DFM to Launch Carbon Trading Pilot Program; OPIS to Provide Pricing Data

November 23, 2023

Dubai Financial Market announced on Thursday that it will launch a carbon trading pilot program at the COP28 climate summit opening in Dubai next week, with global daily price references provided by OPIS, a Dow Jones company.

The pilot program for institutional investors will run from Dec. 4 to Dec. 8.

The move will position DFM at the forefront of climate action as a regulated platform where project capital raising, carbon credit trading and safekeeping are explored in support of the United Arab Emirates' net zero by 2050 goal, the company said in a news release

"The launch of carbon credit trading represents a logical progression for DFM as a platform for ESG-focused themes and building on our existing track record," Hamed Ali, chief executive of DFM and Nasdaq Dubai, said in the release. "As the global economy accelerates its decarbonization, the demand for carbon project financing is poised to surge and the necessity to trade credits will grow in tandem."

The carbon credits traded on the DFM platform will come from certified projects around the world and will include carbon avoidance, reduction and removal initiatives. 

Dubai Electricity and Water Authority, a major utility, will supply carbon credits from two of its projects, while Minerva Foods subsidiary MyCarbon will offer credits from four international projects.

In addition to DEWA, 16 UAE companies including DP World, Dubai International Financial Centre, Emirates NBD and Emaar will participate in the pilot, DFM said.

The transactions will be executed through five DFM brokers while clearing and settlement processes will be handled by Dubai Clear and the Dubai Central Securities Depository, it added.

OPIS will provide all participants in the pilot with global carbon market pricing intelligence during the program to help the stakeholders make informed decisions about buying and selling carbon credits, said Lisa Street, executive director of climate and carbon markets at OPIS, in a statement.

"Partnership in DFM's pilot trading program builds on OPIS' extensive experience in providing trusted and transparent environmental commodities pricing for global voluntary and compliance carbon markets," Street added. "We will help bring greater transparency to carbon credit markets in the UAE in
alignment with the country's commitment to climate change mitigation."

COP28 will be held in Dubai from Nov. 30 to Dec. 12.

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

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

Clean Energy Sector Now Employs More
People Than Fossil Fuel Industry: IEA

November 21, 2023

Thirty-five million people are now employed in the global clean energy sector, compared to 32 million in the fossil fuel industry, according to a new report released Wednesday by the International
Energy Agency.

The second edition of the annual World Energy Employment report showed that global energy employment rose to 67 million last year, an increase of 3.4 million from pre-pandemic levels.

More than half of the growth over this period was in just five sectors: solar photovoltaics, wind, electric vehicles and batteries, heat pumps and critical minerals mining.

Of them, solar PV was by far the largest employer, accounting for 4 million jobs, while EVs and batteries were the fastest growing, adding well over 1 million jobs since 2019, the report said.

Fossil fuel jobs have also seen an increase year on year, but the rebound has been more subdued, leaving them below pre-pandemic levels.

The uptick in clean energy jobs occurred in every region of the world, with China accounting for the largest share of jobs added globally.

The report, however, raised concern about shortages of skilled labor as the number of workers pursuing degrees or certifications relevant to energy sector jobs is not keeping pace with growing demand.

A survey of more than 160 energy companies conducted by the IEA showed that installation and repair work positions were the number one occupation segment for which respondents had the greatest
difficulty hiring, the agency said.

Developing a sufficiently large and skilled local workforce is an imperative in every region, as most energy jobs are tied to the location where installations are developed, the report said.

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

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

Analysts Expect Weak Demand Through CORSIA Phase I, But Unknowns Persist

November 21, 2023

The upcoming shift from the CORSIA Pilot Phase to Phase I will not immediately impact global carbon market dynamics, but key aspects, such as which registries will be approved to supply offsets and how the Article 6 corresponding adjustment mechanism will work, have yet to be determined for the international aviation carbon reduction scheme, industry experts said.

The Carbon Offsetting and Reduction Scheme for International Aviation was developed by the United Nations International Civil Aviation Organization to make airline growth carbon neutral after 2020. The scheme enters its Phase I at the start of 2024 following a three-year Pilot Phase. Both phases are
voluntary, but participation will be required, with some exceptions, when Phase II commences in 2027.

Little will change for participating airlines as Phase I begins, with the exception that they will need to calculate emissions each year, and the baseline will drop to 85% of 2019 levels, according to ICAO.

But several aspects of the program have yet to be determined.

