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Cop 29 president calls for progress on finance

  • Spanish Market: Crude oil, Emissions, Oil products
  • 10/10/24

The president-designate of the upcoming UN Cop 29 climate summit, Mukhtar Babayev, has urged parties to progress on a timeframe and an amount for the new climate finance goal to be decided at the conference in Baku next month.

At a pre-Cop meeting today, Babayev stressed the need to "take seriously the responsibility for identifying a number over a timeframe and come forward with solutions".

"We cannot afford to leave too much to be decided at the summit," he added.

Cop parties must agree in November on the new collective quantified goal (NCQG) — building on the current $100bn/yr target that developed countries agreed to deliver to developing countries over 2020-25. But there remains a huge divide to bridge between developed and developing nations ahead of Cop 29.

Developed countries have yet to commit to a number for climate finance, while developing nations have for some time called for a floor of at least $1 trillion/yr.

The Cop 29 presidency is seeking to build on "possible convergence on certain elements" to provide a solid foundation to discussions on other parts of the goal, Babayev said. Elements for the formulation of the goal include an amount for the NCGQ, timeframes, scope, sources, as well as accessibility and transparency.

Babayev did not provide details on potential convergence, but some common ground was found during technical discussions on elements such as access and transparency. "Qualitative elements of the goal such as transparency and accessibility are also essential to ensuring that the goal is both fair and ambitious," he said. "The substantive framework for the draft negotiation text" on the NCGQ will be released in the next few days, according to Babayev.

The NCQG is Cop 29's "top negotiating priority", Babayev said, but he also urged parties to turn pledges made last year for the loss and damage fund — which will support vulnerable countries with the irreversible and unavoidable effects of climate change — into contributions.

He said that countries need to "respond to the goal of the UAE consensus [Cop 28 agreement] to transition away from fossil fuels in a just and orderly manner taking into account different national circumstances".

There is "no time for us to allow for anyone to try and backpedal on what we have collectively committed to in Dubai," Cop 28 president Sultan al-Jaber said at the meeting today.

Cop 28 last year ended with an agreement that included transitioning away from fossil fuels and tripling renewable energy capacity globally by 2030. Al-Jaber said that the next NDCs must be aligned with the Paris agreement and the Cop 28 deal to keep 1.5°C — the Paris accord's most ambitious temperature limit — within reach. NDCs "must be economy-wide, cover all greenhouse gases and seize the opportunity of climate action as a driver for sustainable growth", he said.

He recognised the efforts of G7 countries in including references to the Cop 28 agreement in their final communique and that he "was very hopeful that the same would happen at G20" later this year.

G7 countries in May committed to phasing out "unabated coal power generation" by 2035 — putting a timeframe on a coal phase-out for the first time. They also pledged "to transition away from fossil fuels" in energy systems in a just, orderly and equitable manner, accelerating actions in this critical decade, to achieve net-zero by 2050 in keeping with the best available science", which is the language used in the Cop 28 text.

Heads of states and governments in September adopted a pact that also included this wording ahead of the UN general assembly.


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08/11/24

California LCFS set for key decision Friday: Update

California LCFS set for key decision Friday: Update

Adds comments from meeting. Houston, 8 November (Argus) — Fuel producers today urged California regulators to preserve incentives in a newly uncertain market as residents asked them to start over with greater ambitions for a zero-emission future. California regulators may toughen carbon-slashing targets and raise hurdles for crop-based fuels to participate in North America's largest Low Carbon Fuel Standard (LCFS). On Friday California's Air Resources Board heard hours of final testimony on a rulemaking that has been 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. "The tools in our toolbox may become much more limited going forward," board chairwoman Liane Randolph said in opening remarks. "While we will do everything we can to protect our authority in California and our existing programs that we have to clean the air, we know that we must do all we can to use our existing state authority to bring clean fuels to California." Board consideration was not expected until late in the day. 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. Hours of public comment included numerous residents near dairies and other infrastructure critical of incentives that continued operations worsening their air quality, as well as environmental groups opposed to incentives not focused on electric transportation. "This proposal is simply not worthy of your vote," Earthjustice staff attorney Nina Robertson said. "It represents a grab bag of giveaways to polluting special interest that have turned what was once a program for climate progress into a piggy bank for their false climate solutions." 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. "While there is always room for improvement, in our view, there's no reason to delay adoption of this proposal today," Neste US president Peter Zonneveld said. "There is no time to waste." Randolph has repeatedly defended the program in public appearances as the temperature on fuel costs concerns rose. Board member Dean Florez said ahead of the meeting that he would vote against the amendments, citing what he considered a lack of clearer information on potential cost and emissions impact. "The opacity has eroded confidence in our intentions and planning," Florez wrote in a guest editorial. 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.

