Markets Are Failing Investors on Sustainability: Mother of All Market Regulators

By Mathew Carr

Feb. 25, 2021 — LONDON: The mother of all market regulators says global markets are in a mess on sustainability.

Investors wanting clear disclosure on the climate and natural-environment impact of the bonds and shares they buy are not being well served, the International Organization of Securities Commissions said yesterday.

“Companies often report sustainability-related information selectively, referencing different frameworks,” the organization said in a statement on its website:

IOSCO said there was an “urgent need” for globally consistent, comparable and reliable sustainability disclosure standards.

On the same day, the Division of Corporation Finance of the Securities Exchange Commission was ordered to enhance its focus on climate-related disclosure in public company filings. SEC staffers “will review the extent to which public companies address the topics identified in the 2010 guidance,” said Acting Chair of the SEC Allison Herren Lee.
See this:

Allison Herren Lee

At the end of 2020 various organisations jointly released a ‘prototype’ climate financial disclosure standard “cobbled together in some haste from existing offerings,” according to this column in Responsible Investor from last month:

The landscape is acronym city.

“Whilst anyone familiar with Taskforce on Climate-related Financial Disclosures (TCFD), integrated reporting and the Global Reporting Initiative (GRI) Standards is likely to be favourably disposed to the proposed reporting requirements, the conceptual framework underpinning them is flawed,” said Carol Adams, Professor of Accounting at Durham University Business School and technical expert to the UNDP’s Sustainable Development Goal Impact Team..

Instead of simply making polluters pay, regulators are getting caught up in this sort of stuff (I’m not claiming it’s easy — check out of the chart on the last page of this):

Milder Temperatures to Curb Bullish EU Carbon Trajectory

By Mathew Carr

Feb. 15, 2021 — LONDON: Milder temperatures are set to curb demand for EU carbon allowances, even as interest from compliance buyers and investors apparently pushed prices to record levels last week.

Still, there’s plenty of chilly weather around Europe the next two weeks, especially in the east.

See this minimum-temperature loop from Weatheronline:

Snip of the loop

Peak gusts loop here:

Some context and price chart here:

Plus more context for U.K. energy markets here:

United Nations to Resume Global Carbon Market Talks March 29-30 (1)

By Mathew Carr

Feb. 9-March 5, 2021 — LONDON: The UN Framework Convention on Climate Change is to resume talks on March 29-30 on measures that may allow countries to cut the cost of climate action via cooperation.

It held talks last month on adaptation. Consultations are listed here:

The negotiations are needed ahead of a planned climate meeting in November in Glasgow, which was delayed a year because of the global coronavirus pandemic.

Cooperation rules on market cooperation and via non-market measures are negotiated under Article 6 of Paris. See this:

Photo by Mathias P.R. Reding on

Here are some of the relevant sections of text:

During consultations, “Parties outlined many issues that need to be resolved in Glasgow. We noted consistent mention of the importance of finalizing the Paris Agreement work programme – Article 6 of the Paris Agreement, transparency, and common timeframes – and addressing finance, adaptation, loss and damage, mitigation and ambition. We also heard the importance of ensuring that all issues are addressed in a comprehensive and balanced manner while noting that issues may require different modes of work and/or different levels of engagement to be resolved.

In discussing the plans for the June session, the Executive Secretary provided a frank assessment of the current state of play in Germany and globally which made planning for an in-person session very challenging, including the fact that currently such large events were not allowed in Germany. Noting the views expressed by Parties during the consultations, the secretariat will therefore work closely with the Presiding Officers to explore how work could be undertaken in June that meets the criteria of
advancing work while respecting the concerns expressed regarding decision-making outside of an in-person session. The Presiding Officers and the secretariat reassured Parties of their intention to maintain flexibility in their planning to respond to improvements in the global situation prior to Glasgow.

We look forward to meeting with you in this format monthly to accelerate progress on specific topics to be identified. We noted the concerns expressed regarding time zone challenges and we committed to rotating the times of these monthly consultations so that no region is consistently disadvantaged. In light of the priorities articulated by Parties, as indicated, the February and March consultations will explore ways to accelerate progress on adaptation and on Article 6 of the Paris Agreement respectively.