ICAO approved nine registries to supply eligible emissions units for the Pilot Phase. But as Phase I approaches, the organization has only extended full approval to two carbon registries.

In addition, airlines that retire Phase I EEUs will need to obtain a corresponding adjustment from the country that produced the credit to ensure it is not counted twice. That process was outlined by Article 6.4 of the Paris Agreement, but most countries have yet to determine specific procedures to carry it out. The subject will receive further attention at COP28 in Dubai, which begins Nov. 30.

Until further clarity emerges on both questions, the overall supply of Phase I CORSIA EEUs will remain indeterminate.

Waiting on Registry Approval

Out of the nine registries approved to supply offsets credits for Pilot Phase, the ICAO council has fully approved two - American Carbon Registry (ACR) and the Architecture for REDD+ Transaction (ART) - for Phase I eligibility.

Four other registries were conditionally approved by the ICAO Technical Advisory Body (TAB) in March, but were asked to make specific program updates. They are: the Verified Carbon Standard (VCS), the Gold Standard, Global Carbon  ouncil (GCC) and Climate Action Reserve (CAR).A further 11 registries applied for Phase I eligibility: the Biocarbon Fund Initiative for Sustainable Forest Landscapes, Biocarbon Registry, Carbonpath, Cercarbono, the Forest Carbon Partnership Facility (FCPF), the International Carbon Registry, J-Credit, KCCI Carbon Standard, the Premium Thailand Voluntary Emission Reduction Program, Riverse and Socialcarbon.

Four of them received conditional approval in November. They are: the FCPF, the BioCarbon Fund Initiative for Sustainable Forest Landscapes, Cercarbono and the Premium Thailand Voluntary Emission Reduction Program. GCC also submitted program updates that were considered by TAB during the November meeting and have been asked to make further changes.

Carbon market stakeholders expect that ICAO will ultimately grant full Phase I approval to several registries.

"We are not sure when exactly TAB will make a decision," ClearBlue Markets Manager of Market Analysis Anop Pandey said. "Given that most of the 11 applied registries were already approved for the Pilot Phase, we would expect most, if not all, of the applications to be successful. This would provide additional supply for the program's first phase."

According to a ClearBlue report this summer, just eight million offsets exist that could become eligible for Phase I, all of which derive from ACR. If Pilot Phase-eligible registries are approved for Phase I, that figure expands to 63 million offsets, according to ClearBlue.

Ongoing Thin Demand

While the overall supply picture for EEUs remains uncertain, demand will hold off for some time.

During the Pilot Phase and Phase I, ICAO tallies up the overall sectoral emissions and compares them to what occurred in 2019. Any growth above those levels will need to be offset by participating airlines.

Covid-19, however, upended airline travel. ICAO estimated international airline travel led to roughly 600 million metric tons of CO2 emissions in 2019. That figure dropped to 250 million tons in 2020.

In the years since, international aviation has rebounded, but remains below pre-pandemic levels. The ICAO has anticipated three scenarios for post-Covid recovery. In its high recovery scenario, international air traffic will push past 85% of 2019 emissions next year, and airlines will need to plan to offset emissions. But in the low recovery scenario, that may not occur until 2027 or 2028.

Compliance for Phase I, furthermore, is not due until 2028.

According to the ClearBlue Markets report this summer, the high recovery scenario would imply an overall demand of roughly 2.1 billion offsets between 2023 and 2035, while the low recovery scenario would require about 609 million offsets.

ClearBlue estimates roughly 175 million offsets are currently available for the voluntary phase. But according to the authors, demand isn't expected to materialize until Phase II and "none of this offset supply will be used for CORSIA compliance under the current eligible offset rules," they write.

Avoiding Double Counting

A second key uncertainty surrounds Article 6 of the Paris Agreement and how governments plan to avoid using credits claimed by airlines for CORSIA compliance for their own nationally determined contributions (NDCs).

Offsetting entities will need to identify the country from which their carbon credits derived, consult with them to determine they have not been counted twice and, where applicable, obtain a letter proving a corresponding adjustment has been made to the country's NDC.

This will require each country to establish a legal framework and process by which they consider and grant corresponding adjustments. Jurisdictions will also need to build the capacity to consider and approve corresponding adjustment requests from offsetters around the world.

Many countries have yet to cement their corresponding adjustment practices, and carbon registries are divided on how to tackle the subject. "Even the key players in the voluntary carbon market are not on the same page," cCarbon Analyst Eszter Bencsik said.

