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EU wants talks that could end new CER supply

  • Spanish Market: Emissions
  • 05/07/19

The EU has attempted to start negotiations to shut down the UN's clean development mechanism (CDM), a move that could cut off the supply of new certified emissions reduction (CER) credits entering the market.

EU negotiators proposed starting talks on closing the CDM during the latest round of UN climate negotiations in Bonn, Germany, which concluded last week.

Negotiators from other countries opposed the move. The talks in Bonn were about the UN's Paris climate agreement. But the CDM was set up under the Kyoto protocol, an older UN climate treaty, and some parties argued that discussions to end the CDM should take place in negotiations on Kyoto, not Paris.

The CDM is a system that allows emissions-reducing projects to generate and sell CER credits. The Paris agreement will set up a new sustainable development mechanism (SDM) to replace the CDM. But negotiators have not yet decided if CDM projects will be able to take part in the new system.

If the CDM is closed down, and its projects cannot transition to the new system, this could cut off the flow of new CER supply.

The CDM cannot continue to operate beyond the end of the Kyoto protocol's second commitment period (2013-20), the EU said at the end of the Bonn talks.

"The time has now come to consider winding it up," it said.

Project transition

Some countries want CDM projects to be transferred to the new mechanism, so they can keep issuing emissions reduction credits. But negotiators have not decided if projects registered under the new SDM will be able to issue CERs, or if they will produce another type of credit.

If projects issue a new type of credit under the new mechanism, then no fresh CER supply would enter the market after the CDM was shut down.

"If the CDM closes down then that is the end of CERs. Even if the projects are transitioned, they would not be issuing CERs," non-governmental organisation Carbon Market Watch policy officer Gilles Dufrasne said.

UN negotiators are hoping to reach a decision on these issues at the UN climate summit (Cop 25) in Santiago, Chile, in December. Parties to the Kyoto protocol will also hold talks at Cop 25.

CDM problems

The transition from the CDM to the SDM has become a politically charged issue in the UN talks. The CDM has been clouded by problems, and negotiators are keen to avoid repeating past mistakes when setting up the new mechanism.

Most large carbon markets, including the EU's, have restricted the use of CDM credits for compliance, partly because of concerns over the environmental integrity of credit-issuing projects.

As a result, CER demand is very low and the market is heavily oversupplied. A CER credit currently trades for around €0.20/t of CO2 equivalent.

Even if the CDM is closed down, "the existing surplus [of CER credits] could linger on for a while without additional measures", Dufrasne said. Environmental groups have warned that CER supply could swell to 4.6bn credits by 2020.

Given the low price of the credits, some CDM projects would be likely to continue cutting CO2 even if they stopped selling CERs. Critics of the system say that buying CERs from these projects does not support "additional" emissions cuts.

"It is important to be blunt here — the CDM delivered investment, but it did not work for everyone, particularly in terms of additionality, distribution and sustained demand," EU climate commissioner Miguel Arias Canete said last month.


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29/01/25

Switzerland targets 65pc emissions cut by 2035

Switzerland targets 65pc emissions cut by 2035

Berlin, 29 January (Argus) — Switzerland has set a new greenhouse gas (GHG) reduction target, aiming to cut emissions by at least 65pc by 2035 across all sectors, compared with 1990 levels. The country submitted its new climate plan under the Paris agreement — its nationally determined contribution (NDC) — to the UN climate body the UNFCCC today. Countries party to the Paris accord are due to submit new NDCs including sectoral GHG reduction targets for 2035 by 10 February. "The target corresponds to a greenhouse gas budget of 106.8mn t of CO2 equivalents, which is equivalent to an average reduction of GHG emissions by at least 59pc over the period 2031–2035," according to the NDC. The targets are to be achieved "primarily" through domestic measures, but the country has the option of including reductions achieved abroad. "In this respect, Switzerland wishes to continue using internationally transferred mitigation outcomes (ITMO) — emission credits — from cooperation initiatives under article 6 of the Paris Agreement," the NDC said. Switzerland's dependence on the use of some non-domestic measures to meet its goals once again drew criticism, with environmental group 350.org today slamming the country's "unquantified" reliance on international carbon trading mechanisms. This raises "serious concerns" about the "credibility" of Switzerland's reduction commitment, 350.org said. The government said that the targets correspond to the recommendations of the Intergovernmental Panel on Climate Change (IPCC). The measures to achieve the reduction in emissions will be enshrined primarily in the amended CO2 law for the period from 2030. The government will send a draft bill to parliament "in due time". The long-term climate strategy assumes that in 2050 Switzerland will still be emitting about 11.8mn t/yr of CO2 equivalent (CO2e), mainly from the agriculture, industry, and waste sectors. The country will therefore need negative emissions exceeding these residual emissions to reach a net-negative balance. The country has already held its first tenders for net negative emissions technologies. Switzerland's climate policy last year came under fire as the European Court of Human Rights ruled that the country's authorities violated Article 8 of the European Convention on Human Rights by insufficiently protecting its citizens from the serious adverse effects of climate change. Switzerland's government rejected the ruling, arguing among other things that the court did not take into account the country's revised CO2 law, which came into force a month before the ruling in March 2024. The government also warned against extending the right of appeal to associations to include climate issues, as this would make the realisation of "urgently needed" infrastructure even more difficult. By Chloe Jardine Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

