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California sets sights on tougher LCFS

  • Market: Emissions
  • 20/12/23

California will target deeper cuts to its transportation fuel carbon intensity and be pickier about the alternatives it allows to achieve them under a proposal issued late Tuesday.

Potential revisions to the Low Carbon Fuel Standard (LCFS) include a 50pc tougher target in 2030 accelerated with a 5pc more restrictive target in 2025. The agency will propose an automatic mechanism to advance to tougher annual targets when unused credits more than triple average deficit generation. And California would for the first time impose emissions reduction requirements on jet fuel used in intrastate flights, which the agency estimated at about 10pc of the jet fuel supplied in the state.

The agency would explore new restrictions on credit-generating fuels, including tracking requirements for crop-based feedstocks and a phase-out of new renewable natural gas (RNG) used directly in transportation by 2041. But CARB would only apply new, tougher eligibility for out-of-state RNG to projects built next decade.

Today's filing allows market participants a pre-holiday look at where regulators want to move the program, but does not mark the beginning of a required 45-day public comment period. CARB now expects to begin that clock in early January, with a public hearing scheduled for 21 March.

Board members must approve the proposal by vote after the public comment period, and language will also undergo a standard review by the state's Office of Administrative Law.

LCFS programs require yearly reductions to transportation fuel carbon intensity. Conventional, higher-carbon fuels that exceed the annual limit incur deficits that suppliers must offset with credits generated from approved, lower-carbon alternatives.

CARB began workshop discussions on how to change the LCFS in late 2021, with spot credits above $140/t. Spot credits have traded at less than half that level through large swaths of 2022 and 2023.

Prices have groaned under the weight of new credits generated in excess of obligations that have doubled since the workshops began, to more than 18mn t — nearly enough to satisfy all the deficits generated in the 2021 compliance year. These credits do not expire. Tougher targets and the mechanism to make the benchmarks harder if credits greatly exceed deficits would attempt to address that imbalance.

The agency advanced the current rulemaking in September with draft documents suggesting a 30pc reduction target, new obligations for intrastate jet fuel and a reduced role for RNG. The new language also included requirements to trace crop-based and forestry-based feedstocks to their point of origin, with independent certification. The agency would also formally remove palm-derived fuels from eligibility — no palm-based fuel has received credits under the program so far.

California's proposed changes come after other jurisdictions had already completed updates to their programs.

Oregon in September 2022 extended the state's Clean Fuels Program through 2035 with tougher targets. Washington regulators will begin a rulemaking to better incorporate aviation fuels into that state's program early next year, but will not touch the decade of annual targets set by lawmakers.

Canada's new Clean Fuels Regulation began enforcement this year. British Columbia adopted North America's steepest 2030 target and will next year set targets for jet fuel supplied in the province.


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05/11/24

EU contributed $31.2bn public climate finance in 2024

EU contributed $31.2bn public climate finance in 2024

Edinburgh, 5 November (Argus) — The EU has contributed €28.6bn ($31.2bn) in climate finance from public sources in 2024 to help developing countries cut their greenhouse gas emissions (GHG) and adapt to climate change, according to the European Council. Around half the funding went to climate adaptation or to cross-cutting action, which involves both mitigation — reducing GHG emissions — and adaptation. Almost 50pc took the form of grants, according to the EU. The €28.6bn includes €3.2bn from the EU budget, including from the European Fund for Sustainable Development Plus, and €2.6bn from the European Investment Bank. The EU said it also mobilised €7.2bn of private finance last year, and it "seeks to extend the range and impact of sources and financial instruments and to mobilise more private finance". The figures were released ahead of the UN Cop 29 climate talks, which open on 11 November in Baku, Azerbaijan. Finance will be a key topic at this year's summit as parties to the Paris deal will seek to agree on a new finance goal for developing nations, following on from the current, but broadly recognised as inadequate, $100bn/yr target. EU negotiators have signalled willingness to support "a stretched goal" with a public finance core, but have yet to provide a figure. Developed countries in general have yet to commit to a number for climate finance, while developing nations have for some time called for a floor of at least $1 trillion/yr. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Carbon markets have ‘fallen short’ for LDCs: UNCTAD


