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CCUS, hydrogen manage expectations ahead of Cop 29

  • Spanish Market: Emissions, Hydrogen
  • 02/09/24

The final text from last year's UN Cop 28 climate summit in Dubai included a nod to carbon capture, use and storage (CCUS) and "low-carbon hydrogen" production — a first mention for both in Cop outcome texts and rare specificity. But these developing technologies have made little tangible progress since the conference, with few new commercial CCUS projects announced, while investment in hydrogen has slowed.

Hydrogen industry participants are not predicting immediate strides forward for the sector at Cop 29, scheduled to take place in Baku, Azerbaijan, in November — industry association Hydrogen Europe is managing expectations for the event, and is already pinning hopes on next year's Cop 30, in Brazil. But it may benefit indirectly from the summit's higher-level initiatives, such as boosting energy transition finance and spurring bilateral carbon credit trading, they say.

Baku may struggle to meet the high bar set at last year's Cop, which was described as a "historical moment" by industry group the Hydrogen Council. Perhaps in tacit recognition that hydrogen will be out of the limelight in Azerbaijan — which lacks robust ambitions for the technology — Hydrogen Europe has its hopes pinned on broader initiatives to give the sector a leg-up.

Azerbaijan's aim to set up a climate fund bankrolled by fossil fuel companies and oil-producing country governments would be welcome, Hydrogen Europe chief executive Jorgo Chatzimarkakis says. Details of the potential fund are not clear, but it could back renewables, as well as supporting countries struggling to adapt to climate change.

Progress at Cop 29 in finalising the details of the Paris Agreement's Article 6 — which allows countries to transfer carbon credits earned from cutting greenhouse gas (GHG) emissions to help other countries meet their climate targets — would "benefit hydrogen big time", Chatzimarkakis adds. It could help to unlock projects in hydrogen-hopeful countries such as Namibia and Mauritania, which have plentiful sun, wind and space but lack straightforward access to finance, he says.

For African countries, securing finance is the "single most critical challenge" in sustainable development, the African Climate Foundation says. The continent receives less than 3pc of global renewables investment and its governments will make a "concerted push" for more access to financing at Cop 29, the foundation's energy access and transitions programme manager, Sahele Fekede, says.

Hydrogen's bubble deflating?

But access to finance is only part of the battle, as several hydrogen-focused investment funds were already established at previous Cops, and governments have earmarked generous subsidy schemes for the sector. The biggest bottleneck this year appears to be commercially viable projects with confirmed customers.

The industry has experienced sluggish progress over the past 12-18 months — far from the frenzy of projects and partnerships announced at Cop 27 in 2022, when hydrogen optimism ran high. Firms and governments have pulled back on hydrogen targets recently, but Cop 29 could see some new announcements. And a recent rise in hydrogen investment decisions in Europe, India and Canada, worth billions of dollars collectively, may mean the industry is turning a corner.

Cop 29 offers the chance for "material advancements" for hydrogen in global technical standards and certification solutions, Hydrogen Council chief executive Ivana Jemelkova says. But 39 governments pledged to support mutual recognition of hydrogen certificates at Cop 28, so it is doubtful if anything more could be presented on this front in Baku. Key governments also endorsed the first set of technical standards to measure the CO2 footprint of different hydrogen plants at Cop 28 — a vital step to underpin certification. But work to expand this CO2 methodology to cover the midstream section is not expected until 2025-26.

Implementing clear "demand drivers" must be the other "critical" talking point, Jemelkova says. Market participants see a lack of willingness to pay for clean hydrogen stifling investment decisions. In contrast, demand within the CCUS industry appears strong, with significant numbers of industrial emitters committing to capture CO2, and setting up pilot projects, while most oil and gas producers are diversifying to some extent into CO2 storage. But subsidy schemes are still under development in many countries and the sector's evolution is often hampered by logistical challenges — getting the capture, storage and transport elements ready simultaneously.

The vast majority of CCUS and carbon capture and storage (CCS) facilities are at the planning stage, and many have not yet started construction. Of the almost 840 CCS facilities mapped by energy watchdog the IEA, just 51 are operational. Of these, 10 sequester the CO2 in dedicated storage, while the CO2 from a further six will be used. These 16 plants have announced a combined maximum capacity of 12.7mn t/yr CO2, IEA data show.

