G7 energy ministers outlined principles to underpin high-integrity carbon markets alongside a wider communique released following their meeting in Japan this month, providing a signal of support towards mitigation actions which generate carbon credits.

European lawmakers on Apr. 18 gave their final approval to a series of provisional deals aiming to also include shipping, buildings, and road transport under carbon pricing in the EU, impose a carbon border adjustment mechanism (CBAM), and launch a Social Climate Fund. The measures had already been subjected to a lengthy legislative process but were finally rubber-stamped as expected this week, despite some minor disagreements.

European carbon allowances (EUAs) posted their first weekly loss in a month last week as activity eased ahead of the compliance deadline. Dec-23 futures contract settled early this week around €93/tonne, down from around €96 two weeks prior. Energy markets remain soft due to comfortable gas supply in Europe.

EU member states handed out a total of 75 million more free EUAs to industrial plants over the last four weeks, bringing the total issuance to around 76% of this year’s maximum. Five countries are yet to begin issuing permits to installations.

Analysts believe that the impact of the German nuclear phaseout which concluded on Apr. 15 has already been long-priced into the EU emissions trading system (EU ETS), though the extension of plants’ lifetimes over the past winter did avoid a significant amount of power sector emissions.

The Washington Carbon Allowance (WCA) Q2 auction on May 31 will exceed at least one of the Auction Price Reserve (APCR) price triggers, according to analysis firm Energy Aspects. The Tier 1 APCR trigger price this year is $51.90 and the Tier 2 price is $66.68. WCA prices have continued to hit new highs on the secondary market, trading as high as $71 on Apr. 14, according to Nodal Exchange data. Energy Aspects also expects all 8.6 million of the current vintage allowances on offer to sell out at the Q2 auction.

Fuel consumption in California totalled 16.72 billion gallons in 2022, down 1.2% from the 16.95 billion gal in 2021, California Department of Taxes and Fee Administration (CDTFA) data showed on Apr. 11. The lower output suggests depressed CO2 emissions under the state’s WCI-linked cap-and-trade system, though California will not publish 2022 cap-and-trade emissions data until November.

Quebec proposed a draft regulation for manure biomethane offset projects under the province’s WCI-linked cap-and-trade system, the province announced on Apr. 11. The protocol aims to avoid GHG emissions generated by the treatment of slurry by biomethanation.

Canada’s GHG output increased in 2021, emitting a total of 670 million tonnes of CO2e in 2021, the government said on Apr. 14. Emissions were up 1.8% from 2020 levels, but 7.4% below 2019 and 8.4% beneath 2005 emissions, the 2023 National Inventory Report (NIR) detailed. The higher output came amid a return to economic activity following the lifting of COVID-19 health precautions.

Trading activity in the Australian market has slowed down while companies with new compliance obligations under the strengthened Safeguard Mechanism are being given a crash course in the reformed Australian Carbon Credit Units (ACCU) market ahead of the July start date.

ACCU issuance has climbed upwards, thanks to nearly 200,000 units being awarded to just one project, while an Australian hydrogen company has signed an agreement with two major Japanese firms to build a facility using its novel technology in the country.

New Zealand’s independent Climate Change Commission has warned that the country is not on track to meet its climate targets with its current ETS settings, once again urging the government to drastically increase the cost containment reserve price trigger and lower auction volume limits.

The stockpile of NZUs in New Zealand’s ETS is starting to shrink, but participant’s surrender obligations have created a temporary bulge, according to newly released data, as the NZU spot price rallied following the release of the Climate Change Commission’s recommendations.

Thailand plans to introduce a carbon tax covering three key sectors to help meet the Southeast Asian economy’s net zero goals, although details on when it will be implemented are yet to be determined, according to local media reports.

A group of Papua New Guinea environmental NGOs have urged the government to publicly release key documents relating to its carbon market regulations, and to hold further consultations with stakeholders.

China has not yet introduced auctioning in its national ETS, but regulators could easily formulate rules for paid allowance allocation based on the lessons learned in the pilot markets, researchers from a government-run think-tank have suggested.