05/11/24
News
05/11/24

Carbon markets have ‘fallen short’ for LDCs: UNCTAD

London, 5 November (Argus) — Carbon markets so far have not delivered meaningful climate finance to least developed countries (LDCs), according to a report by the UN Conference on Trade and Development (UNCTAD), although the mechanisms under Article 6 of the Paris climate agreement present improved prospects. "Fragmented" carbon markets have "fallen short" on providing climate finance to LDCs, increasing climate change mitigation, and supporting the structural transformation of these countries, UNCTAD said. Carbon credit prices are not high enough to incentivise projects, the report warns, and if they hold at about $10/t CO2, about 97pc of LDC mitigation potential will remain unharnessed by mid-century. Participation in the voluntary carbon market (VCM) and the UN's clean development mechanism (CDM) has also been concentrated in few LDC countries. About 75pc of carbon credits from LDC-based projects in the VCM come from just six countries — Bangladesh, Cambodia, the Democratic Republic of the Congo, Malawi, Uganda and Zambia — while 80pc of CDM credits come from six countries, four of which also figure in the VCM's areas of concentration — Bangladesh, Cambodia, Malawi, Myanmar, Nepal and Uganda. And the limited inclusion of carbon offset credits in most compliance markets means they "do not offer meaningful entry points" for LDCs, UNCTAD said. "The outlook may improve" as markets at the UN level shift to new mechanisms under Article 6 of the Paris deal, UNCTAD said, as parties can apply the lessons learned from the CDM to create an improved system — efforts for which have been evidenced by the "prolonged negotiations" on Article 6 rules, which will continue at the UN's Cop 29 climate conference kicking off in Baku, Azerbaijan, next week. The success of these mechanisms will rely on "decisive action" by LDCs to determine how to approach their participation to ensure it supports their development goals, the report found. And UNCTAD called on the international community to standardise carbon market rules to reduce fragmentation and simplify access for LDCs, as well as to allow them to participate in compliance markets. But carbon markets are just one tool, UNCTAD emphasised, and not a substitute for other forms of climate finance. This will be a key topic at Cop 29, as parties attempt to decide on a new collective quantified goal to replace the existing $100bn/yr commitment pledged by developed countries. By Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Trump unlikely to fully end US clean energy policies


