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Cop 26 profile: Europe sets climate bar high

  • Spanish Market: Crude oil, Emissions, Natural gas, Oil products
  • 22/10/21

The bloc hopes the summit will see other major emitters deliver concrete plans for net zero, writes Dafydd ab Iago

The EU has dominated global climate talks since the first UN Conference of the Parties (Cop) summit in Berlin, in addition to holding the UN Framework Convention on Climate Change secretariat in the former German capital Bonn. On top of hosting more than half of the Cops since 1995, Europe has become the first major economic region to lay out in detail a policy path towards net zero carbon emissions in 2050.

"Europe needs to lead, so the rest of the world understands where we need to go," EU climate action commissioner Frans Timmermans told EU environment ministers signing off this month on the bloc's negotiating mandate for Cop 26. That self-image of a bloc leading with ambitious headline targets, and detailed EU and national legislation, is key to the EU's negotiating position in Glasgow.

Having surpassed its previous 20pc reduction target set for 2020, the EU submitted confirmation, this May, to the UN of EU-level emission cuts of 3.8pc in 2019 compared with 2018. That is a full 24pc lower than 1990 levels, even before Covid-19 restrictions cut greenhouse gas (GHG) emissions last year. The bloc also updated its nationally determined contribution (NDC) and legally bound itself to carbon neutrality by 2050 and cutting GHG emissions in 2030 by at least 55pc compared with 1990, up from a previous 40pc target (see table).

For Brussels then, Glasgow must force other major emitters, such as China and the US, to deliver with concrete plans rather than vague commitments towards net zero. European Commission president Ursula von der Leyen only sees China's announcement at the UN that it will stop building coal-fired generation abroad or US president Joe Biden's promise to double US international climate finance as "steps in the right direction". While repeating a promise to commit an additional €4bn ($4.7bn) in climate finance in 2021-27, von der Leyen wants "concrete" plans from international partners. The EU brings to Glasgow the highest level of ambition. "We do it for our planet. And we do it for Europe," she told the European Parliament this month.

If altruism does not push other Cop parties into action, the EU is fine-tuning a carbon border mechanism to protect its carbon-intensive industries. The mechanism starts in 2026 with a duty on cement, iron and steel, aluminium, fertiliser and electricity imported to the EU from countries not subject to carbon pricing.

Concrete carbon phase-outs

Polishing the money aspects of the bloc's negotiating position for Glasgow, finance ministers from the EU's 27 member states stress that the "ambitious" updated NDC is being implemented by a package of legislative proposals adopted by the commission in July. And Timmermans warned environment ministers this month against using the energy price shocks that EU members are facing as an excuse to back down on proposals that are effectively phase-out schedules for CO2-intensive sectors. Timmermans said that if Europe leaves the climate crisis untackled, the resulting social unrest will be far worse than France's 2018 gilets jaunes protests over fuel and climate taxes.

More climate sceptical — and coal dependent — Poland is, for the moment, relatively isolated in arguing for postponing or lowering various climate and energy goals because of the energy price spikes. The majority of EU politicians seem to accept calls by Timmermans and von der Leyen to double down on decarbonisation policies such as an increased GHG cut — of 61pc, rather than 43pc, by 2030, compared with 2005 levels — for industries under the bloc's emissions trading system (ETS). Distributors of road and heating fuels will have to purchase allowances, from 2026, to cover their emissions under a separate ETS with a carbon price that may well float above €100/t. In aviation, allowances for intra-European flights will be slowly reduced, with operators losing free allowances from 2026.

The EU's commitment to delivery is evidenced by over 3,000 pages of dense legal proposals and explanatory texts that aim to set GHG fuel intensity cuts for maritime fuels, oblige flight operators to take up 5pc sustainable aviation fuels by 2030, rising to 20pc by 2035 and 63pc by 2050, and for renewables to reach 40pc, rather than 32pc previously, of EU gross final consumption of energy by 2030.