Earlier this year, UNFCCC executive secretary urged nations to be ambitious.


The Era of Climate Brinkmanship is Ending as Carbon-Free Cashflow Rises (2)

— The climate transition is set to be better managed
— Climate activist Greta Thunberg will be pleased

By Mathew Carr

OPINION, Feb. 9-13, 2021 — LONDON: Not before time, the right things are becoming desirable in the previously cut-throat world of financial markets.

The push-pull for climate-friendly products has become so strong, pension funds are starting to ignore profits made from burning coal, crude oil or even natural gas.

Instead of black gold, examples of emissions-cutting market innovation are gushing thick and fast.

Green is the new black in the commodity world.

A few days ago research and rating provider S&P Global joined dairy group Danone to become one of the first companies to introduce a carbon-adjusted-earnings-per-share metric into its financial reporting.

The metric – based on a theoretical cost per share of the company’s emitted carbon dioxide subtracted from regular earnings per share – provides transparency into how far down the climate transition curve a company is.

The world’s biggest investor Blackrock, belatedly on board with the climate transition itself, said a couple of weeks ago that the global coronavirus pandemic “presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives.”

Carbon-adjusted EPS is another way of progressing toward net-zero targets, favored by more than 2,000 businesses, cities, states, universities and investors around the world, according to UN data. ESG standards and climate disclosure is increasingly becoming mandatory rather than optional.

So, a compelling stage has been set, because these measures imply demand for carbon allowances and renewable-energy credits will rise, as corporates and governments seek to hit targets in 2025, 2030, 2035, 2040, 2045 and 2050.

Photo by Zukiman Mohamad on

Stockmarket darling Tesla made $1.6 billion from selling regulatory carbon credits it received last year, far outweighing its net income of $721 million — meaning it would have otherwise posted a net loss, according to CNN.

A carbon credit boom isn’t quite set in stone. Remember, they were going to be huge 10 years ago, but politics got in the way and demand never showed up.

Now though, things seem different.

Occidental Petroleum’s sale of a shipment of carbon-neutral crude was another recent surprise. The shipment from the Permian to India was apparently made carbon neutral via green emission-reduction projects in both India and Thailand. I’m seeking confirmation and more information.

Trading in the voluntary carbon market could merge with compliance buying and selling under the Paris climate deal, according to some enthusiasts. That climate deal is meant to be biting from this year, but the pandemic has also slowed the number of possible negotiation meetings.

Further, not all emerging nations are on board with a surging voluntary carbon market. They prefer a UN system. Rich countries and companies say the failure of politicians to set carbon trading rules is a key reason why the climate crisis is now so acute.

Giving the market a bigger size won’t necessarily be easy, the Taskforce on Scaling Voluntary Carbon Markets concluded on Jan. 27. It needs to be turning over about $100 billion a year instead of $320 million, it said. See this:

If demand does show up this time, it could stir prices a lot. EU carbon allowances have more than doubled since the start of the pandemic to about 38 euros a ton. Voluntary carbon allowances are mostly more like 6 euros.

Perhaps soon, commodity indexes such as Bloomberg’s BCOM will include EU allowances or voluntary emission credits for the first time. At the moment, the energy element of the index is made up largely of fossil fuels, even though carbon has reached about half the cost of Europe’s wholesale electricity price. And electricity is where it’s at.

The past few years has seen a lot of climate brinkmanship. Mr Donald Trump expanded oil and natural gas, China and India are planning coal-power expansion, Brazil’s Amazon is burning at a rapid pace.

So the shift to greener markets is sorely needed.

Carbon credits could for instance reward striking Indian farmers should they agree to pivot toward more climate-friendly agriculture. They could make the Amazon worth more alive than dead.

See this:

To be sure, the pandemic has placed the global airline industry in severe doldrums, drying up a key area of previously expected offset demand.

Demand Recovers Scenario

Assuming demand does recover, one useful thing that’s happened over the past five years is testing of a cool mechanism for efficiently buying and selling emission credits.

The Pilot Auction Facility for Methane and Climate Change Mitigation handled by the World Bank employs auctions to maximize the use of public resources. Private corporations could use the same system.

Emissions-project investors bid for tradable put options that give the right to sell emission reduction credits, in this case to the World-Bank overseen fund. The projects willing to sell for the lowest price, win the options.