Carbon intensity reg pivotal to biobunkers in 2025


08/11/24
08/11/24

Carbon intensity reg pivotal to biobunkers in 2025

New York, 8 November (Argus) — The International Maritime Organization's (IMO) carbon intensity indicator (CII) regulation will propel biofuel bunker demand in 2025 as its restrictions tighten. The CII regulation came into force in January 2023 and thus far has had a muted effect on shipowners' biofuel bunker demand. But 2025 could be a pivotal year. CII requires vessels over 5,000 gross tonnes (gt) to report their carbon intensity, which is then scored from A to E. A and B vessel scores are regarded as superior energy efficiency, while C, D and E are considered moderate to inferior scores. The scoring levels are lowered yearly by about 2pc, so a vessel with no change in CII could drop from from C to D in one year. If a vessel receives a D score three years in a row or E score the previous year, the vessel owner must submit a corrective action plan. The IMO has not established penalties or restrictions for vessels scoring D. Thus, theoretically a ship owner could have scored D in 2023 and 2024 with no consequences. Year 2025 will mark CII's third year, when ship owners whose vessels were scoring D in 2023 and 2024 will need to rethink their sustainability approach or risk getting D again and having to produce corrective actions plans in 2026. That is in addition to the ship owners whose vessels will score E in 2024. To improve its CII score, a ship owner could reduce its speed and burn low-carbon fuels, among other solutions. Biofuel is the only plug-and-play low-carbon fuel option that does not require a costly vessel retrofitting. in 2023 of the vessels 5,000 gt and over, 3,931 scored D, 1,541 scored E and 3,967 did not report scores, according to the latest IMO data ( see chart ). Assuming that the non-responders refrained from reporting to avoid sharing their low D and E scores, then the total number of D and E scoring vessels could be as high as 9,439, or 33pc of the total vessel count. The bulk of the vessels reporting D and E were dry bulk carriers at 1,853 and 641, respectively, followed by oil tankers at 743 and 349, respectively, according to IMO data. The dry bulk carrier category also had the highest number of non-responders at 1,015 vessels. The vessel classification society American Bureau of Shipping concluded that a reference case container vessel with 154,000t deadweight could see its rating improve from D to C in 2025 if it switched from burning conventional marine fuel to B25 biofuel. FuelEU, EU ETS: All bark, no bite Separately from the CII regulation, ship owners traveling in, out and within EU territorial waters will see the implementation of a new FuelEU marine regulation on 1 January and the tightening of the existing EU ETS regulation. But neither would be major driving forces behind biofuel for bunkering demand in 2025. The EU ETS will require that vessel operators pay for 70pc of their CO2 emissions next year. But even with the added cost of CO2, a B30 biofuel blend is more expensive than conventional marine fuel. In Rotterdam in October, B30 — comprised of 30pc used cooking oil methyl ester (Ucome) and 70pc very low-sulphur fuel oil (VLSFO) — with a 70pc CO2 cost added would have averaged $924/t, compared with VLSFO with added 70pc CO2 cost at $682/t, according to Argus data. In order for the EU ETS to entice ship owners to burn biofuels, at current VLSFO and Ucome prices, the price of CO2 has to rise up to $300/t. And CO2 has fluctuated from $55-$102.5/t from January 2023 to October 2024. Starting on 1 January 2025, the EU's FuelEU regulation will require that vessel fleets' lifecycle greenhouse gas intensity is capped at 89.34 grams of CO2-equivalent per megajoule (gCO2e/MJ) through 2029. For vessels which do not meet this cap, a low biofuel blend can meet the requirement. A B5 blend, comprised of 5pc Ucome and 95pc VLSFO, emits less than 89 gCO2/MJ. At this rate, albeit higher, demand for biofuels would not spike dramatically. Unlike the CII scores which apply to individual vessels, FuelEU applies to vessel pools. Different shipping companies are allowed to pool their vessels together to share compliance and meet the EU ETS emissions limits. Thus several biofuel or LNG burning vessels can compensate for the emissions generated by the majority of the older, less fuel efficient vessels burning conventional marine fuel in the pool. By Stefka Wechsler CII vessels rating Number of vessels (5,000 GT and over) Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Market realities force Opec+ to delay supply boost


