California LCFS set for key decision Friday

Spanish Market: Emissions
08/11/24

Today California regulators will consider toughening carbon-slashing targets and raising hurdles for crop-based fuels to participate in North America's largest Low Carbon Fuel Standard (LCFS).

California's Air Resources Board will weigh rulemaking underway for nearly a year — and on the verge of running out of time — to restore shrinking incentives in the state's program to decarbonize road fuels. The decision comes amid growing outcry over the cost of diversifying the state's fuel portfolio passed on to drivers. Choices made on incentives in the largest US renewable fuels and electric vehicle charging markets may offer some clarity to markets now roiled by uncertainty over the approach an incoming second Donald Trump administration will take.

LCFS programs require yearly reductions to transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limit incur deficits that suppliers must offset with approved, lower-carbon alternatives.

California's program has helped spur a rush of new renewable diesel production that quickly overwhelmed the deficits generated from petroleum gasoline and diesel use in the state. LCFS credits do not expire, and leftover credits available for future compliance grew to 29.1mn metric tonnes by July. The program generated 22.4mn deficits in all of 2023.

Tougher targets on tap

Board approval of amendments considered today would immediately toughen program targets for 2025 by 9pc. The one-year drop would nearly double reductions first proposed last year, and require cuts six times deeper than the typical year-to-year change in targets. Regulatory staff published models in April suggesting such a target could thin a smothering inventory of excess credits available for future compliance by 8.2mn — roughly a third of the available excess credits.

Other proposals would take longer to begin. California would require new attestations about land use for crop-based feedstocks by 2026, shifting toward tougher verification requirements for such feedstocks by 2031. Regulators would limit credit generation for existing suppliers of biodiesel and renewable diesel made from soybean oil or canola oil credits to only 20pc of such fuels they supply to California by 2028. And CARB would begin phasing out outsized credit generation from renewable natural gas used in transportation in 2040, after locking-in incentives for current projects regardless of any regulations that would mandate methane reductions.

The program has faced a late push of opposition from fuel suppliers and environmental critics highlighting costs to previously unaware drivers. The campaign inspired an unusual volume of public comment filings in October from residents focused on gasoline costs. But CARB faces a 5 January deadline to approve the proposals. Missing it would restart the regulatory process, which staff has said could take another two years to complete. Credits available for future compliance nearly tripled over the past two years. Renewable natural gas, electric vehicle and even biofuels groups wary of elements of the proposal have issued statements of support this week.

Chairwoman Liane Randolph has repeatedly defended the program in public appearances as the temperature on fuel costs concerns rose. Targets must get tougher, she said earlier this year. She reiterated the need for the standard in response to media questions about the lack of information about potential cost increases.

CARB's choices will ripple across fuel supply strategies around the world. California used two thirds of the renewable diesel consumed in the US during the second quarter, and access to the market can determine feedstock margins. With immediate federal choices on biofuel tax incentives or possible feedstock sanctions uncertain, clarity on California's may offer suppliers one of the fuel planning footholds this year.

