In this report
- Compliance: UN shipping agency agrees new GHG strategy, UK government opts for less ambition in tightening ETS
- Voluntary: VCMI publishes long-awaited purchasing guidelines for corporates to ensure carbon credit integrity for climate pledges
- Finance: U.S., UK gathering mobilizes $2 bln in climate finance
Compliance: UN shipping agency agrees new GHG strategy, UK government opts for less ambition in tightening ETS
The UN’s International Maritime Organisation (IMO) formally adopted a revised GHG strategy, more ambitious than its 2018 version but still adrift from aligning the sector with Paris Agreement climate objectives. Emissions from international shipping are now to be cut by at least half by 2050, compared with their level in 2008, with the text introducing checkpoints of reducing emissions by at least 20% but striving for 30% by 2030, and by at least 70%, but striving for 80%, by 2040.
The UK government will opt for the least ambitious of suggested options for tightening its Emissions Trading Scheme (ETS) cap to align with a 2050 net zero emissions trajectory and will further mitigate this by adding unallocated allowances to the market. Experts said the country had also set down a very significant marker for the inclusion of removals in its compliance carbon market in the documents, and one that starkly differs from the EU position.
Power generation covered by the European Union ETS fell by almost 100 TWh or around a fifth, year-on-year in the first half of 2023, as much lower output driven by demand destruction and a rise in renewables forced coal and gas out of the mix.
Europe’s carbon market has seen sharp price swings in recent months amid increased use of technical trading as participants have focused on speculative positioning, but some stakeholders are of the view that allowance costs may again start to reflect fundamentals.
The European Commission said it will publish the bloc’s revised EU ETS auctioning regulation at the same time as outlining when additional volumes from the Market Stability Reserve (MSR) will come to market, as part of the region’s REPowerEU policy to move away from Russian energy dependence.
Germany has agreed to increase its domestic carbon price for buildings and transport from the start of 2024, going back on earlier plans to maintain a lower price after energy costs spiralled in the wake of Moscow’s invasion of Ukraine last year.
The European Commission also launched a process for the EU to withdraw from the controversial Energy Charter Treaty due to the pact’s incompatibility with the bloc’s climate law and policy.
Lawsuits challenging Virginia’s planned exit from the U.S. Northeast RGGI cap-and-trade programme could begin later this month once the repeal regulation is published in the state register on July 31, an environmental lawyer told Carbon Pulse. Republican Governor Glenn Youngkin is aiming for the power generators to have their compliance obligations end on December 31, 2023, but green groups say his regulatory repeal is unlawful because it overrides legislation passed by the Virginia legislature.
The WCI compliance instrument surplus bank continued to expand for the second consecutive quarter this year to 387.8 mln V13–21 allowances and offsets on larger offset issuances, while the cap-and-trade scheme’s allowance glut declined further to 355.5 mln despite subdued permit retirements over the three months, programme data from California regulator ARB showed.
Chinese industry associations for steel and cement have intensified research into how to include the sectors in the national ETS and are working to finalise a specific proposal for government officials to consider.
In Australia, the government has removed a rule that deemed forest plantations that received more than 600 mm of rainfall annually ineligible for ACCU crediting. Amid increasing supply, ACCUs have dropped to their lowest levels in almost a year, trading at around A$25, even though the reformed Safeguard Mechanism entered into force on July 1.
Japan has held its first J-Credit auction in a year, selling over 250,000 units from a solar PV project above 3,000 yen ($20.79). Energy efficiency credits traded at around half the price, as usual.
New Zealand has seen NZU prices dip below NZ$40 ($24.73) for the first time since June 2021, as demand continues to be muted amid what is considered the government’s low level of ambition for the scheme as well as uncertainty tied to the latest round of public consultations, which includes an option to split the ETS into two different markets.
India has gazetted regulations for its domestic voluntary carbon market, which is expected to transition to a mandatory ETS from 2026. The Ministry of Power will have final responsibility for the scheme, which will be administered by the Bureau of Energy Efficiency.
Voluntary: VCMI publishes long-awaited purchasing guidelines for corporates to ensure carbon credit integrity for climate pledges
The cross-stakeholder Voluntary Carbon Markets Integrity initiative (VCMI) published its guidelines to help buyers ensure integrity when purchasing carbon credits for voluntary climate pledges. In an interview with Carbon Pulse, a senior member of the body said that lower tiers of achievement could be added to the VCMI Claims Code over the next few months to broaden its reach and encourage more companies to start climbing the ladder of mitigation.
Portugal is considering linking its yet-to-be-launched domestic VCM with that of Spain for liquidity purposes, an official told an industry conference.
Nigeria’s federal government has warned against unauthorised carbon trading, making it the latest country to clamp down on market activities. Malawi also ordered a review of all carbon projects in the country, while Zambia plans to regulate its carbon market and take a share of revenues.
