UN talks inch forward rules on Article 6
UN climate negotiations in Bonn, Germany, have concluded with "uneven" progress made towards completing the rules for the UN Paris climate agreement, including the guidelines that could launch a global carbon market.
Negotiators met to continue writing the rules that will implement the Paris agreement when it comes into force next year.
The Bonn event focused on writing the technical rules, with final decisions on politically sensitive issues not expected until ministers meet at the UN climate summit in December (Cop 25), which will take place in Santiago, Chile.
But the latest draft texts from Bonn are longer than those from the start of the meeting, and contain multiple options that ministers will need to reach a compromise on at Cop 25.
"All options are still in the text," non-governmental organisation Carbon Market Watch (CMW) policy officer Gilles Dufrasne said.
Article 6.4
Article 6 contains rules that would allow countries to trade emissions reductions under the Paris agreement. This could provide the foundations for an international carbon market.
A key issue in the article 6 talks is the future of clean development mechanism (CDM) projects, and the certified emissions reduction (CER) credits generated by these projects.
Negotiators this week came no closer to deciding whether CDM projects, and their CER credits, will be transferred to a new mechanism that will be set up under the Paris agreement. This would mean the credits could be used for compliance with the Paris agreement.
The latest text includes options to transfer all credits, transfer credits produced before or after a specific date, or to ban all transfers.
No option has support from a majority of countries. Brazil and India — both of which have produced, and not yet sold, millions of CER credits — pushed for credits to be transferred to the new mechanism. African countries, small island states and least-developed countries opposed the transfer of credits.
Environmental groups including CMW have warned that CER supply could swell to 4.6bn credits by 2020. If the rules do not prohibit it, countries could buy large quantities of cheap credits to meet their Paris targets, instead of investing in new projects to cut emissions.
"This could really blow a hole in the Paris agreement," Dufrasne said.
Article 6.2
Article 6.2 contains rules allowing countries to trade emissions reductions — known as Itmos — and count them towards their emissions reduction pledges under the Paris agreement.
Negotiators have not yet decided whether Itmos will be measured in tonnes of CO2 equivalent (CO2e) only, or by using other measurements as well.
Saudi Arabia led efforts during the talks to allow non-CO2e measurements. Environmental groups warned that using different measurements could create loopholes and allow countries to manipulate the way their CO2 cuts are counted.
"The potential to game this conversion process seems enormous," Climate Action Network said.
Various methods to avoid "double counting" emissions cuts also remain in the text. Double counting occurs when a single emissions reduction is used for compliance with multiple climate schemes.
Countries' positions on this issue "have not really changed since Cop 24", International Emissions Trading Association international policy director Stefano De Clara said.
Ministers will need to hold further talks ahead of Cop 25 to try to reach compromises, he said. This is likely to take place during a UN climate summit in New York in September, and a "pre-Cop" round of talks in Costa Rica in November.
Not "welcome" here
Countries came under fire from environmental groups for excluding a major climate science report from the Paris agreement text, after countries including Saudi Arabia refused to discuss its findings.
The latest draft text expressed "appreciation" to the Intergovernmental Panel on Climate Change (IPCC) for its report, which warns that global warming must be capped at 1.5˚C, rather than 2˚C, to avoid the most severe impacts of climate change.
But the text failed to "welcome" the report's findings or encourage countries to implement policies to hit the 1.5˚C goal. The EU had pushed for this wording at last year's UN summit.
"Saudi Arabia blocked substantive discussions called for by a large number of vulnerable developing countries on the implications of the IPCC [report]," Union of Concerned Scientists policy director Alden Meyer said.
"If we cannot accept the messages of science when formulating our scientific advice, we are not doing our job," Ana Villalobos, a Costa Rican delegate at the UN talks, said.