By Elliott Blackburn

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08/11/24

Zambia UN carbon market focus on VCM transition

Berlin, 8 November (Argus) — Zambia is expecting to generate at least 10 projects under the UN's new carbon market mechanism, mostly by transferring projects from the voluntary carbon market (VCM). At least five Zambia-based VCM projects could be transitioned to the new mechanism under Article 6.4 of the Paris climate agreement next year, head of the environment ministry's green economy and climate change department, Ephraim Mwepya Shitima, told Argus in a recent interview. By contrast, Zambia expects to transition only one or two projects from its limited portfolio under UN predecessor the clean development mechanism (CDM), although others might decide to follow suit if they see that "it works", Shitima said. Zambia also expects two projects generated under the new Paris Agreement Crediting Mechanism (PACM) proper to be validated next year, thanks to the Supporting Preparedness for Article 6 initiative that provides support to Zambia, Colombia, Pakistan and Thailand. The PACM, a centralised mechanism for trading carbon credits, is expected to launch next year following agreement on outstanding details at the UN Cop 29 climate summit starting in Baku, Azerbaijan, next week. The more advanced and less regulated bilateral carbon market mechanism under Article 6.2, which has already seen some activity, also depends on agreement at Cop 29 to provide clarity on registries, and the scope and timing of project authorisations. There is an overall expectation that agreement will be reached at this Cop, following years of slow progress and failed deals, not least because the Cop presidency has named Article 6 a priority . The lack of progress on Article 6.4 so far has not stopped project developers in Zambia, Shitima stressed, which have received support from the Zambian government. The government is also working on setting up a registry, although if it does not succeed in time, Zambia will use the international registry earmarked for countries unable to set up their own. And despite the credibility crisis the VCM has suffered since early last year, the standard of Zambia's VCM projects — mostly registered under Verra and Gold Standard — is sufficiently high to allow them to transition to the PACM, Shitima said. It is not yet clear whether the PACM will allow all forestry activities, which constitute most of Zambia's VCM projects. Afforestation and reforestation will be included, but the trickier "avoided deforestation" category is still being negotiated. For forestry projects, carbon storage permanence is an important issue, and the Article 6.4 supervisory body recently proposed relatively strict conditions in the shape of a buffer pool for unavoidable reversals and insurance for avoidable ones. These rules have been criticised as possibly too strict and costly for host countries. But Zambia welcomes these "stringent" rules, Shitima said. The country's green economy and climate change law, expected to come into force by the end of the year, will provide the legal basis for charging proceeds from project developers. These will go into a climate change fund, some of which will cover costs for dealing with reversals or guaranteeing the permanence of removals. Zambia is also in talks with buyer countries under Article 6.2 and expects to sign bilateral agreements with Sweden — with which it already signed an initial agreement — and Norway in Baku. By Chloe Jardine Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Deforestation in Brazil's Amazon plunges 31pc

07/11/24

Deforestation in Brazil's Amazon plunges 31pc

Sao Paulo, 7 November (Argus) — Deforestation in Brazil's Amazon biome plunged by around 31pc over the 12 months ending in July — the sharpest decline in over 15 years — bringing the country closer to meeting its target of eliminating deforestation in the region by 2030. Brazil lost 6,288km² (2,404mi²) of Amazon rainforest from August 2023-July 2024, a 31pc decline from 9,064km² in August 2022-July 2023, according to the science and technology ministry's national space institute INPE. The fall in deforestation marks the third consecutive decline in deforestation in the Amazon, after devastation in the region reached a multi-year high of 13,038km² in 2020-21. With the decline, deforestation in the biome reached its lowest level since 2015, when the region recorded losses of 6,207km². Deforestation fell steeply in all of the largest states in the legally defined Amazon region — known as Legal Amazon — except for Roraima, according to data compiled by the Amazon deforestation satellite monitoring system (Prodes). The Legal Amazon contains the nine states in the Amazon basin: Acre, Amapa, Amazonas, Para, Rondonia, Roraima and Tocantins, as well as most of Mato Grosso and Maranhao states. It contains all of Brazil's Amazon biome, 37pc of the cerrado tropical savanna biome and 40pc of the pantanal biome. Para state continued to lead in deforestation with 2,362km², accounting for 37.5pc of total deforestation in the biome. But this year's figure was 28pc lower than the 3,299km² in the prior period. Amazonas state posted the second largest deforestation in the period, with losses reaching 1,143km², accounting for 18pc of the total area of forest lost. Deforestation there fell by 29pc in the 2023-24 cycle from a year earlier. Mato Grosso, Brazil's largest grain-producing state, cut 1,124km² of forests, down by 45pc from the 2,048km² in the previous cycle. The government attributed the decline to increased oversight in the region, with the number of fines issued for illegal deforestation nearly doubling from 1 January 2023 — when president Luiz Inacio Lula da Silva took office — and October this year, compared with the period between January 2019-December 2022. The government also highlighted that deforestation was down in 78pc of the 70 municipalities that were declared priority regions by the administration earlier this year. The government announced R730mn ($129mn) in funding to reduce environmental devastation in these municipalities in April. The government also reduced deforestation in the cerrado by nearly 26pc to 8,174km² in the period. That is the lowest level since 2019 and the first time deforestation in the biome has declined in four years. With the reduction in deforestation, Brazil's 2023 emissions fell by 12pc to 2.3bn tons of CO2 equivalent (t CO2e) from 2.6bn t CO2e in 2022, according to Brazilian climate think tank Observatorio do Clima. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

