CP Daily: Monday June 29, 2020

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*TOP STORY* China ETS could face 600 Mt/year surplus, IEA warns
China’s national emissions trading scheme could generate more than 600 million surplus allowances each year due to the generous benchmarks proposed for facilities that don’t monitor their CO2 fuel factor, the International Energy Agency (IEA) said Monday.
*EMEA* EU Market: EUAs surge to 2020 high near €27 on speculative buying, short-covering
EUAs surged to near €27 on Monday to hit their highest so far this year, rebounding by almost 10% from early weakness as speculator buying drove a strong auction result and widespread short-covering. BRIEFING: Incoming German EU presidency outlines plans to “strengthen” ETS, steer climate law
The incoming German presidency of the Council of EU member states will keep climate policy and the bloc’s carbon market high on the agenda, as Berlin will be responsible for fostering agreements among EU nations over an upgraded level of ambition for 2030. France’s Macron to present new environmental agenda after election setback
French President Emmanuel Macron will put forward in September new climate legislation based on citizen proposals and push for more climate ambition at EU level, he said on Monday following a major setback in local elections.
*AMERICAS* California to begin tagging DEBs-eligible offsets, accept out-of-state project applications
California regulator ARB will begin tagging in-state offset credits that meet the requirements of yielding direct environmental benefits to the state (DEBs) in the coming weeks, with an application process also expected to potentially qualify out-of-state projects with that distinction. California fuel sales collapse in March amid COVID-19 outbreak, larger cuts expected in April
California’s WCI-capped fuel consumption plummeted during March as a statewide ‘shelter-in-place’ order went into effect and stunted vehicle miles travelled across the Golden State, with federal data forecasting steeper drops in April. LCFS Market: California credits dither as price cap set to kick in
California Low Carbon Fuel Standard (LCFS) values have sagged recently on a lack of demand, even as fuel production and vehicle miles travelled picks up and the transportation sector programme’s price ceiling takes effect later this week.
*COMMENT* MARCU MY WORDS: Carbon leakage and competitiveness – different objectives, different tools
The EU needs to broaden its debate beyond a proposed carbon border adjustment mechanism in order to deal with carbon leakage and competitiveness issues thrown up by its climate ambition running ahead of that pursued by its main trade partners, argue Andrei Marcu, Michael Mehling, Aaron Cosbey of think-tank ERCST.
*ICYM* US threatens CORSIA exit if GHG baseline decision not made next week
The US will opt out of the first three years of the CORSIA offset mechanism for global air travel if other countries do not agree to alter the programme’s emissions baseline next week, with other nations potentially following suit, a Dutch minister said Friday.
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*Job listings this week*
– Head of Climate Finance and Carbon Market Policy, Gold Standard – Flexible Location – Head of Corporate Developments, Gold Standard – Flexible Location – Senior Technical Advisor on EU Climate Policies, UNDP – Remote Working – Associate Director, Investments, Natural Climate Solutions, New Forests – Sydney – Environmental and Carbon Markets Broker, TFS – Melbourne – Senior Policy Analyst, Nova Scotia Environment – Halifax
*Or click here * *to see all our job adverts*
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*BITE-SIZED UPDATES FROM AROUND THE WORLD*
*Hasta la vista *- Spain will on Tuesday shut down half of its remaining coal-fired power stations, national newspaper El Pais reports . Seven out of the 15 plants still operating will cease operations after their owners – some of the country’s main electricity companies – decided that it did not make financial sense to adapt them to EU regulations. Until just a couple years ago, these plants accounted for approximately 15% of all GHG emissions in Spain. In 2018, nearly 15% of all electricity consumed in Spain came from coal-fired thermal stations, but high EU carbon prices combined with cheap gas have accelerated fuel-switching. All together, these seven plants have a capacity of 4.6 GW, while four other plants accounting for 3 GW have already filed for permission to shut down.
*Hard compensation* – Chancellor Angela Merkel’s coalition government on Monday agreed on a compensation package for utilities operating hard coal power stations as part of Germany’s plans to phase out coal by 2038 to meet climate goals. The agreement between Merkel’s conservatives and their Social Democrat (SPD) coalition partners opens the door for parliament to vote in early July on a bundle of laws governing the coal phase-out, Reuters reports. Conservative and SPD parliamentary representatives said that under the agreement, utilities that switch hard coal-powered plants to gas will get a conversion bonus of €390/kW instead of a previously agreed €180. The bonus applies to power plants no older than 25 years and is available until the end of 2022. If utilities decided to switch their plants to gas after 2022, the bonus will fall by €25/kW each year. Power stations that are 25-35 years old are entitled for a lower conversion bonus of €225/kW if they switch to gas. The government also wants to entice utilities that do not switch to gas to shut down their hard coal plants with tenders that run until 2026. The goal is to make German power generation free of hard coal by 2033. Last week, the government approved a €4.3 billion compensation package for utilities operating lignite power stations.
*Investor pressure -* German utility RWE sought at its AGM on Friday to convince shareholders of its plans to move away from fossil fuels as environmentalists protested in its coal regions and as Germany prepares to pass a coal exit law from which it stands to gain €2.6 bln. Shareholders said RWE will need good arguments to assure markets that its move away from fossil fuels is credible, and that its international offshore wind activities will take off. (Reuters)
*Cleaning up* – Renewables covered more than half of Germany’s power consumption in the first six months of 2020, according to a first estimate by think-tank Agora Energiewende. Coal use dropped while demand was low due to the coronavirus crisis, leading to the sector’s emissions to fall significantly. The largest emitter in the EU, Germany will most likely reach its original target of reducing GHGs by 40% this year compared to 1990 levels, the organisation said, calling for a massive renewables expansion to ensure emissions continue to fall even after the impacts of the pandemic come to an end.
