Cop 27: NDC updates stumble despite pact
Only a small number of countries updated their nationally determined contributions (NDCs) either during or in the run-up to last month's UN Cop 27 climate conference in Sharm el-Sheikh, Egypt, as wider mitigation ambition at the summit proved tepid.
The Glasgow Climate Pact agreed at Cop 26 last year requested countries revise and increase their 2030 NDC targets, the urgency of which was underscored a few days before Cop 27 by the UN's NDC synthesis report showing that the pledges submitted before the event were still insufficient to meet the 1.5°C target. The 2015 Paris climate agreement aims to limit global warming to well below 2°C above pre-industrial levels, and ideally to 1.5°C.
But despite optimism from US climate envoy John Kerry that the summit would see firm progress on the issue, just five countries submitted official updates to their NDCs during Cop 27 itself — Timor Leste, Vietnam, Andorra, the Bahamas and Mexico.
A further four countries — Chile, the UAE, Kazakhstan and Turkey — announced their intention to update their NDCs at Cop 27, but official documents have not yet been submitted to the UN.
Largest emitters lag
This represents a marked absence of updates from the world's biggest economies, with Mexico and Turkey the only G20 members to have announced NDC revisions during the summit.
Mexico said it would cut its GHGs by 35pc by the end of this decade compared with 2000 levels, while Turkey committed to cut its emissions by 41pc by 2030 compared with a business as usual scenario, up from its previous target presented in October last year of a 21pc cut by the same date. But the country did not say when the new NDC would be submitted.
Australia had updated its 2030 NDC ahead of the conference in June, but its new target still falls short of the 75pc cut needed to help limit the global temperature increase to 1.5°C.
India formalised the commitments it had made at Cop 26 in an NDC submission in August.
The UK "strengthened" its NDC delivery plan in September, but did not increase its emissions cut targets. UK government advisory body the Climate Change Committee (CCC) warned in a post-Cop 27 report this week that "tangible progress has not been demonstrated across a host of areas necessary to meet the UK's 2030 NDC".
Other NDC updates hinge somewhat on awaited political developments. In Brazil, the election of Luiz Inacio Lula da Silva to be the country's next president has built expectations that it will develop a more ambitious, transparent and socially inclusive NDC for 2030.
Brazil only updated its NDC in April, but there are concerns surrounding the credibility of the document.
The EU indicated at Cop 27 that it will update its emissions cut targets only after negotiations between the European Commission, parliament and council on planned reforms to its emissions trading system are complete.
Methane in focus
One area that did see an increase in commitments at Cop 27, albeit largely outside the NDC framework, was methane emissions cuts.
The US during the summit pledged $20bn to tackle methane emissions, while a group of countries committed to "dramatically" reduce methane, CO2 and other greenhouse gases (GHGs) across the fossil fuel chain.
The US, the EU, the UK, Japan, Canada, Norway and Singapore also called for robust reporting and measurement, and for organisations to join the UN's oil and gas methane partnership — a reporting framework for the oil and gas sector.
China signalled a new direction, after choosing not to sign the Global Methane Pledge launched at Cop 26. The country, the world's biggest emitter of methane from fossil fuel operations, released a strategic plan to curb its methane emissions early on at Cop 27, although it is unclear to what extent this will involve mitigation from the coal sector.
A report from the UN, released during Cop, found that global methane emissions will rise by as much as 13pc by 2030, from current levels.
Weak conclusions
But overall progress on mitigation ambition at this year's summit was tepid. The final Cop 27 deal simply reiterated the need to reduce GHGs by 43pc by 2030 relative to 2019 levels, unchanged from pledges made at Cop 26.
Nations in the high level ambition coalition unsuccessfully pushed for the Cop 27 text to include stronger NDCs aligned with the 1.5°C limit goal, mentions of efforts for global emissions to peak by 2025 and a pledge to phase down fossil fuels. EU negotiators had also sought to make the creation of a loss and damage fund conditional on new updated emission reduction targets under the mitigation work programme.
The final deal did "not bring enough added efforts from major emitters to increase and accelerate their emissions cuts", EU executive vice-president and lead climate negotiator Frans Timmermans said following the conclusion of the agreement, warning that a lot of speed had been lost since Cop 26.
The CCC said in its post-Cop 27 report that the Glasgow Climate Pact's request to revisit and strengthen 2030 targets "has been met in a very limited way, with progress stalled on keeping the 1.5°C temperature goal within reach".
