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Compliance: RGAs fade, WCAs spike in wake of second quarter carbon auctions

RGGI Allowance (RGA) prices slid by 30 cents to $13.46 after the June 7 sale cleared below market expectations at $12.73, according to results published June 9. This marked the third straight auction in the Northeast US 11-state power sector carbon market to settle below $13. 

The Virginia Air Pollution Control Board voted to rescind the state’s RGGI-linked cap-and-trade regulation at the end of the year, with the final repeal headed to Governor Glenn Youngkin’s (R) desk for review amid the spectre of probable lawsuits in the coming months. 

The second current vintage auction of Washington state’s cap-and-trade programme sold all allowances for $56.01 on May 31, which is $4.11 above the scheme’s Tier 1 Allowance Price Containment Reserve (APCR) trigger price. 

Washington state will make only one-eighteenth (1.05 million) of its APCR permits available at the cost containment mechanism’s first sale on Aug. 9, the Department of Ecology (ECY) announced June 9. That announcement sent secondary market prices soaring above the reserve's Tier 2 of $66.68 price, with the Dec-23 V23 contract reaching $68.50 on June 12. 

California Carbon Allowance (CCA) prices on June 12 surged to levels not seen since Aug. 2022 ahead of this week’s California-Quebec joint workshop to discuss potential amendments to the linked cap-and-trade programmes. The Dec-23 V23 CCA contract traded as high as $33.10 on Tuesday before giving up some of those gains in the afternoon. 

As part of the joint rulemaking process, Quebec will publish a draft regulation or legislative instrument on potential alterations to its carbon market this winter, with enactment slated for next summer, according to the notice published by the environment ministry (MELCCFP) on June 8. 

The opposition National party in New Zealand has said that if it wins October’s general election it will make sure to keep agriculture – which accounts for about half of the country’s GHG emissions – out of the NZ ETS, and delay the launch of a separate carbon pricing mechanism for the sector by five years to 2030. National is polling neck and neck with the ruling Labour party. 

Australia has published a stepwise reform plan for its Safeguard Mechanism to implement recommendations of the recent Chubb review. Immediate actions include moving project development away from the Clean Energy Regulator to the climate change ministry and revoking the native reforestation methodology. 

The Regulator has already released improved data on Carbon Estimation Areas, but still insufficient for third parties to easily verify project achievements – a highly controversial issue in Australia over the past year. 

China has for the third year in a row added its ETS to its legislative work plan, hoping to write the scheme into law by the end of the year in order to give it more clout. The first two attempts ended in failure. 

Prices for EU allowances (EUAs) fell to six-month lows below €80/tonne before sharply rebounding back up to a settlement at €87.82/t on June 12, amid volatile trading over the past fortnight. Traders are said to be closely monitoring gas markets and the recent price strength was influenced by short-covering and technical breaches. 

Verified emissions in the UK ETS rose by 2.5% in 2022, driven by a post-pandemic rebound in aviation. 

The UK emissions market has traded at a discount to the EU ETS since the end of 2022 amid a lack of policy certainty and falling emissions from the power sector, but reforms could put the market back on a bullish trajectory, according to analysts. 

Switzerland will hold its first auction for 2023 carbon permits between Sep. 11 and 13. 

The German government launched a multi-billion euro Carbon Contracts for Difference (CCfD) programme to help the nation’s EU ETS-covered heavy industries decarbonise their operations.

Voluntary: Middle Eastern, African countries bolster involvement in voluntary carbon market

The Saudi company established to drive growth in voluntary carbon credits in the MENA region will auction 2 million units mainly derived from African projects in a sale to be held in Nairobi on June 14. The region’s aspirations to become a global hub for decarbonisation and sustainable finance will hinge on the construction of more robust market infrastructure and improved transparency on creation and use of carbon credits, analysts have said. 

Zimbabwe is preparing to host a voluntary carbon markets forum as it targets creating a pan-African registry linked to the country’s stock exchange. 

The governor of Kenya’s Kajiado region has ripped up all carbon offset deals signed with projects in the county on grounds they were too opaque for local communities, according to media reports, in another signal of growing government intervention, notably in Africa, in the global voluntary market. 

The UAE launched an alliance to advance carbon market involvement as a means of supporting the nation’s transition to a green economy, with a VCM exchange named as a founding member. 

Regulators and courts are growing increasingly vigilant in clamping down on misleading corporate claims, with three oil firms banned from running “greenwashing” advertisements in the UK while a Dutch court said it will hear a case against claims made by airline KLM.  

Additionally, a pair of California-based law firms filed a putative class-action case against major U.S.-based Delta Air Lines for misrepresenting the total environmental impact of its business operations through advertisements of its pioneering carbon-neutrality claims.  