Carbon capture controversy

CCUS and CCS projects frequently attract criticism. They are used to justify continued fossil fuel use and delay action on cutting GHG emissions, non-governmental organisations (NGOs) say. The technology, while cautiously backed by the UN Intergovernmental Panel on Climate Change's overarching climate science reports, is not fully proven at scale for climate purposes, and can be energy-intensive. Oil-producing countries often cite the technology at climate talks, arguing the need to reduce emissions from oil and gas use rather than removing the source of those emissions. The specific language on CCUS in the Cop 28 outcome text is likely to have been included to mollify fossil fuel-producing countries.

The EU was clear ahead of Cop 28, setting a firm position that CCS or CCUS should play a minor role in tackling climate change. Use of fossil fuels with CCUS should only be an option for "specific hard-to-abate sectors", EU climate commis sioner Wopke Hoekstra said. He doubled down during the summit, telling delegates that "we cannot CCS ourselves out of the space" to address climate change.

But the bloc has since released a proposed carbon management strategy that leans heavily on CCUS to hit ambitious climate goals — although work would have started on the plan well before Cop 28. The EU aims to map potential CO2 storage areas and wants carbon capture to cover all industrial process emissions by 2040.

Europe — including non-EU members Norway, Iceland and the UK — is by far the region furthest ahead, with significant CO2 storage potential and the resources to drive a nascent industry. The past year has seen some new CO2 storage licences awarded, and incremental progress on subsidy frameworks, but a lack of commercial agreements and concrete decisions persists, while start dates for existing developments have been pushed back.

Both CCUS and hydrogen are developing industries and need substantial investment — from the private sector, but also public funding to de-risk an emerging market. Just five jurisdictions — the US, EU, Canada, Norway and the Netherlands — are responsible for 95pc of public funding for CCS and "fossil hydrogen" to date, NGO Oil Change International says, putting subsidies for the technologies at $30bn in total. Finance will be the "centrepiece" of Cop 29, and given previous mention in a Cop text, CCUS and hydrogen are both well positioned to receive energy transition funding. But the industries also need mandates, subsidies and widely used regulatory frameworks to advance.


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08/11/24

Canada climate plans not equally at risk post-Trudeau

Canada climate plans not equally at risk post-Trudeau

Toronto, 8 November (Argus) — Canada's climate policies will be overhauled if prime minister Justin Trudeau loses an upcoming federal election, but the Conservative Party might not move to roll back all of the programs. Trudeau over nine years in office has pushed through a raft of carbon pricing policies, cracked down on provinces with insufficiently ambitious plans, and even started a global "challenge" to spur more jurisdictions to price emissions. But Canada's policies have exacerbated cost-of-living concerns at a time when voters across the world are punishing incumbents for inflation, and Conservative leader Pierre Poilievre has barnstormed the country with a pledge to "axe the tax." An election must happen no later than October 2025, and the ruling Liberals are down significantly in polls. "We are going to see change, significant change," said Lisa DeMarco, a senior partner at the law firm Resilient and a member of the International Emissions Trading Association board at the Canada Clean Fuels and Carbon Markets Summit in Toronto, Ontario, this week. What "axe the tax" might mean in practice is uncertain. Inevitable targets are the country's federal fuel charge, currently at C$80/t ($57.54/t) and set to gradually increase to C$170/t in 2030, and a recently proposed greenhouse gas emissions cap-and-trade program for upstream oil and gas producers. But other policies, especially those with industry support, could remain. The country's distinct system for taxing industrial emissions, which includes a federal output-based pricing system that functions as a performance standard, "will likely be untouched," said former Conservative leader Erin O'Toole. A point of debate at the conference was what Poilievre might do with the country's clean fuel regulations, which function similarly to California's long-running low-carbon fuel standard and have boosted biofuel usage in the country. The policy is "certainly not at the top of the list" of Conservative priorities, said Andy Brosnan, president of low-carbon fuels at environmental products marketer Anew Climate. But that does not mean it will escape scrutiny. Conservatives could tinker with the program or push through more muscular changes like excluding electric vehicles, said David Beaudoin, chief executive of the climate consultancy NEL-i. "We should expect that regulation will be maybe not dismantled but somehow changed, perhaps fundamentally," Beaudoin said. In the gap left by the federal government, provinces could make up the difference with their own climate programs, panelists agreed. Quebec for instance has a linked carbon market with California, and British Columbia has its own low-carbon fuel standard. But policymakers should heed the lessons of Trudeau's declining popularity and reorient how they approach climate policy, O'Toole argued. "Try to be minimally disruptive on economically vulnerable citizens," he said. "Try not to pit industry against industry or region of the country against region." By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

