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Emissions trading scheme participants temper near-term carbon price expectations

Participants in emissions trading mechanisms worldwide have moderated their price expectations compared to a year ago but are optimistic that reforms will drive compliance carbon values higher in the future, according to an annual survey published by the International Emissions Trading Association. 

Last week, European carbon emission allowances (EUAs) dropped to their lowest in four months as traders after prices breached key technical support levels and bearish gas prices added weight to the market. The benchmark Dec-23 contract settled below €83/tonne on May 25 for the first time since January 17.

The EU’s total GHGs fell by 4% YoY in Q4 2022 even as the economy grew. The European Central Bank also forecast a limited impact of rising carbon prices in Europe on the euro zone economy.

EU coal-fired power generation dropped sharply in the first four months of this year, damping fears that the fuel would sustain its 2022 bounce.

The European Parliament postponed a vote to approve the strengthening of the bloc’s renewables target, as division among member states over the role of nuclear threatens to disrupt a process previously seen as a formality. The EU’s carbon border adjustment mechanism (CBAM) regulation formally entered into force.

The Q2 California-Quebec current vintage carbon auction settled at $30.33 on May 17, the highest point in a year and second-steepest settlement of all-time. 

The auction took place one day before a California Senate committee rejected bill SB-12, which would have ratcheted up the state’s 2030 GHG reduction target to 55% below 1990 levels by 2030, up from the 2022 Scoping Plan modelling of a 48% cut and the current statutory goal of at least 40%.

The Virginia Air Pollution Control Board (APCB) will meet June 7 in Richmond to consider endorsing Governor Glenn Youngkin’s (R) plan to eliminate the state’s RGGI-linked carbon market rule effective Dec. 31, 2023.

The New York state government will host seven webinars over the June 1 to June 22 period to provide information to the public and gather feedback on developing the state’s cap-and-invest rule, mandatory reporting rule, and auction rule.

The U.S. EPA has a strong legal basis to regulate CO2 output from power plants using emissions trading systems as potential compliance pathways, three legal experts told Carbon Pulse. 

China has launched a research project to rekindle plans to expand its national ETS into new sectors that includes several government think-tanks, academic organizations, and industry groups. Beijing has long planned to add energy intensive manufacturing sectors to the scheme, but that has fallen far down the list of priorities amid the pandemic and sluggish economic growth.

New Zealand has opened another round of consultations on its ETS around settings for the 2024 to 2028 period, causing some hopes that the number of NZUs available at auction could be cut already from next year.

NZU prices have dropped steadily after the government decided to ignore advice from the independent Climate Change Commission in December to reduce the number of permits, and as a result, NZ Carbon Fund – the only ETS focused on the NZ ETS – saw its worth drop by 20% in Q1, its quarterly report showed.

The New Zealand government has decided to contribute up to NZ$140 mln ($88 mln) for the installation of an electric arc furnace at a plant operated by NZ Steel, the nation’s biggest industrial emitters. The move is expected to shave 800,000 tCO2 off its annual emissions. That will slash its need to receive free NZUs under the ETS. In 2021, the company was given more than 2.1 mln permits for free.

Analysts with Ember have estimated that Jelina Group’s new Lake Vermont coal mine in Queensland will have annual Scope 1 emissions of over 550,000 tCO2e, far more than the 370,000 tonnes estimated by the project itself, and as a result might breach the hard cap Australia has set on emissions from the Safeguard Mechanism by 2030.

The Clean Energy Regulator has started implementing recommendations from the Chubb Review on changes to the Australian carbon market, including putting issuances from the nation’s biggest project type, human-induced regeneration (HIR), on hold. No new HIR credits have been issued since January.

Zimbabwe backs down from voiding existing carbon credit deals, Tanzania readies Africa’s largest project

Zimbabwe appears to have backed down from its threat to render “null and void” all existing carbon offset deals in the country, having previously declared all current carbon offset deals in the country would be subjected to a 50% revenue cut of all future contracts.