Some leaders, like CAR President Craig Ebert, have publicly opposed measures to avoid double counting in the past. In a Jan. 10, 2022 blog post, Ebert wrote doing so "makes no sense."

"This argument obliterates the distinction between double counting and double crediting and is seemingly oblivious to the fact that most national greenhouse gas inventories are comprised of private sector activities within a host country's boundaries (e.g., manufacturing, production of fossil fuels and
electricity, transportation related to corporate operations, etc.)," Ebert said. "Double claiming is critical to the climate fight, reducing the barriers to private investment in emission reductions while also allowing the host country to claim credit."

Other registries, like Gold Standard, have taken the initiative to facilitate Article 6.4. The organization announced it had launched its first Article 6-aligned credits on Wednesday. The offsets derive from a cookstove project based in Rwanda, and the government of Rwanda has provided a letter confirming
the credits won't be used for its NDC.

Most registries, including CAR, have outlined procedures to allow buyers to obtain corresponding adjustments.

According to analysts, however, there are technically zero offsets eligible for Phase I because no corresponding adjustments have been confirmed by CORSIA-eligible registries.

Several aspects of Article 6 are up for negotiation at COP28, which commences in Dubai on Nov. 30. There is a chance that parties can agree on specific operating guidance, which has the potential to speed Article 6 usage.

OPIS CORSIA Price Assessments Nosedive

As CORSIA stakeholders grapple with Phase I uncertainty, the market for Pilot Phase CORSIA-eligible offsets prices has slumped.

On Nov. 8, the OPIS CORSIA-Eligible Offsets (CEO) mean assessment hit a record low of 43.5cts/mt. It has since bounced back to 81.5cts on Friday, but remained well below previous levels.

The OPIS CEO assessment was first set at 80.5cts/mt on Dec. 28, 2020. It hit its historic high of $9.04/mt on Nov. 19, 2021. It set its 2023 year-to-date high of $3.585/mt on Jan. 3., the first session of the year.

The OPIS CEO assessment reflects the high, low and mean price of CORSIA EEUs traded over the course of a given day.

Units that can be retired during the Pilot Phase must originate from projects that started their first crediting period after Jan. 1, 2016, and are issued until Dec. 31 of this year. But participating airlines have over a year before they need to begin retiring offsets. Compliance for the Pilot Phase isn't due
until Jan. 31, 2025, and there may be no offsetting requirements to speak of. Until that date approaches, demand will remain weak, analysts said.

"Given that we do not expect any compliance demand during the Pilot Phase at all, there is really no incentive for anyone to buy GEO, leading to the price decline," Pandey said.

Ready or Not, Here Come Phase I Futures Contracts

As CME GEO futures contracts prices continued on a downward trend last month, the Intercontinental Exchange launched a CORSIA Eligible Emissions Units futures contract for the delivery of Phase I credits.

Since its debut in October, the ICE contract has garnered some trading activity, with relatively small volumes of credits exchanging hands in a range of $8.25/mt to over $11/mt in recent weeks, a significant premium to the CME GEO contract.

"The volumes traded under the CORSIA contract are absolutely negligible," Bencsik said. "It is not indicative of any broader market trend."

The ICE contract is composed exclusively of credits from the American Carbon Registry - one of the two registries approved to issue Phase I credits.

When asked whether the credits traded in the contract are eligible for Phase I compliance, an ICE representative said ACR had established a procedure for obtaining a corresponding adjustment. When a buyer purchases an ICE CORSIA Eligible Emissions Units futures contract, the onus then falls on the registry to ensure Article 6 compliance, they said.

ICE plans to add credits from VCS and Gold Standard if and when they are approved by the ICAO Council.

One-hundred fifteen countries voluntarily participated in the CORSIA Pilot Phase this year. They have agreed to ensure that any flights between them emit no more greenhouse gases than they did in 2019. Emissions reductions can be achieved through a combination of more efficient flying practices, the use of sustainable aviation fuel and retiring carbon offset credits.

Participation in CORSIA will be voluntary until Phase II, which runs from 2027 to 2035.

OPIS CEO over time

Reporting by Henry Kronk, hkronk@opisnet.com
Editing by Bridget Hunsucker, bhunsucker@opisnet.com and Jeremy Rakes, jrakes@opisnet.com 

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

Sibelco Mulls $500 Mn Investment for Spruce Pine HPQ Capacity Expansion

November 14, 2023

Belgium-based industrial minerals company Sibelco is studying a second expansion of high-purity quartz (HPQ) capacity at its Spruce Pine Facility in North Carolina with an estimated $500 million investment to meet growing demand from the solar industry, according to a company press release on Nov. 10.