California LCFS set for key decision Friday


08/11/24
08/11/24

California LCFS set for key decision Friday

Houston, 8 November (Argus) — Today California regulators will consider toughening carbon-slashing targets and raising hurdles for crop-based fuels to participate in North America's largest Low Carbon Fuel Standard (LCFS). California's Air Resources Board will weigh rulemaking underway for nearly a year — and on the verge of running out of time — to restore shrinking incentives in the state's program to decarbonize road fuels. The decision comes amid growing outcry over the cost of diversifying the state's fuel portfolio passed on to drivers. Choices made on incentives in the largest US renewable fuels and electric vehicle charging markets may offer some clarity to markets now roiled by uncertainty over the approach an incoming second Donald Trump administration will take. LCFS programs require yearly reductions to transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limit incur deficits that suppliers must offset with approved, lower-carbon alternatives. California's program has helped spur a rush of new renewable diesel production that quickly overwhelmed the deficits generated from petroleum gasoline and diesel use in the state. LCFS credits do not expire, and leftover credits available for future compliance grew to 29.1mn metric tonnes by July. The program generated 22.4mn deficits in all of 2023. Tougher targets on tap Board approval of amendments considered today would immediately toughen program targets for 2025 by 9pc. The one-year drop would nearly double reductions first proposed last year, and require cuts six times deeper than the typical year-to-year change in targets. Regulatory staff published models in April suggesting such a target could thin a smothering inventory of excess credits available for future compliance by 8.2mn — roughly a third of the available excess credits. Other proposals would take longer to begin. California would require new attestations about land use for crop-based feedstocks by 2026, shifting toward tougher verification requirements for such feedstocks by 2031. Regulators would limit credit generation for existing suppliers of biodiesel and renewable diesel made from soybean oil or canola oil credits to only 20pc of such fuels they supply to California by 2028. And CARB would begin phasing out outsized credit generation from renewable natural gas used in transportation in 2040, after locking-in incentives for current projects regardless of any regulations that would mandate methane reductions. The program has faced a late push of opposition from fuel suppliers and environmental critics highlighting costs to previously unaware drivers. The campaign inspired an unusual volume of public comment filings in October from residents focused on gasoline costs. But CARB faces a 5 January deadline to approve the proposals. Missing it would restart the regulatory process, which staff has said could take another two years to complete. Credits available for future compliance nearly tripled over the past two years. Renewable natural gas, electric vehicle and even biofuels groups wary of elements of the proposal have issued statements of support this week. Chairwoman Liane Randolph has repeatedly defended the program in public appearances as the temperature on fuel costs concerns rose. Targets must get tougher, she said earlier this year . She reiterated the need for the standard in response to media questions about the lack of information about potential cost increases. CARB's choices will ripple across fuel supply strategies around the world. California used two thirds of the renewable diesel consumed in the US during the second quarter, and access to the market can determine feedstock margins. With immediate federal choices on biofuel tax incentives or possible feedstock sanctions uncertain, clarity on California's may offer suppliers one of the fuel planning footholds this year. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Zambia UN carbon market focus on VCM transition


08/11/24
08/11/24

Zambia UN carbon market focus on VCM transition

Berlin, 8 November (Argus) — Zambia is expecting to generate at least 10 projects under the UN's new carbon market mechanism, mostly by transferring projects from the voluntary carbon market (VCM). At least five Zambia-based VCM projects could be transitioned to the new mechanism under Article 6.4 of the Paris climate agreement next year, head of the environment ministry's green economy and climate change department, Ephraim Mwepya Shitima, told Argus in a recent interview. By contrast, Zambia expects to transition only one or two projects from its limited portfolio under UN predecessor the clean development mechanism (CDM), although others might decide to follow suit if they see that "it works", Shitima said. Zambia also expects two projects generated under the new Paris Agreement Crediting Mechanism (PACM) proper to be validated next year, thanks to the Supporting Preparedness for Article 6 initiative that provides support to Zambia, Colombia, Pakistan and Thailand. The PACM, a centralised mechanism for trading carbon credits, is expected to launch next year following agreement on outstanding details at the UN Cop 29 climate summit starting in Baku, Azerbaijan, next week. The more advanced and less regulated bilateral carbon market mechanism under Article 6.2, which has already seen some activity, also depends on agreement at Cop 29 to provide clarity on registries, and the scope and timing of project authorisations. There is an overall expectation that agreement will be reached at this Cop, following years of slow progress and failed deals, not least because the Cop presidency has named Article 6 a priority . The lack of progress on Article 6.4 so far has not stopped project developers in Zambia, Shitima stressed, which have received support from the Zambian government. The government is also working on setting up a registry, although if it does not succeed in time, Zambia will use the international registry earmarked for countries unable to set up their own. And despite the credibility crisis the VCM has suffered since early last year, the standard of Zambia's VCM projects — mostly registered under Verra and Gold Standard — is sufficiently high to allow them to transition to the PACM, Shitima said. It is not yet clear whether the PACM will allow all forestry activities, which constitute most of Zambia's VCM projects. Afforestation and reforestation will be included, but the trickier "avoided deforestation" category is still being negotiated. For forestry projects, carbon storage permanence is an important issue, and the Article 6.4 supervisory body recently proposed relatively strict conditions in the shape of a buffer pool for unavoidable reversals and insurance for avoidable ones. These rules have been criticised as possibly too strict and costly for host countries. But Zambia welcomes these "stringent" rules, Shitima said. The country's green economy and climate change law, expected to come into force by the end of the year, will provide the legal basis for charging proceeds from project developers. These will go into a climate change fund, some of which will cover costs for dealing with reversals or guaranteeing the permanence of removals. Zambia is also in talks with buyer countries under Article 6.2 and expects to sign bilateral agreements with Sweden — with which it already signed an initial agreement — and Norway in Baku. By Chloe Jardine Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Coalition collapse worries German hydrogen sector


