Climate policy and UN Cop meetings
Overview
Argus provides key insights on how global climate policies will affect the global energy and commodity markets. We shine a light on decisions made at UN Cop meetings, which have far-reaching effects on the markets we serve. Progress at Cop 30 in Brazil will be crucial in transforming ambitions into actions aligned with the goals of the Paris Agreement. Countries must produce new climate plans this year.
Follow the key developments in energy transition field with our Net zero page and keep up to date with ongoing coverage of these issues by following Argus Media on LinkedIn and on X.
News
OECD highlights Chile’s green transition potential
OECD highlights Chile’s green transition potential
Santiago, 15 January (Argus) — The energy transition holds the potential to boost Chile's stagnant economic growth, the Organization for Economic Cooperation and Development (OECD) said in a report published today. Chile's high renewable energy potential and "vast" lithium and copper reserves put the country in the right position to benefit from the switch to cleaner energy, according to the OECD Economic Survey of Chile 2025. But the country must simplify regulation, boost investment, upgrade electricity transmission and port infrastructure, and increase carbon prices to meet its climate targets and harness the benefits of the energy transition, it said. Chile's massive renewable energy potential is built on its OECD-leading photovoltaic power possibilities and the world's best onshore wind resources in the Magallanes region in the far south, it noted. It needs to streamline permitting processes that often exceed legal permit reviewing times, making "investment approvals costly and lengthy," it said. Chile's tax on carbon emissions of $5/t of CO2e is low by international standards and insufficient for the country to meet its emission reduction targets, the report said. The country plans to increase the tax to $10/t on sites that emit more than 25,000t/yr of CO2. The OECD also highlighted the country's need to ensure fiscal sustainability, foster women's participation in the labour market and accelerate productivity through digitalization and innovation to bolster growth. The country's income convergence with more advanced OECD economies has stalled since 2012, it said. GDP rose by 2.4pc in 2024, up from a 0.3pc increase in 2023, on the back of postpandemic "adequate macroeconomic policies". By Emily Russell Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.
Make carbon pricing global to reach net zero: WEF
Make carbon pricing global to reach net zero: WEF
London, 15 January (Argus) — Variations in the design of carbon pricing measures across countries make it more difficult to reach net zero emissions by 2050, according to the World Economic Forum (WEF), which has called for greater alignment and linkage. Carbon pricing is vital to tackle climate change, but currently only covers 24pc of global emissions, WEF said. The number of unilateral carbon pricing measures is also increasing, WEF noted, pointing to planned EU and UK carbon border adjustment mechanisms (CBAMs) and the US' proposed Clean Competition Act. While these offer tailored approaches to supporting the energy transition, they could also lead to trade disparities requiring adjustments to the mechanisms, and have limited global impact, WEF warned. Multilateral carbon pricing systems reduce the risk of carbon leakage and can promote fairer trade, WEF said. But they require consensus, which can involve complex negotiations and be complicated by differing economic priorities. WEF suggests a phased approach to setting up a global pricing mechanism. The first step would be to establish minimum standards for pricing and reporting, with price adjustments based on development needs. The second step would be to connect regional markets — including the EU emissions trading system, California's cap-and-trade system, the US' northeast regional greenhouse gas initiative and China's national carbon market — to create "interoperable" pricing systems, WEF said. CBAMs should be adjusted to help trade-exposed industries reduce their carbon-intensity and limit adverse effects for developing countries. And revenues from the measures could be redistributed to "vulnerable" countries, WEF said. And wealthier nations, alongside a carbon pricing "club", should help fund carbon pricing adoption and enter into technology-sharing agreements with developing countries, WEF said. Linking compliance and voluntary carbon markets and those set up under Article 6 of the Paris climate agreement can spur private-sector involvement, WEF added. But regulation and transparency are needed to ensure challenges to integration — such as price volatility and questions over carbon credit credibility — are addressed, it said. By Navneet Vyasan Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.
