In this report

Compliance: EU ETS-covered emissions fall in 2022, Canada aims to future-proof CO2 pricing

Verified emissions from power and industrial sectors in the European Union Emissions Trading Scheme (EU ETS) fell by 1.2% in 2022, analysts estimated, based on preliminary but incomplete data published by the European Commission.

EU Allowances (EUAs), meanwhile, posted their first monthly loss since December in March, despite a 4.9% weekly gain, as they settled at €91.93 on March 31. As of the end of last week, EUAs were valued more than €4 higher than two weeks ago.

The European Commission launched a consultation as part of its preparation for proposing 2040 climate goals next year to ensure the bloc hits its binding net zero emissions goal a decade later. Speakers in Lisbon for the IETA European Climate Summit urged the bloc to take immediate action to include engineered carbon removals into its ETS to allow technologies now considered essential for meeting climate targets to scale.

As part of a broader trend, there has been a lower level of carbon hedging by EU utilities in 2022. This has been due mainly to the energy crisis, but also the shaky macroeconomic picture which has further weakened in recent weeks.

A major shakeup of rules governing derivatives trade in EU Allowances also appears to have been defeated within wider EU financial regulatory reform.

The Canadian federal budget tabled Mar. 28 will consult on a carbon contracts for difference (CCfD) programme to de-risk private sector investments in GHG mitigation projects. The budget from Liberal Prime Minister Justin Trudeau will also launch new investment tax credits or expand existing ones related to clean energy and carbon capture.

The 11 RGGI member states on Mar. 29 presented their proposed modelling framework that will inform the outcomes of the scheme’s third programme review, including potentially ratcheting down the annual allowance caps to zero by 2040. Additionally, New York state officials said they are designing the state’s economy-wide cap-and-invest system for a future linkage with RGGI.

Dec-23 V23 Washington Carbon Allowances (WCAs) traded as high as $59 on Mar. 31, well above the scheme’s Tier 1 Allowance Price Containment Reserve (APCR) trigger of $51.90, according to Nodal Exchange data. Traders attributed the high prices to several bullish supply-demand fundamentals in North America’s newest carbon market.

India is set to become Japan’s next Article 6 carbon trading partner, after the two nations on Friday announced they had signed an agreement to initiate talks over signing a Joint Crediting Mechanism (JCM) deal.

Total traded volumes of Australian Carbon Credit Units (ACCUs) rose significantly as the government successfully passed its Safeguard Mechanism reforms through parliament, while the Clean Energy Regulator has warned of timeline blowouts on accrediting human-induced regeneration (HIR) projects.

Spot prices ticked up only marginally in China’s emissions trading scheme as two block trades injected much needed liquidity, while recent regulatory updates have ignited hopes among participants on the long-stalled offset sector.

With the Australian Safeguard Mechanism set to kick off in July, experts have argued that Australia should start to work on a Carbon Border Adjustment Mechanism (CBAM) as quickly as possible to address carbon leakage and provide investment certainty.

The Australian parliament passed legislation to strengthen the Safeguard Mechanism, providing policy certainty to the country’s industrial sector and carbon market, although experts emphasised the government’s work to achieve climate goals has only just begun.

The New Zealand carbon allowance (NZU) price fell by 10% to an 18-month low, as the usual end of financial year doldrums have been compounded by cratering confidence in the market.

Voluntary: VCM Integrity Council publishes Core Carbon Principles, first applicants approved for CORSIA’s next phase

The two largest voluntary carbon credit issuing standards, Verra and Gold Standard, welcomed the publication of the core carbon principles (CCPs) by the Integrity Council for the Voluntary Carbon Market (IC-VCM) last week, speaking at its launch event in Lisbon. Gold Standard commented that they provide a crucial “floor of competence” for climate projects.

UN aviation body ICAO’s Council approved the American Carbon Registry (ACR) and Architecture for REDD+ Transactions (ART) to supply credits for the 2024-26 first phase of the CORSIA global offset scheme. These credits must have a vintage range of 2021-26, in contrast to the eligibility range for CORSIA-eligible units under the regime’s 2021-23 pilot phase that goes back to 2016.

Certifier Global Carbon Council (GCC) signed an MoU with the Egyptian Exchange (EGX) to collaborate in the expansion of regional carbon markets.

Paris-based developer aDryada has also signed an MoU for a reforestation project deal with Ghana.

A buyer has paid an average of $52/tonne for the first issued electric cooking carbon offsets as well as future units, the project developer UpEnergy told Carbon Pulse.

EU proposals to tackle greenwashing launched over the last fortnight would force companies active in the bloc to disclose where they acquire their carbon credits and whether the units are backed by recognised methodologies.

Japan launches the GX league in early April, a nationwide decarbonisation initiative involving the operation of the voluntary carbon market that over time will expand and culminate in an economy-wide mandatory emissions trading scheme.

China’s environment ministry has called for proposals of offset methodologies under the CCER scheme, marking a first step towards resuming the country’s suspended VCM scheme.

Singapore-based ACX has formed a partnership with a blockchain technology provider to trade forward-financed carbon credits.

Japan has issued more than 700,000 new offsets under its J-Credit scheme, increasing the number of units by 10%, and registered around 30 new projects that will cut emissions by 7.3 million tonnes of CO2.

Finance: Global carbon markets seen withstanding macro headwinds

Both compliance markets and voluntary carbon markets are sufficiently resilient to withstand current macroeconomic headwinds, with experts underlining that bearish impacts of the unwinding banking crisis and rising inflation would be short-term, speakers told the IETA European Climate Summit last week in Lisbon.

A total of more than $63 billion was raised from the sale of carbon allowances across 28 ETS in 2022, according to a report from the International Carbon Action Partnership (ICAP). Soaring prices in the EU’s carbon market helping to drive revenues to a new annual record.

A Finnish startup, Carbonaide, has raised €1.8 million to scale up the manufacture of carbon negative concrete.

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