Cop 27: New UN emissions credits raise questions
The new type of emissions credits agreed at this month's UN Cop 27 climate conference, aimed at supporting domestic climate targets with no offsetting, is causing concern over potential double counting.
The new emissions reduction (ER) credits, to be issued under Article 6.4 of the Paris climate agreement, will come without "corresponding adjustments", which are designed to avoid credits being counted towards more than one country's climate target.
Creating these novel Article 6.4 units was already decided in November 2021 at Cop 26 in Glasgow. But a final agreement on how to officially name these units, and on the permitted scope of their usage, was reached at Cop 27 in Sharm-el-Sheikh earlier this month.
Both the units' name and their definition in the final text have come under scrutiny.
The units' official name — "mitigation contribution A6.4ER" — omits any reference to non-adjustment. This omission has been attributed to delegates from like-minded developing countries — mainly Saudi Arabia but also India — who were heard to be pushing hard, and ultimately successfully, for the "unadjusted" to be dropped from the official name.
Delegates attending the negotiations say these countries appeared keen to enable large-scale international trading of these units, contrary to the units' designated scope.
The text stipulates that the units can be used either towards the host country's nationally determined contribution (NDC) under the Paris deal, or as a "contribution claim" for either results-based climate finance or domestic carbon pricing systems, "inter alia". The "inter alia" refers to the different possibilities of contribution claims, but could also be interpreted more widely.
The Swiss environment ministry, a pioneer in bilateral carbon trading activities, has voiced its disappointment at the dropping of "unadjusted". The Swiss delegation at Cop 27 would have preferred the names "support A6.4ERs", "unauthorised mitigation contribution A6.4ERs" or "unadjusted mitigation contribution A6.4ERs", delegation head Franz Perrez says.
Perrez said the units' official name might lead some to believe that they contribute to global emissions reductions, as authorised A6.4 units will do once the Article 6.4 mechanism is up and running.
Conversely, it might precisely be the existence of authorised units that will make companies steer clear of the unauthorised ones, Perrez said.
Jonathan Crook, global carbon markets expert of non-governmental organisation (NGO) Carbon Market Watch (CMW), says ultimately it is up to companies and governments, as the UN Framework Convention on Climate Change (UNFCCC) cannot police claims that buyers will make. "Companies must not make misleading offset claims on the back of such contribution units, and governments must tighten their advertisement consumer protection laws to prevent this from happening."
Crook says the new credit type also sends out a "clear signal" to the voluntary carbon market that "climate contributions" are a real, and better, alternative to offsetting.
Germany's Development and Climate Alliance — a platform for voluntary greenhouse gas offsetting projects founded in 2018 by development bank KfW, on behalf of the ministry for economic co-operation and development — has tasked researchers from the Wuppertal Institute to look into ways of operationalising the "contribution claims".
Environmental NGO WWF and Cologne-headquartered NewClimate Institute are also researching the issue.
Some clarity on the uptake of mitigation contributions may arise once the Article 6.4 registry goes live, possibly from the end of next year. The registry would list both authorised and non-authorised credits, although it is as yet unclear how transparent the registry will be — for instance, in terms of disclosing the buyer's identity.
No overall agreement on the Article 6.4 framework was reached at Cop 27, mainly because the issue of emissions removals proved too big. Insufficient preparatory time for the UNFCCC "supervisory body" on Article 6.4, together with strong opposition from NGOs against excessively loose rules for removals, ensured that negotiations reached a dead end in the first week of the conference.
Article 6.4 of the Paris agreement will ultimately regulate a global carbon market, essentially a successor to the Kyoto Protocol's clean development mechanism.