ECA's green export finance bypasses developing nations


29/01/25
29/01/25

ECA's green export finance bypasses developing nations

Berlin, 29 January (Argus) — The "greening" of export credit agency's (ECA) finance which occurred in the past decade has largely bypassed developing countries, with investments mainly flowing to higher-income countries, according to a study on ECA transactions. The study, carried out by researchers from the business schools HEC Lausanne, ETH Zurich and HEC Paris, shows that ECA energy finance going to lower-income countries dropped to below 30pc in 2022-23 from 47pc in 2013-15. ECAs, including export-import banks, are state-backed agencies that help national exporters finance deals abroad by providing guarantees or loans. The share of ECA renewables commitments — mostly offshore wind and, increasingly, green hydrogen — rose to around 40pc in 2022–23, from under 10pc in 2013. The complete phase-out of fossil fuel financing appears "distant", the researchers noted. While ECAs handle financing volumes "on a par with multilateral development banks such as the World Bank", the scope and direction of their energy investments have largely remained "opaque", the researchers said. The study is based on an analysis of almost 1,000 transactions between 2013-23 which financed energy-related infrastructure and were supported by ECAs. For some key ECA countries such as China or Canada, data is only partially available. The study also reveals "notable" disparities between countries. Most members of the Export Finance for Future coalition (E3F), a group of European countries committed to aligning their export finance with the Paris climate agreement, have introduced stricter fossil fuel exclusions and are boosting their renewable portfolios. At the same time, major players like South Korea, Japan, and China have maintained significant levels of oil and gas lending. OECD countries should introduce "more rigorous climate policies" and renew international cooperation, the researchers said, particularly with non-OECD countries such as China. The OECD — where ECA terms and conditions are negotiated — could relaunch the International Working Group on ECAs, they said, to help ensure that countries phasing out support for fossil fuels do not see their market shares grabbed by others. Better renewable investment support via ECAs could help scale up the new collective quantified goal (NCQG) on climate finance, set at a minimum of $300bn annually by 2035 at the last UN Cop 29 climate summit in November, the researchers said. And ECA mandates could also be broadened to accommodate the needs of lower-income regions. "It is high time for ECAs to complete the shift to renewable energy, and through carefully designed policies and international cooperation, become true catalysts for a rapid and just energy transition," lead author Philipp Censkowsky from HEC Lausanne said. By Chloe Jardine Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Brazil biofuels venture to add complex in Alagoas


28/01/25
28/01/25

Brazil biofuels venture to add complex in Alagoas

Sao Paulo, 28 January (Argus) — Brazilian advanced biofuels firm GranBio, biofuels producer Impacto Bioenergia and two sugarcane plant operators will build a biofuels complex in northeastern Alagoas state, the companies said on Monday. The biorefinery project, named Exygen I, will cost an estimated R1.5bn ($253mn) and produce carbon neutral ethanol, biomethane and biofertilizers. It will have production capacity of 160mn l/yr (2,760 b/d) by 2026 and use sugarcane byproducts as feedstock, according to GranBio. Exygen I's estimated biomethane production capacity will be 50mn m³/yr. The complex will produce the renewable gas from vinasse, a by-product of sugarcane processing. Future investments would include increasing Exygen I's storage capacity and biogas distribution. But the initial storage and biogas distribution capacities were not disclosed. The project's next step includes producing biogenic CO2 — made from organic matter decomposition — biofertilizers and e-methanol, used in marine fuels. The project is a joint effort between GranBio, Impacto Bioenergia, Alagoas-based producing unit Caete and sugar and ethanol firm Central Açucareira Santo Antonio. Brazil's fuels of the future law , approved in October, increased incentives for the country's biofuels market. By Maria Frazatto Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Capacity markets need to reduce emissions: Aurora