08/11/24
08/11/24

Coalition collapse worries German hydrogen sector

Hamburg, 8 November (Argus) — Germany's hydrogen industry is concerned that the collapse of the country's coalition government this week could further delay the sector's progress. Germany's ambitious plans for a clean hydrogen economy were already progressing more slowly than many had expected, and the collapse of the governing coalition comes at a time when the hydrogen sector is desperate for more clarity on key legislation. Chancellor Olaf Scholz's Social Democratic Party and the Green Party plan to rule as a minority government for the time being, after the third partner, the pro-business Free Democratic Party, exited the coalition on the back of disputes over how to finance the 2025 budget and how to tackle Germany's economic downturn. Scholz intends to ask for a confidence vote on 15 January, which in turn could lead to elections in March 2025, six months ahead of schedule. This prospect of an early election has raised concerns about progress on key legislation, including on energy policy and more specifically hydrogen. The coalition's end "has come at an inopportune time and is creating considerable uncertainty", German hydrogen industry association DWV said. "Political stagnation is looming" and delayed progress on key policies could "jeopardise the ramp-up of a hydrogen economy and potentially set its start back by months or years," it said. Scholz said he will seek votes on urgent laws before Christmas "but failed to make a clear commitment to key projects for the hydrogen economy", DWV said. The industry body listed several legislative initiatives planned or underway that need addressing. These include the so-called hydrogen acceleration act — which is designed to streamline permitting procedures for electrolysis plants, import terminals, storage facilities and other infrastructure — and the power plant strategy which involves the development of hydrogen-ready gas-fired power plants and for which first tenders are planned for the first half of 2025. The industry is still waiting for a dedicated storage strategy which is long overdue and was most recently promised for "this autumn". And while Germany has until 21 May next year to transpose key rules from the EU's revised Renewable Energy Directive (RED III) into national law, industry participants have called for this to be done as soon as possible to provide certainty, especially around mandates for renewable hydrogen use in industry . DWV also reiterated calls for the implementation of a certification system for renewable hydrogen and derivatives, having previously said that this will be critical to unlock support for producers through greenhouse gas emissions certificates. Turn the page Persistent uncertainty over future budgets raises questions over subsidy mechanisms that are long overdue and which Berlin is counting on to reach its 10GW electrolyser capacity target for 2030. This includes tenders for 3GW of so-called "system-serving electrolysis capacity", intended to provide flexibility in the wider electricity system. These were due to be launched last year and run steadily until 2029 for 500 MW/yr of capacity. The economy and climate protection ministry told Argus in late August that it was planning to consult on the tender framework this autumn, but it has yet to do so. The DWV acknowledged that "the coalition, despite all the criticism, has also done a lot of good for the hydrogen ramp-up". Progress on the planned pipeline network, the carbon-contracts-for-difference scheme and the power plant plans has been made this year. But despite progress in some areas, Germany's 10GW electrolysis capacity is "far out of reach", according to David Hanel, head of public affairs in Germany for French hydrogen project developer Lhyfe. The "current political crisis" offers opportunities for a reset, especially a "reality check" on the effectiveness of support measures that have been drawn up for the sector, including the European hydrogen bank, Hanel said. A change in government following the election is highly likely. Polls show the conservative opposition sister parties CDU and CSU firmly in the lead, although with a projected 30-33pc share of votes they too would need coalition partners. A change in power is unlikely to lead to a major shift in Germany's course on hydrogen. But it could be good news for proponents of "blue" hydrogen made from natural gas with carbon capture and utilisation or storage (CCUS) or "turquoise" gas-based hydrogen made via pyrolysis. In a "discussion paper" on energy published earlier this week, the CDU/CSU called for a "fast, multi-coloured and broad" approach to hydrogen. In order to advance plans, barriers for domestic gas-based hydrogen production with abated emissions have to be removed, the parties said. The incumbent coalition had stressed openness to imports and use of hydrogen from different sources , including gas-based pathways, but limited funding support for domestic production of renewable hydrogen. A change in government could also mean that the recently-approved hydrogen network will be revised. The CDU/CSU has called for extensions to "cover all main economic regions," focusing specifically on the southern states of Baden-Wurttemberg and Bavaria . By Stefan Krumpelmann Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