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Australia's Climate Active program drives ACCU demand
Australia's Climate Active program drives ACCU demand
Sydney, 12 July (Argus) — The Australian federal government-backed Climate Active certification program continued to drive voluntary demand for Australian Carbon Credit Units (ACCUs) last year, although future growth remains uncertain as the scheme will undergo a planned reform. Cancellations of ACCUs for Climate Active certification reached 592,837 units in 2022, down from an all-time high of 625,705 in 2021, according to estimated data that the Department of Climate Change, Energy, the Environment and Water (DCCEEW) recently disclosed to Argus . Figures for 2023 are not yet available, according to the department, but cancellations may have reached a new high between 650,000-700,000 units, according to Argus estimates ( see table ). Each ACCU represents 1t of CO2 equivalent (CO2e) stored or avoided by a project. The Clean Energy Regulator (CER) said it does not have a dataset of ACCU cancellations for Climate Active certification, despite having disclosed figures in some of its quarterly carbon market reports in recent years. It mentioned late last year that the program accounted for around 0.5mn of a total 0.8mn cancelled for voluntary purposes in the first three quarters of 2023, and later reported total voluntary cancellations of 290,146 units in the fourth quarter alone. Voluntary cancellations reached nearly 1.1mn units in 2023 , a new record high. Certification under the Climate Active standards is awarded to businesses that measure, reduce and offset their carbon emissions to achieve carbon neutrality. More than 700 certifications have been provided to entities including large and small businesses, local governments, and non-profit organisations. But significant changes in climate science, business practices and international benchmarks since the program was established in 2010 prompted the federal Labor government to seek modifications aimed at driving a more ambitious voluntary climate action in Australia, following its separate reform of the compliance market's safeguard mechanism . The DCCEEW late last year launched a consultation with proposals to reform Climate Active, which would require more climate ambition from businesses seeking to be certified under the program. The use of carbon credits to offset emissions that have not been reduced by businesses would be tightened, with a requirement that all eligible international offset units meet a five-year rolling vintage rule, replacing the existing post-2012 vintage requirement. Other proposals include mandating a minimum level of gross emissions reductions and a minimum percentage of renewable electricity use. "The government is working through feedback on these proposals and will announce the consultation outcome later this year," a DCCEEW spokesperson told Argus . No expected changes in eligible offsets ACCUs have been representing a small share of the total offsets used for Climate Active certification at between 5.7-10.8pc in recent years, despite the estimated record high last year, according to DCCEEW estimates ( see table ). Organisations can currently use certified emissions reductions (CERs) and removal units (RMUs) under the program, as well as verified carbon units (VCUs) from the Verra registry and verified emissions reductions (VERs) from Gold Standard. The DCCEEW did not provide a breakdown of cancelled volumes per credit type. No minimum use of ACCUs and no changes to the list of eligible international units are expected in the near term, following advice from a review from Australia's Climate Change Authority (CCA) in 2022. But some market participants have been asking for the removal of CERs, which account for the "vast majority" of carbon offsets surrendered by Australian organisations, according to utility AGL. CERs are "outdated", utility Origin Energy said in its submission to the Climate Active consultation. "We consider it would be consistent with international carbon reduction mechanisms to introduce a clear end date to phase out the use of CERs from the program and ensure greater alignment with the more relevant Paris Agreement," Origin said. "This reform is considered an immediate priority, and of more urgent need than some of the other proposals in this consultation." Uncertainties over future demand More investor and activist pressure in recent years over the use of carbon offsets with perceived low levels of integrity have also been forcing companies to review not only their offset standards, but also claims of ‘carbon neutrality' and similar terms. One of the DCCEEW's proposals is to discontinue the use of ‘carbon neutral' to describe the certified claim and to choose a different description. "A lot of the voluntary demand for carbon offsets in Australia has traditionally come from Climate Active, but the landscape is indeed moving quickly and the concept of carbon neutrality is being replaced by net zero," said Guy Dickinson, chief executive of Australia-based carbon offset services provider BetaCarbon and head of carbon trading at sister company Clima. This should drive more price stratification between carbon removals and carbon avoidance credits, he noted. Telecommunications firm Telstra, one of the biggest companies in Australia, recently announced it will stop using carbon offsets to focus instead on reducing its direct emissions. It will