions intensity by 45% below 2005 levels by 2030. The plan to achieve this target is outlined in its Long-Term Low Emissions and Development Strategies published on the Environment Ministry website, covering key areas including:

  • Electricity: "Rational use" of fossil fuel resources while expanding renewables (e.g., centralized solar and onshore wind parks) and exploring low-carbon technologies (e.g., modular nuclear reactors)Transport: Scale use of biofuels, especially ethanol blending in petrol to hit 20% by 2025, and green hydrogen
  • Urbanization: Enhance energy and resource efficiency with urban planning, effective green building codes
  • Forests: India on track to achieve 2.5-3 billion mt of addition carbon sequestration in forest and tree cover by 2030
  • Finance: Low-cost international climate finance key for transition, with estimates for costs in the range of "trillions of dollars by 2050"

There were no details on plans for international carbon market engagement in the report.

India said its approach is based on considerations including significant energy needs for development, and its "little" contribution to global warming - with a historical greenhouse gas contribution of 4%,  despite being home to 17% of the global population.

Its greenhouse gas emissions totaled 2,838 MtCO2e in 2016, according to official numbers.

Under the Paris Agreement, which aimed to keep global temperature rise well below 2 degrees Celsius above pre-industrial levels, all countries are required to submit reports to show how they will get there.

So far, 57 countries including India, China and the US have submitted such plans to the United Nations Framework Convention on Climate Change.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

China, the U.S. and India are in order the world's largest greenhouse gas emitters, according to global research non-profit organization, the World Resources Institute.

--Reporting by Melissa Goh, mgoh@opisnet.com
--Editing by Hanwei Wu, hwu@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: Standard Setters Look to Build Capacity, Seek Clarity to Scale

November 14, 2022

The world's largest carbon-offset registry Verra is seeing a "flood of projects", with a 400% increase in requests from August to October compared to the previous three-month period.

Speaking at COP27 in Sharm-el-Sheikh on Nov. 9, Verra CEO David Antonioli said it is essentially facing a "supply chain problem" and needs to relook its internal processes and technology. It is also facing a shortage in auditing capacity, or the resources to assess that projects are up to mark.

"We need to be working more with accreditation entities throughout the world to build the auditing capacity that will help usher in and streamline the approval process," said Antonioli.

Verra is working with partners to allow local auditors to be part of the process, in the longer term.

Antonioli was speaking on the topic of the potential of carbon markets to scale green hydrogen, alongside representatives from Gold Standard, South Pole, and Perspectives, as part of a panel organized by Singapore investment platform GenZero.

He added that to scale supply, the voluntary market needs clarity from initiatives by the Integrity Council for Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative.

This could offer companies confidence on the credits they can buy, and for them to identify what claims they can make in terms of offsets.

Gold Standard, echoing Verra's point, said these initiatives could give green hydrogen a boost.

"Buyers will be sure that green hydrogen stacks up as well as any of those other credits, even if you consider it to be less charismatic than, say, a forest or a community. The actual environmental integrity is there," said Owen Hewlett, Chief Technical Officer of Gold Standard.

Hewlett also added that voluntary carbon markets need to come into line with the Paris Agreement. With stricter rules such as having to avoid the double counting of credits, this could allow credit developers to be able to cater to the most "use cases", and spur both demand and price.

He outlined a possible shift in buying behaviour that could support green hydrogen demand. Companies could consider a mix of credits that is "science-aligned, ambitious and optimized", with green hydrogen in the mix.

This is opposed to buying just a singular type of credit, such as 100% in forest carbon credits or in clean cooking, etc.

"I foresee over the next sort of 12 months or so we'll start to see some guidance on what would be an optimal mix," said Hewlett.

Panelists said green hydrogen projects, a sector "not taking off" due to the lack of a green premium and investment, offer opportunities for the market.

"Grid-connected renewable energy in most contexts no longer satisfies the (Article 6) additionality criterion, whereas a large, upscaled hydrogen value chain from renewable energy definitely is additional," said Dr Axel Michaelowa, Senior Founding Partner of Perspectives.

Green hydrogen can also allow developing countries to play a part in the energy transition, serving as an energy carrier for them to harness huge resources of renewable energy in their countries, he added.

--Reporting by Melissa Goh, mgoh@opisnet.com
--Editing by Carrie Ho, cho@opisnet.com

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COP27: Week 1 Roundup

November 11, 2022

HubSpot Video

Here are a few stories you might not have seen from the first week of COP27 climate summit in Sharm El Sheikh, Egypt.

Forest Degradation Causing Massive Emissions: Report

Global tropical forest degradation has been analyzed for the first time by carbon tracker CTrees, and it doesn't look good.

Data released by Ctrees on Wednesday at COP27 show that forest degradation from logging and fire in tropical regions accounts for 1 to 1.5 gigatons of carbon dioxide emissions every year. By comparison, emissions from deforestation account for 2.5 to 3 gigatons of carbon annually.

The California-based nonprofit uses artificial intelligence and satellite technology to track trees worldwide. Its interactive platform offers data across every country and jurisdiction, offering critical information about forest change.

Ctrees also measures carbon levels in trees outside forests, an important and often overlooked natural resource that contributes substantially to national biomass, carbon stocks and livelihoods, it said.

In Africa, satellite mapping revealed that one-third of all trees are located outside areas classified as forests, and together with sparse savanna woodlands and dry forests they store more than 60 billion metric tons of carbon.

Egypt Adopts New Climate Investment Plan

COP27 host Egypt has become the first country to adopt a Climate Investment Plan in partnership with the Green Climate Fund (GCF).

The move could significantly accelerate efforts by the country to combat climate change by unlocking new investment, GCF said Wednesday.

"The Investment Plan model shifts the focus from looking at climate projects on a project-by-project basis toward a systemic model for securing finance for a country's climate priorities," the international agency said in a news release.

There are several benefits in moving to a systemic investment planning approach, it said. For example, it offers the potential to move well-designed proposals through the GCF's investment process more quickly.

"If we fail to plan, we are planning to fail," Egyptian Environment Minister Yasmine Fouad said in the release. "But planning isn't enough, we need to mitigate risk. This investment plan is showing us where the risks are but also where are the opportunities."

African Business Leaders Back Accelerated Climate Action

More than 50 business leaders from across Africa have come together at COP27 with a unified voice, calling for accelerated action to build resilience against climate change.

The chief executives presented the Africa Business Leaders' Climate Statement on Wednesday, outlining corporate commitments aligned with global climate goals.