08/11/24
08/11/24

Market realities force Opec+ to delay supply boost

London, 8 November (Argus) — Eight Opec+ members have opted to delay a plan to begin raising crude output from December by one month, as slowing global oil demand growth and rising supply keep the pressure on prices. The eight — Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman — had already postponed, by two months to December, their plan to start returning supply. But they have now "agreed to extend the November 2023 voluntary production adjustments of 2.2mn b/d for one month until the end of December 2024", the Opec secretariat said on 3 November. The decision was made to avoid potential oversupply given a well-supplied market after heavy refinery maintenance, one Opec+ delegate said. Expectations of slower demand also led Saudi Aramco to cuts its December official formula prices this week for customers in Asia-Pacific. End-of-year volatility and uncertainty about Chinese oil demand also played their part in the decision, giving the group more time to see whether China's economy responds positively to Beijing's stimulus measures and to assess market trends for the first quarter, the delegate added. But at least one Opec source was unhappy with the postponement and concerned that Opec+ has missed its chance to increase supply. "When do we bring back our barrels?" the source said. "No-one knows." Rising non-Opec+ production from the US, Guyana, Brazil and elsewhere is already expected to meet slowing growth in demand next year. And concerns about the outlook for global oil demand are intensifying in light of slower-than-expected growth in China. The IEA expects oversupply of 1mn b/d next year even without the additional Opec+ oil returning to the market. The re-election of Donald Trump as US president could further alter the supply-demand balance in a way that does not favour the return of Opec+ crude. Trump's threat of tariffs and trade wars once in office may heighten concerns over slowing economic growth in China and other key markets. And his Iran policy could further destabilise a region on the brink of a sustained wider conflict. Still, Opec delegates see Trump's promises of cutting energy prices for US consumers as electioneering staples that he will be unable to deliver in practical terms. US shale producers are already producing at record levels and are likely to keep production growth restrained as they prioritise shareholder returns. Conformity focus But market dynamics are not the only drivers of Opec+ decision-making. Many in the group face internal political and financial pressure to increase production and oil revenue. Given this background, the decision to delay the production increase keeps the focus on those in the group that have been overshooting their output targets — namely Iraq, Russia and Kazakhstan. The secretariat made a point of underlining the wider group's "collective commitment to achieve full conformity" on 3 November, with a focus on those three countries. While Iraq, Kazakhstan and Russia have made some progress in reducing output in recent months, all three remained above their effective targets in October under their latest publicly available compensation plans. Kazakhstan fell around 60,000 b/d short of its promise to deliver extra production cuts, according to Ar gus ' latest estimates, having reduced output by around 200,000 b/d to 1.26mn b/d. Iraq was still above its Opec+ target of 4mn b/d and 130,000 b/d above its effective target under its compensation plan. Russia's production was bang on its formal Opec+ target, but 10,000 b/d above its effective target under its compensation plan, which stipulated a first cut of 10,000 b/d in October. Opec+ crude production mn b/d Oct Sep* Target† ± target Opec 9 21.23 21.18 21.23 +0.00 Non-Opec 9 12.12 12.30 12.62 -0.51 Total 33.35 33.48 33.85 -0.50 *revised †includes additional cuts where applicable Opec wellhead production mn b/d Oct Sep Target† ± target Saudi Arabia 8.95 8.92 8.98 -0.03 Iraq 4.03 4.07 4.00 +0.03 Kuwait 2.43 2.46 2.41 +0.02 UAE 2.93 2.95 2.91 +0.02 Algeria 0.91 0.91 0.91 0.00 Nigeria 1.42 1.36 1.50 -0.08 Congo (Brazzaville) 0.27 0.24 0.28 -0.01 Gabon 0.23 0.21 0.17 +0.06 Equatorial Guinea 0.06 0.06 0.07 -0.01 Opec 9 21.23 21.18 21.23 +0.00 Iran 3.30 3.37 na na Libya 1.08 0.55 na na Venezuela 0.90 0.90 na na Total Opec 12^ 26.51 26.00 na na †includes additional cuts where applicable ^Iran, Libya and Venezuela are exempt from production targets Non-Opec crude production mn b/d Oct Sep* Target† ± target Russia 8.97 8.97 8.98 -0.00 Oman 0.76 0.76 0.76 +0.00 Azerbaijan 0.48 0.48 0.55 -0.07 Kazakhstan 1.26 1.46 1.47 -0.20 Malaysia 0.32 0.32 0.40 -0.08 Bahrain 0.16 0.16 0.20 -0.04 Brunei 0.09 0.09 0.08 0.01 Sudan 0.01 0.01 0.06 -0.05 South Sudan 0.06 0.06 0.12 -0.07 Total non-Opec 12.12 12.30 12.62 -0.51 *revised †includes additional cuts where applicable Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump to zero in on Iran’s oil exports - will it work ?


08/11/24
08/11/24

Trump to zero in on Iran’s oil exports - will it work ?

