In this report

Compliance: EUAs shed value over 10 trading sessions, California LCFS surplus reaches new record

European carbon allowance prices (EUAs) lost value over each of the past two weeks as the benchmark shed nearly €10 over the 10 sessions ending May 1, when it settled at €85.91/tonne.

Analysts have raised their short-term forecasts for EU carbon prices in a poll conducted by Carbon Pulse, but warned of coalescing bearish pressures from increasing permit supply and weakening fundamentals.

EU Emissions Trading System (EU ETS) volume dropped year-on-year by 26% in 2022 compared to 2021’s record of near 10 billion permits. Official data also confirmed that verified emissions marginally rose last year.

Renewable energy generated more of the EU’s electricity than fossil fuels over winter for the first time, data revealed, and large utility RWE posted a significant drop in generation from its German lignite power plants in the first quarter of 2023.

EU member states approved a series of deals aiming to put shipping, buildings and road transport under carbon pricing, impose a carbon border adjustment mechanism (CBAM), and launch a Social Climate Fund.

The discount in UK Allowance prices to their EU counterpart has widened to the most since inception of the British market, as traders price in bearish factors of UK lengthening while Europe tightens its targets.

Wisdom Tree launched Europe’s first exchange-traded product (ETP) for California Carbon Allowances (CCAs).

Analysts expect the EU’s CBAM would likely speed up development of China’s national carbon market, bringing aluminum, cement, and steel sectors into the ETS within a couple of years.

The Washington Department of Ecology (ECY) will conduct an emergency rulemaking to clarify holding limits and use of permits from the Allowance Price Containment Reserve (APCR) ahead of the Q2 cap-and-trade auction.

Canada’s Alberta province announced an aspirational target for net zero emissions by 2050, which will include[PB1] , and will consider the reduction of oilsands emissions limits, methane emissions abatement from the oil and gas sector, a framework for offsets, and emissions trading and market linkage with other provinces and jurisdictions.

California’s Q4 Low Carbon Fuel Standard (LCFS) net credit generation receded from recent highs, but the surplus bank hit a new all-time record of 15.07 Mt.

The impending Canadian Clean Fuel Regulations (CFR) are set to cover some 20 transportation fuel suppliers and producers initially registered under the programme when compliance obligations begin July 1.

The Chilean government published a resolution that will prevent renewable electricity providers from having to pay into the country’s $5/t carbon tax which subsidised fossil fuel-fired generation.

India said it will participate in UN aviation body ICAO’s CORSIA global aviation offsetting scheme from when the mandatory phase starts in 2027, leaving major emitters China, Brazil, and Russia unconfirmed.

South Korea has cancelled plans to auction off a combined 3.7 million CO2 permits before the June 30 annual compliance deadline due to low allowance prices and poor market liquidity.

Singapore and Cambodia have signed an MOU to develop a framework by year-end to allow trading in correspondingly adjusted Article 6 carbon credits under the Paris Agreement to help the two countries meet their NDCs.

Voluntary: Verra publishes draft consolidated REDD methodology, direct air capture (DAC) carbon removal projects gain foothold

Offset standard developer and manager Verra issued a draft version for its long-awaited consolidated REDD+ avoided deforestation methodology that will replace five separate methodologies and tackle the thorny issue of calculating emissions baselines that has provoked criticism of hot air in the voluntary carbon offset sector.

The Voluntary Carbon Markets Integrity Initiative (VCMI) will launch an “operable” Claims Code on June 28, to guide corporates’ use of voluntary carbon credits, aiming to tackle environmental integrity in the demand side of the market.

Carbon credit provider South Pole has proposed a new label for climate claims made by corporates in the wake of a backlash against terms such as “carbon neutral,” opting for a “contributions” approach.

Meanwhile, the South Pole-led carbon removals buyers’ venture, NextGen, announced the advance purchase of nearly 200,000 tonnes from a portfolio of DAC, biochar, and biomass projects, aiming to hit 1 Mt in forward deals by 2025 at an average target price of $200/t.