Italy asks for pragmatism in energy transition
Italy asks for pragmatism in energy transition
Abu Dhabi, 15 January (Argus) — Italy's prime minister Giorgia Meloni today called for pragmatism in approaching the "historic challenge" of energy transition. The ambitious goals of tripling renewable energy capacity and doubling annual energy efficiency gains by 2030, agreed in the first global stocktake at the UN Cop 28 climate summit in the UAE, are far from being achieved, Meloni said at Abu Dhabi sustainability week, but "this must not frighten us or lead us to step back". The IEA found in June last year that current renewable energy plans — the so-called nationally determined contributions (NDCs) — for 2030 fall short of the ambition set at Cop 28, and that most countries need to up their targets in new plans due to be submitted this year. Meloni suggested countries should think in new ways, adding that decarbonisation plans cannot "come at the price of economic desertification." Ideology cannot stand in the way of methods that could help build a viable alternative to fossil fuels, she added. She also called for "overcoming the anachronistic division between developed nations and emerging ones, so as to share responsibilities". "We need a balanced energy mix based on the technologies we have in place, those we are experimenting with and those yet to identify," she said, referring to renewables energies, such as wind and solar, green hydrogen but also biofuels, gas, carbon capture and nuclear fusion. Since assuming office, Meloni has supported a rebound in Italian gas production . But the country's gas-fired generation hit its lowest in six years in 2024 , as a result of higher generation from renewable energy sources. Italy aims to have 131.3GW of installed renewable capacity by 2030 and is among the European countries with the highest ambitions. Meloni is also a supporter of nuclear energy, with Italy now aiming to meet at least 11pc of its power demand with nuclear energy by 2050. Rome had previously banned nuclear power in a referendum in 1987 after the Chernobyl disaster. By Bachar Halabi and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.
ADB to fund Indonesia $92.6mn for geothermal expansion
ADB to fund Indonesia $92.6mn for geothermal expansion
Singapore, 15 January (Argus) — The Asian Development Bank (ADB) has signed a $92.6mn financing agreement with geothermal power producer Supreme Energy Muara Laboh (SEML) to develop Indonesia's geothermal power capabilities. The funds will go toward the expansion of a geothermal facility at Muara Laboh in West Sumatra, and the construction, operation and maintenance of a new 83MW geothermal power plant, the ADB announced on 14 January. The support will "help Indonesia to meet its clean energy targets and deliver affordable electricity," said the ADB's country director for Indonesia, Jiro Tominaga. The project will also allow Indonesia to enhance its long-term energy security, while reducing greenhouse gas emissions. The finance package consists of $38.8mn from the bank's ordinary capital resources, a $38.8mn "B loan" from Sumitomo Mitsui Banking, and a $15mn concessional loan from the Australian Climate Finance Partnership (ACFP). Indonesia has the world's largest geothermal energy reserves, estimated at 23.1GW, said the ADB. But the country is still heavily reliant on fossil fuels for its energy needs, with coal accounting for 61.8pc of Indonesia's power mix in 2023, while renewables accounted for 19pc. Indonesia's president Prabowo Subianto announced in November that Indonesia intends to retire all coal-fired power plants by 2040, and the government subsequently clarified that it is instead aiming for a coal phase-down . But a phase-out could be possible if the country rapidly increases its share of renewables in the energy mix to 65pc, according to energy think-tank Ember. This would mean a renewable energy target higher than the government's current goal of 75GW by 2040. By Prethika Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.
Analysis
EU ETS auction revenue decreases in 2024
EU ETS auction revenue decreases in 2024
London, 23 December (Argus) — Revenue from the sale of EU emissions trading system (ETS) allowances decreased in 2024 despite a higher volume of ETS being sold, as the average settlement price fell by 23pc. EU ETS primary market auctions generated around €39bn ($40.6bn) this year, down from €44bn in 2023. Revenue decreased despite a higher overall volume of ETS being sold at auction, with around 599mn permits sold in 2024 compared with 523mn in the previous year. The auctions cleared at an average price of €64.76/t of CO2 equivalent (CO2e) in 2024, considerably lower than the 2023 average of €83.60/t CO2e. Lower demand for permits weighed on carbon prices in 2024. Eurozone manufacturing performance has contracted consistently since July 2022 , and there has been an accelerated decline in new factory orders, production and purchasing, data from Hamburg Commercial Bank show, reducing industrial activity and therefore compliance demand for carbon allowances. This fall in industrial activity also reduced power use, which combined with continued renewables build-out has reduced the carbon intensity of the region's generation mix. The top five highest-emitting countries in sectors covered by the EU ETS — Germany, Poland, Italy, Spain and France — all recorded record low