Offset certifier Gold Standard has paused issuances of carbon credits from projects based in Zimbabwe until it learns more about the government’s plans to take revenue from such activity.
Governments are drastically slashing carbon credit issuance rates from their own cookstove projects and helping craft a new global framework to tackle integrity concerns, Carbon Pulse analysis showed.
At the same time, a Belarusian group, through former South African President Jacob Zuma, has donated two mln “questionable” carbon credits towards Zimbabwe’s nascent emissions trading efforts.
A Germany-based carbon credit intermediary will sell credits from Canada’s first industrial-scale biochar facility on the voluntary market, while steelmaker ArcelorMittal announced plans to purchase biocarbon from other plans in the country.
After more than six years of suspension, China’s environment ministry has released draft regulations for its CCER offset scheme, which is expected to relaunch later this year or in early 2024. The draft proposed to rule out any new projects starting after 2012 and would not credit any emissions reductions achieved before China announced its 2030/2060 carbon targets in September 2020. Rules for which CCERs will be eligible in the ETS will be released later.
Japan has issued its first J-Credits to two projects applying the recently approved methane emissions reductions from rice paddies methodology, which a number of companies have said they want to implement nationwide as well as in big rice-producing countries in Southeast Asia.
One of those firms is agritech company LifeLab, which has announced plans to set up its own registry for carbon credits, focusing on rice paddies and soil carbon. It expects to issue its first domestic credits next year, at which stage it also plans to expand to Vietnam, the Philippines, and Thailand.
Japan Alliance for High Quality Carbon Credits (JAJQCC) has been formed by a group of companies, including food manufacturer Ajinomoto, Japan Tobacco, and Mitsubishi UFJ Financial Group. The alliance aims to generate up to 300 mln carbon credits across Africa by the end of the decade.
Pakistan’s MoU has signed a partnership agreement with offset standard Verra to help build capacity as well as try and ensure domestic credits align with international standards.
A new tool developed by Swiss-headquartered Allcot with the support of Colombian standard registry Cercarbono is about to be launched to formalise best practice in the voluntary carbon market by enabling project developers to report on the governance, financial, and sustainable performance of projects and climate change mitigation programmes in a standardised way.
Voluntary carbon market standards body American Carbon Registry (ACR) published its revised crediting methodology, updating a prior version of project-based carbon credit issuance guidelines from December 2020.
Finance: U.S., UK gathering mobilizes $2 bln in climate finance
Companies, financiers, and philanthropists as part of The Climate Finance Mobilisation Forum announced a collective $2 bln in investments in energy transition, climate resilience, and nature-based solutions projects in emerging markets at a joint U.S.-UK gathering.
Nova Scotia-headquartered carbon removal firm CarbonCure Technologies secured $80 mln in a new funding round led by Blue Earth Capital, with backing from existing shareholders including Breakthrough Energy Ventures, Taronga Ventures, Amazon’s Climate Pledge Fund, Microsoft Climate Innovation Fund, and 2150.
The Smithsonian Tropical Research Institute (STRI) has received a $12 mln grant from the Bezos Earth Fund to support an international system to independently ensure the accuracy of satellite monitoring of forest biomass.
German-based intermediary First Climate will sell carbon credits from Carbonity’s biochar project in Quebec that aims to sequester up to 75,000 tonnes annually.
U.S.-headquartered Zefiro Methane Corp (ZMC) sold an undisclosed portion of its methane emissions credit portfolio stemming from plugging orphaned oil and gas wells to energy and commodity trading firm Mercuria Energy America, with financial terms of the deal also kept under wraps.
Brazil expects to see a $9.1 bln mobilisation of clean energy investment in the country after the board of the multilateral fund Climate Investment Funds (CIF) endorsed a $70 mln plan to support renewable power onto the grid.
Ten large Japanese corporations have invested a forest carbon created in mid-June that went live in early July. The fund, set up by Tokyo-headquartered Sumitomo Forestry, will primarily focus on investing in the U.S. and will be managed by Eastwood Forests. Investors included oil and gas major Eneos, Japan Post, shipping firm NYK Lines, and Sumitomo Mitsui Banking Corp.
Japan has added Kyrgyzstan as its partner country #27 under the Joint Crediting Mechanism (JCM), making the Central Asian nation a candidate for hosting projects that can generate credits aligned with Article 6 of the Paris Agreement and eligible for compliance use in Japan’s domestic market.
South Korean investor BeFLAT Services have signed an MoU with the government of Darkhul province in Mongolia and India-based Greenworks consulting to develop an Article 6-aligned project at a local landfill, as Korea and Mongolia deepen their cooperation on international carbon markets.
South Korea has also confirmed its Article 6 MoU with Vietnam, initially penned in 2021.
The Commonwealth Bank of Australia has invested in Wollemi Capital’s $147 mln Series A funding round, a firm that funds businesses and projects focussed on the net zero transition such as food, agriculture and natural capital, energy transition, and climate services.
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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.