The firm has concluded long-term sales agreements, inclusive of prepayments, with global solar photovoltaic (PV) customers "that will require an additional expansion of installed capacity" that is "expected to be larger" than a previously announced expansion to double its HPQ capacity at Spruce Pine.

That expansion, which builds on a 30% prior increase in installed capacity, is "on track for completion in 2025," Sibelco said.

When contacted by OPIS, a company spokesperson said Nov. 14 that Sibelco could not provide an estimate of the final plant's total nameplate capacity or how much capacity would be destined for PV or semiconductor customers as the study has only just started.

Sameer Gaikwad, director of Research and Business Intelligence at Exactitude Consultancy, estimates Sibelco's current HPQ production capacity to be around 35,000-40,000 metric tons (mt) a year, with capacity increases expected from the second quarter of 2024.

With this latest expansion of installed capacity, underpinned by a mine life potential of more than 100 years, Sibelco can provide its customers "long-term security of supply," Hilmar Rode, Sibelco's CEO, said in the press release.

Various estimates place Spruce Pine as accounting for 60-90% of the world's HPQ supply, making it the single largest source of the raw material. Norway-based The Quartz Corp is another prominent miner at Spruce Pine.

A second Sibelco expansion wouldn't directly impact China's solar wafer market in the short term, according to a North Asian crucible maker. China's solar wafer manufacturers have faced periodic shortages of HPQ, the raw material used to make expendable crucibles in which polysilicon is made into ingots, then sliced into wafers.

"Crucible quality affects the quality and cost efficiency of ingot growing," even as it is "very difficult to get clear information" on how HPQ shortages impact the quality of Chinese wafers, a solar materials trader said.

And the impact of additional Sibelco capacity in the long term remains unclear, according to sources. "It's essential to observe whether the expanded volume can be absorbed by new customers from emerging PV markets such as India and the USA," the crucible maker said.

HPQ shortages have "been an issue since 2021" when global module production was around 220 gigawatts (GW) and the N-type modules were less than 5% of that share, the trader said. When Sibelco's first expansion phase is completed in 2025, "the world may need 500GW+ of module actually produced and of which 80% or more may be N-type. So even a doubling of HPQ production may not be enough."

Reporting by Nicholas Lua, nlua@opisnet.com
Editing by Hanwei Wu, hwu@opisnet.com 

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

Washington State to Pursue Linkage with California, Quebec Carbon Markets

November 3, 2023

Washington state will pursue linking its emissions allowance market with California and Quebec's under the Western Climate Initiative, the state Department of Ecology announced Thursday.

Lawmakers designed Washington's Cap-and-Invest program with the intent to seek linkage with the WCI. The formal decision came after preparation, which included a slate of agency request legislation related to linkage that was published by Ecology last week and a preliminary linkage analysis released in October.

"Seeking to link with California and Quebec offers our state the best path to a successful and durable carbon market," Ecology director Laura Watson said during a press conference.

Watson said the soonest a linked market could begin operation is 2025 but indicated the linkage process could take longer. The California Air Resources Board has not announced its decision on whether it will seek linkage with Washington, and Watson said the departments have not had formal discussions on linkage.

CARB communications director Lys Mendez told OPIS last week CARB's process would take two years in the case of all three jurisdictions deciding to pursue linkage.

"California's process to finalize program linkage would be about two years from when that step is initiated," Mendez said.

California and Quebec linked their emissions markets in 2014.

"Now that I've made this preliminary decision, we will begin the formal discussions with California and Quebec, and they will need to make their own decisions on whether or not to link," Watson said.

Passed in 2021, the Climate Commitment Act established Washington's Cap-and-Invest program and laid its market-based approach to meeting state emissions reductions goals. The program began Jan. 1, 2023, and the state held its first auction Feb. 28. The legislation directs Ecology to "seek to enter into linkage agreements with other jurisdictions."

A linked program would hold joint auctions of allowances usable for compliance in California, Washington and Quebec, that would also be tradable across jurisdictions. The linked market would have a uniform allowance price.