Their key pledges include developing robust corporate resilience plans to improve adaptive capacity, upholding the guiding principles of a just transition as central to all climate actions, setting targets to drastically increase the use of renewables and contributing to a global dialogue to advance the understanding of the "fair share" principle.

The statement also calls for action to create "an enabling environment that facilitates increased access to finance" and ensure that African business can leverage global markets.

The CEOs are part of the Africa Business Leaders Coalition, committed to advancing sustainable growth, prosperity and development in the continent.

Four Countries Agree to Set Up Green Shipping Links

Norway, the United Kingdom, the Netherlands and the U.S. have agreed to establish green shipping corridors between them.

In a joint statement issued Monday at COP27, the countries said the agreement reflected their desire to accelerate the fight against climate crisis.

The U.K. and the U.S. have also agreed to launch a special Green Shipping Corridor Task Force focused on bringing together experts in the sector.

Green shipping corridors are specific maritime routes decarbonized from end to end, including both land-side infrastructure and vessels, the U.K.'s Department for Transport said. Setting up such routes involves using clean fuel or energy, putting in place refueling or recharging infrastructure at ports and deploying zero-emission vessels.

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

Platform for REDD+ Sovereign Carbon Credits Launched

The European Energy Exchange will collaborate with the Coalition for Rainforest Nations to establish a platform for REDD+ sovereign carbon credits, the parties said Wednesday.

The German company and the U.S.-based nonprofit signed a letter of intent on their partnership at COP27.

Under the REDD+ (Reducing Emissions from Deforestation and forest Degradation) framework, countries receive result-based payments for restoring forest lands.

Until now such payments have mostly come from public sources. The partnership seeks to expand this to the private sector.

Kevin Conrad, executive director of the Coalition for Rainforest Nations, said the platform would help corporations and investors channel climate finance to rainforest nations and make their own net zero targets Paris Agreement-compliant.

The nonprofit was established by tropical countries. It assists governments and communities to responsibly manage their rainforests through capacity building, policy and financial support.

Net Zero Technology Centre Reveals Priorities for Energy Transition

The Net Zero Technology Centre, an organization focused on developing and deploying technology for energy transition, has identified five priorities to accelerate the global path to net zero.

They are blue and green hydrogen, offshore wind, oil and gas electrification, carbon capture and storage and digital transformation technologies, the center announced Thursday at COP27.

The organization will unveil its full action plan at the climate summit's Energy Day on Nov. 15.

The institute, based in Aberdeen, United Kingdom, believes the plan will help achieve the Paris Agreement's climate goals and create integrated net zero energy systems.

Twelve research organizations from eight countries contributed to its report, Closing the Gap: A Global Perspective, the center said.

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

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: $309 Billion/Year for Green Energy Investment Comes at a Cost

November 11, 2022

We are transitioning the largest and most complex industrial system in the world. We will need an additional €300 billion ($308.9 billion) investment per year to meet Europe's REPowerEU, targets; this will come at a cost, participants at the Green Deal and financial funds' session, organized at the Benelux/EIB Pavilion at COP27 in Sharm El Sheikh said Thursday.

The energy transition will occupy the minds of policy makers and investors for the next 3 to 5 years and the major challenge ahead of us is the social dimension, even more so because we are in a current unstable economic environment, they mentioned. Evolving from today's average energy poverty of 12 percent, toward a 25 percent energy poverty, is not a positive factor for energy transition.

Europe will need a common budget to meet the energy transition. "The U.S. is in a position to fund a $2.3 trillion infrastructure plan because they have a common budget," Nicolas Piau, co-founder and CEO of TiLT Capital Partners said.

"The European Investment Bank is doing an excellent job in catalyzing money into the private sector, but this doesn't come close to what (the) U.S. is able to do. Europe needs to raise its stakes," Piau said.

Participants argued that we live in a fragmented world. "We are moving away from a global energy supply system to a local supply level. This makes it crucial for Europe to produce its own low carbon energy and to decrease its dependency on energy imports. Infrastructures play a key role in this," Michal Kurtyka, Strategic Advisor Eiffel Transition Infrastructure Fund and former first Polish Minister of Climate mentioned.

On the regulatory side, speakers agreed that the energy transition does not need to add more red tape. "Instead, governments should implement market based financial incentives for low carbon supply chains and inter-balancing mechanism," Julia Padberg, partner at SET Ventures said.

For Nicolas Piau, energy is a very complex system, and the financial world is working hard on methodologies to align their portfolios with the targets of the Paris Agreement.

"But aligning very diverse types of industries with the climate goals is very difficult. Regulators, investors, entrepreneurs, and politicians will have to recognize that we need to take risks and that we will make mistakes," he concluded.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Benita Dreesen, bdreesen@opisnet.com
--Editing by Yazdi Merchant, ymerchant@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: Push to Expand Natural Gas Capacity Will Undermine 1.5C Goal: Report

November 10, 2022

The massive push to expand natural gas production in the wake of Russia's invasion of Ukraine will seriously compromise efforts to limit global warming to 1.5 degrees Celsius, the research consortium Climate Action Tracker (CAT) warned Thursday.

Its Warming Projections Global Update was released at the COP27 climate summit in Sharm El Sheikh, Egypt.

"What we found is that the dash for gas globally is at such a scale that it was undermining the world's ability to limit warming to 1.5 degrees," Bill Hare, CEO of CAT partner organization Climate Analytics, told a news conference. "The world seems to have overreached in its bid to respond to the energy crisis induced by the illegal Russian invasion of Ukraine."

CAT estimates that carbon dioxide emissions from all proposed and under-construction liquefied natural gas (LNG) projects between 2021 and 2050 could add up to around 10% of the remaining global carbon budget for 1.5C warming by mid-century.

In 2030, LNG oversupply could reach 500 megatons, almost five times the European Union's imports of fossil gas from Russia in 2021, and over double Russian total exports, the report said.

Hare believes the energy crisis has really taken over the climate crisis and the gas industry is taking advantage of that.

"Increasing our reliance on fossil gas is not the solution to the energy crisis, it is not the solution to the climate crisis. We know that renewable energy is in fact the most cost-effective way forward," Hare said.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18.

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

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: John Kerry Unveils 'Energy Transition Accelerator' Carbon Credit Plan

November 9, 2022

U.S. presidential envoy John Kerry announced a proposal Wednesday at COP27 in Sharm El Sheikh for an 'Energy Transition Accelerator' that would create a new class of carbon offset credits generated by developing countries reducing their power sector emissions.

Kerry urged other nations and the private sector to get behind the proposal, which would see state bodies and regional governments in developing countries issue carbon credits by reducing power sector emissions, with big companies aiming to offset their own emissions then buying the credits.