That injects price tension into the mix, reducing the chance of overblown profits for sellers and helping buying companies push up their adjusted carbon earnings per share.

A fund buying like this for corporates would lower the cost of meeting their net-zero targets. All this assumes emission-credit markets are well managed and not oversupplied. It’s going to be tough to make that happen in the next few weeks or months.

The World-Bank-overseen facility was created five years ago to keep projects running because carbon-credit prices plunged amid the flagging demand I mentioned earlier. Rich countries put in the cash.

The first sales result back in 2015 showed the program was “extremely efficient and scalable,” providing sorely needed finance to projects and making capturing methane worth the cost, the bank said at the time. Methane is a potent greenhouse gas with a global-warming potential 25 times that of carbon dioxide.

I wrote this in 2015:


The facility hosted three successful auctions between 2015 and 2017, allocating nearly $54 million in climate finance, with the potential to abate about 21 million metric tons of CO2 equivalent, according to its website. The Pilot Auction Facility also addressed nitrous oxide through 2020. The volume is about a day and one half of U.S. energy emissions. It’s a start, at least.

Such structures should prevent profiteering in the next batch of carbon markets, something the first batch was criticised for.

They could also boost transparency and increase the incentive to install strict oversight of the green projects, including in countries with a history of corruption. Auction rules can insist on high standards and stipulate which projects can buy the put options.

That means countries would want to make sure their projects are attractive and so they would make sure they are managed properly. Projects looking to sell into the fund (buy the put options) would also need to make sure they meet standards, or they won’t be able to use this as a revenue-generating route.

No one wants to be seen buying bad credits, whether they’re bad because of their environmental credibility, bad because of the behavior of the people running the project, or bad because of the national oversight.

See this:

Tate Britain: Kumari Singh Burman’s ice cream van — Diwali inspired art

(Corrects to capitalize Indian, adds link, adds S&P Link, adds details Saturday)

Carbon Allowances Spike to Record Above 38 Euros as Murdoch’s Times Newspaper Endorses Pollution Pricing (1)

By Mathew Carr

Feb. 4, 2021 — LONDON: EU carbon allowances surged for a third day in a row, after the Times of London newspaper said putting a price on climate pollution “made sense” even though it was politically risky.

The allowances rose above 38 euros a ton before falling back. See this chart from the IG website:

Intraday here from ICE:

Here are some reasons for carbon’s gain, by Alessandro Vitelli, a long-time market watcher and analyst:

The Times wrote an editorial which included a headline that could be read in two ways “Costing the Earth”:

New taxes to combat carbon emissions may seem politically perilous but they make economic sense and can help achieve the net-zero target by 2050

Thursday February 04 2021, 12.01am, The Times

No one relishes paying more taxes. Introducing new ones is fraught with political peril. Even so, Boris Johnson has instructed government departments to draw up proposals to put a financial price on carbon, to help Britain achieve the legally mandated target of net-zero emissions by 2050. This implies higher consumer prices and bills for carbon-intensive goods and services, which is not an obviously vote-winning strategy.

Despite this, it is the right approach and it may be possible to compensate households for these higher costs. Though new measures will need to be devised and implemented with an awareness of unanticipated costs, they ought to receive cross-party backing and gain sufficient public support…


It might seem strange to conflate a post-Brexit London-based newspaper with the Brussels-based market – and I’m not saying it’s even a major reason for the upward market move.

Yet a lot of the trading in the EU system – world’s biggest emissions market by traded volume – still takes place in London.

After leaving the EU and its carbon market, the U.K. is setting up its own system.

Murdoch’s Wall Street Journal also wrote a story saying U.S. President Biden will probably struggle to “compartmentalize” global climate action, since it’s tied up closely with worldwide trade.

See this from 11 hours ago:

See our earlier take:

Murdoch’s press has previously displayed skepticism toward climate action and even raised doubts that the devastating 2019-2020 bushfires in Australia were stoked by climate change. It was the arsonists, right, mate?!