South Korea’s monthly CO2 auction cleared at a price slightly above March’s sale, though still failed to sell out amid bearish sentiment. Analysts expect that the mid-term outlook for the ETS still hinges on the government’s 2030 roadmap for emissions reductions.

  Back to Top

Some 780 companies adopted emission reduction targets in the first three months of the year, bringing the cumulative number to date globally to almost 4,800, according to Trove Research.

The Energy Transition Accelerator (ETA), led by the U.S. Department of State, Bezos Earth Fund, and The Rockefeller Foundation, announced on Apr. 11 the selection of Winrock International to create a jurisdictional-scale offset standard. The standard will generate “high-quality” carbon credits representing verified emissions reductions achieved through the implementation of ambitious, integrated, sector-wide energy transition strategies in qualifying developing countries.

Apple announced on Tuesday that it intends to double its commitment to nature-based carbon removal projects to $400 million, eyeing the resulting credits for use towards its own Scope 3 carbon neutral 2030 goal.

Buyers' club Frontier has seen its total commitment for engineered carbon dioxide removal (CDR) purchases climb above $1 billion by 2030 with the inclusion of four new multinationals’ pledges announced on Apr. 12, a year after the launch of the venture.

Oil major TotalEnergies claiming climate neutrality on certain products derived from carbon credits purchases lacks sufficient credibility to justify the label, a German court ruled, a decision that will see the French firm alter its strategy towards carbon claims.

A French public-private partnership involving EcoAct established the first carbon accounting methodology in Europe dedicated to the protection of seagrass beds via the country’s carbon credit certification programme.

In a report, the European aviation sector estimated it will need an extra €820 billion in funding if it is to reach its net zero emissions goal by 2050. A UK industry group meanwhile outlined a roadmap consisting of technological and efficiency improvements coupled with up to 9 Mt of carbon removals to meet the mid-century target.

Nordic tech firms including music streaming service Spotify and e-payment company Klarna are set to contribute a further $5 million in 2023 to a fund set up as an alternative to carbon offsetting.

A ministerial commission in the Democratic Republic of Congo recommended terminating 30 forest concessions, including a handful linked to REDD+ projects as well as undeclared carbon credit sales.

The Gabonese government meanwhile awarded a conditional multi-year land lease to a UK-based producer and global supplier of African timber Woodbois for the generation of tens of millions of carbon and biodiversity offsets.

Vancouver-based Klimat X Developments said on Apr. 17 the initial bidding round for voluntary credits from the first 5,000 hectares of its Sierra Leone Rewilding Project has attracted 16 interested parties, ranging from trading houses to large emitters. The developer said it expects the deal to close by June.

The International Energy Agency (IEA) launched a tender to purchase batches of various types of carbon offsets and other environmental credits.

  Back to Top

Slow progress from policymakers on clarifying the role of novel carbon dioxide removal technologies will limit significant progress in the near-term, experts told a removals event in Switzerland. Legislative uncertainty is particularly notable in the EU where key decisions on the clear role of engineered removals in the region are not expected before 2030.

Climate NGOs filed a lawsuit against the European Commission over its decision to include gas and nuclear energy in its taxonomy list of sustainable investments.

European companies are stepping up their investment in climate action in the wake of the coronavirus pandemic and are expected to continue that trend, according to a European Investment Bank (EIB).

An activist group for Indigenous peoples, the Amerindian People’s Association, has lodged a grievance with the Architecture for REDD+ Transactions (ART) Secretariat arguing that the Guyanese government discarded the principle of Free, Prior, and Informed Consent (FPIC) during the issuance of 33.47 million V16-20 credits late last year, which oil corporation Hess agreed to purchase a portion of.

  Back to Top

The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by Carbon Pulse. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.

CME GROUP DOES NOT REPRESENT THAT ANY MATERIAL OR INFORMATION CONTAINED HEREIN IS APPROPRIATE FOR USE OR PERMITTED IN ANY JURISDICTION OR COUNTRY WHERE SUCH USE OR DISTRIBUTION WOULD BE CONTRARY TO ANY APPLICABLE LAW OR REGULATION.