stationary emissions in 2023 , which reduced buying demand ahead of the 30 September compliance deadline for last year's emissions. Uncertainty regarding future EU ETS supply has also weighed on the value of permits this year. The bloc has auctioned additional allowances since July 2023 in an attempt to raise €20bn for its REPowerEU initiative by 2026, but it has not specified how many permits it expects to sell, presenting the possibility that auction volumes could be increased if revenue falls short. Around €5.60bn were raised in EU ETS auctions for REPowerEU in 2024, increasing from €2.82bn a year earlier. The European Commission confirmed last month that it will not adjust scheduled sales volumes until September next year at the earliest. A total of €2.29bn were raised through sales this year for the EU's innovation fund — designed to stimulate low-carbon technology development in the bloc — up from €1.81bn in 2023. And revenue for the EU's modernisation fund — which supplies lower-income member states with financing to improve their energy systems — rose to €6.27bn in 2024 from €5.61bn a year earlier. All remaining revenue from EU ETS actions was returned to member state governments, which have been obliged to spend 100pc of these funds on climate and energy-related projects since the beginning of this year . EU ETS auctions will resume on 7 January. UK ETS auction revenue tumbles A total of 68.96mn permits were auctioned under the UK ETS in 2024, bringing in £2.56bn ($3.21bn) in revenue. This compares with revenue of £4.20bn from the 78.74mn allowances sold last year. Alongside the lower number of permits for sale, revenue was squeezed by weaker UK carbon prices. UK ETS auctions cleared at an average of £37.18/t CO2e this year, down from an average of £53.36/t CO2e in 2023. This was largely a function of similar conditions to those seen in the EU. The UK's production sector contracted in the second and third quarters of the year, government statistics show. And the country's last coal-fired power plant closed in September , reducing the carbon intensity of its generation mix. UK ETS auctions will resume on 8 January. By Navneet Vyasan EU ETS annual auction revenues €bn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cop 29 Article 6 deal ushers in new carbon markets era
Cop 29 Article 6 deal ushers in new carbon markets era
New NDCs will show how many countries aim to use Article 6 mechanisms towards climate goals London, 29 November (Argus) — Countries concluded nine years of negotiations on UN-level carbon market mechanisms at the Cop 29 climate conference in Baku, Azerbaijan, this month, opening up new avenues for carbon trading that will present both opportunities and challenges for existing systems. Cop 29 ended last week with agreement on the crucial outstanding elements to allow the full operationalisation of Article 6 of the Paris Agreement, which includes two mechanisms designed to help countries co-operate on meeting their emissions cut targets, or nationally determined contributions (NDCs), through carbon trading. Article 6.2 provides for the bilateral trading of so-called internationally traded mitigation outcomes (Itmos) between countries, while Article 6.4 establishes the Paris Agreement Crediting Mechanism (PACM). The mechanisms distinguish themselves from existing carbon markets largely in the rules and methodologies underpinning the credits. Article 6.2 credits will be "correspondingly adjusted", meaning emissions savings cannot be double-counted by the buyer and seller. And Article 6.4 specifically requires the downward adjustment of emissions cut pathways over time, as well as providing environmental and human rights safeguards and a buffer pool to address any reversal of achieved mitigation. This offers potential guidance to other carbon markets, whether existing schemes in need of reform or newly established. The unregulated voluntary carbon market (VCM) has notably suffered a reputational crisis since last year, largely as a result of questions surrounding the integrity of its credits. Brazil's planned emissions trading system is "sure to benefit" from the benchmarks established by Article 6.4, Bruno Carvalho Arruda of the Brazilian foreign affairs ministry said this week. But Article 6 also potentially poses competition to existing systems, if the credits that it issues are perceived to be more robust. "The UN system will not be immune from the same criticisms as the VCM," Switzerland's lead negotiator on international carbon markets under Article 6, Simon Fellermeyer, told delegates at Cop 29. But its basis of legitimacy — an inclusive system, which has been developed over a long period of time — gives confidence to participants and could act as a "guiding star" that other markets could try to align with, he said. Healthy competition There is a role for independent carbon crediting registries, but they will be looking at the UN process for comparison, chair of the Article 6.4 supervisory body Olga Gassan-Zade said following the body's initial adoption of key rules for the mechanism last month. "It's healthy to have competition," she said. The submission of new NDCs under the Paris deal, due in February, should bring some more clarity as to how many countries intend to make use of Article 6 mechanisms towards their goals, as they set out how they intend to meet ever-stricter emissions cut targets, this time for 2035. Some parties, including the EU, have made it clear that they will not use Article 6 to meet their targets under the Paris agreement. But deputy director-general of the European Commission's climate directorate, Jan Dusik, still welcomed the agreement on Article 6.4 at Cop 29 as a "significant achievement", emphasising the "complementary role" it can play for individual member states that want to make additional emissions cuts beyond the bloc's NDC, as well as for EU companies. And the flow of money between regions through Article 6 mechanisms could become all the more vital in light of the $300bn/yr climate finance deal reached in Baku, which is widely regarded as inadequate by developing countries. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cop: Baku mitigation outcomes disappoint