Rupert Murdoch’s son James has criticized the family empire’s stance on misinformation, including on climate change:

(Updates with the link to other reasons for the gain in allowances, adds Tweet; swapped in Carbonreporter link )

TECH-LED OIL SHIFT: Historic First Net-Zero Crude Shipment Up For Sale: Person (2)

–Carbon neutral* deal won’t help buyers’ particulate-pollution, but will help the climate, assuming offsetting’s done well
–Further details not immediately available

By Mathew Carr

Jan. 30-Feb. 5, 2021 –LONDON: The story of Occidental Petroleum’s delivery of carbon-neutral crude oil to India’s Reliance Industries has taken a twist or two.

Oxy said Jan. 28 that under a “transaction,” Reliance would receive the shipment.

Now, it’s up for sale, according to a person familiar with the situation.

That India’s biggest listed company was taking the oil — produced in the U.S. Permian Basin — was surprising, because the energy transition is meant to be starting earlier in wealthier western nations, where environmentally conscious consumers may be more likely to pay a premium to fill their tanks.

Few petrol stations offer “carbon-free” fuel, even in Europe. This shipment’s emissions are offset against unspecified emissions-reduction projects in India and Thailand that are verified by Verra, according to the person.

Depending on government policies across the globe and consumer preferences, clean oil may become strongly demanded. Airlines already face a pilot industry-wide carbon program, the Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation. That’s also a world first.

Germany is extending carbon pricing to transport and heating, sectors not covered by the EU’s emissions market. The opening price of the tax was lifted to 25 euros a ton for 2021 from 10 euros proposed initially, rising each year to 55 euros/ton by 2025. See this:,off%20a%202030%20climate%20plan.

The Oxy transaction, arranged in conjunction with Macquarie Group, is the energy industry’s first major petroleum shipment for which greenhouse gas (GHG) emissions associated with the entire crude lifecycle, well head through combustion of end products, have been offset, Oxy said last week.

The shipment isn’t refined yet, the person said.

Photo by Pixabay on

The shipment is valued at about $100 million at current market levels and it’ll be interesting to see if it attracts a premium. There may also be some public scrutiny of the oil-carbon trade because of its historic nature.

I’ll publish more about the Oxy deal if/when I find out. As of Friday, Feb. 5, details are not available. Key data would include how many tons of carbon dioxide the deal implies for the approximately 2 million barrels of oil, from well to wheel. I’m hearing 1.29 million tons of CO2 equivalent, but that too isn’t verified.

At the Germany carbon tax rate 25 euros ($30), the shipment could attract a premium of about $39 million or 39%, according to approximate calculations from that unconfirmed data — or much less at a voluntary market rate of about $6 a ton of carbon dioxide equivalent.

As the Paris climate deal begins this year, there’s hot debate among policy makers and business about how to apply market incentives to the energy transition to speed it up, while protecting fair claims on the world’s remaining carbon budget. See this:

India is planning carbon markets:

Another fascinating detail of the Oxy deal is the accounting:
Technology will play an important role in decarbonization of the industry. Occidental and Macquarie both invested last year in Xpansiv, a technology-based environmental commodities platform and exchange, which was leveraged in this transaction. At the same time, Occidental is working with Carbon Finance Labs who has supported this transaction and is developing a differentiated, distributed ledger-based carbon accounting platform for tracking end-to-end lifecycle carbon emissions through commodities supply chains.

I added some emphasis.

Photo by Yogendra Singh on

(Updates/corrects to say shipment may not be refined in India, nor used in that nation’s cars; shipment for sale; updates/corrects with possible premium estimate; adds details not immediately forthcoming; updates unverified calculation of premium; note: oil market is notoriously lacking in transparency)

*NOTE: I’m using “net zero” and “carbon neutral” interchangeably; Oxy defines them differently — see below.

Here’s what one of Oxy’s units said:

Release in full:

Oxy Low Carbon Ventures (OLCV), a division of Occidental (NYSE:OXY) announced today the delivery of two million barrels of carbon-neutral oil1 to Reliance Industries in India. This transaction, which was arranged in conjunction with Macquarie Group’s Commodities and Global Markets group (Macquarie), is the energy industry’s first major petroleum shipment for which greenhouse gas (GHG) emissions associated with the entire crude lifecycle, well head through combustion of end products, have been offset.