Tougher CO2 emissions standards for new passenger cars and vans require average emissions to come down by 55pc from 2030 and by 100pc from 2035, compared with a 2020-21 target of 95g CO2/km​. That effectively sets a 2035 phase-out date for sales of unabated internal combustion engines. There is also a 13pc GHG intensity reduction target for transport fuels by 2030, effectively doubling to 28pc the share of renewable fuels in road transport.

Ships calling at EU ports will have to reduce the average GHG intensity of their fuels by 6pc by 2030, 13pc by 2035 and 75pc by 2050, all from 2020 levels. And the commission wants member states to push zero-emission car sales by equipping major highways with electric charging every 60km and hydrogen refuelling every 150km.

Article 6 integrity

Signing off on a negotiating mandate for Timmermans and the commission in Glasgow, EU environment ministers have called for article 6 of the Paris climate agreement to set rules for international carbon trading that are "consistent with the necessary increased global ambition and the achievement of climate neutrality, and that avoid double counting and lock in to high-emissions pathways". Ministers specifically want article 6 provisions that promote sustainable development, ensure environmental integrity and ambition, and address risks such as "non-permanence" of carbon cuts or sequestration and "leakage" from projects.

Off the record, EU officials involved in the nitty-gritty of climate negotiations are openly sceptical about international carbon trading, flagging an increasing number of complaints about the credibility of voluntary offsets with "different controversies in different countries". Officials fear double counting and the need for "corresponding" adjustments of their own emission figures when countries sell reductions to others. "Fostering global ambition, ensuring environmental integrity and avoiding double accounting are at the core of the Paris agreement and of the EU position on market mechanisms," European environment commissioner Virginijus Sinkevicius says.

The EU's non-governmental organisations have called the bloc's negotiating position "good enough", especially as EU ministers now back a five-year timeframe for countries' NDCs to the Paris agreement to be implemented from 2031. But campaigners say the EU27 have intentionally left their negotiators room to manoeuvre, including on how the EU and member states will help reach the €100bn goal for international climate finance for developing countries. And non-governmental organisation Carbon Market Watch wants the EU to do more to ensure international carbon market negotiations move beyond just compensating emissions and zero-sum offsetting to deliver real GHG reductions. It calls for tough offsetting and carbon trading rules at Cop 26, and will this month present critical analysis of claims by companies including Shell, Total, BP, Russian state-controlled Gazprom and Chinese state-controlled PetroChina of carbon-neutral natural gas and crude shipments.

EU GHG reduction targets
NDC target % Baseline yearTarget year
2016 — 40pc19902030
2020 — 55pc 19902030
2016 — 80-95pc19902050
2020 — 100pc19902050