04/11/24
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04/11/24

Trump unlikely to fully end US clean energy policies

Houston, 4 November (Argus) — Although former US president Donald Trump has promised to end climate policies enacted during the administration of President Joe Biden, the political complications of reversing course make a full change of direction unlikely should Trump return to the White House. Trump has frequently criticized Inflation Reduction Act (IRA), promising to terminate the " Green New Scam " and rescind all unspent funds in the Biden administration's climate policy suite, if he is elected to a second term. But fulfilling that pledge may be difficult for many reasons, not least of which is whether Republicans have control of both chambers of Congress after Tuesday's election, including the unlikely outcome of a 60-seat majority needed to bypass a Senate filibuster. Beyond the math, Republican districts are benefiting from IRA funding, with some lawmakers from Trump's party already opposing the turmoil that could arise from an about-face on tax policy. "There's no way they're going to be able to replace and repeal the IRA, in large part because so many of the dollars are flowing to [Republican] states," said David Shepheard, a partner at consultant Baringa who specializes in energy and resources. "I think the pieces of the IRA that are most at risk are the [electric vehicle] tax credits, potentially some of the stimulative pieces around offshore wind." The IRA established a host of federal incentives to support clean electricity growth and the associated domestic supply chain. Those include technology-agnostic production and investment tax credits for electricity generators based on their emissions intensities. But the law went well beyond the power sector and also established credits for hydrogen production, electric vehicles and the manufacture of components needed by clean electricity systems. Project developers are counting on a policy trajectory that does not match Trump's rhetoric, which would allow some incentives to stay on the books. Companies expect market forces, such as corporate demand, and state mandates to continue to drive growth for solar and onshore wind and energy storage, rather than national politics. But there is more trepidation around offshore wind, a less mature sector for which the federal government is effectively the landlord for project sites. "There is no doubt that the trajectory of the US offshore wind industry will be impacted by the November election," Liz Burdock, chief executive of offshore wind industry group Oceantic Network, said. "Its outcome will influence how we maintain our momentum." Uncertainty around the US presidential election has dampened private investment in the sector this year, according to Oceantic. At the same time, companies say the industry has come a long way since 2016, with a handful of projects now operating, while recent macroeconomic challenges are subsiding. Furthermore, demand for offshore wind would continue at the state level, and these factors could make the industry more resilient to headwinds. Executive decisions Trump still could use the executive branch to "stonewall" sectors helped by the IRA in the absence of a repeal, including by influence the timing or distribution of IRA funds, according to Shepheard. He could shift regulators' priorities to new oil and gas development, which, along with other actions, could make resources such as combined-cycle natural gas plants more attractive than renewables. "The extent that renewables and other cleaner energy assets are competing with gas, that'll be the big change from a Trump administration," Shepheard said. At the same time, funding for onshore wind and solar is "relatively safe", and tax credits for hydrogen and carbon capture are on comparably firm ground because of support from the oil and gas industry, Shepheard said. Some companies have expressed cautious optimism that some elements of the IRA, such as the advanced manufacturing tax credit, will survive. The incentive is not only important for the solar supply chain but also offshore wind, as state-level solicitations often require developers to invest in local manufacturing. Republican states in the US southeast have already benefited from new factories springing up on the back of the credits. For example, Enel chose Oklahoma for a new new module plant , First Solar located a factory in Alabama and Qcells has expanded production in Georgia. Moreover, removing that carrot could leave the US solar industry reliant on Chinese companies, which could run afoul of Trump's protectionist trade instincts. Trump's campaign did not respond to multiple requests to elaborate on his policy plans. By Patrick Zemanek Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Canada advances oil and gas GHG cap