no longer seek Climate Active certification as a result and will remove references that its plans are ‘carbon neutral' or ‘carbon offset'. This could prompt other businesses to follow suit, market participants said. Another source of uncertainty over future voluntary demand comes from a DCCEEWW proposal that abatement from all ACCUs used under Climate Active would count towards meeting Australia's Nationally Determined Contribution (NDC) under the Paris Agreement. The use of ACCUs under the program have so far been treated as ‘additional' to Australia's emissions reduction target through accounting under the Kyoto Protocol. If the government goes ahead with such a proposal, this could disincentivise participation in Climate Active as organisations might consider this as "paying to help the government meet its targets through the voluntary action of businesses," utility EnergyAustralia warned in its submission. There has been increased interest in emerging and alternate standards to those acceptable under Climate Active, such as the American Carbon Registry, Climate Action Reserve and Puro.Earth offsets, according to environmental marketplace Xpansiv's vice president of carbon and Australian energy, Peter Favretto. But Climate Active has reported positive growth in certified brands since its inception and will likely continue to create demand for offsets in the international voluntary market and the Australian ACCU market, he said. "With the upcoming mandatory climate reporting legislation in Australia , and a similar atmosphere in other global jurisdictions such as the US and the UK, there is a growing demand that could lead to further growth in Climate Active certifications," Favretto added. By Juan Weik ACCUs used for Climate Active certification units Year Volume Total voluntary ACCU use Climate Active % 2019 243,105 329,145 73.9 2020 417,405 605,499 68.9 2021 625,705 844,445 74.1 2022 592,837 855,081 69.3 2023 650,000-700,000* 1,090,575 60-64* DCCEEW, CER *Argus estimates Total offsets under Climate Active unit Year ACCUs Total offsets ACCUs % 2019 243,105 4,230,011 5.7 2020 417,405 6,857,628 6.1 2021 625,705 5,796,466 10.8 2022 592,837 7,472,711 7.9 DCCEEW Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Boeing used less SAF in 2023 than planned
Boeing used less SAF in 2023 than planned
New York, 10 July (Argus) — US aerospace manufacturer Boeing used less sustainable aviation fuel (SAF) in 2023 than it had initially planned, citing "supply chain issues." Boeing doubled its internal SAF consumption in 2023 compared with year-prior levels according to its latest sustainability report, with the fuel making up about 3pc of its total aviation fuel use over the year. But the company's use of around 478,000 USG neat SAF in its own operations was still less than its previously announced purchase commitments. Boeing early last year committed to funding 5.6mn USG of blended SAF from Finnish biofuels producer Neste over the course of 2023, with 2.6mn USG to be used directly by Boeing and another 3mn USG to support SAF use elsewhere as part of a book-and-claim accounting process. Since the Neste blend contains about 70pc conventional jet fuel, the Boeing commitment in essence was to purchase and use within its own operations about 780,000 USG neat SAF. But Boeing's direct SAF consumption last year, which reflects fuel used internally and not fuel it supported for use elsewhere, was around 61pc of its earlier purchase agreement. The company, confirming the discrepancy, said not all the planned 2.6mn USG were received because of "supply chain issues" but declined to elaborate further. Under the initial deal, Epic Fuels and its parent company Signature Aviation were supposed to supply 2.3mn USG of the Neste blend to Boeing, while Avfuel was supposed to supply 300,000 USG. Avfuel manager of alternative fuels Keith Sawyer told Argus that it ended up supplying more than the planned 300,000 USG at Boeing's request last year and that the fuel supplier is on track to meet its obligations to supply 1.5mn USG of blended SAF to Boeing this year. Epic Fuels and Neste declined comment. Boeing has set plans to use 4mn USG of the same Neste SAF blend in its own operations this year, with some coming from Epic and some from Avfuel, and to purchase SAF certificates associated with 5.4mn USG of blended SAF used elsewhere. Boeing added that SAF, which today mostly comes from hydrotreated vegetable oils and waste fats, is "the biggest lever for the industry to decarbonize by 2050." The company plans to use more of the fuel internally and to ensure that all the commercial airplanes it produces are compatible with 100pc SAF by 2030. In short supply Aviation companies see SAF as crucial for meeting climate goals, though usage to date has been limited by SAF's steep premium to conventional jet fuel. Though prices for SAF delivered to the US west coast have recently fallen on expectations of higher supply, it is still more than twice as expensive as conventional jet according to Argus assessments. The fuel's growth thus hinges on government policy, but low environmental credit prices in the US and uncertainty about a clean fuels tax credit kicking off next year have created a difficult investment environment for biofuels producers. Few potential suppliers and thin market liquidity then make it hard for prospective customers to rapidly scale up their SAF consumption. American Airlines for instance wants to replace 10pc of its jet fuel with SAF by 2030, but the US airline reported in its own sustainability report last week that it used 2.7mn USG SAF in 2023, an increase from the prior year but still less than 0.1pc of its total fuel use. Chief executive Robert Isom said that "we've signed commitments with multiple SAF producers, at a premium, to try to secure supply" but that "the volume of SAF available today and likely to be ready over the next several years is a tiny fraction of what's needed." By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU parliament groups detail climate, energy policy asks