*Rig reductions -* Norway could cut its emissions by 4 Mt per year, or nearly 8% of its total GHG output, by providing more renewable electricity for major industrial plants and offshore oil and gas platforms, according to two government agencies. More offshore platforms could be hooked up via subsea cables to the mainland grid to help achieve that goal. (Reuters)
*More money* – The UK government has announced nearly £80 mln in investment to help cut carbon emissions from homes and energy-intensive businesses. The funding will be invested in a wide range of programmes, including pioneering heat networks and an innovative new initiative to bring down the cost of retrofitting residential properties with the latest energy efficiency technologies. Funds announced today include £30 mln towards the first phase of the Industrial Energy Transformation Fund (IETF), which supports energy intensive manufacturers, like car factories and steel plants, to cut their carbon footprint; £25 mln for heat networks, which reduce carbon and cut heating bills for customers, including one which will harness geothermal water sitting in disused mines to heat 1,250 homes; and £24 mln for innovative projects to help develop energy efficient homes by installing green tech and insulation in houses.
*Under-reported* – Chemical maker Ineos has been under-estimating emissions from its chemical plants at Grangemouth since 2016, according to the Scottish Environment Protection Agency (Sepa). The agency has withdrawn previously published data on emissions from Ineos Chemicals and asked the company to review a “discrepancy” in its figures, The Ferret reports . Sepa says that Ineos had omitted “in error” CO2 emissions from a gas boiler at Kinneil terminal on the Firth of Forth, as well as some flaring. “Sepa’s quality audits highlighted an error in the previous years’ data,” said the agency’s head of environmental quality Martin Marsden. Sepa requested Ineos Chemicals to review its data due to a discrepancy involving its EU ETS reporting.
*Carbon pricing call – *US House Democrats’ plan to combat climate change set for publication Tuesday will call for net zero emissions by 2050 and some form of carbon pricing, Bloomberg reports . The more than 500-page plan, from the Select Committee on the Climate Crisis convened by House Speaker Nancy Pelosi and chaired by Representative Kathy Castor, also calls for achieving 100% clean vehicles by 2035 and decarbonising the nation’s power grid by 2040. However, the plan is silent on how CO2 pricing and the other goals should be achieved and leaves much of the nitty-gritty legislating details to other committees, anonymous sources told the news outlet.
*Schering is caring – *Plant Scherer in Georgia, for years the highest capacity coal-fired plant in the US, will lose one of its four units to retirement , a sign that even the largest coal power stations are not immune to the economic pressures driving down the fuel’s standing in the nation’s generation mix. On Friday, the board of directors of Jacksonville municipal utility JEA – a minority owner of the 848MW unit 4 at Scherer – agreed to a 20-year purchase agreement with Florida Power & Light – the majority owner of the unit – that will replace the capacity the municipal utility receives from unit 4 and lead to its closure on Jan. 1, 2022. While the other three units at the plant are not affected by the decision, the closure of unit 4 will reduce the capacity of Scherer to 2,673 MW, making Southern Co.’s over 3,000MW Plant Bowen, also in Georgia, the largest coal-fired plant in the country, according to a statement from the Sierra Club. (Utility Dive)
*Chesa-bleak –* Oklahoma City-based shale gas pioneer Chesapeake Energy announced Sunday that it has filed for Chapter 11 bankruptcy protection, the highest-profile fracking company to do so during the COVID-19 pandemic. However, analysts said the filing also signals pre-pandemic financial woes that had badly afflicted Chesapeake for years, and to some extent the shale sector overall, which has long struggled with debt and cashflow problems. (Axios)
*Cheap *- Brazil’s B3 commodities exchange registered its second sale of CBIO carbon credits at prices below initial market expectations, as the biofuels industry awaits a revised 2020 official target for sales of the credits to better match lower demand in the Covid-19 scenario, Argus reports . The sale of 2,000 CBIOs at R15 ($2.75) per credit was registered under the non-required section of the credits’ trading platform, well below the estimated price of $10 that had been projected as their likely price prior to open trading. Brazil’s fuel distributors must buy the credits to offset their annual sales of fossil fuels as part of the Renovabio biofuels law that took effect this year. The exchange specifies volumes and prices, but not the identity of buyers and sellers of the credits. So far, biofuel producers have registered over 1 mln CBIOs on the B3 exchange. The first sale of the credits registered was for 100 CBIOs at a price of R50 per credit on June 12 , but it was seen as a symbolic trade.
*And finally… **Bail bonds – *The US Federal Reserve has bought $17.5 mln worth of energy company bonds and $19.5 mln of utility bonds on the open market as of June 18 through a taxpayer-backed programme to help companies weather the coronavirus-induced economic slump. The data published Sunday showed utilities and energy companies comprised one-fifth of the central bank’s individual bond purchases, while the reserve likely also boosted energy companies through purchase of exchange-traded funds (ETFs). The information showed the Fed has bought bonds on the secondary market issued by Exxon Mobil, Duke Energy, Williams Co., Phillips 66, Sabine Pass Liquefaction, FirstEnergy Corp., DTE Electric, Florida Power & Light, and Marathon Petroleum. Environmental activists and some congressional Democrats have questioned the programme’s support of oil and gas companies whose finances were ailing before coronavirus-influenced shutdowns. (Politico)
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