UK refiners seek unused CO2 allowances after closures

: Emissions, Oil products
25/12/23

UK downstream association Fuels Industry UK has urged the government to reallocate unused free CO2 allowances from two recently closed refineries to help remaining plants cope with rising emissions compliance costs.

The group wants allowances granted under the UK Emissions Trading Scheme (ETS) for the 150,000 b/d Grangemouth and 105,700 b/d Lindsey refineries to be redistributed. Each allowance permits the holder to emit one tonne of CO2 equivalent.

Grangemouth and Lindsey were allocated 441,925 and 541,475 allowances for 2025, respectively. It is unclear how many remain after their closures in April and August.

The association warned the sector "may not survive that long" without temporary support, citing carbon costs that exceed those faced by overseas competitors until the UK's carbon border adjustment mechanism (CBAM) takes effect.

ExxonMobil's 270,000 b/d Fawley refinery — the UK's largest — will spend $70mn-80mn on carbon costs this year, rising to $150mn within five years, the company's UK chair Paul Greenwood told MPs during an Energy Security and Net Zero Committee hearing in October. Fuels Industry UK chief executive Elizabeth de Jong also addressed the committee, highlighting broader cost pressures.

It remains unclear whether refined fuels will be covered by the UK CBAM, which starts in January 2027. Fuels Industry UK is seeking confirmation that they be included from January 2028, and it wants additional free UK ETS allowances distributed to sectors not covered by CBAM during a "volatile" period linked to expected UK-EU carbon market linkage. Such linkage would exempt UK and EU from each other's CBAMs, but talks have yet to start.

UK refiners have also missed out on government energy price support schemes during the gas price surge triggered by Russia's invasion of Ukraine, de Jong told MPs. Refiners paid market rates to power operations at their UK sites, missing out on discounts afforded to UK companies under the Energy Bill Relief Scheme, which ran between October 2022-March 2023, and then under the Energy Bills Discount Scheme between April 2023-March 2024.

By contrast, US refiners access natural gas at roughly one-third of UK prices, Greenwood said.

By George Maher-Bonnett

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25/12/23

TKW-Frachtkosten steigen 2026

Hamburg, 23 December (Argus) — Die Kosten für den Transport von Heizöl, Diesel und Benzin per Tankkraftwagen steigen im kommenden Jahr vielerorts an. Dies ist primär auf höhere Dieselkosten infolge der steigenden CO2-Bepreisung und THG-Erfüllungskosten zurückzuführen. Auch ein stetiger Anstieg der Lohnkosten sowie Investitionen in die Flottendekarbonisierung treiben die Kosten weiter. Anbieter handeln Diesel für Januar bundesweit derzeit mit einem Aufschlag in Höhe von etwa 10 €/100l bis 13 €/100l gegenüber Dezemberware. Der Grund hierfür ist der Anstieg der CO2- und THG-Kosten im neuen Jahr. Viele Transportverträge enthalten sogenannte Floater-Klauseln, die Preisänderungen beim Kraftstoff automatisch auf die vereinbarten Frachtkosten übertragen. Somit geben Spediteure Mehrkosten durch steigende Kraftstoffpreise in der Regel an ihre Kunden weiter. Um welchen Betrag die Frachtkosten tatsächlich ansteigen werden ist aber noch unklar, denn neben dem höheren Dieselpreis belasten unter anderem auch steigende Personalkosten die Branche. Der Fahrermangel setzt sich fort und wird aktuell durch Krankheitsausfälle sowie die laufende Urlaubszeit zusätzlich verstärkt. Spediteure berichten zudem, dass die Nachwuchssuche zunehmend schwierig wird. Viele Beschäftigte werden in den kommenden Jahren in den Ruhestand gehen. Um dem entgegenzuwirken, erhöhen Speditionsunternehmen Löhne oder werben verstärkt Personal im Ausland an — Maßnahmen, die ebenfalls kostentreibend wirken. Auch Investitionen in die Dekarbonisierung der Flotten wirken sich auf die Kostenstrukturen aus. Die Anschaffung emissionsärmerer Fahrzeuge sowie zusätzliche technische Anforderungen und Dokumentationspflichten führen zu höheren Grundkosten, die in den Frachtraten berücksichtigt werden müssen. Einige Händler berichten jedoch, dass ein Anstieg ihrer Frachtkosten im kommenden Jahr bislang noch ausbleibt. Dies führen sie auf bestehende Vertragsstrukturen zurück. So verfügen manche Spediteure über längerfristige Vereinbarungen, teilweise mit Laufzeiten von mehreren Jahren, wodurch kurzfristige Kostensteigerungen zunächst abgefedert werden. Von Marcel Pott Senden Sie Kommentare und fordern Sie weitere Informationen an feedback@argusmedia.com Copyright © 2025. Argus Media group . Alle Rechte vorbehalten.