Limiting global warming to just 1.5 degrees Celsius above pre-industrial levels required "creative ideas" that "break out of the mold", Kerry suggested, arguing that the initiative would learn from the rules governing forest-based carbon credits.

"Our intention is to put the carbon market to work to deploy capital otherwise undeployable, to speed the transition from dirty to clean power specifically for two purposes: to retire unabated coal-fired power and to accelerate the build-out of renewables," said the former U.S. secretary of state. "We want to bring to the power sector for the first time ever the type of broad jurisdictional approach that is proving so effective in the forestry sector."

Online news outlet Climate Home News reported earlier this month that several countries including Germany have expressed reservations about the idea. Kerry sought to address skepticism in some quarters about the proposal, which the U.S. has been discussing with other governments, NGOs and companies over the last few months, saying that the initiative would learn from "mistakes" made by the creation of low-quality carbon offsets in the past.

"We know that there are a range of views on this. Unfortunately, some past abuses have in many minds discredited the use of a carbon credit. But we also know that with the right safeguards, with the right transparency, with the right accountability, with the right crediting, this can be done well.

"Frankly we believe very deeply that we shouldn't let the mistakes of the past keep us from employing a powerful tool for steering private capital where it is most needed," said Kerry, who was speaking at an event organized by the American Center, the U.S.'s presence in the summit's exhibition area.

Kerry outlined a series of proposed rules that would govern the initiative, which he said the U.S. wants "up and running no later than COP28" in Abu Dhabi, the United Arab Emirates, next year.

"We also plan to establish strong safeguards on the use of these high-quality credits. To buy them, companies -- not including fossil fuel companies -- must have a net zero goal and a science-based interim target," said the former presidential candidate. "And they must use these credits to supplement, not substitute, for deep reductions of their own emissions."

A part of the revenues generated by Energy Transition Accelerator carbon credits would be hypothecated, he added: "We plan to make sure that a portion of the finance generated goes toward supporting adaptation and resilience in vulnerable countries where it is very difficult because of market forces to attract capital to those sectors.

"We believe that this can be catalytic by ensuring a predictable finance stream for energy transition. This approach will increase the bankability of clean energy projects and it will unlock more concessionary, upfront capital."

Kerry also emphasized that consultations on the proposals would be necessarily broad, with Wednesday's announcement initiating "a more intensive conversation, a process by which we will fully vet and develop this plan. We plan to work very closely with governments, experts, NGOs, with all the relevant stakeholders."

The presidential envoy claimed that "we are hearing strong interest from companies", referring to representatives from Microsoft and Pepsi, who were on a panel with him at the American Center. There was also "strong interest from developing countries", he said, name-checking Nigeria and Chile.

"We would like to explore ways that the Africa Carbon Markets Initiative (ACMI) that was announced yesterday could conceivably complement this effort," said Kerry, referring to the creation of a new plan to scale up the continent's voluntary carbon market and produce 300 million carbon credits annually by 2030.

Kerry said that nations needed to harness a level of capital that only private companies and the financial sector can muster: "There is no way we have enough money in the public sector or the skillsets we need to ... accelerate the deployment of renewables around the world. Scaling these new technologies is critical ... No government in the world has enough money to get the job done."

"We have to invest $2.5 trillion to $4.6 trillion a year from now until 2050,"
he said, citing United Nations data, with "a majority of that investment [coming] in emerging and developing countries."

The strategy of offsetting carbon emissions through retiring carbon credits has grown in recent years to finance climate projects and reach net-zero and Paris Agreement-aligned goals. The fast-growing global voluntary carbon market reached the $2 billion-mark this summer.

According to OPIS pricing data, the Voluntary REDD+ V21 forestry credit price assessment average was $14.473/metric ton on Tuesday, up $1.815/mt from $12.658/mt on Jan. 3, 2022.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Anthony Lane, alane@opisnet.com
--Editing by Rob Sheridan, rsheridan@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: IOSCO Launches Consultation on Developing Sound Carbon Markets

November 9, 2022

The International Organization of Securities Commissions (IOSCO) on Wednesday launched a 90-day public consultation on its recommendations to establish well-functioning carbon markets.

Its proposals are contained in two discussion papers released at the COP27 climate summit in Sharm El Sheikh, Egypt.

The first sets out a series of recommendations for jurisdictions seeking to establish compliance markets as a way to meet their obligations under Article 6 of the Paris Agreement.

It offers insights into appropriate regulatory and oversight frameworks to allow for the development of sound, efficient and liquid compliance markets.

The other report focuses on enhancing the resilience and integrity of voluntary carbon markets, which IOSCO says has not yet scaled to their full potential in helping to mitigate climate change.

"To identify and consider the role of financial regulators in mitigating potential vulnerabilities in these markets, IOSCO has undertaken a fact-finding exercise with exchanges, market intermediaries, academics, market participants and standard setters from different geographies, as well as IOSCO members," the paper said.

Many of the concerns raised about the sector relate to market integrity, it added.

The global securities watchdog urged stakeholders to provide feedback on how to foster fair and functional markets and increase structural resilience. The public has until Feb. 10, 2023, to send feedback.

IOSCO is the global standard setter for securities regulation. The organization's membership regulates more than 95% of the world's securities markets in some 130 jurisdictions.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Michael Kelly, mkelly@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: Africa Carbon Markets Initiative Launched With Lofty Goals

November 8, 2022

African countries took a major step Tuesday to expand dramatically the continent's participation in the voluntary carbon market by launching the Africa Carbon Markets Initiative (ACMI) at the COP27 climate summit in Sharm El Sheikh, Egypt.

ACMI aims to produce 300 million carbon credits annually by 2030, and between 1.5 billion and 2.5 billion credits per year by 2050, according to a roadmap released Tuesday.

The initiative will create or support 30 million jobs by 2030 and more than 100 million jobs by 2050 through project development, execution, certification and monitoring. The roadmap also estimates that the projects would unlock $6 billion in revenue annually by 2030 and over $100 billion by 2050.

It identifies 13 action programs to support the growth of carbon markets in Africa. While retirements of African credits have grown by an average of 36% annually over the past five years, aggressive action will be required to maintain this level of growth over the coming decades, ACMI said.

The initiative is led by a 13-member steering committee of African leaders, chief executive officers and carbon credit experts. The panel includes officials from the United Nations and several nongovernmental organizations (NGOs).