Cop: Baku mitigation outcomes disappoint
London, 29 November (Argus) — Parties hoping for higher ambition on mitigation — reducing emissions of greenhouse gases — left the UN Cop 29 climate summit in Baku, Azerbaijan, last week disappointed, after their attempts to reach an ambitious outcome were thwarted. Eyes now turn to next year's summit in Belem, Brazil, where an uncertain geopolitical context and US unwillingness to engage could make mitigation commitments all the more difficult to achieve. The conference achieved the operationalisation of article 6 of the Paris agreement , which allows for international trading of carbon credits. A new climate financing goal to follow on from the $100bn/yr promise for 2020-25 was agreed, although the amount on offer and terms left recipient countries deeply disappointed. Developed countries had pushed for the conference's outcomes to recommit to and build on the historic pledge made at last year's Cop in Dubai to transition away from fossil fuels. But the declaration of host Azerbaijan's president Ilham Aliyev that fossil fuels are a "gift from god" may have set the tone for the following two weeks of negotiations. Hopes alighted on two texts to have Dubai outcomes reflected at Baku — the UAE dialogue on the global stocktake and the mitigation work programme (MWP). But parties fundamentally disagreed on what these texts should include. An "agenda fight" on the first day of the conference caused the opening plenary to be interrupted, with parties disagreeing on whether the global stocktake should be classed under matters related to finance. A fudge was agreed, leaving the text under finance, but with a footnote. This would "provide reassurance that the placement does not prejudge the outcome," Cop president Azerbaijan's Mukhtar Babayev said. The first draft text, which came out near the beginning of the second week, still contained diametrically opposed visions on what the dialogue could consist of. Reciprocal accusations of cherry-picking flew. Saudi Arabia insisted that "the scope of the dialogue is on finance, and [the draft text] is advancing mitigation-centric cherry-picking." The Arab Group would "never accept" a text centred around positions which attempt to draw mitigation into the UAE dialogue, Saudi Arabia said. New Zealand claimed that the UAE dialogue was advancing on all elements except mitigation, and said such cherry-picking was unacceptable. Parties could not reach agreement, rejecting the final draft presented in the early hours of 24 November, two days after the official end of the summit. Developed countries criticised what they called a lack of ambition, with Switzerland saying the text contained "attempts to backtrack on the commitments taken last year", and Australia saying "some bodies have sought to slow or stymie discussions." Vulnerable developing states opposed the text too, with Fiji calling the result an "affront" to the Paris agreement. The mitigation work programme (MWP) text — the result of a workstream set up at Cop 27 in Egypt to provide a forum for discussing means to reduce emissions — was gavelled through without objections, but significantly watered down from drafts. The final text excised references in the preamble to temperature targets and net-zero carbon emissions, did not refer to fossil fuels, and mentioned emissions reductions only in specific contexts. The MWP final text did not provide guidance or encouragement for high ambition on the upcoming round of nationally determined contributions (NDCs) — the documents in which states set out their climate goals for the coming decade. States have until February 2025 to publish the new versions of these documents, which will set out their plans for emissions reductions to 2035. Instead the text highlighted their "nationally determined" nature, a warning against attempts to impose top-down targets on emissions reductions on other states. Other initiatives on mitigation appeared to fall by the wayside. Azerbaijan in July announced its plans for a $1bn "climate finance action fund" to be provided by fossil fuel-producing states and firms. But the plan received no more mention at Baku. Another presidency pledge, to increase global power-sector energy storage and build or refurbish 25mn km of grid infrastructure made an appearance in a draft UAE dialogue text, but was cut for the final, non-adopted version. The outcome of Cop 29 leaves a " mountain of work " to be done at the next Cop in Belem in 2025, according to UNFCCC executive secretary Simon Stiell. Countries will have published their latest NDCs by then, but without the spur of a