Facebook and Instagram owner Meta has entered into a partnership with climate financier Aspiration to pre-purchase 6.75 million nature-based carbon removal offsets with an expected delivery from 2027 to 2035.  

Brazil's Amazonas state has called on public conservation units to submit applications to create carbon credits from avoided deforestation projects, while Tocantins state formalised its previously announced deal with commodity trader Mercuria to certify hundreds of millions of jurisdictional REDD+ units. 

In PNG, the Kamlapar Incorporated Land Group has filed a lawsuit against developer New Ireland Hardwood Timber (NIHT), seeking to revoke 1.3 million VCUs from its Topaiyo REDD+ project amid claims NIHT had failed to properly obtain free, prior, and informed consent from the landholders. NIHT is rejecting the claims, saying consent was appropriately awarded by the actual landholders and dismissing the suit as “ridiculous”. 

Japanese startup Green Carbon has signed an MoU with the Philippines’ state-owned National Development Company that involves generating up to 45 million carbon credits annually from forestry, rice cultivation, and agricultural projects. It also signed a research partnership with Vietnam’s national agricultural university, eyeing a roll-out of rice paddy irrigation projects. 

At the same time, VC firm Wavemaker Impact, Bill Gates-founded accelerator Breakthrough Energy Ventures, Singapore’s state-owned investment fund Temasek, and its subsidiary GenZero have together launched Rize, a new company set up to decarbonise rice cultivation in Asia. 

Japan has registered the very first REDD+ project under its JCM, greenlighting Mitsui’s Stung Treng REDD+ project in the Prey Lang wildlife sanctuary in Cambodia, expecting it to yield around 350,000 credits annually. 

Singapore is continuing to establish itself as the major Asia-Pacific carbon trading hub, with the Monetary Authority of Singapore announcing it will team up with a number of local financial institutions to form the Singapore Sustainable Finance Association, which initially will focus on scaling up the voluntary carbon market. 

Malaysian state-owned oil company Petronas has signed an MoU with another state-owned entity, the Malaysia Forest Fund, to develop nature-based projects in order to meet its target of reaching net zero emissions by mid century. 

Eight green groups, including the Nature Conservancy, Birdlife International, and WWF Singapore, have jointly launched the Scene Coalition, an initiative that will support investment in and development of high-quality nature-based solutions that reduce carbon emissions, protect biodiversity, and benefit Indigenous peoples and local communities. 

Carbon credit rating service BeZero will introduce scores for yet-to-be-issued units in an effort to cater for companies looking to manage risk in the primary VCM.

Finance: Pre-COP28 climate talks in danger of failure

Global progress on climate change continues to stutter as a key two-week intersessional UNFCCC summit begins its second week in Bonn with few signs of progress. Pressure is mounting on the UAE ahead of the year-end COP28 in Dubai due to the lack of a clear agenda, split priorities among negotiating parties, and the potential influence of the fossil fuel industry on talks. 

Singapore and Mongolia have signed an MoU to work together on setting up projects for carbon credit generation under the Paris Agreement’s Article 6, Singapore’s tenth such deal. The low-carbon business unit of the Singaporean government’s investment company is also lining up a deal to invest in a nature restoration project in Ghana with the credits to count towards the Asian nation’s climate goals.

Meanwhile, Ghana has opened talks with South Korea to negotiate a bilateral carbon trade deal as the government continues to lead the field in leveraging the Article 6.2 mechanism of the Paris Agreement. 

Switzerland’s main carbon credit-buying entity has issued a plea to project developers to reach out to pitch ideas under Article 6.2 due to a lack of available opportunities in the market. 

Targeting $100/tonne costs for direct air capture (DAC) by mid-century does not represent a realistic or credible goal, a carbon capture expert told the Climeworks summit, adding that it may be more valuable for developers to outline 2030 price and volume goals and then evaluate how best to proceed. 

California-based startup bio-oil recycler Charm Industrial announced a $100 million fundraise that it will utilise to speed up deliveries of carbon removals from bio-oil sequestration. 

Japan has selected seven advanced CCS projects for backing that could store around 13 MtCO2 annually by 2030. Five of those are domestic, while the other two are in Malaysia and Oceania. If built as plants, the sites will store CO2 from oil and gas, as well as a number of energy intensive industries. 

Tokyo Stock Exchange and financial conglomerate SBI Holdings have separately announced they both will set up carbon trading exchanges in Japan, the latter in cooperation with climate tech startup Asuene. The TSE one will focus on domestic J-Credits, while SBI and Asuene will offer trade in those as well as in international credits. 

Australian airline Qantas will launch a $263 million fund to provide direct investments in climate-related projects and initiatives, with a focus on sustainable aviation fuel and nature-based solutions. 

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