This transaction is a first step in the creation of a new market for climate-differentiated crude oil. It is also a bridge to the development of a further differentiated petroleum product, net-zero oil2, which Occidental intends to eventually produce through the capture and sequestration of atmospheric COvia industrial-scale direct air capture (DAC) facilities and geological sequestration. The transaction is an example of Macquarie’s commitment to innovation in the environmental products space and to being a leader in energy transition.

The oil was produced in the U.S. Permian Basin by Occidental and delivered to Reliance in India. Macquarie arranged and structured the bundled offset supply and retirement. The offsets were sourced from a variety of projects verified under the Verra Verified Carbon Standard meeting eligibility criteria for the UN’s International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The volume of offsets applied against the cargo are sufficient to cover the expected GHG emissions from the entire crude lifecycle including oil extraction, transport, storage, shipping, refining, subsequent use, and combustion.

This type of transaction, which involves the bundling of high-quality carbon offsets with crude oil, is an immediate executable solution that helps promote investments in longer-term, industrial-scale decarbonization strategies. It is also a step in the furtherance of Occidental’s net-zero ambitions and commitment to addressing climate change today.

Occidental, the first U.S. based international energy company to announce an ambition to achieve net-zero GHG emissions associated with the use of its products by 2050, has been using carbon-dioxide in its enhanced oil recovery operations in the Permian for over 40 years. During this time, it has developed market-leading expertise in carbon capture, utilization and storage (CCUS). In 2019, OLCV made an investment in Carbon Engineering’s Direct Air Capture (DAC) technology and announced plans, through its development company 1PointFive, to proceed with engineering the world’s largest DAC and sequestration plant. This project will utilize Occidental’s existing Permian Basin enhanced oil recovery infrastructure and its market-leading carbon management expertise to permanently sequester captured atmospheric carbon-dioxide. OLCV expects net-zero oil from DAC to be available to customers in 2024.

The two companies also recognize that technology will play an important role in decarbonization of the industry. Occidental and Macquarie both invested last year in Xpansiv, a technology-based environmental commodities platform and exchange, which was leveraged in this transaction. At the same time, Occidental is working with Carbon Finance Labs who has supported this transaction and is developing a differentiated, distributed ledger-based carbon accounting platform for tracking end-to-end lifecycle carbon emissions through commodities supply chains.

“We are taking important initial steps to work with our customers in hard-to-decarbonize industries to offer carbon-neutral and other low-carbon products that will leverage our expertise in carbon management to lower their total carbon impact and address Scope 3 emissions,” said Richard Jackson, President Oxy Low Carbon Ventures.

“Macquarie is delighted to have worked with Occidental in developing this innovative solution. We look forward to continued collaboration with the company on realizing their ambitious carbon-neutral goals.” said Ozzie Pagan, Senior Managing Director for Macquarie in the Americas. “Macquarie is working to lead the energy transition through innovation and investments focused on advancing de-carbonization. We seek to develop, along with our clients, actionable strategies today and sustainable innovations for the future.”

The Very Large Crude Carrier (VLCC) Sea Pearl containing the carbon-neutral oil finished unloading in India today.

About Oxy Low Carbon Ventures

Oxy Low Carbon Ventures, LLC (OLCV) is a subsidiary of Occidental, an international energy company with operations in the United States, Middle East, Africa and Latin America. OLCV is focused on advancing cutting-edge, low-carbon technologies and business solutions that enhance Occidental’s business while reducing emissions. OLCV also invests in the development of low-carbon fuels and products, as well as sequestration services to support carbon capture projects globally. Visit for more information.

About Macquarie

Macquarie is a global leader in environmental products and the energy transition more generally. It was recently awarded a number of awards at the Energy Risk Awards, including 2020 Environmental Products Bank of the Year, 2020 Oil & Products and Derivatives House of the Year and the 2019 Natural Gas/LNG House of the Year. Macquarie is active in both voluntary and compliance carbon markets globally and continues to innovate in the delivery of environmental commodities products and markets. See here for more information.

1 The term “carbon-neutral oil” indicates that Oxy Low Carbon Ventures and Macquarie have engaged in a structured transaction that results in the offset of an amount of carbon dioxide equivalent to that associated with the production, delivery and refining of the crude oil and the use of the resulting product through the retirement of carbon offset credits.

