EU agrees carbon removals framework
Negotiators for the European Parliament and EU member states have provisionally agreed on a regulation establishing an EU carbon removal certification framework. Parliament said the new rules will allow for farmers to receive payments for carbon removals and set minimum sustainability requirements for carbon farming activities.
The provisional agreement paves the way for formal adoption by parliament and EU member states, possibly before the EU elections in June. The new voluntary EU certification framework for carbon removals covers permanent carbon storage through industrial technology, carbon storage in long-lasting products, as well as carbon farming.
Parliament noted an extended scope covering carbon farming activities that cut emissions from agricultural soils. And livestock methane emissions reduction is to be included on the basis of a review in 2026. Permanent carbon removals are defined as storing carbon for at least 35 years. And carbon farming activities must continue for at least five years.
The agreement also foresees carbon removals and emissions cuts as contributing to achieving the EU's nationally determined contributions (NDCs) — emissions reduction pledges — to the Paris climate agreement. And the European Commission will establish an EU registry for carbon removals and soil emissions reductions within four years of the regulation's entry into force.
European waste-to-energy association Eswet noted the specific recognition of biogenic permanent carbon removal via bioenergy with carbon capture and storage. Eswet called for the carbon removals certification framework to interact with the EU's emissions trading system (ETS) so as to provide incentives to remove carbon and accelerate to net zero emissions, which the EU is legally mandated to reach by 2050.
But non-governmental organisation Carbon Market Watch (CMW) was more negative, calling for parliament and member states to reject the regulation.
The units certified under the framework risk being double-counted by both voluntary carbon markets and as part of the EU's NDCs and climate policies, CMW warned. And sustainability criteria for biomass are not strict enough, probably leading to increased biomass demand.
But CMW does see some positive elements, such as biodiversity conditions for carbon farming and a periodic review into the impact of biomass. CMW further said the framework's units will "initially" be ineligible for use under non-EU member state NDCs or the UN's carbon offsetting and reduction scheme for international aviation (Corsia).
"The EU should have banned offsetting in voluntary and compliance frameworks, such as the EU ETS and Corsia, and double-counting rather than allow the carbon removal certification framework to slow down decarbonisation efforts," Wijnand Stoefs, CMW's lead on carbon removals, 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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