Swiss-based tech firm Climeworks plans to engage in several large-scale DAC projects in the U.S., selling a further 7,000 removals credits.

The Texas Permian Basin DAC plant developed by 1PointFive using Canadian DAC company Carbon Engineering technology and slated to capture up to 1 MtCO2/yr once fully operational held its ground-breaking ceremony at the end of April.

Efforts to create an EU carbon removals market face an uphill struggle as the option is set to be disregarded by the lead lawmaker on the issue, parliamentary sources told Carbon Pulse.

The forested Brazilian state of Para resumed plans to auction around 10.4 million hectares of public land to generate voluntary carbon credits and help avoid deforestation.

Panama’s environment ministry (MiAMBIENTE) and offset standards body Verra have signed an MoU to help develop a national voluntary carbon market.

The public-private LEAF coalition approved Bolivia and Colombia’s Choco department to supply REDD credits certified by the Architecture for REDD+ Transactions programme.

China will consider the inclusion of biomass in its long-suspended national offset programme and provide more policy support for the emerging sector, Ministry of Ecology and Environment officials said.

Japan revised requirements stipulated in the country’s national offset programme in preparation for its participation in UN’s aviation offsetting scheme CORSIA.

Mitsui OSK Lines, a Japanese shipping giant, set a target to remove over 2 MtCO2e by 2030 by investing in carbon removal projects.

Japanese oil and gas company Inpex signed an agreement for the supply of what it claims to be carbon neutral gas with a local energy company.

New Zealand’s main opposition party launched a high-level farming policy ahead of the upcoming election that would ban foreign direct investment in forestry, in a bid to stop companies buying up agricultural land and converting it to forests that generate carbon credits.

Three of Pertamina’s business units combined to sign a carbon trading cooperation agreement to help the Indonesian national oil company (NOC) realise its long-term net zero emissions goal.

Finance: Low-carbon project pipeline accelerates in Q1 2023

The global low-carbon project pipeline has accelerated in the past year to reach over 400 projects in Q1 2023, driven by green hydrogen projects as last year’s elevated gas prices have taken the shine off prospects for fossil-fuel based projects equipped with CCS.

The governor of the French central bank has urged the rapid rollout of global carbon pricing as one of the main tools for meeting climate goals, speaking at a conference in London.

EU industry chief Thierry Breton reiterated his support for a new sovereign fund to support the energy transition, with the scope of the investment vehicle to be considered over the summer.

Farmers in Europe are being offered interest-free loans to finance regenerative agriculture on the condition they repay the debt by generating carbon credits for investors.

Global wood supplier Woodbois, which had recently acquired a multi-year land lease conditional award for carbon credits from the Gabonese government, saw large investor Premier Milton Group sell its stake after a lender terminated the firm’s debt facility.

Supply chain carbon accounting platform CarbonChain raised $10 million in Series A funding and will expand operations to better support North American market.

U.S.-based carbon offset firm Ethicstream secured a $5 million investment from Catch Capital Partners and is halfway to hitting a $10 million Series A fundraising target.

The Bezos Earth Fund committed $9.7 million to carbon market training initiatives for Brazilian Indigenous people in the states of Mato Grosso and Mranhao.

Australia will launch a sovereign green bonds programme next year as well as develop a sustainable finance taxonomy to encourage greater, more transparent private sector investment in the energy transition.

Thailand’s national oil company PTT signed a carbon credit derivatives framework agreement with state-owned Krungthai bank.

Taiwanese regulators teamed up with the island’s main stock exchange to build and launch a carbon trading platform that will launch around mid-year.

CITIC Securities, one of China’s biggest securities firms signed a letter of intent with Shanghai-listed Yueyang Forestry and Paper to secure domestically issued CCERs worth no less than 100 million yuan ($14.5 million), ahead of the relaunch of the national voluntary scheme.

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