EU GHG emissions by source

Net EU electricity generation, 2019

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09/04/25

Colombian crude gains on US tariff uncertainty

Colombian crude gains on US tariff uncertainty

Sao Paulo, 9 April (Argus) — Colombian heavy sour crudes have reached their narrowest discounts to Ice Brent in at least four years, supported by uncertainty surrounding US tariffs and tight supplies of similar grades. Castilla's discount to Ice Brent was $3.50/bl on Tuesday and Vasconia's was at $1.45/bl, $4.40/bl and $3.15/bl tighter than on 2 January, respectively. Castilla has not reached that narrow of a level against the benchmark since early 2021 and Vasconia has not since mid-2019. Outright prices were $60.89/bl for Vasconia and $58.84/bl for Castilla on Tuesday. Colombian crude discounts started to narrow in January after US president Donald Trump mentioned plans for a 25pc tariff on all imports from Mexico and Canada, which produce competing heavy sours. Amid the uncertainty, buyers opted to secure supply that might not face tariffs, sources said, despite delays in tariffs implementation in early February and March. But a sweeping executive order last week excluded energy commodities from tariffs, as well as trade covered under the US-Mexico-Canada free trade agreement (USMCA). Then on Wednesday Trump announced he will pause many of the tariffs on other products for 90 days, but no changes have been announced for energy imports . Despite Trump's tariff exemptions on crude imports to the US, tight availability of heavy supply for US Gulf refiners could still support relative values for Colombian grades. Subbing in Colombian crudes are seen as good substitutes for heavy crude from the US' nearest neighbors, especially Mexican supplies, which are widely used by US Gulf coast refiners. Additionally, Colombia's geographical location makes shipping to the US Gulf coast quicker and less costly compared with other South American countries, such as Ecuador, which also produces heavy sour crude. Further tightening heavy supply for Gulf coast refiners, the US government announced in March that the deadline for the end of Chevron's waiver to produce in Venezuela is 27 May, stopping the flow of crude to the US from its joint venture with state-owned PdV. Chevron brought about 222,000 b/d in Venezuelan crude to the US from January-November 2024. according to the US Energy Information Administration (EIA). Even with the volume representing a fraction of Gulf coast imports, it represents almost 30pc of total Colombian output. Its production reached 760,000 b/d in January, according to oil services chamber Campetrol, citing figures from hydrocarbons agency ANH. Further US tariffs on countries that take delivery of Venezuelan oil and natural gas could also make Colombian barrels more attractive, although Ecuadorean crudes are possible regional supply alternatives too. Meanwhile, Mexico's state-owned Pemex has faced quality issues with its crude production since late last year, which could lead to Gulf coast buyers turning to Colombian barrels as alternatives. Pemex acknowledged issues with salt and water levels in its crude in February but denied that international buyers have rejected shipments because of those concerns. Mexico's policy of expanding domestic refining has also contributed to a decline in crude exports to the US in recent years. Colombian crude values have also likely been supported by firmer competing Canadian crude values at the US Gulf coast. Canadian crude differentials have firmed in part because of upgrader turnaround season in Alberta's oil sands region, slowing production. The shutdown of the 622,000 b/d Keystone pipeline from the region after a spill in North Dakota on 8 April also limited supply, buttressing prices. By João Scheller Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

What do tariffs mean for the global gas market?


09/04/25
09/04/25

What do tariffs mean for the global gas market?

Some countries are considering retaliatory tariffs, while others hope to reduce their trade deficit in order to negotiate lower rates London, 9 April (Argus) — Newly announced US tariffs on goods entering the country and some of the countermeasures already announced by large trade partners are unlikely to cause any direct disruptions to global gas markets. But the indirect effects on gas supply and demand may be huge, stemming from a weaker macroeconomic outlook, fuel substitution and inflationary pressures on infrastructure development. US president Donald Trump on 2 April imposed a minimum 10pc tax on all foreign imports from 5 April,with much higher tariffs on selected countries that briefly came into force on 9 April, before Trump announced a 90-day pause. China is the only exception. It has announced retaliatory tariffs that could disrupt US energy exports, resulting in an escalation that has already brought up the respective levies to 125pc in the US and 84pc in China. These are unlikely to have any direct impact on LNG trade flows, as China had already stopped importing US LNG earlier this year. But disruptions to trade between the world's two largest economies may weigh heavily on manufacturing activity in China, in turn reducing industrial gas demand. And the ripple effects of disruptions to US LPG exports to China may alter fuel-switching economics in the region and beyond. Most other countries in Asia-Pacific have opted not to follow China's lead by retaliating against US tariffs, even though many have warned about the potential for long-term economic disruption. The Japanese government intends to negotiate a better tariff deal and is considering investing in the US' proposed 20mn t/yr Alaska LNG export project as part of wider efforts to reduce its trade surplus with the US. Countries in Asia-Pacific have been hit with some of the highest of Trump's targeted duties. The EU is keeping retaliatory measures on the table, but these are unlikely to include any levy on US LNG. Europe has become much more reliant on LNG imports after losing the bulk of its Russian pipeline supply, and imposing tariffs on energy imports would only reignite inflationary pressures that European countries have tried to curb over the past three years. The bloc says it is ready to negotiate on possibly increasing its US LNG imports to reduce its trade surplus and would zero out its tariffs on industrial imports if the US agrees to do the same. But Trump says this offer is not enough, citing the EU's upcoming Carbon Border Adjustment Mechanism as one of the "unfair trade practices" that justifies a tariff response. Nerves of steel Much greater risks for gas markets may stem from rising infrastructure costs in the US' upstream and midstream sectors, particularly as a result of earlier tariffs imposed on steel and aluminum imports. These present an immediate risk for US LNG developers, particularly for the five projects under construction and the six others expected to reach final investment decisions this year. Metals account for up to 30pc of the cost of building an LNG export plant. An LNG terminal can cost $5bn-25bn to build, depending on its size, with steel used for pipelines, tanks and other structural frameworks. US facilities can be built using some domestic metal, but higher prices for this may lead to construction and final investment decision delays for the country's planned liquefaction projects. US tariffs' primary effect on the domestic gas market stems from duties levied on non-energy goods used by the oil and gas industry, including steel and specialised pipeline components such as valves and compressors, which are imported from overseas. The US remains a net natural gas importer from Canada , but these flows are unlikely to be affected by trade tariffs given the lack of alternative supply sources available to some northern US states. US LNG project pipeline mn t/yr Project Capacity Expected start/FID Under construction Plaquemines 19.2 2025 Corpus Christi stage 3 12.0 2025 Golden Pass 18.1 2026 Rio Grande 17.6 2027 Port Arthur 13.5 2027 Waiting for final investment decision Delfin FLNG 1 13.2 mid-2025 Texas LNG 4.0 2025 Calcasieu Pass 2 28.0 mid-2025 Corpus Christi train 8-9 3.3 2025 Louisiana LNG 16.5 mid-2025 Cameron train 4 6.8 mid-2025 Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Delta pulls full-year forecast amid US tariffs: Update