German government collapse could delay energy policies


07/11/24
07/11/24

German government collapse could delay energy policies

London, 7 November (Argus) — The collapse of the German coalition government may delay critical energy security policies currently under discussion, with industry and power associations expressing concerns about potential political standstill on such issues in the coming months. Asked in Berlin on Thursday, energy minister Robert Habeck said he does not expect a general agreement between the remaining red-green government and the conservative Union, which would ensure all further projects in this parliamentary period. And "it remains to be seen" if some decisions could be made together with the opposition on a case-by-case basis where the interests of government and CDU align, Habeck said, although energy security could be one topic where bills could be passed during the minority government phase before the end of this year. CDU politicians including on the state level had "constantly" written him letters to ask when some laws would "finally" be passed, he said, highlighting that while he does not expect "a great deal of helpfulness" he hopes the opposition will work with the government on the basis of how beneficial planning security would be for Germany as a whole. Among the energy security laws waiting to be passed is the draft law that abolishes the German gas storage levy on cross-border interconnection points , while the government has not yet passed its power plant strategy nor submitted the second of its two planned "solar packages". Chancellor Olaf Scholz on Wednesday said that among the legislative projects he was trying to pass before the end of the year were "immediate measures for our industry" on which he was currently deliberating with "companies, unions and associations". He said he would quickly try to begin speaking to opposition leader Friedrich Merz around the questions of defence and economic stability, since the economic stabilisation "cannot wait until elections have taken place". The coalition government collapsed after Scholz sacked finance minister Christian Linder , leading the latter to withdraw his party from the ruling coalition. An election looks likely in early 2025. Industry and renewables associations in particular voiced concerns about the timing of the collapse and potential political stagnation, with general leader of chemicals association VCI calling for elections at "the earliest possible time" to avoid "stalemate and political standstill", while the federation of German industries BDI said the country needs a "new, effective government" with a parliamentary majority "as quickly as possible". VCI stressed that Germany needs low energy prices, faster permitting and less bureaucracy, while BDI highlighted that existing market uncertainty is likely to rise with the arrival of the new US administration at the beginning of 2025, when Scholz plans to hold a vote of confidence. And wind association BWE stated that the country "cannot afford to stand still", while solar power association BSW appealed to members of the Bundestag to "make decisions and compromise" on important energy policy issues across party lines. Renewables association BEE called for laws and budget funds already in process for the continuity of energy measures to be adopted by December, stating that "even in a political crisis" the country "cannot afford" stagnation and stalemates. Conservative opposition sister parties CDU and CSU have been polling well ahead across 2024 at around 30-33pc of the vote. While the parties agree with the ruling coalition on several aspects of energy policy — including supporting hydrogen-fired and climate-neutral gas-fired generation — they notably diverge on the topic of nuclear generation. Germany completed its long-awaited nuclear phase-out in April 2023, but the CDU/CSU this week announced it would conduct an investigation into whether the last plants to be decommissioned could feasibly be reactivated. The CDU/CSU also reiterated its support for the development of fourth and fifth-generation nuclear reactors. Nuclear plants are notorious for lengthy construction times, meaning a single parliamentary term may not be enough to see projects through without cross-party support, and the ruling Greens and SPD remain anti-nuclear. The country has also not yet decided on a final storage location for its existing nuclear waste, which will need to be stored there for "one million years", according to the final report from the commission for the storage of highly radioactive waste. But the CDU and SPD have both voiced support for the introduction of a national green gas sales quota , with the CDU/CSU this week highlighting green gas quotas in the gas grid as a way to leverage the market to reach climate goals. By Till Stehr and Helen Senior Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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