In this report

COMPLIANCE: Carbon pricing mechanisms brought $93 billion in revenue last year

Revenues from carbon pricing mechanisms reached $93 billion in 2022, slightly lower than the prior year, with more than half of this total specifically redirected towards climate activities, according to a report by the Institute for Climate Economics (I4CE).

Stakeholders broadly welcomed the last-minute adoption of recommendations for how the UN crediting mechanism under Article 6.4 of the Paris Agreement should operate. They also pointed to uncertainties that risk diluting ambition and noted the challenge of deferring many key decisions given the ambiguous nature of certain sections of the text.

Canada’s federal government amended its “backstop” output-based pricing system (OBPS) to increase the stringency of covered entities’ GHG emissions per unit of output, now set to decline at a fixed tightening rate with no end date. This has resulted in estimated net benefits that offset the costs to Canadian household welfare.

Canada’s three-year home heating oil exemption would shrink fuel charge proceeds by C$1.1 billion ($783 million) between 2023-27, while doubling the rural top-up rate for fuel charge rebates from 10% to 20% would see the rural supplement payments rise to almost C$3 billion ($2.1 billion) from 2024-31, according to a report by the Parliamentary Budget Officer (PBO).

California regulator ARB and Quebec's Environment Ministry (MELCCFP) modelled CO2 permit prices rising to $180 in 2040 under various allowance budget scenarios as the WCI partners explore potential amendments to the cap-and-trade program.

Strong demand at the Nov. 8 Allowance Price Containment Reserve (APCR) sale in Washington state’s WCI-modelled cap-and-invest program saw all five million permits on offer sold at the Tier 1 fixed price of $51.90.

Democrats in the Wisconsin Assembly introduced Forward on Climate, a legislative package to accelerate climate action in the state, including energy efficiency measures, sustainable agriculture practices, and considerations for the social cost of carbon (SCC).

Brazil's lower house of Congress will hold a crucial vote on legislation for a national Emissions Trading System (ETS) – PL412/2022 – amid negotiations over the program’s managing body, sectoral inclusion, and tax reform.

European carbon prices fell to a new one-year low at the end of November on mild weather and weak demand for fossil fuels.

The European Commission published projected EUA auction volumes for 2024, but analysts were mixed as to how the figure compared to their expectations.

The EU’s first draft legislation defining a framework for certifying carbon removals passed with a large majority during a vote in the full European Parliament.

Developer of clean cooking projects Atmosfair was issued the first carbon credits aligned with the Paris Agreement’s Article 6 on the Gold Standard registry, with Rwanda agreeing to correspondingly adjust for those credits on its own emissions tally in order to prevent double counting of the reductions.

The Egyptian Senate made slow progress on whether to establish carbon pricing in the country, with the government approaching handover of its year-long presidency of the UN climate negotiations.

The incoming New Zealand coalition government has agreed to scrap the review into the country’s ETS. 

South Korea appears likely to push back the timeline for the release of a basic plan underpinning the next phase of its domestic carbon market. Local media reported that the government will finalize the fourth basic plan for the ETS next year, as it “needs to further collect more options.”

The Malaysian state of Sarawak has passed legislation to support the generation and sale of carbon credits, and impose a carbon tax on companies failing to report on their emissions.

China will promote the inclusion of biodiesel projects in the national carbon offset scheme, as part of a broader plan to popularize the applications of green fuels in the country.

Rio Tinto has bought a 14.5% stake in Australian carbon project developer Australia Integrated Carbon to secure a supply of carbon credits to offset emissions from its operations under the Safeguard Mechanism.


FINANCE: Developed nations fulfill goal to provide $100 billion in climate finance to developing countries, OECD reports

The goal of developed countries providing and mobilizing $100 billion of climate finance annually to developing countries to help them cut emissions and adapt to climate change is expected to have been achieved as of 2022, according to the OECD.

Reforming and scaling climate finance, including moving forward on operationalizing a new loss and damage funding mechanism, establishing global renewables targets, and the future of fossil fuels, are likely to be the core topics of discussion at COP28 in Dubai. COP28 will also bear witness to the first ever global stocktake (GST) of the Paris Agreement.

An international climate club for governments will be officially launched at the beginning of December at COP28, with a particular focus on industrial decarbonization, the EU’s top climate official Kurt Vandenberge said.

The UN’s Green Climate Fund (GCF) will ramp up its focus on attracting private capital as part of reforms to the mechanism, as it seeks to scale funding to $50 billion by 2030 and address criticism of its role in channeling climate finance.

The world is already planning for a doubling of renewable power capacity by 2030, analysts said in a report, adding that this should give confidence to governments that a global agreement to triple renewables this decade is achievable.

Revenues from carbon pricing mechanisms reached $93 billion last year, according to researchers, slightly lower than the prior year, with more than half of this total specifically redirected towards climate activities.

The Canada Growth Fund, a C$15 billion public investment vehicle, will allocate almost half of its capital to issue carbon contracts for difference (CCfDs) and offtake agreements.

Community-driven programs to install low- and zero-emission technologies, reduce GHG output, and improve climate resiliency are eligible for $2 billion in grants from the Inflation Reduction Act (IRA), the U.S. EPA announced.

