Biden win could boost carbon, REC markets

Market: Emissions
03/11/20

The use of environmental markets in the US could get a boost if former vice president Joe Biden prevails in today's presidential election.

The Democratic presidential nominee has called for the US to achieve net-zero greenhouse gas (GHG) emission by the middle of the century, with a focus on the electric and transportation sectors. Markets for GHG allowances, renewable energy certificates (RECs), and potentially even low-carbon fuel standard (LCFS) credits, could all contribute to federal policy goals.

Biden has not explicitly called for a national carbon price, but he has left the door open to the use of a policy like cap-and-trade, saying he wants Congress to enact an "enforcement mechanism" to achieve net-zero GHGs that would make polluters "bear the full cost" of their emissions. It would also include "clear, legally binding emissions reductions" and cover the entire US economy.

To meet his goal of a zero-emissions electric grid by 2035, Biden has proposed something akin to a national REC market in calling for setting a technology-neutral "energy efficiency and clean electricity standard" for utilities and grid operators. It would "scale up best practice" from state-level clean energy programs that use RECs or similar credits for compliance.

Biden has said his approach would include a role for zero-emissions power provided by existing nuclear and hydropower generators. Many of the current state renewable energy mandates do not grant RECs for compliance to either resource.

When it comes to fuels, Biden has not said much about what he plans to do with the federal Renewable Fuel Standard (RFS), but he has criticized President Donald Trump's administration's handling of the program and has called for a "doubling down" on ethanol and advanced biofuels in US policy.

At the same time, Biden has said the US needs to do more to promote low-carbon fuels in aviation and other sectors, and he has called for setting aggressive motor vehicle standards that would eventually require the sale of only zero-emission models.

A national LCFS credit trading program could help achieve all of those policy goals.

The RFS as written runs through 2022, after which the US Environmental Protection Agency (EPA) will take more authority over setting the program's biofuel blending mandates.

Biofuel industry supporters in Congress have signaled a desire to update the program before then, while Democrats in Capitol Hill have, to varying degrees, embraced the idea of an LCFS. Senate Democrats say a LCFS should be on the table, while their colleagues in the House of Representatives have more specifically called for transitioning the RFS into a national LCFS along the lines of California's program, which requires a 20pc reduction in the carbon intensity of transportation fuels by 2030.

While the focus in California is on on-road fuels like gasoline and diesel, and alternatives like biofuels and electricity, it also allows sustainable aviation fuel to generate compliance credits that can be sold to regulated fuel suppliers.

A Biden victory would lead to a complete reversal of US climate policy, four years after president Donald Trump's election did the same, especially if Democrats win control of the Senate today.

Senate Democratic leader Chuck Schumer (New York) has promised to make climate legislation a priority next year if his party prevails.

"If Democrats take back the Senate, I promise we will vote on bold legislation," he told the Renewable Energy Finance Forum-Wall Street conference in September.

But of the potential environmental markets that could arise in a Biden administration, carbon pricing may prove to be the most difficult lift. Democrats may come out of the elections with control of both chambers of Congress but likely well short of the 60 votes needed in the Senate to overcome any potential Republican filibusters.

But some supporters remain optimistic that it can be done, as demand for action is growing among voters and the private sector, which could lead to more Republican support.

"I have been surprised by how interested industry is in having something like pricing carbon," US senator Mike Braun (R-Indiana) said in September during the National Clean Energy Week conference.

But he also conceded that is a policy that "politically would be something that would take some time for my side to digest.

Braun suggested his proposal to encourage US farmers to enter the carbon offset market could be the "perfect bill" for bipartisan action by Congress next year.

Even if carbon pricing stalls at the federal level, a Biden administration is likely to allow states to expand the use of markets themselves by eliminating a number of roadblocks Trump's administration has attempted to place in the way of emissions trading.

Trump's administration repealed the Clean Power Plan promulgated under former president Barack Obama's administration, replacing it with the far-less ambitious Affordable Clean Energy rule. That measure

prohibits the use of emissions trading as a compliance mechanism.

The Justice Department under Trump has sought — so far unsuccessfully — to scuttle California's carbon market link with the Canadian province of Quebec.

A course reversal on those fronts would at least give market supporters some confidence that they can play a role in achieving the goals of US and state climate policy.

By Michael Ball

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Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Singapore, 24 December (Argus) — South Korea plans to invest 450 trillion won ($309bn) in green finance by 2030, acting president and prime minister Han Duck-soo said on 23 December. The country is also "actively encouraging private investment by upgrading the Korean Green Taxonomy system", Han added. The taxonomy is technical legislation that classifies the industrial carbon and environmental footprint for investors. It aims to promote green finance and prevent ‘greenwashing', with the aim of achieving a sustainable circular economy. The most important issue for the industrial sector, which accounts for about 36pc of domestic emissions, is to transition to carbon neutrality, Han said. South Korea has an "export-driven economic structure with high external dependence", he said, which means international carbon barriers will significantly affect South Korea. This makes decarbonisation key to maintaining competitiveness, he added. South Korea is also responding to the climate crisis through technological innovation. The country's science ministry last week unveiled plans to invest almost W2.75 trillion to develop technology to respond to climate change in 2025. By Tng Yong Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: US tax fight next year crucial for 45Z

23/12/24

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Viewpoint: US tax fight next year crucial for 45Z

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By Cole Martin Tax credit changes 40A Blenders Tax Credit 45Z Producers Tax Credit $1/USG Up to $1/USG for road fuels and up to $1.75/USG for aviation fuels depending on carbon intensity For domestic fuel blenders For domestic fuel producers Imported fuel eligible Imported fuel not eligible Exclusively for biomass-based diesel Fuels that produce no more than 50kg CO2e/mmBTU are eligible Feedstock-agnostic Carbon intensity scoring incentivizes waste over crop feedstocks Co-processed fuels ineligible Co-processed fuels ineligible Administratively simple Requires federal guidance on how to calculate carbon intensities for different feedstocks and fuel pathways Expiring after 2024 Lasts from 2025 through 2027 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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