OPIS on Wednesday assessed the WCA V23 December 2023 price at $53.30/mt and the WCA V23 November 2023 price at $53.05/mt. Meanwhile, OPIS assessed V23 CCA prices at $37.90/mt for December 2023 and $37.72/mt for November 2023.

WCA secondary market prices this year climbed from an initial OPIS assessment of $43/mt on Jan. 3 for V23 December 2023, to a peak of $70.50/mt assessed April 14.

Ecology said it hopes to apply downward pressure on prices with its second Allowance Price Containment Reserve (APCR) auction next week.

"The November APCR auction frontloads the available APCR supply by offering 5 million allowances, all at the lower Tier 1 price. This is intended to put further downward pressure on compliance costs for covered entities," Ecology said.

Watson said Ecology is not targeting a set price for WCAs on the secondary market, but that linkage is intended to reduce allowance prices in Washington.

"Our analysis did show that a linked market is likely to not only generate market stability but also have some downward pressure on prices," Watson said.

Climate Commitment Act Implementation Manager Luke Martland added that linkage would likely mitigate allowance prices in Washington, but Ecology hopes to let the market itself determine the linked price.

"We don't have a specific price in mind, and we don't try to determine what the market will set as an appropriate price," Martland said.

Analysts at ClearBlue Markets model lower allowance prices in a scenario where Washington links to WCI compared to Washington continuing on its own.

If Washington is unable to link with the WCI, Watson said the department intends to continue operating the standalone Washington Cap-and-Invest program.

Ecology disclosed Thursday that Watson confirmed the department's intention to link in a letter to Gov. Jay Inslee and state legislators.

"I have directed my staff to immediately begin the process of pursuing a linkage agreement to ensure that our state's economy and communities can begin enjoying the benefits of linkage as soon as possible," Watson said in the letter.

Reporting by Slade Rand, srand@opisnet.com 
Editing by Jeremy Rakes, jrakes@opisnet.com 

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

Deforestation Accelerated Last Year Despite Countries' Commitment: Report

October 24, 2023

Global deforestation worsened last year despite pledges by countries to save and restore forests, according to a report released Tuesday.

The Forest Declaration Assessment, published by a coalition of civil society and research organizations called Forest Declaration Assessment Partners, showed that deforestation increased by 4% in 2022, compared to the previous year.

The annual report said this loss of 16.3 million acres of forest means that the world is 21% off track to eliminate deforestation by 2030.

At the COP26 climate summit in Glasgow, Scotland, more than 140 countries had issued the Glasgow Leaders' Declaration on Forests and Land Use, promising to halt and reverse forest loss by 2030.

The report reviewed that commitment and tracked progress on reducing forest loss compared to the average deforestation rate between 2018 and 2020, aiming to reach zero loss by 2030.

It showed that progress on protecting and restoring forests moved too slowly last year, and in some cases, worsened.

Efforts to protect primary tropical forests - the densest, most pristine forests on earth - are 33% off track, with more than 10 million acres lost in 2022, the analysis showed.

Forest loss increased by 8% from baseline levels in tropical Latin America and the Caribbean, with Brazil and Bolivia faring poorest. In contrast, deforestation decreased by 18% from baseline levels in the tropical countries of Asia, with Malaysia and Indonesia meeting their interim goals for 2022, the study found.

"Unfortunately, these individual successes cannot outweigh the massive forest loss and degradation underway across critical forest ecosystems," the report said.

The analysis also revealed that gross greenhouse gas emissions from deforestation increased by 6% compared to 2021, totaling 4 billion metric tons of carbon dioxide equivalent in 2022.

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

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

US Fertilizer Giant CF Industries Cashed in on Surplus British Carbon Credit

October 23, 2023

U.S. fertilizer giant CF Industries made £32.1 million ($39.17 million) earlier this year from selling UK carbon allowances, according to accounts filings by its British subsidiary, after the British government handed free pollution allowances to the company in 2022 for its ammonia plant in northwest England
that was taken permanently offline and did not operate that year.

The accounts for CF Fertilisers UK Limited's 2022 financial year filed Thursday state: "The company has received £32,139,082 from [the] sale of UK Emissions Trading Scheme carbon credits in 2023."

The information is contained in the "post balance sheet events" part of the accounts, which do not specify the origins of those carbon credits. However, it is highly likely that the sale involved the free allowances handed to the company on the basis of helping it cover the costs of emitting carbon at its
Ince plant in northwest England and its Billingham complex in northeast England, where its other ammonia plant has also been offline for a year and been permanently shut down.