London, 8 November (Argus) — Donald Trump's return to the White House poses questions for the oil market, not least what it might mean for Iran's rising crude exports. Early signs suggest Trump intends to dial up the pressure on Tehran and its oil sales, but repeating the playbook from his first presidency is unlikely to deliver the same result today. Iran's oil exports have been on the rise since Joe Biden's election win against Trump four years ago. Before he took office, Biden's talk on the campaign trail about wanting to revive the 2015 nuclear deal — which Trump reneged on in 2018 before reimposing sanctions on Iran — created space for a relative easing of tensions. That, in turn, paved the way for a recovery in Iranian oil sales. Iran's crude and condensate exports were averaging below 500,000 b/d throughout the second half of 2019 and 2020 as Trump-era sanctions took effect, but they began to tick up in 2021 and have carried on rising ever since. Exports averaged around 1.6mn b/d in January-October this year, according to data from analytics firms Kpler and Vortexa, just 500,000-600,000 b/d short of what Iran was selling in the two years before the sanctions were reimposed. Biden's detractors, many from across the aisle, pointed to the recovery in Iran's exports as proof that his administration was not properly enforcing the sanctions imposed under Trump, and that it was intentionally looking the other way. Biden's team regularly dismissed those claims, insisting enforcement was ongoing. The truth is that there is a cat and mouse game between sanctions enforcers and countries under sanctions. It took Iran 18 months to rebuild networks bypassing the sanctions regime. Russia, subject to a less onerous G7 price cap, similarly figured out ways to break through the sanctions noose. A batch of Iranian tanker-focused sanctions imposed under Biden since late last year appears to have had an effect on delivered prices to China, and yet Iran's exports have continued to climb. Those were the days A second Trump presidency will bring an opportunity for change. Given his first administration's hawkish stance towards Iran, there is an overwhelming expectation that he and his new team will set out to tighten the economic grip on Iran in an effort to limit Tehran's ability to financially support its proxies in the region. The stated goal of Trump's maximum pressure campaign in 2018 was to drive Iran's oil exports to zero, from above 2mn b/d. And although it ultimately failed to deliver that, reducing exports to less than a quarter of pre-sanctions levels still constituted success. However, repeating that success in 2025 and beyond will be a tall order. Analysts canvassed by Argus argue that pressing ahead with sanctions, even with stricter enforcement, would at best deliver a limited reduction, largely because Iranian oil trade today is not what it was in 2018. "Today, everyone who had been wary of the implications of being involved has already left the game. And those who do remain are those who do not necessarily fear sanctions," said Iman Nasseri, managing director for the Middle East at consultancy FGE. In 2018, around-three quarters of Iran's 2mn b/d or so of exports went to buyers in Europe, Asia-Pacific, Turkey and the UAE. The rest was going to China, to a mix of state-owned and private-sector companies. The threat of sanctions subsequently deterred almost everyone from taking Iranian crude except for Chinese independent refiners, pushing Tehran's exports below 500,000 b/d. Chinese independents have since gradually increased their intake of discounted Iranian crude to the point that they have been collectively taking around 1.5mn b/d in recent months. The remaining 100,000-200,000 b/d has been going to Iran's allies Syria and Venezuela. "With the majority of exports going to independent and private players in China who are not really worried about sanctions, or exposed to the US financial market, we should not expect a change in their behaviour," Nasseri says. "At best, we could be looking at a fall of 200,000-500,000 b/d" owing to increased enforcement. Homayoun Falakshahi, senior oil analyst at Kpler, also expects limited results should Trump choose to again focus his efforts on sanctions and enforcement, unless he is prepared to work with Beijing to put pressure on those independent refiners that are single-handedly keeping Iran's oil lifeline open. "Trump could try to trade off the Iranian issue with something of more significance to China," Falakshahi said, although he admits it will be "very difficult" to convince Beijing. "There would be significant pushback from Chinese officials, especially now, when refining margins are weak," he said. "You would be taking out one of the cheapest feedstocks going to Chinese refiners." Falakshahi sees no real impact in the short term, given the vast and intricate network of middlemen and entities that Iran has built to facilitate its oil trade in recent years. But the market "could see a decrease of 500,000-600,000 b/d in Iranian exports" by the summer of 2025, he said. A different approach Another challenge for the new Trump administration is the speed at which Iran has been expanding its tanker fleet in recent years. Biden's administration has responded with a record number of vessel-specific sanctions this year. "And that could go further after Trump takes office," said Armen Azizian, senior oil risk analyst at Vortexa. Some of the tankers that have been sanctioned by the US are "having difficulties on the water", he added. "We've seen cargoes on the water for longer, and some other tankers have been restricted to domestic trade. If they were to sanction more VLCCs, you would see an impact." Even so, Tehran still has plenty of opportunity to carry on expanding its fleet. "Iran has been growing its dark fleet for two years now," Azizian said. "The average age of the VLCCs joining the dark fleet has been 18 years, and there are many candidates that could join over the next year. So, while Trump could change how things are done, so long as Iran continues to expand its fleet, it shouldn't have a problem continuing its trade." By Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Canada climate plans not equally at risk post-Trudeau


08/11/24
08/11/24

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.

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