"The current scale of financing available for Africa's energy transition is nowhere close to what is required," Damilola Ogunbiyi, chief executive officer of NGO Sustainable Energy for All and a member of the ACMI's steering committee, said in a statement. "Achieving the Africa Carbon Markets Initiative targets will provide much-needed financing that will be transformative for the continent."

ACMI is committed to supporting high-integrity credits where an equitable and transparent distribution of revenue goes to communities, it said.

The Integrity Council for the Voluntary Carbon Market, which is developing a definitive and consistent global benchmark standard for high-integrity carbon credits, quickly welcomed the establishment of ACMI.

"Expanding the supply of high-quality carbon credits is a key priority and we are delighted to be part of ACMI so we can help make this happen," council chair Annette Nazareth said in a statement emailed to OPIS. "There is an enormous latent opportunity to use high-integrity carbon credits to unlock investment and provide critical funding to help secure a just transition in countries across Africa."

A new consortium called the Nature Framework Development Group was also launched at COP27 to help ACMI achieve its goals. The creation of the group was announced by Ivan Duque, former president of Colombia and member of the ACMI steering committee.

The group includes Conservation International, Verra, International Union for Conservation of Nature, Conservation Finance Alliance and the Biodiversity Consultancy, and aims to develop a market leading nature/biodiversity credit.

"By creating nature/biodiversity credits, the consortium aims to unlock new flows of financing for the protection of biodiversity and critical ecosystems," Duque said.

The strategy of offsetting carbon emissions through retiring carbon credits has grown in recent years to finance climate projects and reach net-zero and Paris Agreement-aligned goals. The fast-growing global voluntary carbon market reached the $2 billion-mark this summer. According to OPIS pricing data, the Voluntary REDD+ V21 forestry credit price assessment average was $14.673/mt on Monday, up $2.015/mt from $12.658/mt on Jan. 3, 2022.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27: U.S. Seeks Support for New Developing Country Carbon Offsets

November 8, 2022

U.S. presidential climate envoy John Kerry is attempting to build support at COP27 in Sharm El Sheikh for the creation of a new class of carbon offset credits that would be created by developing countries reducing emissions from their power sectors, according to media reports.

Kerry's plan would see state bodies and regional governments in developing countries generating carbon credits by reducing power sector emissions, with big companies wanting to offset their own emissions being encouraged to buy the credits, the Financial Times reported yesterday, citing sources familiar with discussions about the proposal.

The former U.S. secretary of state is keen to unveil the scheme later this week, with the U.S. telling other parties that tens of billions of dollars in carbon credits could be created by the initiative, the newspaper reported.

At the end of last month, Kerry said at an event hosted by the Chatham House think tank in London that the U.S. was looking at "the possibility of the private sector in effect being enticed to the table" with "cash which goes directly into closing down some coal plants and deploying renewables".

However, online news outlet Climate Home News reported earlier this month that the idea has met skepticism in several countries including Germany.

The U.S. State Department did not reply to a request for an official comment on the initiative.

The strategy of offsetting carbon emissions through retiring carbon credits has grown in recent years to finance climate projects and reach net-zero and Paris Agreement-aligned goals. The fast-growing global voluntary carbon market reached the $2 billion-mark this summer. According to OPIS pricing data, the Voluntary REDD+ V21 forestry credit price assessment average was $14.673/mt on Monday, up $2.015/mt from $12.658/mt on Jan. 3, 2022.

The world's largest annual climate change conference, the United Nations Conference of the Parties, or COP27, runs Nov. 6-18 in Sharm El Sheikh, Egypt.

--Reporting by Anthony Lane, alane@opisnet.com
--Editing by Yazdi Merchant, ymerchant@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

COP27 Preview: Fossil Fuel Emissions Peaking, Carbon Markets in Focus

November 3, 2022

Delegates from 193 nations will convene in Sharm El-Sheikh for the 27th Conference of the Parties (COP27) starting this Sunday with a focus on implementing agreements to lower greenhouse gas emissions (GHG) that are predicted to increase by nearly 10.6% by 2030 when compared to 2010 levels.

The forecast of rising emissions unveiled in a United Nations (UN) report last week puts the world on track for a 2.4-2.6 degrees Celsius temperature increase by the end of the century, significantly higher than the 2015 Paris Agreement goal to limit temperature changes to 1.5 degrees Celsius above pre-industrial levels.

The 10.6% increase in emissions by 2030 is marginally better than the UN's assessment last year, which found that countries were on a path to increase emissions by 13.7%. However, countries are still far from doing what is necessary to meet the 1.5 degrees Celsius goal. A 2018 UN climate change report demonstrated that carbon emissions need to be reduced by 45% compared to 2010 levels by the end of the decade to limit global warming to 1.5 degrees Celsius.

COP27 also comes at a time when the International Energy Agency (IEA) reported that emissions and global demand for fossil fuels will plateau by 2025 due to several countries boosting investments in cleaner energy sources and weaning themselves off Russian fossil fuel exports in the wake of the invasion of Ukraine.

But emissions are expected to rise in the lead-up to 2025 as regions like Europe avoid Russian fossil fuels by pivoting to Asian liquefied natural gas and coal, the most carbon-intensive fossil fuel. The upswings in coal usage and natural gas demand are only "temporary", the IEA believes, as cleaner sources of energy including nuclear power will represent a bigger part of these countries' energy mix.

The scaling back of COVID-19 restrictions in the world's largest economies has also led to an increase in emissions. Global carbon emissions went up by 5.3% in 2021 when compared to 2020, nearly reaching pre-pandemic levels, according to the IEA and the Netherlands Environmental Assessment Agency.

The IEA forecasts that the total global demand for fossil fuels will decline from the mid-2020s to 2050, with demand falling annually by the average equivalent of a large oil field's lifetime output.

Even at this pace, with global carbon dioxide emissions falling to about 32 billion tons per year by 2050, the world is on a path to become warmer by 2.5 degrees Celsius by 2100, a dire scenario, according to the IEA.

Countries attending COP27 are expected to demonstrate how they will implement their climate plans and efforts to reduce greenhouse gas emissions. The UN has called for more ambitious 2030 targets as current efforts are not enough to avoid "catastrophic global warming", it said in its most recent report.

Although 193 parties agreed at COP26 in Glasgow last year to update their climate pledges, so far only 24 have submitted updates to their "nationally determined contributions", a number that the UN called "disappointing".

The Egyptian presidency said it is hoping to move climate change plans and strategies into action, with many analysts calling COP27 an 'implementation COP'. "Now is the time for action on the ground," Egypt's COP27 presidency page says. "If we are to meet our pledges and commitments, words must be turned into action."