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Feedstock imports shake up US biofuel production
Feedstock imports shake up US biofuel production
New York, 24 July (Argus) — Waste from around the world is increasingly being diverted to the US for biofuel production, helping decarbonize hard-to-electrify sectors like trucking and aviation. But as refiners turn away from conventional crop-based feedstocks, farm groups fear missing out on the biofuels boom. Driven by low-carbon fuel standards (LCFS) in states like California, US renewable diesel production capacity has more than doubled over the last two years to hit a record high of 4.1bn USG/yr in April according to the Energy Information Administration. Soybean and canola processors have invested in expanding crush capacity, expecting future biofuels growth to lift vegetable oil demand. But policymakers' growing focus on carbon intensity, a departure from the long-running federal renewable fuel standard (RFS) that sets volume mandates for broad types of fuel, primarily benefits waste feedstocks, which generate larger LCFS credits because they are assessed as producing fewer emissions. Argonne National Laboratory's GREET emissions model, which has been modified by federal and California regulators for clean fuels programs, factors in emissions sources like fertilizers and diesel use on farms for virgin vegetable oils but not for used oils sourced from cooking operations. Refiners trying to maximize government subsidies are thus sourcing waste-based feedstocks from wherever they can find them. Through May this year, imports to the US under the tariff code that includes used cooking oil (UCO) and yellow grease rose 90pc from year-prior levels to more than 1.8bn lb (844,000t). While China represents most of that, sources are diverse, with significant sums coming from Canada, the UK, and Indonesia. Imports of inedible and technical tallow, waste beef fat that can be turned into biofuels, have also risen 50pc so far this year to 800,000lb on ample supply from Brazil. While soybean oil was responsible for nearly half of biomass-based diesel production in 2021, that share has declined to around a third over the first four months this year as imports surge (see graph). "Every pound of imported feedstock that comes in displaces one pound of domestically sourced soybean oil or five pounds of soybeans," said Kailee Tkacz Buller, chief executive of the National Oilseed Processors Association. Even as LCFS and RFS credit prices have fallen over the last year, hurting biofuel production margins and threatening capacity additions , imports have not slowed. Feedstock suppliers, many from countries with less mature biofuel incentives and limited biorefining capacity, might have few options domestically. And exporting to the US means they can avoid the EU's more prescriptive feedstock limits and mounting scrutiny of biofuel imports. More ambitious targets in future years, particularly for sustainable aviation fuel, "will create a lot of competition for UCO in the global market," said Jane O'Malley, a researcher at the International Council on Clean Transportation. But for now, "the US has created the most lucrative market for waste-based biofuel pathways." Incentives for US refiners to use waste-based feedstocks will only become stronger next year when expiring tax credits are replaced by the Inflation Reduction Act's 45Z credit, structured as a sliding scale so that fuels generate more of a subsidy as they produce fewer greenhouse gas emissions. While essentially all fuel will receive less of a benefit than in past years since the maximum credit is reserved for carbon-neutral fuels, the drop in benefits will be most pronounced for fuels from vegetable oils. Granted, President Joe Biden's administration wants the 45Z credit to account for the benefits of "climate-smart" agriculture, potentially helping close some of the assessed emissions gap between crop and waste feedstocks. But the administration's timeline for issuing guidance is unclear, leaving the market with little clarity about which practices farmers should start deploying and documenting. "While a tax credit can be retroactive, you can't retroactively farm," said Alexa Combelic, director of government affairs at the American Soybean Association. Squeaky wheel gets the soybean oil The concerns of agricultural groups have not gone unnoticed in Washington, DC, where lawmakers from both parties have recently called for higher biofuel blending obligations, prompt 45Z guidance, and more transparency around how federal agencies scrutinize UCO imports. There are also lobbying opportunities in California, where regulators are weighing LCFS updates ahead of a planned hearing in November. At minimum, agricultural groups are likely to continue pushing for more visibility into the UCO supply chain, which could take the form of upping already-burdensome recordkeeping requirements for clean fuels incentives and setting a larger role for auditors. Fraud would be hard to prove, but two external groups told Argus that the Biden administration has indicated that it is looking into UCO collection rates in some countries, which could at least point to potential discrepancies with expected supply. More muscular interventions, including trade disincentives, are also possible. Multiple farm associations, including corn interests frustrated that the country's first alcohol-to-jet facility is using Brazilian sugarcane ethanol , have asked the Biden administration to prevent fuels derived from foreign feedstocks from qualifying for 45Z. The possible return of former president Donald Trump to the White House next year would likely mean sharply higher tariffs on China too, potentially stemming the flow of feedstocks from that country — if not from the many others shipping waste-based feedstocks to the US. Protectionism has obvious risks, since leaving refiners with fewer feedstock options could jeopardize planned biofuel capacity additions that ultimately benefit farmers. But at least some US agriculture companies, insistent that they can sustainably increase feedstock production if incentives allow, see major changes to current policy as necessary. By Cole Martin Waste imports crowd out soybean oil Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Equinor 2Q profit supported by higher European output
Equinor 2Q profit supported by higher European output