09/04/25
09/04/25

Delta pulls full-year forecast amid US tariffs: Update

Adds details from earnings call throughout. Houston, 9 April (Argus) — Delta Air Lines pulled its full-year 2025 financial guidance today, citing US tariff-related uncertainty. "Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook," the airline said Wednesday in an earnings call. Delta said it hoped the growing US tariff war with the world would be resolved through trade negotiations, but that it also told its main aircraft manufacturer, Airbus, that it would not purchase any aircraft that includes a tariff fee. "If you start to put a 20pc incremental cost on top of an aircraft, it gets very difficult to make that math work," chief executive Ed Bastion said in an earnings call today. In the meantime, Delta is protecting margins and cash flow by focusing on what it can control, including reducing planned capacity growth in the second half of the year to flat compared to last year, while also managing costs and capital expenses, Bastion said. Delta expects revenue in the second quarter of 2025 to be either 2pc higher or 2pc lower from the year earlier period with continued resilience in premium, loyalty and international bookings offsetting softness in domestic and standard flights. Punitive taxes on imports from key US trading partners were implemented on Wednesday despite President Donald Trump's claims of multiple trade deals in the making. Trump's 10pc baseline tariff on imports from nearly every country already went into effect on 5 April. The higher, "reciprocal" taxes went into effect today, although at midday Wednesday he announced a 90-day pause on most of the higher tariffs, while increasing tariffs on Chinese imports even higher. The company reported a profit of $240mn in the first quarter of 2025, up from $37mn in the first quarter of 2024. Confidence craters in 1Q Corporate travel started the year with momentum, but a reduction in corporate confidence stalled growth in February and March, Delta said. For the first quarter, corporate sales were up by low-single digits compared to the prior year, with strength led by the banking and technology sectors. The company's fuel expenses were down by 7pc in the first quarter of 2025 compared to the prior year period. The average price Delta paid for jet fuel was $2.45/USG, down by 11pc to the prior year period. Delta said it has seen "a significant drop off in bookings" out of Canada amid the trade disputes with that country which started earlier than the broader US tariffs. Meanwhile, Mexico is "a mixed bag," the company said. Delta is considering reducing capacity levels in Mexico and Canada in the future. The company reported a profit of $240mn in the first quarter of 2025, up from $37mn in the first quarter of 2024. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Delta pulls full-year forecast on tariff uncertainty


