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China emissions prices surge as ETS starts operations

  • Spanish Market: Coal, Crude oil, Emissions, Metals, Natural gas, Petrochemicals
  • 16/07/21

Prices of China emission allowances (CEAs) have risen sharply on the first day of trading in the country's national emissions market.

China's emissions trading scheme (ETS) started operations at 9.30am local time in Shanghai today, coming on line following years of preparations and several weeks later than planned. The market opened at 48 yuan/t (€6.30/t or $7.40/t) of CO2 equivalent (CO2e) and rose as high as Yn52.8/t, the maximum 10pc increase allowed under market rules.

Prices closed up by 6.7pc at Yn51.23/t. Total trading volumes were 4.1mn t for a value of Yn210mn.

The prices are well below those in the EU ETS, where December 2021 allowances traded last week at €54.25/t CO2e, around eight times higher than today China's ETS closing price at the equivalent of €6.70/t.

About 4.5bn t/yr of CO2 emissions are covered in the initial stage of the ETS, making it the world's largest such trading scheme, Huang Runqiu, China's environment and ecology minister, said at today's opening ceremony.

The ETS will initially cover only the thermal power sector, with around 2,200 coal- and gas-fired power generation plants included in the scheme. The first compliance cycle ends on 31 December this year covering emissions allowances for 2019-20.

Ten state-owned companies, accounting for a large proportion of the emissions covered, participated in today's trading. These comprised power utilities Huadian, Huaneng, Datang, China Energy Investment, SPIC and CR Power; provincial energy firms Shenergy and Zhejiang Energy; and state-controlled oil and gas giants Sinopec and PetroChina, which have captive power plants.

Some state-owned power firms have set up carbon asset management teams to represent their multiple power generation plants across the country, and to trade allowances in the ETS on their behalf.

Sinopec trading arm Unipec and PetroChina International are representing the captive power plants at the two companies' refineries and oil fields. The two firms have a total of 31 power subsidiaries covered by the ETS entities.

Market participants are not expecting much liquidity in the ETS any time soon, as only the 2,200 entities with physical power plants are allowed to participate. There is not yet any clear timeline for third-party traders, such as financial firms and independent carbon asset management companies, to enter the market.

China has been operating pilot emissions trading schemes since 2013 in provinces and cities including Beijing, Tianjin, Shanghai, Chongqing, Guangdong, Hubei and Shenzhen.

Total traded volumes in these pilot projects were 480mn t as of June, valued at Yn11.4bn ($1.76bn), while the weighted average carbon price in the past two years was around Yn40/t of CO2e, according to environment and ecology ministry (MEE) figures.

The MEE plans to expand the ETS to include other emissions-intensive sectors including steel, nonferrous metals, cement, petrochemicals, chemicals, paper and aviation in the longer term.


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20/12/24

Viewpoint: PGM demand from hydrogen sector to rise

Viewpoint: PGM demand from hydrogen sector to rise

London, 20 December (Argus) — Demand for platinum and iridium from the hydrogen industry will rise in 2025, albeit at a slower pace than anticipated because of delays to hydrogen project development. Demand from the hydrogen industry for platinum group metals (PGM) has increased significantly in recent years. The World Platinum Investment Council (WPIC) reported a 123pc increase in demand for platinum from hydrogen applications year on year on 26 November, from a small base. The WPIC anticipates a further 32pc growth in 2025. PEM electrolysers and hydrogen fuel cells both utilise platinum and iridium, opening up a new end-market for some PGMs. Demand from hydrogen applications may offset falling autocatalyst demand from the automotive industry in the long term. Hydrogen industry demand for platinum, iridium and ruthenium will also support demand for palladium, even though palladium is not utilised in hydrogen applications. As demand for platinum from the hydrogen industry increases, palladium will increasingly be substituted for platinum in internal combustion engine (ICE) vehicles, increasing automotive palladium demand and lifting PGM prices overall. More than $300bn in global hydrogen investments are earmarked through to 2030. Many governments seeking to reach their ambitious climate goals are investing in hydrogen, with 61 governments adopting hydrogen strategies as of 2024. "We know that all areas of the world will not shift to hydrogen in the same way as Europe, but we see technology advancing and costs falling, which gives us confidence that the hydrogen economy will be a big driver for platinum and iridium demand in the future," Heraeus Precious Metals Germany head of trading Dominik Sperzel told Argus . According to the WPIC, 11pc of global platinum demand will come from hydrogen application in 2030, totalling 900,000oz. By the late 2030s hydrogen energy production is expected to be the largest end-market for platinum, with 3.5mn oz of demand expected by 2040. "We have seen the hype over the past four to five years. Iridium prices started to increase in 2020 because of supply disruptions and on the demand side, people were excited about new technology announcements and projects entering the pipeline," Sperzel said. Johnson Matthey iridium prices increased by 285pc from the start of 1 June 2020 to 1 June 2021, reaching a peak of $6,300/troy ounce (toz). But they have since fallen by 29pc to $4,450/toz on 12 December as hydrogen demand failed to meet expectations. The development of the hydrogen economy has underperformed in recent years relative to expectations, and expected demand for PGMs has not yet materialised, according to PGM market participants. Many hydrogen projects remain unfinanced, and much of the hype has since abated. There are several challenges inhibiting the development of a widespread hydrogen economy, including the lack of existing infrastructure for hydrogen delivery. Another has been the availability of government subsidies, as significant funds have been earmarked for hydrogen investment but not yet disbursed. "Since 2022 to this year, subsidies available for green hydrogen projects have gone from $50bn to $300bn, but the funds haven't been flowing until early this year. It was only in June that the first of the European subsidies really began to be distributed to support the construction of these facilities. Now that subsidies are beginning to flow, development will accelerate quickly, driving consumer demand for fuel cell electric vehicles," World Platinum Investment Council research director Edward Sterck told Argus . The outlook for hydrogen as an energy source is improving, particularly in Europe and China, as a result of public sector investment and policy focus. The EU in April included over €100mn in grant funding for the construction of hydrogen refuelling stations across seven EU countries, including Poland, in a larger package of €424mn for zero-emission mobility. The EU in May 2024 adopted its hydrogen and gas decarbonisation package, which introduced a regulatory framework for dedicated hydrogen infrastructure. According to the Hydrogen Council, in July 2024 alone, six European hydrogen projects reached final investment decision (FID) status. Investment in hydrogen projects reaching FID globally has increased sevenfold since 2020 from 102 committed projects to 434 in 2024. "We remain positive about the project pipeline and PGM demand. The open question is if the push will happen in the next year, or take longer," Sperzel said. By Maeve Flaherty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: More changes for Dated crude benchmark ahead