Installations like CF Industries' ammonia plants are deemed to be hard to decarbonize and consequently receive free pollution permits every year from the government so that operators are not put at a disadvantage to competitors in countries that do not apply levies on their carbon emissions.

Most free allowances are typically handed back at the end of the annual compliance reporting period by installation operators to emissions trading system authorities in the U.K. and the EU tasked with managing Europe's two largest cap-and-trade systems. But if an installation operator has a surplus of
free allowances beyond those needed to cover the cost of emissions at its site, it can sell those allowances on the open market to other emitters and parties.

The Ince installation received its annual allocation of 488,602 free allowances in 2022 despite being taken offline in September 2021 and remaining shut thereafter. The company announced in June last year that it would permanently close the facility, citing high natural gas prices.

Those allowances were worth £38.68 million ($48.1 million), using the average carbon price of £79.17 ($96.97) for the year. However, the newly released CF Fertilisers UK Limited company accounts show that the company did not sell any permits in 2022 and since then the value of allowances has slumped from a record £97.75 on Aug. 19 last year to either side of £40 in recent weeks.

The number of free allowances handed to CF Industries' Billingham site in 2022 was also greater than its emissions after the company took offline its ammonia plant at the heart of the installation in September of that year, resulting in a surplus of 248,941 permits (see table below). Carbon emissions produced at
Billingham are set to plummet in 2023 in the wake of the decision to close the ammonia plant on a permanent basis, likely leaving a substantial surplus of pollution permits that the company can sell on the market if it has not already done so.

Illinois-based CF Industries did not respond to questions posed by OPIS via e-mail.

CF Fertilisers UK Limited Billingham Complex Key Data

Year Emissions     Free Permits Difference Notes
2018 863,911 837,158 -26,753 Triennial turnaround
2019 901,507 820,301 -81,206  
2020 1,052,231 803,386 -248,845 Fully operational
2021 796,161 878,500 82,339 Turnaround, fall shutdown
2022 629,956 878,897 248,941   Ammonia plant offline
2023 -- 878,897 --  

CF Fertilisers UK Limited Ince Facility Key Data

Year Emissions   Free Permits Difference Notes
2018 500,807 6,754 126,806   Triennial turnaround
2019 710,047 614,976  -95,071 Fully operational
2020 650,133   602,295 -47,838  
2021 452,684 601,567 148,883 Offline from September
2022 6,754 488,602 481,848 Permanently closed

(Verified emissions data from European Commission and U.K. government; emission and permit numbers refer to metric tons.)

British Lawmaker Blasts CF Industries Over Carbon Credit Windfall

Lawmaker Alex Cunningham, a Member of Parliament in the U.K. representing the Stockton North constituency, which includes the Billingham site, told OPIS late on Friday that he intended on writing to the British government about the sale of surplus credits by the company.

"I have worked successfully with several owners of the fertilizer plants at Billingham and Ince getting [them] access to [government] ministers and supporting them in a difficult industrial landscape," the Labour Member of Parliament told OPIS.

"Given [that CF Industries] have closed ... Ince completely and now ceased ammonia production at Billingham, I am all the more angry that they appear to have made a fortune off the back of carbon credits, which were supposed to be used to mitigate their emissions. That they can walk away with many millions of pounds [from the sale of carbon credits] beggars belief. I will be writing to the [UK government] industry minister asking him what the government are going to do about it," Cunningham said. 

The British subsidiary accounts show that the company made a profit of £102 million excluding the costs of the U.K. restructuring but that those costs totaled £134 million.

The UK's emissions trading system inherited the installation cessation rules of the EU ETS from which it broke away at the beginning of 2021. Those rules allow an operator to keep all of the free allowances handed to its installation in its final year of operations even if the installation emits very little carbon.

The European Commission has recognized that the free allowance system's installation cessation rules are open to "abuse," OPIS reported last month.

The European Commission's Expert Group on Climate Change Policy met on June 16, and a copy of the minutes from the meeting shows that the group discussed how to amend Article 26 of the Official Journal of the EU, which outlines the rules on managing the issuance of allowances to installations that have ceased operations.

A proposed change would cap an installation's designated free allocations starting the day after an installation is shut down, according to the minutes taken at the June 16 meeting. Such an amendment would prevent operators from receiving surplus free EU carbon allowances in the year when an installation stops emitting carbon.

The British government has not yet given any indication that it is considering a similar initiative.

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

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