Policy is key for Cop 30 sustainable fuels pledge

25/12/23

Policy is key for Cop 30 sustainable fuels pledge

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Under the IEA scenario, liquid and gaseous biofuels would meet around two-thirds of sustainable fuel demand in 2030, while hydrogen and hydrogen-derived fuels would "expand rapidly" after 2030. Cop 30 host Brazil proposed the pledge in September , based on the IEA's preliminary findings, and the commitment was launched with India, Italy and Japan at the pre-Cop event in Brasilia, Brazil in October. The pledge now has 27 signatories from Latin and North America, Asia, Africa and Europe, encompassing sustainable fuels producers and consumers. Canada, Indonesia, Mexico and the Netherlands are among the signatories. The pledge "sends an important political signal: scaling up sustainable fuels is not only necessary for climate goals, but feasible", the European Waste-based and Advanced Biofuels Association (Ewaba) told Argus . "Europe's biodiesel sector shows how sustainable biofuels can strengthen energy security, reduce import dependence and deliver immediate climate benefits using existing vehicles and fuel infrastructure," Ewaba added. Rising demand Sustainable fuels are typically used in transport sectors, which are among the highest-emitting, particularly in advanced economies. Although transport electrification is expanding, it is typically not moving fast enough to hit climate targets in line with the Paris Agreement, while shipping and aviation will require multiple decarbonisation solutions. Hydrogen and related fuels are also likely to see uptake from industry and power generation. Global demand for sustainable fuels doubled over 2010-24, and is already expected to grow this decade, boosted by policies designed to drive emissions reductions and support energy security. Conversely, the removal of tax credits for electric vehicles in the US, and recent weakening of the EU target for zero-emission cars are also likely to support increased biofuels consumption. The full implementation of existing and announced policies and targets, "plus the removal of market barriers, could lead to a near-doubling of sustainable fuel use in just six years", the IEA said. This could attract investment for new production capacity, it added. It also recommended prioritising infrastructure and supply chain development, as well as innovation funds for new technologies. The IEA found that sustainable fuels could cover 10pc of road transport demand, 15pc of aviation demand and 35pc of shipping fuel demand by 2035 — although it would "vary widely" by region. In an accelerated case, the IEA found that liquid biofuels could provide 8.07EJ in energy in 2030, up by 62pc from 2024 levels. The picture shifts by 2035 in the scenario, with biogas supply more than doubling and low-emissions hydrogen more than quadrupling, both from 2030. Land-use concerns But a near-term focus on increased biofuels production sparked concerns from several organisations about feedstock availability and the land conversion implications. "Such a massive uptake in biofuels could have calamitous consequences for the environment and climate, depending on how this pledge is interpreted," European non-governmental organisation (NGO) Transport & Environment (T&E) said. It flagged land cleared for crops such as palm oil, soy, sugarcane and corn. T&E projections show that "under current growth trends and policies, 90pc of biofuels will still be reliant on food and feed crops by 2030." The IEA noted "limited" expansion opportunities for biofuels from waste oils and fats, while it recommended improving crop yields for other feedstocks. But climate change is likely to hamper crop output. The UN Environment Programme warned recently that under a ‘business as usual' pathway, land degradation "is expected to continue at current rates, with the world losing fertile and productive land the size of Ethiopia or Colombia annually". Cop pledges often aim to drive an existing trend faster, and this is typically evident in the signatories — a coalition of the willing. Brazil has vast ethanol production capacity and strong domestic consumption mandates, like India, while another signatory, Chile, is forging ahead with renewable hydrogen production. The pledges, like all climate action, rely on strong policy, but commitment from key countries is more likely to achieve results. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: WCI changes still in the works