EU's Hoekstra balances divergent calls on climate

07/11/24

EU's Hoekstra balances divergent calls on climate

Brussels, 7 November (Argus) — EU climate commissioner Wopke Hoekstra, nominated again for the role, balanced conflicting calls around climate legislation in a hearing today with members of the European Parliament (MEPs). Some MEPs were in favour of tougher climate legislation, while others demanded delays to targets. Hoekstra defended key climate energy legislation, including EU CO2 reduction targets for cars and vans, while maintaining a cautious approach on expansion of the EU emissions trading system (ETS) to new sectors. Hoekstra committed to a 2026 ETS review that touches upon maritime, aviation, municipal waste and negative emissions, in response to a question from German centre-right EPP MEP Peter Liese, who has been a key parliament negotiator for ETS reforms. "Negative emissions are a cornerstone of making it to net zero. I'll absolutely look into the ramifications, whether this could be included," said Hoekstra, commissioner-designate for climate, net-zero and clean growth. If international efforts to reduce aviation emissions do not deliver, Hoekstra is also open to an ETS that equally impacts EU and international aviation. Hoekstra underlined the pivotal importance for "predictability" of legislation for industry, referencing certain firms' concern at a 12-month delay to the bloc's deforestation regulation. Hoekstra promised a "dialogue" with the car industry about sticking to CO2 standards for cars and vans and the phase-out, from 2035, of new vehicles with an internal combustion engine (ICE). Hoekstra is "all in" for ensuring the EU car industry's success. But the Dutch politician is reticent about delaying penalties for carmakers that do not meet CO2 standards from 2025. For biofuels and e-fuels, Hoekstra does not want to change current EU legislation. The EU should not open the "box that was closed" by EU legislation, notably with a 2035 phase-out that only foresees use of the ICE with non-biogenic CO2 neutral fuels. "I feel there is a bright future for biofuels. We need more, particularly in many other domains," he said, equally noting that the EU needs to "focus first and foremost on electrification". And Hoekstra could give no clear deadline for phasing out fossil fuel subsidies in the EU, but said he would do his best to create transparency on the issue. Speaking notes prepared in advance of the hearing already indicated a cautious approach to new elements in future climate policy. Hoekstra underlined the need for a "business case" for decarbonisation in agriculture and forestry, mirroring the approach taken by EU agriculture commissioner-designate Christophe Hansen. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump victory raises climate law questions

06/11/24

Trump victory raises climate law questions

Houston, 6 November (Argus) — Federal tax incentives enacted through US President Joe Biden's signature 2022 climate law could survive in some fashion during a second Donald Trump administration, but their ultimate fate could depend on a Republican majority in Congress. While details of president-elect Trump's plans will unfold in the coming months, the Inflation Reduction Act (IRA), which established tax incentives for clean electricity and the related supply chain, is very much up for review, according to panelists during a post-election webinar hosted by US law firm Bracewell. Beyond the presumed policy shift, the Biden administration is still working to finalize guidance for some of the IRA's incentives, such as production and investment tax credits for clean energy, and regulators have yet to outline other provisions in the law beyond cursory notices. The confluence of those factors could chill renewable energy development, at least in the near term. "Investors stand the risk of being whipsawed to some degree in terms of not having the comfort they need to make a billion-dollar investments on new clean energy facilities," Bracewell tax policy lead Tim Urban said. In addition, an expected 2025 tax bill could move around several trillions of dollars, "and some of that bill could either end up being IRA fixes or IRA repeals or curtailments," he said. Much will depend on whether Republicans retain a majority in the House of Representatives, which would give them control of Congress after they regained a Senate majority on Tuesday. That would open the door for budget reconciliation — the same process through which Democrats passed the IRA in 2022 — and allow Republicans to make changes to the law with a simple majority vote rather than the 60 typically required to bypass the Senate's filibuster rules. In other words, Republicans would not have to reach across the aisle to compromise with Democrats. While some Republicans have objected to outright ending the IRA, they have not yet faced the "horse trading" and intraparty pressure that accompanies negotiations around major legislation, according to Urban. "I'm still optimistic that that much, if not all the IRA may be salvageable, but I think there's a lot of work to be done," he said. Project developers have signaled a similar outlook , noting that renewable energy expanded during the first Trump administration, despite investment in newer sectors like offshore wind flagging ahead of the 2024 election. Even for offshore wind, they expect a slower pace of development rather than a complete abandonment of the industry by the US. The biggest change could come from competing priorities, with Trump's policies potentially making the all-in cost of resources like natural gas more attractive than renewables. Even without details, Trump's desire to see oil and gas producers " drill, baby, drill ", and his first term in the Oval Office offer some broad insight into how his policies could manifest. "One hallmark of the first Trump administration was to not pick winners and losers on technologies or type of energy," said United States Energy Association chief executive Mark Menezes, who served as US deputy secretary of energy in 2020-21. That meant making sure nuclear could be treated equally with other sources and "renewables weren't forced on a particular group if they didn't want to have renewable power, for example," he said. The incoming administration is likely to pursue a "rather aggressive approach to fossil fuel expansion", with a raft of "immediate" executive orders to support that goal, according to Scott Segal, co-chair of Bracewell's policy resolution group. But the IRA will likely be handled with a "scalpel" rather than a "sledgehammer", he said. By Patrick Zemanek Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop 29 finance talks need leadership after Trump win