28/01/25
28/01/25

Capacity markets need to reduce emissions: Aurora

London, 28 January (Argus) — European capacity markets focus too much attention on fossil fuel-fired plants and not enough on renewable sources of security of supply, according to a report issued by research firm Aurora that was commissioned by campaign group Beyond Fossil Fuels. Capacity markets in the six European countries that have them — the UK, France, Italy, Poland, Ireland and Belgium — have made payments totalling €89.6bn since a mechanism of this kind was first established in the UK in 2015, the report says. The mechanisms are intended to allow firm sources of generation to remain financially viable, even as increasing intermittent renewable generation reduces the number of hours that these types of plants can run profitably. Of this, nearly half went to support gas-fired capacity and 8pc to coal-fired plants, although there is some uncertainty over precise amounts because of data unavailability. Nuclear plants, mostly in France, received 12pc of the support, while storage — located mostly in the UK and Poland — took 13pc. Renewables, interconnectors and demand-side response took only 7pc, 5pc and 2pc, respectively. And 19GW of newbuild gas-fired plants have been funded through the schemes, with another 11GW of newbuild gas-fired plants having been awarded a contract for delivery in the next three years. Some of the plants will continue receiving funding until the 2040s, Aurora said, putting at risk European states' plans to move towards net zero greenhouse gas emissions. Payments for some assets in five of the countries studied continue until 2037-43, although France's unique decentralised system does not provide incentives beyond the front year. Payments to operators of battery energy storage systems (Bess) make up only a small part of the total, even though these units can provide zero-emissions short-term energy storage. Regulators should set up schemes to prioritise zero-emissions forms of security of supply, the report says. And alternative schemes, such as capacity reserves, in which fossil-fired capacity is kept back to resolve supply-demand imbalances but not allowed to act in wholesale markets, can ensure these plants do not lead to emissions increases. At the same time, a lack of viable long-term storage options could mean fossil fuel-fired technologies are needed for longer periods. Bess systems too can suffer from an inability to charge during long periods of low renewables output, which prompted Polish grid operator PSE to increase the technology's de-rating in an auction held last year. Other countries are considering setting up capacity markets, with discussions under way in Spain, Germany and Greece. Spain's planned market, which is under consultation , will allow payments for thermal generators only for a year in advance and in particular circumstances, with only renewables, storage and demand response being eligible for long-term support. By Rhys Talbot Capacity market spending by technology Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Republican floats repeal of 45Z clean fuel credit


27/01/25
27/01/25

Republican floats repeal of 45Z clean fuel credit

New York, 27 January (Argus) — A Republican lawmaker has quietly introduced a bill to repeal a key subsidy for low-carbon fuels, complicating a debate among lawmakers on what to do with clean energy incentives provided by the Inflation Reduction Act. The bill, HR 549, introduced this month by US representative Beth Van Duyne (R-Texas) would repeal the 2022 climate law's "45Z" incentive for clean fuels, which offers increasingly generous subsidies to fuels as they produce fewer greenhouse gas emissions. While the credit is currently in effect, the legislation as written would apply retroactively, striking the credit from the tax code after 2024. The proposal comes as Republicans prepare to pass major legislation this year through the Senate's reconciliation process, which bypasses the 100-member chamber's 60-vote requirement to advance most bills. Intent on extending tax breaks passed during President Donald Trump's first term but wary of adding to budget deficits, lawmakers are searching for ways to cut government spending. While changes to at least some Inflation Reduction Act programs are expected, biofuels policy is seen as a less likely target for Republicans than other climate policies. And even members supportive of scrapping clean energy subsidies might be wary of repealing incentives retroactively. Still, the new bill suggests that a full repeal of 45Z could at least be part of legislative discussions this year. The bill was referred on 16 January to the House Ways and Means Committee, of which Van Duyne is a member. Other Republicans on the Ways and Means Committee have expressed openness to updating but not necessarily eliminating the credit, with six members opening a request for information last year on options such as limiting foreign feedstocks or encouraging more "climate-smart" farm practices. Industry groups generally supportive of 45Z might even welcome some legislative changes, particularly those frustrated by incomplete guidance on qualifying for the credit issued in the waning days of former president Joe Biden's term. More information on lawmakers' plans could come soon, with House Republicans on Monday attending a policy retreat with Trump in Florida. Whatever changes are proposed, Republicans' slim majorities leaves them with little room for dissent and could give farm-state lawmakers leverage to ensure some type of biofuel tax credit survives legislative negotiations. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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