20/12/24
20/12/24

Viewpoint: More changes for Dated crude benchmark ahead

London, 20 December (Argus) — The crude market has adjusted to the presence of US WTI in the Dated basket, but the past year has revealed some hiccups, suggesting more changes will be needed to the benchmark's structure. WTI has been a part of Dated for more than a year, in which time it has bought much-needed liquidity to a shrinking amount of physical crude underpinning the benchmark, and has encouraged a return of some old, long-absent market participants and the entry of a few new ones. WTI has introduced more transparency to Dated, making it much more easily accessible. While some traders feared the grade would arrest any volatility, which is necessary for trading companies to thrive, this has not happened. Instead, WTI has effectively tied the European market to the US one, with European Ice Brent futures following WTI Nymex futures very closely. But recent months have exposed some flaws, suggesting some more changes to the benchmark are needed. European refiners run as much as 4.5mn b/d of light sweet crude, Vortexa data show. Dated was designed to represent the price moves of this large market via a few crudes produced, and mostly consumed, in the region. But production of several component grades have shrunk because of natural decline at North Sea fields. Production of Brent, the benchmark's namesake grade, has fallen from above 400,000 b/d in 2001 to just 38,000 b/d this year. Forties' exports dropped from more than 600,000 b/d to 175,000 b/d in the same time. Therefore it seemed fair when Dated was set by WTI nearly half of the time, as it is the single largest crude that European refiners buy, accounting for around 14pc of all their supplies. The situation reversed in the last weeks of 2024. WTI has not set Dated since 11 October, with that duty mostly shared between Oseberg, Ekofisk and Troll. But values of these grades — especially Oseberg and Troll — are rather theoretical, due to low liquidity of just 2-5 cargoes a month. It is not uncommon to see bids for those grades in the window, when the scarce supplies loading on the dates covered by bids are already placed. The same applies to Brent, for which loadings range between just 1-2 cargoes every month. WTI and Forties have greater liquidity, allowing them to be more representative of Europe's light sweet market, but their recent marginal role in setting the benchmark price raises a question if grades like Brent, Oseberg and Troll need to be in the basket at all. QPs an almighty relic of the past It might feel counterintuitive that smaller and more expensive grades affect the price of Dated — which is set by the cheapest grade in the basket. But Oseberg, Ekofisk and Troll, which are typically more expensive on a fob basis than is WTI on a delivered-Europe basis, are adjusted by quality premiums (QPs) for benchmarking purposes. QPs are calculated at 60pc of the difference between each grade and the most competitive of the six benchmark grades in the second month prior to the month of loading. The mechanism was made for a basket of crudes that originate in the North Sea and trade on a fob basis. Inclusion of WTI, which in turn is adjusted by intra-European freight to make it a fob price in the North Sea, has widened QPs for the three grades. With price spreads between pricier and cheaper benchmark grades increasingly dependent on volumes of WTI coming to Europe, such an adjustment does not seem to serve its purpose anymore. By Lina Bulyk Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Australia’s Cleanaway, LMS to produce landfill gas