EU parliament groups detail climate, energy policy asks
Brussels, 9 July (Argus) — The European Parliament's centre-left S&D and liberal Renew groups are finalising their key policy requests ahead of an expected plenary vote, on 18 July, on the re-appointment of Ursula von der Leyen as European Commission president. Both groups, like the centre-right EPP, are broadly calling for a continuation of the bloc's Green Deal. Von der Leyen, a member of the centre-right EPP's governing body, has already received nomination from EU leaders. But she will also need support from the centre-left, liberals and Greens to gain a majority in plenary on 18 July. The EPP had intended to finalise its policy calls for 2024-29 in Portugal by 5 July. But parliament's largest centre-right party is still working on a "live" document with hundreds of amendments. Core elements remain, including revision of CO2 standards for new cars to allow for alternative zero-emission fuels beyond 2035 and a new e-fuel, biofuel and low-carbon fuel strategy. The centre-left S&D group has already handed von der Leyen its policy wishlist for 2024-30. The group has called for several existing targets to remain in place, including the EU's legal commitment to climate neutrality by 2050 and the 2030 greenhouse gas (GHG) reduction target — cuts of "at least" 55pc by 2030, from 1990 levels. It also wants CO2 standards for cars and the deforestation regulation to remain in place. S&D also wants to extend legal obligations under the EU's Climate Law to establish an "ambitious" intermediate climate target for 2040 of "at least 90pc and up to 95pc of net GHG emissions", compared with 1990 levels. And the group calls for renewable energy, energy efficiency and clean technology manufacturing to be at the core of the EU's energy security strategy. The liberal Renew group does not want the next commission "backtracking" on the Green Deal, and is pushing for affordable energy for households. The group wants a "complete phase-out" of imported Russian fossil fuels, with a strong emphasis on a continued supply diversification and energy efficiency. Renew further calls for a "zero carbon" Energy Union package of legislation with joint purchasing and allowing for more investment in power storage, grids and generation. Other liberal calls are for expanding the emissions trading system (ETS) and expanding the EU's carbon border adjustment mechanism (CBAM) to new sectors, including downstream users such as automotive. A "phase-out" of coal, oil and gas in industry should come through strong market-based ETS measures, while ETS revenues should support accelerated electrification, the group added. And it calls for a science-based 2040 GHG target. The Green group has not prepared a specific post-electoral document for 2024-29 strategy. But its support for von der Leyen is made conditional on not rolling back the Green Deal. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
South Korea pledges $7mn for loss and damage fund
South Korea pledges $7mn for loss and damage fund
London, 9 July (Argus) — South Korea today has pledged $7mn to the UN loss and damage fund, to address the unavoidable and irreversible effects of climate change in developing countries. Loss and damage falls under a wider climate finance theme. Discussions of the topic, often fraught, can hold back progress in other areas, such as mitigation — cutting emissions. After years of negotiations, countries agreed at the UN Cop 27 climate summit in November 2022 to establish the loss and damage fund . Talks on the fund dominated Cop 27 and climate finance is set to take centre stage again at Cop 29 in November. The second meeting of the fund's board is underway in Songdo, South Korea until 12 July. Countries agreed on the loss and damage fund's setup at last year's Cop 28 , while several made financial pledges totalling over $700mn. The fund's board has 26 members, including 12 representing developed countries and 14 from developing nations. Of the latter, there are two apiece representing small island developing states and least developed countries, according to UN classification. These countries are among the most vulnerable to the effects of climate change. Board members decided today that the Philippines will be the board's host country. The board had previously approved the World Bank as the fund's interim host . The board meeting this week should agree on the workplan for this year, and "kick off discussions on key issues around observer participation, communities' direct access to funding, and the types of financial instruments", director of policy and campaigns at non-governmental organisation ActionAid Brandon Wu said. But "most major decisions on those topics will likely come later this year", Wu added. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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