strong outcome from Baku pushing towards high ambition. Developed countries had already set their sights on an ambitious outcome on mitigation in Brazil, and the lack of reinforcement of the Dubai outcome this year will make that all the more difficult to achieve. The likely role of the US in next year's talks offers little consolation. The election of Donald Trump in the weeks before this Cop opened threw a spanner in the works. Trump withdrew the US from the Paris agreement during his last term, and has indicated his intention to do so again. But with the withdrawal process taking one year from notification, and Trump not due to be inaugurated until January, the US will once again be present next year, but probably as an unwilling partner. By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cop 29 climate finance deal settled but work remains
Cop 29 climate finance deal settled but work remains
London, 28 November (Argus) — The UN Cop 29 climate summit technically achieved its aim of settling the details of a new climate finance goal, but it represents a huge compromise for poorer developing countries and the finance may take some time to reach them. Almost 200 countries agreed — although this was later disputed by some — on a goal that will see developed countries "take the lead" on providing "at least" $300bn/yr in climate finance to developing nations by 2035, to support the latter to decarbonise and implement their energy transitions. It is the new iteration of the current climate finance goal, under which developed countries agreed to provide $100bn/yr to developing nations over 2020-25. The new goal trebles the previous target, but falls short of what developing countries were pushing in Baku — $1.3 trillion/yr, including $440bn-600bn/yr in public finance mostly in grants and concessional finance. Other key aspects of the goal — the contributor base and the structure — remain largely unchanged. It only "acknowledges the need for public and grant-based resources and highly concessional finance", stopping short of calling for grants rather than loans. Developing nations have long emphasised the need for grants and concessional loans, to avoid increasing their debt burdens. The deal does not take inflation into account, and does not define climate finance. Civil society and non-governmental organisations largely dismissed it as weak. Several developing nations and groups have decried the amount, saying it does not meet the minimum requirement to support their energy transition and adapt to the effect of climate change, and that it could further hinder their economic development. For the least developed countries and small island developing states, in particular, the pill is hard to swallow. The goal does not include the sub-targets that they had called for . Some developed parties said that these nations needed more support. But specific targets proved a step too far, with a delegate from Somalia telling Argus that "rich" developing countries did not support such carve-outs. Some ground may have shifted slightly on the contributor base — also a long-running bone of contention. UN climate body the UNFCCC works from a 1992 list of developed and developing countries, but the former group argues that economic circumstances have changed for many countries since then. The Cop 29 finance text "encourages developing country parties to make contributions… on a voluntary basis", much like the Paris Agreement. But it clarifies that any provision of finance would not change a country's status. There was a notable focus during Cop 29 on China's climate finance contributions — which is likely to have supported developed countries' argument for a wider donor base. From billions to trillions The Cop 29 finance text acknowledged the need for trillions of dollars, calling on "all actors… to enable the scaling up of financing to developing country parties for climate action from all public and private sources to at least $1.3 trillion per year by 2035". There was also reference to a "roadmap" for reaching that level, but the wording avoids calling for finance from any particular source. EU climate commissioner Wopke Hoekstra said that, with the help of the multilateral development banks (MDBs) and with the deal's structure, the bloc is confident that $1.3 trillion/yr of climate finance could be reached. But he also pointed to a challenging global context. "This is a significant leap forward in exceptionally difficult geopolitical times," Hoekstra said. The EU is the largest provider of bilateral climate finance, contributing €28.6bn ($30.1bn) in 2023. In the end a "bad" deal proved better than no deal for the least developed and most vulnerable countries. The election of Donald Trump as president of the US will add a new layer of uncertainty to the climate talks next year, and the geopolitical context shows no sign of easing. But some developing countries worry that the finance may take a long time to reach them, if at all. Developed countries have a contested track record for the $100bn/yr goal, which they only met for the first time in 2022 . The new deal has a 10-year timeframe, for the $300bn/yr from developed countries, and for the larger $1.3 trillion/yr aspiration. How much money will flow to developing nations in 2025-2035 is anyone's guess, but work on improving access to funds will be crucial in the meantime. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Country focus