09/04/25
09/04/25

Delta pulls full-year forecast on tariff uncertainty

Houston, 9 April (Argus) — Delta Air Lines pulled its full-year 2025 financial guidance today, citing US tariff-related uncertainty. "Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook," the airline said Wednesday in an earnings call. Delta said it hoped the growing tariff war woudl be resolved through trade negotiations, but that it also told its main aircraft manufacturer, Airbus, that it would not purchase any aircraft that includes a tariff fee. In the meantime, Delta is protecting margins and cash flow by focusing on what it can control, including reducing planned capacity growth in the second half of the year to flat compared to last year, while also managing costs and capital expenses, chief executive Ed Bastion said. The company reported a profit of $298mn in the first quarter of 2025, up slightly from $288mn in the first quarter of 2024. The company's fuel expenses were down by 7pc in the first quarter of 2025 compared to the prior year period. The average price Delta paid for jet fuel was $2.45/USG, down by 11pc to the prior year period. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

German coalition eyes 'limited' foreign carbon credits


09/04/25
09/04/25

German coalition eyes 'limited' foreign carbon credits

Berlin, 9 April (Argus) — The parties likely to form Germany's next government today presented their coalition treaty, which pledges to allow the use of foreign carbon credits to reach the country's 2040 climate target. The treaty, presented in Berlin by the four party leaders Friedrich Merz of the CDU — the likely next federal chancellor — Lars Klingbeil and Saskia Esken of the SPD, and Markus Soeder of the CDU's Bavarian sister party CSU, stresses the parties' commitment to German and European climate targets, the Paris climate agreement, and reaching climate neutrality in Germany by 2045 "by combining climate action, economic competitiveness and social balance, and by focusing on innovation". "We want to remain an industrialised country and become climate neutral," the treaty reads. The parties' support for the EU's suggested interim target to reduce its emissions 90pc by 2040 compared with 1990 levels is conditional on two points. Germany must not be expected to go beyond its 88pc reduction target for 2040 enshrined in the country's climate action law. And its companies must be allowed, with a view to reducing their residual emissions in an "economically viable" way, to resort to "permanent and sustainable negative emissions", and to "credible CO2 reduction through highly qualified, certified and permanent projects" in "non-European partner countries". Making use of the latter activities should be permissible for up to three percentage points of the 2040 reduction target, although the "priority" for companies will be to reduce carbon emissions. And allowing these options must be reflected in the European Climate Law and the EU emissions trading system (ETS), the parties stipulate. The treaty also underlines the importance of "effective" carbon leakage protection to preserve Germany's "industrial value creation". The treaty calls for the European Green Deal and Clean Industrial Act to be further developed to "bring competitiveness and climate action together", and stresses the importance of carbon pricing instruments, which more countries should be persuaded to introduce. The parties also flag the importance of social acceptance, advocating an "economically viable price development" and pledging to ensure the smooth transition of Germany's domestic carbon price for the heating and transport sectors into the EU ETS 2 on the latter's launch in 2027. The parties pledge "immediately" to adopt a legislative package that enables carbon capture, transport, use and storage (CCU/CCS), particularly for industrial emissions that are difficult to avoid, and also for gas-fired power plants — a disputed issue within the SPD, and the reason why CCS legislation did not pass under the outgoing SPD-Green-led federal government. The new government said it will legally enshrine the "overriding public interest" of the construction of CCS infrastructure, as well as pledging to give the "highest priority" to ratifying the [amendment to the] London Protocol, allowing cross-border CO2 transportation, and to enter bilateral agreements with neighbouring countries on storing carbon. The new government will enable CO2 storage offshore in Germany's exclusive economic zone and the North Sea, as well as onshore where geologically suitable and accepted. The parties see direct air capture as a "possible" future technology to "leverage negative emissions". By Chloe Jardine Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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