Spotlight on Carbon Markets in Egypt

One of the key tools in addressing rising emissions is Article 6 of the Paris Agreement, a text that was finally adopted in Glasgow last November. The article establishes how international carbon offset markets should work as well as the transfer of emission reductions between different governments.

The rules agreed in Glasgow avoid double-counting of carbon offset credits by both project hosts and the foreign buyers of those offsets, offering a boost to the integrity of future markets.

Dirk Forrister, chief executive officer of the International Emissions Trading Association (IETA), said at an IETA webinar this Monday that COP27 would be an opportunity for countries to "come together and form alliances" under the Article 6 framework.

One potentially positive outcome from this COP is meeting a need for "capacity building", Forrister said, as countries and international institutions coordinate the authorization and certification of different emissions trading systems or mechanisms to enhance multilateral cooperation in carbon markets.

As of June 2022, there are 30 emissions trading systems (ETS) operating worldwide, with large polluters like India also looking to implement similar cap-and-trade programs to price carbon emissions and incentivize companies to turn to greener sources of energy.

According to the World Bank's carbon pricing dashboard data, the EU, UK, Swiss and New Zealand ETSs have the higher carbon prices of the 30 operating cap-and-trade programs. Based on pricing data from April 1, 2022, these higher carbon prices range from $86.53 per metric ton in the EU ETS to $52.62/mt in the New Zealand ETS.

Globally, there are 68 carbon pricing initiatives currently under implementation through a combination of both established and pilot ETS programs and carbon taxes. In 2022, these 68 initiatives -- among them the EU ETS and carbon taxes in countries like Argentina and South Africa -- account for 11.83 billion metric tons of carbon dioxide emissions, or 23.11% of global GHG emissions.

In the last 12 months, the price of EUAs has gone up from around €58/mt to just over €80/mt, an increase that peaked in mid-August when the benchmark ICE December 2022 EUAs contract nearly broke €100/mt ($97.49). The high cost of carbon has led to EU legislators looking at policy proposals to push the price down through frontloaded auctions to give companies dealing with unprecedented energy costs some respite, though this could lead to higher EUA prices by the end of the decade.

Similarly, UKAs have gone up from over £50/mt to nearly £80/mt ($89) in the last year, making polluters operating in the UK pay the highest price for carbon in the world.

Still, geopolitical tensions will complicate matters, especially as some countries benefit from not applying carbon prices, attracting companies keen to avoid such costs, a scenario often called "carbon leakage".

The EU is currently knee-deep in internal negotiations related to establishing a Carbon Border Adjustment Mechanism (CBAM), which would ensure that carbon intensive products imported to the EU will be subject to a levy. While the EU has yet to finalize this proposed tariff, this would apply to sectors including electricity, iron, steel, aluminum and cement.

The CBAM -- part of the EU's plan released last year to reduce its emissions by 55% compared to 1990 levels by the end of this decade -- is already one of the more controversial measures on the world stage and is slated to start in 2026.

Countries like China and Russia say that the CBAM would violate World Trade Organization agreements and a former Indian environment minister called it "unfair taxation" and a "regressive proposal" last year.

Amy Merrill, senior lawyer at Climate Asset Management and previously a lawyer at the United Nations Framework Convention on Climate Change, said at the IETA webinar that the EU's CBAM "could be used as a wrecking ball if anyone is feeling mischievous" and wanting to upend progress at COP27. "There are always wrecking balls at a COP and this is going to be a difficult COP."

The 2022 United Nations Climate Change Conference will be held from November 6 to 18 in Sharm El-Sheikh, Egypt.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

Shipping Industry Could Pay €15 billion In 2027 Under EU ETS: Brokerage Firm

October 25, 2022

The upcoming inclusion of the shipping industry within the scope of the European Union Emissions Trading System (EU ETS) could cost the sector between €5-15 billion in 2027 alone, depending on different EU proposals and the price trajectory of carbon allowances, according to global shipping brokerage firm BRS Group.

Mattia Ferracchiato, head of carbon markets at BRS Group, told delegates at the Carbon Forward conference in London earlier this month that different proposals from the EU Commission, Council and Parliament could cost the shipping industry around €500 million in 2023 and up to €15 billion in 2027 to cover its carbon emissions.

Under the Commission's proposal, the inclusion of shipping sector emissions in the ETS would be phased in and would start by covering 20% of verified emissions in 2023 before rising incrementally to 100% by 2026. Vessels with 5,000 gross tonnage or more that call at EU ports would be included. For vessels traveling solely between EU ports, all emissions would be counted whereas those traveling between EU and non-EU ports would see only half of those emissions being subject to the ETS.

Basing its estimates on 2021 emissions data from ships above 5,000 gross tonnage and assuming a stable average European Union emissions allowances (EUAs) price of €65/mt, BRS Group forecasts that the EU Commission's proposal would cost the shipping industry over €2 billion in 2024 and increase to €5 billion in 2027.

In comparison, the EU Parliament's proposal avoids the Commission's phased approach to putting a price on shipping emissions. It kicks in a year later but covers 100% of emissions from the beginning and would be the most expensive scenario for the industry, coming in at €5 billion in 2024, 2025 and 2026 and reaching nearly €8 billion in 2027, according to BRS Group's presentation.

Many EU carbon market analysts expect EUAs could be trading at more than twice the €65/mt base case price used by BRS Group by the end of the decade, making a €15 billion cost for the shipping sector in 2027 a realistic scenario. The benchmark ICE December 2022 EUAs contract closed at €77.11/mt on Tuesday.

Ferracchiato told OPIS in an interview this week that the shipping industry is not prepared for extra carbon-related costs, regardless of whether these come in at €5 billion or €15 billion per year. He noted that industry participants had carried out cost analyses and expected an increase of $4 to $5 per metric ton to their cargo costs, which could be passed on to their clients.

Ferracchiato said that the EU's proposals would speed up the industry's decarbonization over the next five years, with some shipping companies considering reducing the speed of their vessels to comply with the International Maritime Organization policies and to pay for fewer EUAs.

"We are going to see many ammonia-, hydrogen- and methanol-ready vessels from 2025 and 2027 onward," Ferrachiato told OPIS, adding that a more comprehensive switch to alternative fuels would take place between 2030 and 2035.

According to the EU, the maritime sector's emissions account for 4% of the EU's total carbon dioxide emissions, amounting to over 144 million tons of carbon in 2019. The European Commission proposed last year to include the sector in the EU ETS as part of the bloc's plan to cut emissions by 55% over 1990-2030.