25/12/23

Viewpoint: WCI changes still in the works

Houston, 23 December (Argus) — The Western Climate Initiative (WCI) — the joint California-Quebec carbon market — has spent over two years waiting for clarity on potential program changes with growing concerns that it may not appear until 2026. Bullish sentiment initially pervaded the WCI market in December as California Air Resources Board (CARB) originally planned on publishing its long-awaited draft of cap-and-invest amendments by the end of the year. But this sentiment has been tempered by the possibility that CARB may instead release guidance on its plans because of the limited time left in the year, with a draft published in early 2026, sources said. The WCI partners are considering more-stringent program rules for 2027 and beyond, including increased incentives for participants to reduce greenhouse gas (GHG) emissions. But market participants may feel like they are experiencing deja vu — at this same time last year, they were expecting to see draft plans for updates to each program. CARB delayed publishing a draft of these program amendments multiple times over the last two years, which in turn has resulted in Quebec delaying the release of its own proposed changes. The agency earlier this year deferred to state legislators and their work to extend the state's 'cap-and-invest' program to 2045 from its previous 2030 sunset date. Lawmakers passed this program extension package, AB 1207 and SB 840, in September , putting the ball back in CARB's court. Staff at an October workshop said CARB planned to publish its amendment proposal, which includes changes required by the legislation, by the end of this year and bring it before its board for review by April. At the meeting, staff floated the idea of removing at least 118mn metric tonnes (t) from the 2027-2030 program allowance budgets to keep the program on target for a 40pc reduction in GHG emissions, compared with 1990 levels, by 2030. The agency previously considered setting a stricter 48pc or 55pc by 2030 target, which would have required the removal of a larger number of allowances through 2030. The change in the program's ambition was a central point of the agency's rulemaking discussions since they started in 2023 . The 40pc target is a more "viable" option at this time, but this decision is not final, CARB staff said in October. The change in the US economy and federal policy away from Inflation Reduction Act incentives and greenhouse gas regulation this year may have contributed to CARB's 2030 target shift, said Nick Roy, a national and state energy policy research associate with environmental policy think tank Resources for the Future. "It is probably true that there is not the governor's office pushing for the same level of ambition that they were originally because of federal policy changes," Roy said. WCI partner Quebec is considering removing 17.5mn allowances, equal to historical carbon offset use in the program, and limiting future offset use for compliance, the province's environment ministry said in an October 2024 market notice. The province has also weighed transitioning to a government purchase and retirement system to replace carbon offsets as part of these changes, but it has not provided further details. The province plans to publish its draft regulations in winter 2026, with adoption in spring-summer 2026. A formal proposal would shed light on CARB's plans going forward as well as how the agency plans to implement program changes required by AB 1207 and SB 840. CARB has one year to adopt the new regulations after it publishes the draft. Legal scrutiny Whether the administration of President Donald Trump plans to act on its threat of legal action against California's "cap-and-invest" program is still unclear. An 8 April executive order directed US attorney general Pam Bondi to evaluate legal action against state and local laws hindering the development or use of domestic energy resources. The order specifically cited California's carbon market. California Carbon Allowances for December delivery fell by more than $2.50/t to $26.74/t the day after the order, but have since climbed above $30/t. Market participants believe the Trump administration could target a proposed link between the WCI and the Washington state carbon markets. Such a link could happen in mid- to late-2027, according to California and Washington regulators. This could create a narrow window for any federal action before Trump leaves office in January 2029. The threat of federal legal action still pervades the market, but participants expect that a lawsuit becomes increasingly unlikely as time passes. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: Rising premium base oil supply to target EU

25/12/23

Viewpoint: Rising premium base oil supply to target EU

London, 23 December (Argus) — European premium base oil spot prices could face downwards pressure in 2026 from increased competition as global supply rises and import duties are removed. Average Group II European spot prices have fallen steadily since the end of April, by 14pc to €932.50/t assessed on 12 December. This is mostly owing to muted demand but exacerbated by a weakening US dollar against the euro as volumes are bought on a dollar basis and sold in euros in Europe. A persistent supply overhang from the US saw exporters increasingly target European buyers. This trend looks to continue into 2026 as the EU looks to remove a 3.7pc import duty on US Group II shipments. This is part of EU-US tariff negotiations, with EU states showing broad support for the duty removal of a large package of US goods, including base oils. A European parliament vote on this is slated to take place, probably in late January. Europe is a net importer of Group II base oils, with ExxonMobil's 1mn t/yr refinery in Rotterdam the only northwest European production site. Base oil and finished lubricants exports to the EU and UK made up on average 14pc of US total exports since 2020, EIA data show. Freight rates will again play a part in deciding how much product arrives in Europe in 2026. Rates from the US to Europe have been falling since the summer. Argus assessed 40,000t specialised chemical tankers on the route at an average $38.08/t in October, down by 15pc from August, and 5,000t part-cargo assessed rates fell by 10pc in the same time to average $69.50/t. Should rates continue to fall and the EU remove duties, US shipments to Europe are likely to increase. European prices are the highest globally. Supplies of N600 are at a $463.50/t premium to US equivalents and at a $404.50/t premium to Asia bulk, as assessed on 12 December. Global Group II production is likely to rise in 2026. Polish refiner Orlen will expand its Gdansk facility with an additional 450,000 t/yr, Saudi Arabia's Luberef will expand its Yanbu refinery by 100,000 t/yr, and ExxonMobil's Jurong, Singapore, plant expansion is slated to come online fully by year-end 2025. All these will probably target the highest price region, Europe, for their additional capacity. Spot prices for Group I are also ending 2025 on a downwards trend, as weak demand offsets structurally tighter supply. But this could reverse in early 2026. Orlen will undergo a refinery-wide maintenance for 60 days in the first quarter, affecting output at its 250,000 t/yr Group I unit at Gdansk. EU sanctions on refined products using Russian crude has seen diesel prices rise. The price spread of the premiums Group I SN 150 and diesel carry over the feedstock vacuum gasoil (VGO) narrowed to average $95/t in November, from $233/t in August. Should this continue refiners are likely to prioritise diesel output over base oils. Several European refiners are already pivoting away from base oil production, curbing supply availability and adding upward price pressure. But minimal scheduled maintenances in 2026 is likely to enable supply to recover, and a weak economic outlook should see demand remaining steady. By Gabriella Twining Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: CSAPR sentiment bearish despite coal use

