S&P Global Commodity Insights - Carbon Markets Daily

Carbon Markets Daily

March 14, 2023

Alexander Cavendish said. Platts, part of S&P Global Commodity Insights, assessed natural carbon capture credit prices at $12.80/mtCO2e on March 13, which compares with an all-time high of $22.90/mtCO2e on Feb. 1, 2022. European Parliament formally backs three key climate bills, part of Fit for 55 package „ Parliament agrees on extension of Market Stability Reserve up to 2030 „ Approval of EU’s commitment to cut emissions to 40% from 2005 levels „ Prices for EU carbon permits remain at high levels, just below Eur100/mt The European Parliament formally approved a raft of climate reforms March 14 after the EU had provisionally agreed on them late last year as part of its Fit for 55 package. The Parliament agreed to extend the Market Stability Reserve of the EU Emissions Trading System to 2030, which is in place to protect against falling CO2 prices due to external shocks. “This means that at least 24% of the market surplus should be put in the market stability reserve and a minimum of 200 million allowances until 31 December 2030,” the European Parliament said in a statement. “From 1 January 2031 onwards the intake rate would fall to 12% and the minimum number of allowances to 100 million.” The MSR was established in 2015 to address the structural imbalance between the supply of and demand for allowances in the EU ETS. “Ensuring a strong emissions trading system will lower our dependence on fossil fuels and on Russia,” said Cyrus Engerer, a Maltese Member of the European Parliament. “We need to accelerate our transition to renewables and to work towards energy sovereignty.” In mid-December, negotiators agreed to reform the EU’s Emissions Trading System, increasing carbon cutting ambitions to 2030, detailing the removal of free allowances and introducing new carbon pricing mechanisms. More targets The Parliament also approved a bill that calls for EU countries to reduce greenhouse gas emissions from 30% to 40% compared with 2005 levels. This bill sets binding annual reductions for greenhouse gas emissions for road transport, heating of buildings, agriculture, small industrial installations and waste management for each EU member state and currently regulates roughly 60% of all EU emissions. “For the first time, all EU countries must now reduce GHG emissions with targets ranging between 10 and 50%,” the statement said. Thirdly, the Parliament approved a law that raises the EU —Eklavya Gupte

carbon sinks target for the land use and forestry sector by 15%. “The EU 2030 target for net greenhouse gas removals in the land, land use change and forestry sector will be set at 310 million mtCO2e…” the statement said. “This new EU target should reduce the EU’s GHGs in 2030 further from 55% to around 57% compared to 1990-levels.” Member states will be allowed to purchase or sell removal credits between land use, land use change and forestry sector (LULUCF) and the Effort Sharing Regulation to reach their targets. The Effort Sharing Regulation is part of the Fit for 55 in 2030 package. High carbon prices The main purpose of the ETS is to reduce GHG emissions and carbon intensity to meet their net-zero targets, which includes a commitment to reduce net emissions by 55% by 2030. The EU’s ETS cap and trade system places a limit on the level of emissions covered by different sectors. It includes around 45% of the bloc’s total greenhouse gas emissions. The cap declines each year to guarantee emissions fall over time. Companies can buy and sell carbon permits known as EU Allowances, which can be traded for the CO2 they emit. EU Allowances, carbon permits under the EU ETS, recently hit record highs above Eur100/mtCO2e ($105/mtCO2e), attributed to technical signals and strong financial investor interest, along with the tightening of rules of the bloc’s key climate policies, especially under its ETS. December 2023 EU Allowances, which hit Eur101.16/mtCO2e on Feb. 21, have eased back to trade in a Eur93-98/mtCO2e range in early March. Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2023 at Eur95.68/mtCO2e on March 13. —Eklavya Gupte Subscriber Notes Platts moves annual roll for reflected vintages in Voluntary Carbon Credit Assessments to first working day of Q3 Platts, part of S&P Global Commodity Insights, has amended the annual roll for the vintages reflected in its Voluntary Carbon Credit assessments to the first working day of Q3 from the start of 2023. A proposal published Oct. 21 is available here: https://www. spglobal.com/commodityinsights/en/our-methodology/ subscriber-notes/102122-platts-proposes-to-move-the-annual roll-for-reflected-vintages-to-first-working-day-of-q3. The decision note published Nov. 30 is available here: https:// www.spglobal.com/commodityinsights/en/our-methodology/ subscriber-notes/113022-platts-to-move-annual-roll-for reflected-vintages-in-voluntary-carbon-credit-assessments-to first-working-day-of-q3 Previously, Platts methodology rolled on the first working day of the new year, with all assessments reflecting new vintages. For example, under the previous methodology, the Platts Household Devices assessment reflected vintages from the last

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