Non-governmental organisation the Environmental Defence Fund had expected to see more revised NDCs than were eventually put forward, the group's vice president for global climate co-operation Mandy Rambharos told Argus.
It is "no big surprise that the attention has been on the immediate issues" of the food and energy crises, exacerbated by the war in Ukraine and coming not long after countries began to recover from the Covid-19 pandemic, Rambharos said.
NDCs 'avenue' for action
But NDCs "provide a good avenue" to chart a course through which the climate crisis and the energy, food and water crises can be solved simultaneously, and this narrative needs to be driven more strongly, Rambharos said.
EDF is "cautiously optimistic" that more countries could come forward with more ambitious programmes.
"We saw a strong demonstration of possible solutions and initiatives from a broad range of stakeholders at the Cop," Rambharos said. "We are encouraged that this provides direction of the range of actions countries can avail themselves to raise the ambition of climate action."
Next year's Global Stocktake is a good opportunity to encourage this, Rambharos added. The two-year process, designed to take stock of the implementation of the Paris climate agreement, began at Cop 26 and will be finalised at next year's Cop 28 conference in the UAE.
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South Africa adopts climate change law
South Africa adopts climate change law
Cape Town, 25 July (Argus) — South Africa's president Cyril Ramaphosa has signed into law the country's climate change bill, which sets out a national response to climate change for the first time. The new climate change act will enable the orderly reduction of greenhouse gas (GHG) emissions through the implementation of sectoral emission targets towards South Africa's commitment to reach net zero by 2050. Currently, the country is the 15th largest GHG emitter in the world, according to the World Resources Institute. The law provides policy guidelines to ensure South Africa reaches its nationally determined contribution (NDC) under the Paris climate agreement by assigning individual enterprises carbon budgets and facilitating public disclosure of their progress. In its updated 2021 NDC, the country has undertaken to cut its GHG emissions to 350mn-420mn t of CO2 equivalent (CO2e), equivalent to 19-32pc below 2010 levels, by 2030. The lower end of this range is in line with the Paris Agreement's 1.5°C global warming threshold. To meet this, South Africa will have to achieve a steep decline in coal-fired electricity generation. A carbon tax is seen as a vital component of the country's mitigation strategy, according to the president. "By internalising the cost of carbon emissions, carbon tax incentivises companies to reduce their carbon footprint and invest in cleaner technologies, and also generates revenue for climate initiatives," Ramaphosa said. South Africa's carbon tax was introduced in a phased approach in June 2019 at a rate of 120 rands/t ($7/t) of CO2 equivalent (CO2e) and increased to R134/t of CO2e by the end of 2022. But tax-free allowances for energy-intensive sectors such as mining, and iron and steel, along with state-owned utility Eskom's exemption, implied an initial effective carbon tax rate as low as R6-48/t of CO2e. South Africa's National Treasury is targeting an increase to $30/t of CO2e by 2030. But the extension of phase one from the end of 2022 to the end of 2025, together with an uncertain future price trajectory and lack of clarity on future exemptions, means the effective carbon tax rate is likely to remain well below the IMF's recommended $50/t of CO2e by 2030 for emerging markets. The new climate change act seeks to align South Africa's climate change policies and strengthen co-ordination between different departments to ensure the country's transition to a low-carbon and climate-resilient economy is not constrained by any policy contradictions. It outlines South Africa's planned mitigation and adaptation actions aimed at cutting GHG emissions over time, while reducing the risk of job losses and promoting new employment opportunities in the emerging green economy. The law also places a legal obligation on provinces and municipalities to ensure climate change risks and associated vulnerabilities are acted upon, while providing mechanisms for national government to offer additional financial support for these efforts. The new act formally establishes the Presidential Climate Commission (PCC) as a statutory body tasked with providing advice on the country's climate change response. Among other things, the PCC is developing proposals for a just transition financing mechanism, for which a platform will be launched in the next few months. Over the last three years, South Africa has seen an increase in extreme weather events often with disastrous consequences for poor communities and vulnerable groups. To address the substantial gap between available disaster funds and the cost of disaster response, the government announced in February that it would establish a climate change response fund. At the time of the announcement, Ramaphosa reiterated that South Africa would undertake its just energy transition "at a pace, scale and cost that our country can afford and in a manner that ensures energy security". Elaine Mills Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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.
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