The Impact of Triple Digit Carbon Prices

Carbon prices, however, will be a growing concern for polluters. The benchmark December 2022 EUAs contract reached an all-time high of 99.22 euros/mt this August, and while EU legislators are still discussing specifics, EUAs are likely to be frontloaded through auctions over the next few years, meaning that there will be a lower supply of EUAs nearer the end of the decade than was previously planned.

BRS also produced estimated costs for the shipping industry if EUA prices ranged from €80/mt in 2023 up to €130/mt in 2027. Under that scenario, the Commission's plan would start at over €6 billion in 2024 and scale upward to €10 billion by 2027.

The Parliament's proposal would prove more expensive to the shipping industry, rising from over €6 billion in 2024 up to nearly €16 billion in 2027.

While ships weighing more than 4,000 gross tonnage are not set to be included immediately within the EU ETS, Ferracchiato said it is only a matter of time before such vessels are subject to the cap and trade system. Vessels below 5,000 gross tonnage will have to monitor, report and verify (MRV) their carbon emissions to the EU for a few years prior to being included in the EU ETS, similar to vessels over 5,000 gross tonnage. Any such MRV phase would only begin in 2023 or 2024, Ferracchiato said.

While details have yet to be finalized, an EU Council fact sheet states that the shipping companies should be the party to purchase EUAs, but this cost could be passed down to the charter company through a contractual agreement.

Charterers, however, will likely veer towards more "efficient and greener vessels" to reduce potential carbon emission costs, said Ferracchiato: "The shipowner with the greener fleet wins."

"The shipping industry seems to be quite scared," Ferracchiato told OPIS. "But we also have to say that these billions of euros [in emission costs] are not very well distributed, assuming the worst-case scenario of the €15 billion cost by 2027 with an EUA price at €130 euro/mt -- €4.5 billion of that €15 billion is a cost held by only 20 companies."

The EU is expected to vote by the end of this year on the EU ETS reform policy proposals, with trilogues between the EU bodies to take place in November and December.

--Reporting by Humberto J. Rocha, hrocha@opisnet.com 
--Editing by Anthony Lane, alane@opisnet.com 

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Climate Action Reserve Developing Offset Methodology for Low-Carbon Cement

October 19, 2022

The Climate Action Reserve is developing a new methodology for quantifying, monitoring and verifying the climate benefits associated with low-carbon cement, which could be a "game changer" for the sector, the offset registry said Wednesday.

It said the Low-Carbon Cement Protocol would incentivize innovative replacements for ordinary portland cement, the most common and carbon-intensive type of cement.

"Based on preliminary analysis of this industry, the expectation is for low-carbon cement offset credits issued under this protocol to financially support and incentivize the production and availability of alternative, more environmentally friendly cementitious products that are too cost prohibitive and inefficient to pursue currently," the Reserve said in an online post.

The protocol will be initially applicable to projects in the U.S. only, the registry said.

The methodology will go through the organization's transparent protocol development process, which includes the formation of an expert work group, public consultation and presentation to the Reserve's board, it said.

"The Reserve strongly encourages experts and participants from this industry as well as anyone else interested in this protocol to become involved in developing this protocol, which can be a game changer for the sector," the post said.

Cement is a key ingredient of concrete, the second-most consumed material on the planet after water. Concrete accounts for about 8% of the world's carbon dioxide emissions, according to the British think tank Chatham House.

The global demand for cement is projected to increase as much as 23% by 2050.

--Reporting by Abdul Latheef, alatheef@opisnet.com
--Editing by Michael Kelly, mkelly@opisnet.com

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100-Fold Increase in CCS Projects Needed to Meet Climate Goals: Think Tank

October 17, 2022

There are currently a total of 196 carbon capture and storage (CCS) projects worldwide, with the vast majority in development, but the technology will need to be scaled up hundred-fold to avoid the worst impacts of climate change, said a report published Monday by the Global CCS Institute.

The Melbourne, Australia-headquartered think tank unveiled its annual report on the status of CCS installations Monday. The report shows that in 2022 alone, a total of proposed 61 facilities were added to the project pipeline across the world.

Out of the 196 total CCS installations, 153 are in development and have a carbon dioxide capture capacity of 244 million metric tons per annum (mtpa), or 44% more than at the same time last year. Thirty CCS projects are currently in operation with a carbon dioxide capture capacity of 43 mpta, while a further 13 projects are under construction.

However, investments in CCS technology "are still grossly inadequate", according to the think tank. In order to meet United Nations climate targets, the rate of carbon dioxide storage should be in the billions of tons per year, a far cry from the current capacity.

The Institute's report emphasized that the CCS sector will require more investment and that scaling-up CCS technology will result in more efficient deployment and make CCS technology more competitive.

CCS projects in the European Union and the U.K. saw a "promising increase", with a total of 73 CCS facilities across the region under different stages of development, almost doubling year on year the total amount of CCS projects in the region.

North America continues to lead the CCS industry in terms of facilities already operating, with a total of 18 CCS installations up and running across the U.S. and Canada, according to Guloren Turan, a general manager with the Global CCS Institute.

The Asia Pacific region saw countries like Thailand unveiling its first CCS project, China bringing online its first million metric ton CCS installation and Australia announcing new projects in Victoria and Western Australia.

Jarad Daniels, chief executive officer of the Global CCS Institute, told delegates at a Monday event that he expects the rate of growth for CCS projects to increase after the U.S. passed the Inflation Reduction Act and as companies face more pressure to lower their carbon emissions.

"[CCS] will continue to play multiple, unique roles in decarbonizing the global economy," Daniels said. "Many essential industries like cement and chemical production have no other viable path for deep decarbonization other than CCS."

--Reporting by Humberto J. Rocha, hrocha@opisnet.com
--Editing by Anthony Lane, alane@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

World Bank to Offer Emission Reduction Grants Through New Trust Fund

October 14, 2022

The World Bank will launch a trust fund at next month's COP27 climate change summit in Egypt to provide grants to projects that reduce greenhouse gas emissions in developing countries.

The facility, known as Scaling Climate Action by Lowering Emissions (SCALE), would allow the international community to put funding into public good, World Bank President David Malpass said Thursday at news conference in Washington, D.C.

He did not reveal the size of the fund.

SCALE will pool public funds and make them available for the most impactful and scalable projects to reduce emissions, Malpass said in an earlier social media post.

"We are in the process of capitalizing the fund with the aim of launching it at COP27," he wrote in the LinkedIn post. The summit will open in Sharm el-Sheikh, Egypt, on Nov. 6.

Integrated within the World Bank Group's climate change operations, SCALE will provide additional funding in the form of grants to developing countries as they generate reductions in emissions, Malpass wrote.