20/12/24
20/12/24

Australia’s Cleanaway, LMS to produce landfill gas

Sydney, 20 December (Argus) — Australian waste management operator Cleanaway and bioenergy firm LMS Energy will partner on a 22MW landfill gas-fired power station at Cleanaway's Lucas Heights facility near the city of Sydney. Cleanaway, Australia's largest publicly listed waste management firm, will receive exclusive rights to landfill gas produced at Lucas Heights for 20 years, the company said on 20 December. LMS will invest A$46mn ($29mn) in new bioelectricity assets, including a 22MW generator. Tightening gas markets owing to underinvestment in new supply has led to speculation that more waste-to-energy plants could be brought on line in coming years, especially in the southern regions. Landfill gas projects receive Australian Carbon Credit Units (ACCUs) by avoiding methane releases, with the total ACCU quantity calculated after a default baseline of 30pc is deducted for projects beginning after 2015. A total of 42.6mn ACCUs were issued to landfill gas projects since the start of the ACCU scheme in 2011, 27pc of the total 155.7mn and the second-largest volume after human-induced regeneration (HIR) methods at 46.68mn. Canberra is reviewing ACCU issuance for these projects, and wants most projects to directly measure methane levels in captured landfill gas to avoid overestimation. Landfill gas operations which generate electricity from the captured gases can also receive large-scale generation certificates (LGCs). LMS has 70 projects currently registered at the Clean Energy Regulator (CER) and has received 24.57mn ACCUs since the start of the scheme. This is the largest volume for any single project proponent, just ahead of Australian environmental market investor GreenCollar's subsidiary Terra Carbon with 23.57mn units. Cleanaway received almost 1mn ACCUs from two projects and has four other projects that have yet to earn ACCUs. By Tom Major and Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump backs new deal to avoid shutdown: Update


19/12/24
19/12/24

Trump backs new deal to avoid shutdown: Update

Adds updates throughout Washington, 19 December (Argus) — US president-elect Donald Trump is offering his support for a rewritten spending bill that would avoid a government shutdown but leave out a provision authorizing year-round 15pc ethanol gasoline (E15) sales. The bill — which Republicans rewrote today after Trump attacked an earlier bipartisan agreement — would avoid a government shutdown starting Saturday, deliver agricultural aid and provide disaster relief. Trump said the bill was a "very good deal" that would also include a two-year suspension of the "very unnecessary" ceiling on federal debt, until 30 January 2027. "All Republicans, and even the Democrats, should do what is best for our Country, and vote 'YES' for this Bill, TONIGHT!" Trump wrote in a social media post. Passing the bill would require support from Democrats, who are still reeling after Trump and his allies — including Tesla chief executive Elon Musk — upended a spending deal they had spent weeks negotiating with US House speaker Mike Johnson (R-Louisiana). Democrats have not yet said if they would vote against the new agreement. "We are prepared to move forward with the bipartisan agreement that we thought was negotiated in good faith with House Republicans," House minority leader Hakeem Jeffries (D-New York) said earlier today. That earlier deal would have kept the government funded through 14 March, in addition to providing a one-year extension to the farm bill, $100bn in disaster relief and $10bn in aid for farmers. The bill would also provide a waiver that would avoid a looming ban on summertime sales of E15 across much of the US. Ethanol industry officials said they would urge lawmakers to vote against any package without the E15 provision. "Pulling E15 out of the bill makes absolutely no sense and is an insult to America's farmers and renewable fuel producers," Renewable Fuels Association chief executive Geoff Cooper said. If no agreement is reached by Friday at 11:59pm ET, federal agencies would have to furlough millions of workers and curtail services, although some agencies are able to continue operations in the event of a short-term funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Power supply crisis to lift Ecuador’s GHG emissions


19/12/24
19/12/24

Power supply crisis to lift Ecuador’s GHG emissions

Quito, 19 December (Argus) — Ecuador's greenhouse gas emissions have likely risen in 2024 as the country grappled with an ongoing power supply crisis because of severe droughts, interim energy minister Ines Manzano told Argus . Although the government has yet to calculate the exact percentage increase in GHG emissions, Manzano confirmed the increase after six months of droughts that led to a significant decline in hydropower output and extensive daily power outages of 3-14 hours from 23 September-20 December. Thermoelectric plants consumed an average of 26,560 b/d of diesel, fuel oil, natural gas and crude residue from January-October 2024, a 35pc year-on-year increase, Petroecuador data show. This trend is expected to continue through the end of the year as Ecuador will have installed and rented an additional 400 MW of thermoelectric capacity, including land-based plants and power barges by December. This expansion represents a 5pc increase in the country's total installed power capacity. In 2023, thermoelectric power plants emitted 3.7mn t of CO2 equivalent (CO2e), marking a year-on-year increase of 48pc, data from the energy ministry show. Drought-related challenges also led to 35 days of blackouts from October-December 2023, increasing reliance on thermoelectric power. That year, emissions from thermoelectric plants accounted for 9pc of the 43mn t of CO2e emitted by the energy sector, up from 6pc in 2022. The outlook for 2025 suggests little relief from the current trend. By April 2025 the government plans to bring online an additional 1.3GW of thermoelectric capacity, compared with April 2024, while adding only one new hydroelectric plant — the 204MW Toachi-Pilaton. By Alberto Araujo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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