Carbon capture utilization and sequestration (CCUS) stakeholders said that the U.S. Inflation Reduction Act (IRA) will out-incentivize funding for Canadian technology, despite the expected C$20 billion ($14.6 billion) legislation enshrining a CCUS tax credit first announced in 2021.

Frontier, backed by several multinational firms including Stripe, Alphabet, and JPMorgan Chase, will pay $46.6 million to two U.S.-based DAC startups CarbonCapture and Heirloom for the future delivery of units totaling over 70,000 tons.

The Bezos Earth Fund has granted a third donation of $30 million to the U.S. National Fish and Wildlife Foundation (NFWF), earmarked for protection of threatened longleaf pine forests and Northern Great Plains grasslands.

The International Energy Agency underlined the necessity of curtailing future oil and gas production in order to keep warming at 1.5C above pre-industrial levels. The UN Environment Programme urged nations to go further than their current Paris Agreement pledges in order to be on track to meet targets, as they otherwise face a temperature rise of up to 2.9C this century.

Germany’s Federal Constitutional Court of has ruled that a 2021 government budget act, which redirected €60 billion initially borrowed to address the COVID-19 pandemic towards climate and energy measures, is unconstitutional and therefore void.

The UK government announced it will invest £4.5 billion in subsidies and grants for green industry from 2025, with just under half going to the electric vehicle sector and £1 billion to green energy, including hydrogen.

Indonesia has launched a policy and investment plan under the Just Energy Transition Partnership (JETP), increasing its ambitions for renewables penetration by 2030 and decreasing its emissions upper limit. The plan estimated that Indonesia will need $97.3 billion by the end of the decade to shift away from coal, compared to the $20 billion agreed to under the JETP.

Kyushu University in Japan will invest into a Carbon Xtract Corp, a direct air capture venture that aims to begin capturing CO2 via nano-separate membranes later this decade.

Deep Sky announced a Series A funding round of C$75 million ($54.5 million) to advance its goal of a billion ton-scale project in Canada.

VOLUNTARY: Gold Standard commences consultation on new methodology to phase out coal power

Carbon credit certifier Gold Standard launched a consultation on a new methodology for phasing out coal power while ensuring a just transition to clean energy.

Climate Action Reserve announced a public comment period for a new U.S. and Canadian protocol that will provide guidance on how to quantify, monitor, report, and verify emissions reductions from the production and use of biochar.

Bayer and ADM announced a regenerative agriculture program to improve soil health and productivity in Brazil. The program will begin replacing nitrogen and other chemicals in its fertilizer with biological alternatives, institute no-till farming, and begin using cover soil as well as cover crops on its operations.

Alaska Airlines is partnering with SaaS firm CHOOOSE, a platform that measures carbon footprints to sell passengers sustainable aviation fuel (SAF) credits or nature-based offsets to counteract emissions from flight trips.

The Brazilian state of Roraima has signed a letter of intent (LOI) with a Banco de Brazil to facilitate $3 million in carbon credit funding for farmers who invest in sustainable agriculture.

A financing mechanism with backing from the UK government will provide advanced funding for forest-rich countries that sign binding Emissions Reduction Purchase Agreements (ERPAs) with the LEAF Coalition. That is with executives hoping to secure two such deals this month and several more in the first half of 2024.

Qatar’s Global Carbon Council (GCC) has received letters of authorization from Oman and the UAE for projects to offer correspondingly adjusted (CA) carbon credits on its registry. This is part of expansion plans that involve adding a CCS methodology and gaining eligibility for phase one of CORSIA.

BeZero Carbon announced a partnership with satellite data provider Planet Labs to enhance the monitoring, reporting, and verification of forestry projects.

A report from Accenture found that companies buying carbon credits and removals are on average more successful in reducing their operational emissions than those that do not.

Xpansiv has launched a consultation to support the trading of instruments aligned with the Integrity Council for the Voluntary Carbon Markets’ (ICVCM) Core Carbon Principles (CCP), due to be assigned to the first carbon credits in the opening quarter of 2024.

Japan has made a number of movements to ramp up work on its J-Credit market, including the Tokyo Stock Exchange introducing a three-month trial market maker scheme, the approval of 26 new projects, and the approval of a new beef cattle feeding methodology.

Pakistan’s government is considering a cap-and-trade model for its imminent voluntary carbon market, according to local media. The key sectors covered would be power and agriculture. The government will form an expert committee to draft the policy framework to form the market.

Singapore-based Climate Impact X has temporarily suspended credits from a troubled Kasigau corridor project from its nature-based benchmark, Nature X, a day after two senior staff members at the project were sacked as a result of an ongoing investigation into sexual harassment and abuse allegations.

UAE-based mangrove project developer Blue Forest is exploring the potential for blue carbon in Vietnam, after signing an MoU with the Ca Mau Forest Department. Blue Forest will identify methods that could restore 10,000 ha of degraded mangrove forests due to the expansion of the country’s shrimp farm industry.

The Philippines will announce priority investment areas for green and blue carbon projects, with 1 million ha of classified government land to be opened up for investment in Q1 next year.

Stay in the know

Stay informed with the latest news, insights, and data on the carbon markets with Carbon Pulse’s Climate Markets Update, a biweekly publication brought to you exclusively by CME Group.

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.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2024 CME Group Inc. All rights reserved.