25/12/22

Viewpoint: CSAPR sentiment bearish despite coal use

Houston, 22 December (Argus) — Expectations for lower prices is likely to persist in the federal Cross-State Air Pollution Rule (CSAPR) allowance markets next year as they remain oversupplied, even with higher levels of coal-fired generation. The seasonal NOx markets have been more active this year compared to 2024, when prices essentially flatlined due to regulatory and legal uncertainty brought about by a barrage of lawsuits filed against the US Environmental Protection Agency (EPA) for its "good neighbor" plan. That plan, which the agency finalized in 2023 under former president Joe Biden, sought to help downwind states meet the 2015 national air quality standards for ozone. The plan imposes more stringent ozone season NOx caps for power plants in more than 20 upwind states, as well as setting new limits on some industrial facilities. But the plan is now essentially defunct after the US Supreme Court halted its implementation in June 2024. This led the EPA to return to less-rigorous NOx emissions limits tied to older ozone standards and reshuffle the participating states into the Group 2 and "expanded" Group 2 markets. Argus launched its assessment of the latter in February 2025. EPA said in March it intends to reconsider the good neighbor plan in order to give states more freedom in developing their own ozone reduction plans. The announcement led to the US District of Columbia Circuit Court of Appeals pausing a lawsuit challenging the legality of the good neighbor plan until the agency completes its reconsideration, and which could culminate in new regulations by fall 2026. But those developments did little to move the seasonal NOx markets, which have already been sluggish due to oversupply and weak compliance demand, leading to more dramatic price fluctuations when trades do occur. Argus has assessed Group 2 allowances at $875/short ton (st) since 1 December and expanded Group 2 allowances at $850/st since 24 October. It is unclear how US president Donald Trump's current hostility towards environmental regulations will affect the administration's attitude towards the existing CSAPR allowance trading markets, but it seems likely that they are here to stay. The EPA likely is "digging into the air transport modeling that they have to understand what their options are," and which could potentially echo its determination during Trump's first term that states had adequately addressed downwind pollution, said Carrie Jenks, executive director of Harvard Law School's Environmental and Energy Law Program. "The EPA is committed to advancing cooperative federalism and working with states on state implementation plans (SIPs) to provide clean air for all Americans," the agency said in December. But extensive case law suggests that the EPA has little room to give states more power to manage emissions as they see fit. Both the DC Circuit Court and the US Supreme Court have made it clear that the EPA must intervene if a state does not sufficiently lower its emissions, Jenks said. "So the EPA's hands, regardless of who's in the White House, are really tied," she said. As a result, the EPA will likely try to prolong the issue by giving states more time to draw up their own ozone-reduction plans. The debates over those plans could revolve around how the modeling of emissions is conducted and interpreted. Even if that modeling is challenged in the courts, it can take years for litigation to get resolved. More coal, more emissions Despite the continued dearth of activity in the seasonal NOx markets, increases in coal-fired generation, a significant source of NOx and SO2 emissions, have buoyed the outlook in those markets, heightening expectations for higher emissions. During the past year, stronger power demand and higher natural gas prices have allowed coal to take a larger market share, which has resulted in increased coal-fired power in grids that serve states covered by CSAPR. But NOx emissions during this year's ozone season, which ran from May through September, were lower than expected, according to market participants. Cumulative emissions in the Group 2 and expanded Group 2 markets rose by just 1pc and 4.2pc, respectively, and remained well below their overall limits. It was likely more cost-effective for power plants to run their NOx controls than to purchase or surrender additional allowances for compliance. Still, given the Trump administration's pro-coal agenda, it remains to be seen for how long increases in coal generation will continue and to what extent that will affect the CSAPR markets. Conversations over ballooning data center demand have also bled into the seasonal NOx markets as the Trump administration seeks to leverage coal to power that boom. There are currently a lot of moving parts that make it difficult to make predictions, including how competitive coal is compared to other energy sources such as renewables, where data centers get built, their demand flexibility, and the federal and state regulatory landscapes in the coming years, Jenks said. By Ida Balakrishna Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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