06/11/24

Cop 29 finance talks need leadership after Trump win

Edinburgh, 6 November (Argus) — Donald Trump's US presidential election victory will likely affect finance negotiations during the UN Cop 29 climate summit starting next week, but the US can still play a role while other developed countries step up to the plate, according to observers. Key negotiations at Cop on a new finance goal for developing nations, the so-called NCQG, could be "severely undermined" by Trump's victory, as the prospect of Washington withdrawing from the Paris Agreement may discourage other countries from engaging with US officials, non-profit IISD's policy adviser Natalie Jones told Argus . Trump pulled the US out of the Paris Agreement during his last term in office, calling it "horrendously unfair", and he has signalled he will do so again. "This could potentially weaken ambitions" at Cop 29, but it is unlikely to derail negotiations, Jones said. Observers agree that the US can still play a role in talks on the new finance goal, a key topic at this year's summit. Parties to the Paris deal will seek to agree on a new finance goal for developing nations, following on from the current $100bn/yr target, which is broadly recognised as inadequate. "The Biden administration still has a critical window to support vulnerable nations' calls to mobilise climate finance and deliver a strong climate target," civil society organisation Oil Change International's US campaign manager Collin Rees told Argus . The Biden administration's delegation, which will still take part in Cop 29, will not change position at this stage, according to Jones. And the US could continue to show some leadership, she said, adding that Washington likely intends to release its 2035 Nationally Determined Contribution (NDC) early. Countries' new climate plans must be submitted to the UN climate body the UNFCCC by February 2025, but the US could release its NDC at Cop 29 before Trump takes power early next year, she said. "President Biden must do everything he can in the final weeks of his term to protect our climate and communities," including on fossil fuels, Rees said. The prospect of Trump pulling the US out of the Paris accord could cause initial anxiety at Cop 29, Climate Action Network executive director Tasneem Essop said. But "the world's majority recognises that climate action does not hinge on who is in power in the US". "As we saw before and will see again, other countries will step up if the US reneges on their responsibilities and stands back," Essop said. Trump's victory might also present the EU with an opportunity to strengthen its leadership among other developed countries, according to Jones. "It is really on the EU and other countries to step up now," she said. This is a view echoed by German Green lawmaker Michael Bloss, a member of the European Parliament's delegation at Cop 29. "Europe needs to become the adult in the room," Bloss told Argus . The EU cannot rely on the US anymore and must become a global climate leader to ensure success at Cop 29, he said. Meanwhile, Oil Change's Rees stressed that the NCQG is a collective goal. "Other major economies must now step forward to fill the gaps, much as they would have needed to in any scenario given how the US has long refused to pay its fair share," he said. By Caroline Varin and Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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