US Congress begins with focus on energy, taxes
US Congress begins with focus on energy, taxes
Some Republicans worry that their razor-thin House majority could soon see their caucus fractured, writes Chris Knight Washington, 3 January (Argus) — The new Republican majority in US Congress has set its sights on passing legislation to grow energy production, unwind climate policies and cut trillions of dollars in taxes, but doing so will require the party to overcome its history of infighting. That disharmony was on display last month, when Republicans in the House of Representatives nearly forced a government shutdown by scuttling a spending deal negotiated by their own leaders. Similar dynamics have been at play for the past two years, as rifts over how to govern made it difficult for House Republican leaders to use a tiny majority to extract policy concessions during negotiations. The first test of party unity in the 119th Congress — sworn in on 3 January — will come as House Republicans vote on whether to re-elect Mike Johnson as speaker with an even smaller majority than last year. Johnson can only afford to lose a handful of votes, assuming all Democrats vote against him, before Republicans risk a repeat of 2023, when far-right members ousted the last speaker but could not agree on a replacement for weeks. A lengthy voting impasse could delay the 6 January certification of the election victory of president-elect Donald Trump, who this week endorsed Johnson. Trump campaigned on passing legislation to allow industry to "drill, baby, drill" by increasing federal oil and gas lease sales, removing regulations and unwinding parts of outgoing president Joe Biden's signature Inflation Reduction Act (IRA). Among the options are rescinding a fee on methane emissions that started at $900/t, and requiring more oil and gas lease sales in the US Gulf of Mexico. On taxes, Trump has proposed extending $4 trillion in cuts due to expire at the end of 2025, in addition to cutting corporate rates to as low as 15pc from 20pc, rescinding clean energy credits, and putting a 20pc tariff on all imports. Other items on Congress' to-do list include passing legislation to fund the government and raising the statutory limit on federal debt. Republicans also say they want to pass a bill to expedite federal permitting, after a bipartisan effort to do so failed to advance in December. Learning to two-step Republican leaders have floated a two-step plan to pass Trump's legislative agenda that would use "budget reconciliation" — a legislative manoeuvre that will prevent a Democratic filibuster in the Senate, but which limits the bill to provisions that will affect the federal budget. Senate majority leader John Thune, a Republican from Texas, has suggested packaging immigration, border security and energy policy into a first budget bill that would pass early this year. Republicans would then have more time to debate a separate — and far more complex — budget bill that would focus on taxes and spending. But some Republicans, mindful of a slim 220-215 House majority that will temporarily shrink because of upcoming vacancies, worry the two-part strategy could fracture the caucus. Republicans have yet to decide the changes to the IRA, which includes hundreds of billions of dollars of tax credits for wind, solar, electric vehicles, battery manufacturing, carbon capture and clean hydrogen. A group of 18 House Republicans last year said they opposed a "full repeal" of the law, which disproportionately benefits districts represented by Republicans. Republicans plan to use their expanded influence to push changes at all levels of government and the work it supports. Incoming Republican chairman of the Senate energy committee John Barrasso has issued a report urging OECD energy watchdog the IEA to revive the inclusion of a "business-as-usual" reference case in its annual World Energy Outlook. Barrasso says the IEA has lost its focus on energy security and instead become a "cheerleader" for the energy transition. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.
Japan’s flexible energy plan poses unpredictable risk
Japan’s flexible energy plan poses unpredictable risk
An uncertain energy transition demands a range of policy options, but makes investment planning harder, Osaka, 20 December (Argus) — The Japanese government has addressed the uncertainty facing its new energy mix goal for the April 2040-March 2041 fiscal year by drafting multiple plans to tackle concerns over the future development of clean energy technologies. But the wide range of targets could also reduce predictability and complicate the country's energy strategy toward its 2050 net zero emissions goal. The new power mix goal will be the centrepiece of Japan's Strategic Energy Plan (SEP), which is due to be updated before the end of March 2025. The SEP must be reviewed every three years, and the previous one was formulated in 2021, before Russia's invasion of Ukraine refocused Tokyo's discussion on how to prioritise energy security, decarbonisation and economic growth. The latest review of the SEP has totally changed from the previous one, said Yoshifumi Murase, a commissioner of Japanese trade and industry ministry Meti's natural resources and energy agency, noting that Tokyo will take a flexible approach to its power mix goal while facing uncertainties that include a risk scenario for