Governments could use the funding for just transition, low-carbon development, or to cover part of the interest payments of projects, the post said.

In the 2022 financial year, the World Bank Group delivered a record $31.7 billion to help countries address climate change, it said in September. That was a 19% increase from the $26.6 billion financing reached in the previous fiscal year.

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

© 2022 Oil Price Information Service, LLC. All rights reserved.


High Costs, Geopolitical Risks Impede Blue Carbon Removal Projects

October 10, 2022

Demand for voluntary blue carbon credits from companies seeking to fulfill net zero pledges surged in 2022, but geopolitical risks, limited verification capacity and high startup costs will likely prevent blue carbon credit supply from scaling up for years to come.

Companies want blue carbon credits -- which are generated by coastal carbon sequestration projects -- for their high quality and ability to diversify carbon storage portfolios.

But blue carbon projects account for just 10 of the 1,829 projects registered by Verra, a leading carbon credits registrar and verifier. More are on the way, however, with 23 in the project registration pipeline.

High demand for the credits and relatively expensive project costs have pushed the offsets to a substantial premium over forest-based credit alternatives in the voluntary carbon market.

OPIS since late March has assessed vintage 2022 blue carbon credits at $25/mt to $29/mt, while credits from high-quality, but typically less expensive, REDD+ forestry projects have ranged from between $12.50/mt and $16/mt. On Oct. 7, OPIS assessed the spread between the two at $13.

"It's what everyone wants, but no one can get," Arthur Wace, sustainability consultant with London-based carbon risk management and procurement firm Redshaw Advisors, said. "We have clients that have made net zero commitments for 2030 or even 2025. They want to invest in projects now. But the risks are too high."

Sources said there are a few reasons for that, including that the blue carbon verification and credit issuance system is still in its early stages.

Project methodologies continue to develop, and it remains difficult and costly in many parts of the world to accurately measure the carbon stored in blue environments.

Further, it requires significant startup capital to begin to restore a coastal environment and it takes years to realize profits from credit sales. And many countries with blue carbon projects have yet to decide how to govern them. "The market is not in a position to scale," Wace said. "But we're getting there."

Carbon Accumulation Rates Vary

As methodologies develop and researchers learn more about blue carbon environments, their climate diversity and carbon storage capacities are becoming clearer. Coastal mangrove forests, salt marshes and seagrass beds typically store carbon at a higher rate than forests and for longer periods.

Scientists estimate wetland environments store carbon at 10 to 20 times the rate of land forests, but others caution that comparisons are tough to make because of wide variations in both ecosystems. And while coastal wetland environments around the world are under threat globally, there's no risk of them burning during periods of drought.

A research team led by University of North Carolina Professor Antonio Rodriguez studied carbon deposits in salt marshes along North Carolina's coast. In a study published in July in Nature, the group detailed the variations that occur depending on the age and growth of the ecosystem.

"If you look at carbon burial at different time scales, you get vastly different values," Rodriguez said.

When salt marshes degrade, they begin to release the carbon they have stored.

But when restoration begins, as Rodriguez and his team found, carbon accumulation rates are high. Rates plateau as the ecosystem matures, but most of the carbon sucked from the atmosphere remains.

"That's really important for offsetting because if you restore a salt marsh, then you're going to benefit from that increased burial right away," he said.

What's more, as sea levels continue to rise, researchers expect the area viable for salt marshes will expand.

'Can we even do this?'

Liz Guinessey is Verra's food and blue carbon innovation manager and wetlands expert. Before that, she investigated GHG emissions and carbon storage in Georgia's coastal wetlands for her master's thesis.

"Back then, it was this question of, 'Can we even do this? Can we get the quantification down pat enough to be able to potentially bring this carbon that gets stored to market?'" Guinessey said.

Despite the challenges, she said Verra has managed to develop ways to do so with confidence. "I think we've been able to figure out ways to deal with that uncertainty, deal with those fluctuations, and still be able to very clearly estimate at a conservative level what's actually stored," Guinessey said.

Still, blue carbon credit verification remains a developing practice. Verra released its first blue carbon methodology in 2020 and has since added three more. The organization is now in the process of consolidating the three into a single document.

Competing registry Gold Standard has not finalized blue carbon methodologies, although it said it's developing a mangroves methodology with FORLIANCE.

Sources also said it can be challenging to find researchers with the expertise needed to verify a blue carbon project's impact. And it's a dirty job.

"Most are muddy, mucky environments," Guinessey said. "You get literally absorbed by mud a lot of the time. These are not great conditions for field work. But I think that we're getting to a point where it's not becoming as challenging, especially with new technologies like remote sensing."

Geopolitical Risk

As blue carbon methodologies develop and experts learn to understand and measure the environmental conditions, governments have grown wary of voluntary projects.

In one case, the blue carbon project known as Tahiry Honko was launched in 2014 by UK-based Blue Ventures and 10 small communities in Madagascar.

But in 2018, the Malagasy government argued the communities had signed a bad deal and placed a moratorium on the sale of carbon credits. None from the project have been sold, according to Mongabay, an online conservation news outlet. A number of voluntary offset projects that predate the moratorium remain in limbo.

Actions by other governments could also affect the projects.

India's Power Minister Raj Kumar Singh in August announced a ban on the exports of carbon credits, though the government has offered no further information.

Some sources believe Singh was referring to carbon credits that would apply to India's new compliance market, rather than those that would be sold on the voluntary market.

In recent months, Papua New Guinea, Honduras and Indonesia also have announced moratoriums on the sale of some credits. And many other countries have stepped in to regulate the voluntary market in some way.

"So many of these coastal systems are considered public goods under different jurisdictions," Guinessey said. "So, getting either the government to sign on to a carbon project or figuring out some sort of concession to allow for a group to move in and actually develop a project can be a barrier."

Where Are Blue Carbon Credits Headed?

Along with geopolitical risks and limited global blue carbon credit capacity, project finance is also a problem. Restoring blue environments is costly and it can often take several years before developers are able to start selling credits.

A number of companies are working to reduce the risks of carbon offset projects in general. Verra is developing credits that can be sold to generate startup capital to projects just getting off the ground. And in September, Parhelion Underwriting launched its first insurance product that protects against the potential invalidation of credits issued.

Still, the barriers to entry, particularly for communities in developing countries, remain high, sources said.

Analysts, however, expect buying interest in blue carbon credits will continue to rise.

"There is a general undersupply, and these projects are perceived to be of very high quality," Anop Pandey, manager of market analysis for ClearBlue Markets, said. "We believe that any new supply will certainly get bought up quickly.