2 The term “net-zero oil” indicates that Occidental produced oil through the abatement of atmospheric carbon dioxide in an amount equivalent to the carbon dioxide associated with the production, delivery and refining of the crude oil and the use of the resulting product.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this release relating to expectations, beliefs, plans or forecasts are forward-looking statements. These statements are typically identified by words such as “potential,” “will,” “would,” “should,” “may,” “plan,” “anticipate,” “believe,” “expect,” “ambition,” “effort” or similar expressions that convey the prospective nature of events or outcomes. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Actual results may differ from anticipated results, sometimes materially, and reported or expected results should not be considered an indication of future performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements, as a result of new information, future events or otherwise. Material risks that may affect the results of Occidental and its subsidiaries appear in Part I, Item 1A “Risk Factors” of Occidental’s Annual Report on Form 10-K for the year ended December 31, 2019 and in Occidental’s other filings with the SEC.

Melissa E. Schoeb

While Trump’s Exit from the Paris Climate Deal was Reckless, China’s Net Zero Target for 2060 is not Soon Enough: Kerry

By Mathew Carr

Jan. 24, 2021 — LONDON: China’s plans to cut emissions to net zero by 2060 should not stand, according to John Kerry, the U.S. climate envoy.

“We don’t want that to stand. We need to get down from 2060,” Kerry told a virtual meeting with U.S. mayors on the weekend.

“If that’s happening with the largest emitter in the world, we’re all going to lose credibility,” Kerry said. See this, about 37 minutes in:

Thirty eight states covering 80% of the U.S. population “kept going” on emission cuts despite Trump’s anti-climate-action stance, Kerry said. The nation needs to press on “with humility,” he said. “They are not going to believe us when we just say it, we have to do it,” he said after speaking with European leaders calling for more ambitious climate action.

See this report on Kerry’s earlier remarks from last week:

Kerry called on U.S. states to keep up their downward pressure on emissions. All nations need to set targets for 2025 and/or 2030 “so everyone can understand it’s not fake. It’s not a phony, empty promise. It really is getting real.”

The 2050 target for net zero is “a global target. We have to be there by 2050,” Kerry said.

China, the most populous nation and biggest emitter, is seeking to cap emissions by 2030:

U.S. emissions probably plunged last year amid the pandemic:

Snow people worse for wear after small squall in East London, UK, on Jan. 24 – Victoria Park

The EU’s Gambit to Link Trade and Climate Action Pays Off, Drawing China and the U.S. (3)

–Humility and justice on climate begin emitting from U.S. officials for the first time in four years

–The foundation of a global carbon market is laid, with the voluntary system immediately providing some glue and investment incentive

by Mathew Carr

Jan. 20-27, 2021 — LONDON: On Donald Trump’s last day in office, it was becoming clearer that the European Union’s push to link climate action and trade policy is rapidly paying dividends.

Portugal has taken over the presidency of the EU for this six-month period ending June, and one of its priorities is to focus on the region’s plan to install a carbon border adjustment mechanism in Europe, according to sources.

This is supplemented by a push to digitize the global trade in good that will allow more accountability for who precisely is damaging the climate…and who’s not.

“We will promote a comprehensive digital cooperation strategy aligned with the United Nations 2030 Sustainable Development Goals, highlighting the EU’s role as a global actor and benchmark in terms of ethics and trust,” Portugal said last month in its plan.

The mechanism is meant to focus the minds of EU trading partners’ on protecting the climate as they seek to build back better and greener from the hugely damaging global coronavirus pandemic.

That means instead of doubling down on fossil-fuel subsidies, nations are set to scale them back. Instead of rewarding use of oil, natural gas and coal, companies that use dirty fuels will need to make up for the damage they cause.

We are not quite there yet, but it’s getting closer.

China’s apparently on board, agreeing to cap its emissions starting 2026 or soon after, but its pitch to cap at a level that’s higher bodes ill for meeting the Paris target for a 1.5C rise in temperatures.

See this and below:

The most populous nation’s national carbon market is getting underway starting next month.

The country, which produces the world’s biggest volume of heat-trapping gases, will at an undefined time begin to charge its huge industries for the right to pollute.