London, 24 July (Argus) — Norway's state-controlled Equinor posted a small rise in profit on the year in the April-June period, as a lift in its European production offset lower gas prices. Equinor reported a profit of $1.87bn in the second quarter, up by 2.2pc on the year but down by 30pc from the first three months of 2024. The company paid two Norwegian corporation tax instalments, totalling $6.98bn, in the second quarter, compared with one in the first quarter. Equinor paid $7.85bn in tax in April-June in total. Its average liquids price in the second quarter was $77.6/bl, up by 10pc from the second quarter of 2023. But average gas prices for Equinor's Norwegian and US production fell in the same period by 17pc and 6pc, respectively. The company noted "strong operational performance and lower impact from turnarounds" on the Norwegian offshore, including new output from the Breidablikk field . Equinor's entitlement production was 1.92mn b/d of oil equivalent (boe/d) in April-June, up by 3pc on the year. The company cited "high production" from Norway's Troll and Oseberg fields in the second quarter, as well as new output from the UK's Buzzard field. But US output slid, owing to offshore turnarounds and "planned curtailments onshore to capture higher value when demand is higher", the company said. It estimates oil and gas production across 2024 will be "stable" compared with last year, while its renewable power generation is expected to increase by around 70pc across the same timespan. Equinor's share of power generation rose by 14pc on the year to 1.1TWh in April-June. Of this, 655GWh was renewables — almost doubling on the year — driven by new onshore wind capacity in Brazil and Poland. "Construction is progressing" on the UK's 1.2GW Dogger Bank A offshore windfarm , Equinor said. It is aiming for full commercial operations in the first half of 2025 at Dogger Bank A — a joint venture with UK utility SSE. Equinor was granted three new licences in June to develop CO2 storage in Norway and Denmark. The Norwegian licences — Albondigas and Kinno — together have CO2 storage potential of 10mn t/yr. The Danish onshore licence, for which Equinor was awarded a 60pc stake, has potential capacity of 12mn t/yr. Equinor has a goal of 30mn-50mn t/yr of CO2 transport and storage capacity by 2035. The company's scope 1 and 2 greenhouse gas (GHG) emissions amounted to 5.6mn t/CO2 equivalent (CO2e) in the first half of the year, edging lower from 5.8mn t/CO2e in January-June 2023. It also incrementally cut its upstream CO2 intensity, from 6.7 kg/boe across 2023, to 6.3 kg/boe in the first half of this year. Equinor has kept its ordinary cash dividend steady , at $0.35/share, and will continue the extraordinary cash dividend of $0.35/share for the second quarter. It will launch a third $1.6bn tranche of its share buyback programme on 25 July. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Bipartisan bill would extend blenders tax credit
Bipartisan bill would extend blenders tax credit
New York, 23 July (Argus) — A bipartisan group of lawmakers has proposed legislation to extend an expiring tax credit for biodiesel and renewable diesel that are blended into the US fuel supply. The bill, which was introduced by representative Mike Carey (R-Ohio) and is pending before the House of Representatives' Ways and Means Committee, would specifically extend a credit offering $1/USG for blenders of biomass-based diesel through 2025. The credit is otherwise set to expire at the end of this year and be replaced in January by the Inflation Reduction Act's 45Z credit, which will be more generous to fuels with lower carbon intensities. The text of the bill has not yet been released. But a draft version shared with Argus by an external group would restrict fuel that is "allowed" a credit under 45Z from also qualifying for the reinstated credit for blenders, a provision that seems to primarily benefit fuel imports. The expiring biodiesel credit allows fuel produced outside the US to qualify, since the credit is claimed by blenders instead of producers, while the new 45Z credit is specifically for refiners producing fuel in the US. The US administration's timeline for finalizing guidance around 45Z is unclear, to the frustration of biofuels groups that have warned that prolonged uncertainty could jeopardize planned investments aimed at boosting production and feedstock supply. An extension of the existing biodiesel credit could potentially provide more certainty to the biofuels supply chain. Fuel retailers that had previously warned that shifting the credit from blenders to producers will raise fuel prices for consumers, including the National Association of Truck Stop Owners and the Society of Independent Gasoline Marketers of America, commended Carey's proposal. But the tax credit extension would also upend other incentives driving biofuel production. The 45Z credit offers up to $1/USG for road fuels, but incentives are more generous the fewer greenhouse gas emissions a fuel produces, whereas the expiring credit does not adjust benefits based on carbon intensity. In addition, prolonging incentives to import fuels could hurt domestic producers and lead to wider biodiesel and renewable diesel availability, potentially weighing on prices of renewable identification number (RIN) credits that refiners submit to regulators to comply with the renewable fuel standard. Market participants have generally expected that prices for RINs, which also act as a source of revenue and incentive to produce low-carbon fuels, will rise next year to account for 45Z providing less of a subsidy than the expiring credit. Clean Fuels Alliance America, which represents biomass-based diesel and sustainable aviation fuel companies, declined to comment or take a position on the legislation. But the group said that it would continue advocating for President Joe Biden's administration to swiftly propose and finalize 45Z guidance. The bill currently has four sponsors, three Republicans and one Democrat, but it is tough to gauge how broad support for any credit extension would be within Congress. It is not uncommon for Congress to pass legislation near the end of the year extending or reinstating tax credits that would have otherwise expired, and various energy tax credits were extended in Congress' lame duck session after the 2020 presidential election. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU pledges €20mn to Brazil's Amazon fund
EU pledges €20mn to Brazil's Amazon fund
Sao Paulo, 23 July (Argus) — The EU has signed a letter of intent with Brazil's Bndes development bank to donate €20mn ($21.7mn) to the Amazon fund as part of broader efforts by Europe to support sustainable development in Brazil. The fund is the world's largest to use the REDD+ framework, which aims to reduce emissions from deforestation and forest degradation and promote sustainable forest management. It has R3.9bn under management and has supported 114 projects to date. The European Investment Bank also agreed to finance €300mn in Brazilian energy transition, green economy and digital transition projects under "very favorable" conditions, it said. The Amazon fund resumed operations last year, after suspending operations for four years during the government of former President Jair Bolsonaro. It attracted R726mn ($130mn) in 2023 . Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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