Tanzania signed an MoU with a Singapore-registered holding company to develop what could become the biggest carbon credit project yet in Africa, with sources telling Carbon Pulse that the government has other similar agreements.

Turkey will establish a national programme to scale carbon credit supply to help meet its 2053 net-zero target, aiming to expand project activities into a regional market and move away from a reliance on renewable energy projects.

Nigeria Sovereign Investment Authority (NSIA) and the National Council on Climate Change (NCCC) signed an agreement to advance climate action in the country via regulation on carbon markets, while its oil and gas regulator also disclosed plans to develop a regulatory framework for carbon pricing.

Verra’s founding CEO David Antonioli announced he is stepping down. Meanwhile, the offset standard developer and manager announced it will launch carbon credit labels to signify emissions removals versus reductions, along with Paris Agreement compatibility. 

JPMorgan Chase agreed to spend some $200 mln via several long-term deals to buy a total 800,000 tonnes from startups. Oslo-headquartered engineered removals company Removr signed an agreement with a storage technology provider as they target the launch of a 100,000-tonne DAC plant in Iceland in 2027. UK enhanced rock weathering project developer Undo secured $12 mln of fresh investment to scale operations globally.

The Brazilian state of Tocantins will formalize a 10-year agreement REDD credit agreement equating to 245 million tonnes of CO2 saved with Mercuria Energy on July 5, the state government announced. 

The Architecture for REDD+ Transactions (ART) Secretariat rejected a complaint from the Amerindian People’s Association (APA) in Guyana claiming the country's government did not receive consent from local communities to facilitate the distribution of tens of millions of avoided deforestation carbon offsets.

Pakistan’s national government has given its approval for Indus Delta Capital’s Delta 1 and 2 blue carbon projects to participate in the voluntary market until 2043. Given the nation’s lack of a regulatory framework, no corresponding adjustments will formally be carried out. However, the government has committed to not counting the project towards its NDC, which the company says will effectively remove any double-counting concerns.

Singapore has signed MoUs with Bhutan and Kenya to cooperate on carbon credit generation under Article 6 of the Paris Agreement, taking the island state’s total number of such agreements to nine.

Italian energy firm Eni has signed an MoU with the Vietnamese government with the aim of cooperating on agri-feedstock and nature-based carbon credits. Eni wants to use residues from agro-industrial value chains to produce vegetable oils for its bio-refineries.

Thai national oil and gas company PTTEP has partnered with the Krungthai bank on setting emissions reductions targets and then getting the bank’s assistance in acquiring any carbon credits it needs to buy to meet those goals.

Singapore-based trading company Pavilion Energy this month received a first shipment of “carbon neutral” LNG using a methodology on how to measure, report, and verify GHG emissions along the LNG value chain developed by Pavilion, QatarEnergy, and Chevron. The LNG shipment was sent by QatarEnergy.

Global clean energy investment remains resilient

Investment in clean energy is significantly outpacing that on fossil fuels as affordability and security concerns triggered by the global energy crisis strengthen momentum, the IEA said in a report. The G7 meanwhile endorsed new investments in natural gas as a “temporary” solution to reduce countries’ dependence on Russian energy amid the war in Ukraine, drawing sharp criticism from climate campaigners.

Morgan Stanley Investment Management secured $500 mln in commitments from European investors for its climate private equity strategy, which seeks to fund growth-stage firms capable of collectively avoiding or eliminating 1,000 MtCO2e by 2050.

The UK government offered 12 companies a total of 20 operating CCUS licenses with the potential to bury around 30 MtCO2 a year.

Climate tech firms EcoRegistry and Verdana have teamed up to launch EcoConsortium, a new venture that will provide the Asia-Pacific’s first digital carbon registry, with an embedded digital MRV platform.

Australian capital tech company FLINTpro, which has developed a software system used to measure and manage carbon and natural capital across a range of land types, has raised $9 mln in Series A funding, including from advisory firm Pollination, Persei Venture, Ananta-OM, and Synovia Capital.

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