“At present, the carbon emission allowances obtained by enterprises are allocated for free,” the Chinese Communist Party said via its China Daily newspaper on Jan. 18.

“In the long term, the allocation method of allowances may gradually transform to a combination of allocation and auction. In addition to buying carbon emissions, companies can also use the national certified voluntary emissions reductions generated by voluntary greenhouse gas emissions reduction projects to offset their carbon emissions,” it said.

(More on the voluntary carbon markets below)

See this:

Some of my readers are calling for China to be more explicit about its plans to cap emissions in the period from 2025-2030. EU officials express doubt about whether the cap will be for the full five years or only for 2030.

China could clarify.

U.S. President Joe Biden is now boosting ambition.

America needs to press on with humility, said special climate envoy John Kerry:

Not only is Biden seeking net zero emissions by 2050 and 100% clean power by 2035 but there is a push to right some wrongs about the nation’s fossil-fuel obsession.

A third plank of the new Biden plan is to “direct 40% of our investment to distressed communities, which is an indicator of his commitment to environmental and climate justice,” said Todd Stern, former U.S. climate envoy.

“Now the U.S. is back,” not just for 2050 but for the 2020s, Stern told the BBC. “The goal posts have moved now,” after other nations took over leadership on the issue, he said.

“Nobody’s ever accused me of being a dewy-eyed optimist. That’s not who I am. But do I think Biden is going to go all out and get a lot done and move the ball significantly? Yeah.”

See this:

Other Americans are showing some humility about the precarious position that the U.S. now finds itself in.

Biden will be seeking to mobilize a “50 gigawatts or 100 gigawatts extravaganza of renewable energy,” every year, said Tim Williamson, former renewable energy official under President Barack Obama. The U.S. almost hit 42 gigawatts last year under Trump, Williamson said.

For perspective, the U.K.’s entire power capacity is about 75 gigawatts.

Europe is absolutely killing the U.S. on the investment side in some areas:

That could be about to change.

“The Europeans pushing for carbon border adjustments is a good thing,” because it will force the U.S. to adopt carbon pricing in some way, shape or form, Williamson said recently.

“Putting a price on carbon in the United States is not going to happen until somebody forces the United States to do it,” and that’s what the EU has done. If the U.S. can’t price carbon via a national market or by linking state programs, it’ll do so less efficiently via ESG standards and the Securities Exchange Commission, he said.

“By the end of the Biden administration you’ll [Europe will] have a cross-border adjustment tax. I think that’s true.”

More importantly for the climate, China, India, Brazil and Russia are among the nations that need to hasten their transition … and there the EU pressure via trade will probably work its magic too. The timing there remains even more unclear.

Where there’s trade in goods, there’s the giant companies that underpin it. They too, are more on board than ever before in tackling the climate crisis, seeking to back projects that absorb greenhouse gas to burnish green credentials where they can’t cut their operational emissions quickly.

See this:

Those corporates are keen to use cost-effective systems like global carbon markets.

A likely scenario is the world will come to a deal to combine compliance and voluntary carbon markets during the next few months, said Guy Turner, chief executive officer of Trove Research, which is examining the barriers to scaled-up climate action and carbon markets.

There’s still a substantial risk that some debates about market structure can’t be resolved before the Glasgow climate talks in November, extending the delay of the transition into a fourth decade, Turner said.

One complicated issue to be decided is what to do with an oversupply of emission credits created before this year, which has the potential to dampen prices if targets are not made tight enough.

The combination of voluntary and compliance markets under Paris needs to happen fairly quickly indeed, “otherwise you are going to basically choke off all investment” in emission-reduction projects, Turner said by phone.

If climate negotiators manage to agree a market structure that satisfies the big countries and suits the needs of business, the upside for capital flows to cleantech is substantial, even in the nine months before the Glasgow talks, according to Dirk Forrister, president of the International Emissions Trading Association and former advisor to President Bill Clinton, speaking by phone last month.

Natural climate solutions (NCS) — where forests are enhanced, protected and created — are key. They would also right some climate injustice.

“With close to 7 billion tons of CO2 in annual potential by 2030, assuming an illustrative price per ton of $20 would suggest potential capital flows greater than $100 billion, with opportunity
across the world, especially in the Global South,” consultants McKinsey said this week.