innovation failures. Meti has not disclosed details of these scenarios. The draft 2040-41 power mix entails renewable energy making up 40-50pc of the country's power generation, up from 22.9pc in 2023-24 (see table). By contrast, Tokyo plans to curb the thermal share to around 30-40pc from 68.6pc over the period. Meti has refrained from disclosing a breakdown for thermal fuels for now, as the ratio of each will vary depending on technological developments in hydrogen, ammonia and carbon capture, utilisation and storage. But the absence of a breakdown for thermal power targets could weigh on private-sector investment plans, warns one committee member. "[Technological] uncertainty does exist, but the industry can hardly invest without predictability," said Tatsuya Terazawa, chairman of the government-affiliated think-tank the Institute of Energy Economics Japan. Tokyo is supposed to increase predictability for investors with specific measures for each thermal fuel on the table, he added. Long-term uncertainty The ambiguous target also makes it difficult to map out Japan's long-term fuel procurement, especially for LNG, which would play a role in ensuring power generation flexibility alongside the growing share of solar and wind. Japan has faced falling long-term LNG supplies as previous SEPs that promoted renewables and the liberalisation of the retail power market disincentivised the industry to extend contracts. Japanese gas demand is expected to fall in the base scenario, but increase in the risk scenario, Teiko Kudo, deputy president of Sumitomo Mitsui Banking, said. It would be important to show the maximum volume of gas Japan may need within a specific period in the next SEP, she said. The issue of fuel security may be further exacerbated if Japan's planned return of nuclear reactors is delayed. Under the draft power mix for 2040-41, nuclear accounts for around 20pc, up from 8.5pc in 2023-24. But it is still uncertain how many reactors will be operational by then because of safety concerns over Japan's nuclear power sector since the 2011 Fukushima meltdown. The new SEP has made some progress, allowing nuclear power operators who had decommissioned reactors to build next generation reactors at their nuclear sites, not limited to the same site. The previous SEP did not mention building new reactors or replacements. The 2040-41 power mix aligns with a 73pc greenhouse gas emission reduction goal by 2040-41 based on 2013-14 levels. The new emissions target is currently under discussion, ahead of Japan's submission of its updated nationally determined contribution (NDC) to the UN Climate Change secretariat by February 2025. Power mix goals could be revised depending on the final NDC, Meti said. Japan's power mix goal % FY23 FY30 FY40 Power generation TWh 985 934 1,100-1,200 Renewable 22.9 36-38 40-50 Solar 9.8 14-16 22-29 Wind 1.1 5.0 4-8 Hydroelectric 7.6 11.0 8-10 Geothermal 0.3 1.0 1-2 Biomass 4.1 5.0 5-6 Nuclear 8.5 20-22 20 Thermal 68.6 41.0 30-40 LNG NA 20 NA Coal NA 19 NA Oil NA 2 NA Hydrogen/ammonia NA 1.0 NA ― Meti FY23: actual ratio (preliminary), FY30: confirmed goal, FY40: draft goal Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cost of government support for fossil fuels still high
Cost of government support for fossil fuels still high
London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost a third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Lula, Biden reach new energy transition deal
Lula, Biden reach new energy transition deal
Rio de Janeiro, 19 November (Argus) — The US and Brazil have sealed a new partnership to advance the energy transition, despite looming uncertainty over the future of US climate policies under the incoming Donald Trump administration. The partnership was announced following a meeting today between US President Joe Biden and Brazil's Luiz Inacio Lula da Silva on the sidelines of the G20 summit in Rio de Janeiro. Energy transition was one of Brazil's three goals for its G20 presidency, which it handed over to South Africa today. The two countries have agreed to focus on three pillars, the US embassy in Brazil said, as they pursue the dual objective of fostering economic growth and job creation while meeting climate targets like emissions reduction and keeping average global temperatures from rising by more than 1.5°C. These pillars are the acceleration and expansion of clean energy production and deployment, the development of the clean energy supply chain and green industrialization. The partnership intends to mobilize financing from public, private and multilateral development institutions to pursue the decarbonization of the power, transportation, industrial and manufacturing sectors in both countries. This joint effort between the US and Brazil is aligned with their domestic policies, the embassy noted, notably Brazil's new industrial policy and the US' bipartisan infrastructure law and the 2022 Inflation Reduction Act. A commitment to fighting climate change and developing the green economy is a key aspect of Lula and Biden's shared agenda. But both this cooperation and the future of Biden-era clean energy incentives are in question following Trump's victory in the US election. Trump has tapped oil executive and energy transition critic Chris Wright to lead the US Department of Energy (DOE). By Constance Malleret Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Argus related services