Also, as offset usage by corporations continues to receive more scrutiny, there will be more pressure for corporations to show the offsets they are using are of a high quality with large emission reduction and removal benefits."

Stronger demand for the credits and price premiums are helping development efforts.

"In 2019-2020, you could buy a carbon credit from a REDD+ project for $6, $7," Wace said. "Now, as prices have come up, we can begin to bring on higher impact projects."

At the same time, the buyers for blue carbon offsets are mostly large tech companies with significant cash flows.

"Will other corporate industries be willing to pay for these projects?" Pandey asked. "In other sectors with companies that have smaller budgets for offset purchases, but still have high emissions, maybe not. As such, the demand and supply of these projects will need to find a balance."

Blue carbon projects face other risks, including the environments' ability to survive and continue to sequester carbon for decades.

During a six-month period in 2016 and 2017, for example, between 40 and 50 million mangrove trees in Australia's Gulf of Carpentaria died. The culprit was an exceptionally harsh El Nino climate that dropped coastal water levels by 40 centimeters for roughly six months.

Still, with cooperation between government and private industry, experts expect blue carbon credits will eventually provide a crucial, high-quality means of carbon sequestration at scale. But it remains impossible to say exactly when that will come to pass.

--Reporting By Henry Kronk, hkronk@opisnet.com; Editing by Bridget Hunsucker, bhunsucker@opisnet.com and Jeff Barber, jbarber@opisnet.com 

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Carbon Credit Retirements Rise 7.5% Led by Oil and Gas, Services Demand

October 5, 2022

Voluntary carbon market credit retirements have increased by 7.5% over the first nine months of the year, with demand from the oil and gas industry as well as environmental services dominating the landscape, according to analysis from cCarbon on Wednesday.

Total voluntary carbon credit retirements across the board climbed to 112.7 million through September, compared to 104.1 million over the same period last year. Verra registry retirements without Climate Community and Biodiversity benefits (CCB) were at 64.5 million through September, up from 45 million a year earlier and Verra retirements with CCB were at 20.7 million, down from 37.6 million over the same period last year, according to cCarbon.

Gold Standard registry retirements were at 19 million through the first nine months this year, up from 16.9 million last year

Harry Horner, strategy lead at cCarbon, said in an email to OPIS that traditionally there has been a large December jump in retirements due to buy-side's annual reporting; however, he doesn't expect 2022 retirements to be much more than 10% higher than 2021 retirements.

In a sector analysis of retirement demand, the oil and gas industry retired about 16.4 million carbon credits between 2020 and 2022, claiming 22.4% of total retirement demand in the voluntary carbon market during that time, according to cCarbon. In comparison, carbon credit retirements from the oil and gas sector were only 1.37 million between 2016 and 2019.

Meanwhile, credit retirements from carbon services industry were 21.5% of the total demand during 2020 to 2022 at 15.6 million, up from 3.34 million during 2016 to 2019.

Digging deeper, oil and gas retirements by protocol showed that REDD+ credits made up 54% of the market share followed by soil-based credits at 20.6%. Of the REDD+ retirements, the preferred project regions were Peru, Columbia and Brazil, according to the analysis from cCarbon.

Despite the increase in total retirements over the first nine months of the year, total issuances for voluntary carbon market credits were down by 30%, cCarbon said.

Through the first nine months of the year, there had been 186.6 million issuances, which is down from 267.9 million issuances over the same period last year.

"From an issuance perspective we are well behind 2021, because of the gold rush for minting older vintages that occurred in 2021," Horner said.

Issuances by Verra - both with and without CCB - and Gold Standard have both fallen over the first nine months of the year.

Verra issuances were nearly 102 million without CCB and 35.5 million with CCB for the first nine months of this year, down from 135.5 million and over 92 million for the same period a year ago, while Gold Standard issuances were nearly 26 million for the first nine months of 2022, down from nearly 31 million the year prior, cCarbon said.

With the decline in issuances and increase in retirements, "we still expect there to be a healthy annual surplus from the year - that is around 40-50% of total annual retirements," Horner added. "An annual surplus trend that is likely to continue long into this decade, unless there is drastic action on trimming supply-side eligibility."

--Reporting by Jeremy Rakes, jrakes@opisnet.com; Editing by Lisa Street, lstreet@opisnet.com and Michael Kelly, mkelly@opisnet.com 

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Washington State May Link Cap-and-Trade Program to Calif. by 2027: Analysts

October 4, 2022

Washington state's forthcoming cap-and-trade program may link to California's existing program as early as 2027, analysts said Monday at a conference held in Baltimore by the Environmental Markets Association.

Washington's program, set to begin in January after being passed in April 2021, mirrors parts of California's program.

Mercuria analyst Dan McGraw noted that California, Washington and Oregon are competing against one another to create environmentally strong policies.

"I think the earliest you see them potentially link is in 2027," McGraw said of Washington and California. "I think California would be wise to sit back and watch it and see how it goes."

ClearBlue Markets analyst Jennifer McIsaac said Washington's nascent program needs time to establish itself; linking it to California would take years to occur.

The Washington Department of Ecology announced Friday that the state would hold its inaugural quarterly auction in the second half of February.

"It looks like [Washington has] tried to align some of the key program items with the [Western Climate Initiative] market. That doesn't mean they're ready to link," McIsaac said. "Linking would be a long process. Each side has to kind of approve the other side. I think the expectation is that it is going to take years for these two programs to link. I think for the first several years, we should look at these as two separate entities, but interrelated."

On Friday, Washington also adopted its emissions budget for its first four-year compliance period that will begin in 2023.

Washington's budget is set to 63.3 million metric tons of carbon dioxide equivalent (mt CO2e) for the 2023 compliance year, which will reduce by 4.8 million mt CO2e each year.

Washington in December joined the Western Climate Initiative, which facilitates the quarterly auctions for the linked California and Quebec markets, along with Nova Scotia's biannual auctions. Washington will feature current vintage year carbon allowances in its quarterly auctions and will hold biannual auctions to sell future vintage allowances.

Washington's Climate Commitment Act will require entities that emit 25,000 metric tons of carbon dioxide (CO2) to purchase allowances from a cap that will reduce over time to offset emissions. The program will feature an auction reserve price that matches California's, and like that state's, Washington's will increase annually by 5% plus inflation.

--Reporting by Mayra Cruz, mcruz@@opisnet.com; Editing by Kylee West, kwest@opisnet.com, and Barbara Chuck, bchuck@opisnet.com

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