04/11/24
News
04/11/24

Canada advances oil and gas GHG cap

Houston, 4 November (Argus) — Canada is proposing to use a cap-and-trade system to reduce greenhouse gas (GHG) emissions from its oil and gas sector, a long-promised but politically contentious move. The proposed program aims to reduce emissions from the sector by 35pc, compared to 2019 levels, by 2030-32, according to a draft rule published by Environment and Climate Change Canada (ECCC) on Monday. It would cover upstream production activities, both onshore and offshore, including for oil, natural gas and liquified natural gas. After an initial four-year phase-in over 2026-29, entities would then need to meet their emissions obligations over the first 2030-2032 compliance period. While all operators must report emissions, only those producing more than 365,000 b/yr of oil equivalent, equal roughly to 99pc of upstream emissions, would be covered by the trading program. Covered entities would receive free allowance allocations, which would decline in line with their emissions cap. Companies could also buy allowances on the secondary market if needed, use carbon offsets or contribute funds to a decarbonization program. The first three-year compliance period of 2030-31, would be set at 27pc below emissions reported for 2026, which ECCC said would be equivalent to the 35pc target. The federal program will not link with the California-Quebec joint carbon market, known as the Western Climate Initiative, regulators said. ECCC officials stressed that the resulting program would cap emissions, not production, for Canadian oil producers, pushing back at a common criticism from opponents. The federal move will keep the industry accountable to its own promise of net-zero by 2050 and result in a greener and more competitive industry, said Canada Natural Resources Minister Jonathan Wilkinson. "As the world moves to reduce emissions generated by the production and combustion of fossil fuels, oil and gas extracted with the lowest production of emissions will have value in the world," Wilkinson said. But Alberta premier Danielle Smith claimed on Monday that the proposed program violates Canada's constitution. Provinces have exclusive authority over non-renewable natural resource development and the proposal ignores ongoing projects in the province, such as the Pathways Alliance, she said. Canadian Natural Resources, Cenovus, ConocoPhillips Canada, Imperial, MEG Energy and Suncor Energy are involved in the project. The program is a cap on production and will cost the province "anywhere from C$3bn-$7bn ($2.1-5bn)/yr" in absent royalty payments because of a loss of 1mn b/d in production, Smith said, promising future legal challenges against the federal government. "The only way to achieve these unrealistic targets is to shut in our production, I know it, they know it. We are calling them out on it, and they have to stop it," she said. Canada, a major net exporter of oil, has committed to reducing emissions by 40-45pc, compared to 2005 levels, by 2030 and net-zero by 2050. But emissions from the country's oil and gas sector remain an obstacle to meeting those goals. The sector accounts for 31pc, or 217mn metric tonnes, of the country's emissions in 2022 , according to the most recent federal data. Emissions from this sector increased by 83pc from 1990 to 2022. Over the past year Canada's federal government has focused on competitive climate change-related policies, from rolling out investment tax credits for decarbonization technologies to enforcement of the government's new Clean Fuel Regulations. But the road for the Liberal Party-led government to meet the climate goals remains a rocky one ahead of a federal election that must take place no later than October 2025. In September, the Conservative Party, led by Pierre Poilievre, attempted a no confidence measure on prime minister Justin Trudeau's government, fed by discontent around the federal carbon tax. While the motion failed, it highlights the balancing act for the Liberal Party ahead of the election. Trudeau has resisted calls from within his party to cede the field as his popularity waned, to the benefit of Poilievre. ECCC plans to request public comment on the proposal through 8 January 2025 and estimates it will finalize the regulations next year. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Oil use still flat to 2030 in TotalEnergies scenarios


04/11/24
News
04/11/24

Oil use still flat to 2030 in TotalEnergies scenarios

Edinburgh, 4 November (Argus) — TotalEnergies continues to see oil demand plateauing until 2030, and then to decrease slower than natural field decline even in a scenario limiting global warming below 2°C. In its annual energy outlook released today, TotalEnergies updated two different scenarios for energy demand to 2050. The 'Momentum' scenario assumes countries with 2050 net zero targets reach their goals and China hits its 2060 target, with low carbon energy meeting half of developing countries' needs. It has temperature rising by 2.2-2.3°C by 2100, compared with 2.1-2.2°C in the same timeframe last year. The Paris climate agreement seeks to limit global warming to "well below" 2°C above the pre-industrial average and preferably to 1.5°C. "In this scenario, fossil fuels still cover half of the growth in energy demand in the Global South, due to insufficient low-carbon investment," TotalEnergies said. The 'Rupture' scenario assumes global co-operation supports net-zero development in India and developing countries, with energy demand growth met by low-carbon energies and efficiency gains. It has temperature rising by 1.7-1.8°C in 2100, unchanged from last year. "Beyond 2040, all decarbonisation levers are applied globally, in particular the deployment of new energies and carbon capture, use and storage (CCUS)," TotalEnergies said. TotalEnergies still sees oil demand plateauing until 2030 in Momentum and Rupture, reaching around 70mn b/d in the former and 44mn b/d in the latter in 2050. This compares with 63mn b/d in the Momentum scenario and 41mn b/d in the Rupture scenario by 2050 in last year's report. Around 25pc of oil demand stems from the petrochemical sector in 2025 in the Rupture scenario, according to the firm. Oil demand starts decreasing around 2035 in Momentum, but slower than the 4-5pc natural decline of existing fields, requiring new developments. It decreases faster in Rupture — by 3.9pc per year over 2030-50 — but still more slowly than natural decline, the firm said. In the Rupture scenario, the aviation and shipping sector need sustainable liquid fuel supply to rise four-fold compared with today. But a higher EV penetration rate in this scenario reduces biofuels requirements for road transportation, freeing up more supply for aviation and shipping, according to the firm. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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