“Consequently, nature more broadly, and NCS specifically, should be an integral component of economic strategies to ensure a green recovery from the ravages of COVID-19,” it said in its report.

East London graffiti

For McKinsey’s report:

(Updates to include the challenge of dealing with the existing oversupply; clarifies Williamson’s title; adds Forrister; adds McKinsey)

China Seen Capping Emissions in the Five Years From 2026 in Boost for Global Climate Fight (6)

–China’s carbon market officially starts in two days (Feb. 1)
–Precise date of carbon cap remains unclear

–EU welcomes China’s moves

By Mathew Carr

Jan. 9-29, 2021 — LONDON: China is seen capping its national emissions of greenhouse gas for the first time.

It will strive to do so in the five years starting 2026, after beginning experiments on caps in regional areas, according to a China Daily report.

Precisely when the cap will start remains a mystery.

But, importantly, it’s the first time the nation has said it will probably agree to a physical cap. Until now it’s been only willing to cut emissions measured as a portion of a unit of economic output, which gives no guarantee of a physical limit.

It’s a hard, declining cap that the climate needs, which would boost the chance of global emissions falling quickly from current levels. While China’s emissions have grown, on a per person basis they remain far below those in the U.S.

It might sound technical, but it’s some of the most important news for our climate in the past 30 years, the period when countries agreed to tackle heat-trapping gas via the United Nations to avoid global warming. This also potentially pivots China from its “developing country” mindset (but for now China is sticking with its line that it’s the biggest developing nation).

Given its population, China’s move makes it the world’s biggest climate champion (if it wasn’t before).

A hard emissions cap from the world’s most populous nation, and biggest emitter by far, will make it politically easier for U.S. President Joe Biden to impose aggressive climate measures in the U.S.A., the country most to blame for the climate crisis.

Biden’s potential control of lawmaking for at least two years may have influenced the timing of China’s announcement on its planned cap at some point in the five years through 2030.

“One of the nice things about communist dictatorships is that you can afford to take the long-term perspective,” said Yvo De Boer, former executive director of the UN Framework Convention on Climate Change. “You don’t need to worry about the day-to-day sentiments and concerns of voters.”

“I’ve seen the Republicans and the Democrats come and go. I’ve seen Bill Clinton sign the Kyoto Protocol and Bush tear it up,” de Boer said by phone. “I’ve seen Obama sign the Paris agreement and Trump tear it up. So they come and they go every four years or eight years, but the Chinese communist party stays, so I think they were trying to be sensible. The overriding driver will always be what’s best for the Chinese economy — and international relations are part of that but not the entire driver.”

The U.S. and China have been locked in a trade dispute for much of former President Donald Trump’s four-year term. The global pandemic has caused emissions to plunge, especially in specific nations including the U.S.:

At a news conference on 5 January, Li Gao, head of climate change at the China ecology/environment ministry, said the Asian nation will make efforts to tighten emission allowance allocation under its planned carbon market as the country forges ahead to establish a carbon emission management mechanism with a national emission cap, China Daily said Jan. 7 in a story that was subsequently published Jan. 8 on the website of the nation’s environment ministry.

That publication on the official government site gives it added credibility:

Setting a target on carbon intensity-or carbon dioxide emissions per unit of GDP- is what the country has done until now. That will be a stepping stone during the next five years, Li said, according to the report.

“But we are also considering introducing caps on carbon emissions in some key regions to align air pollution control with carbon reduction,” he said.

“With the experiences we accumulate in these trials, we will strive to transform our carbon emission management mechanism from one with a carbon intensity cap to one with an emission upper limit during the 15th Five-Year Plan period (2026-30),” he said, adding that the ministry will tighten emission allowance allocation accordingly as it promotes the transition.

Photo by Ruiyang Zhang on

China’s plan could provide a template “for other nations,” the report said.

China plans to peak its emissions before 2030 and achieve net zero emissions by 2060, 10 years after the U.S. and the EU, two regions with more historical responsibility for climate change.

I asked the EU commission to comment. This is what it said earlier this month:

“We welcome the publication of the rules on China’s national emissions trading system.

·       By putting a requirement on power companies across the country to participate in the Chinese ETS (emissions trading system) from February 2021, to cover emissions from 2019 and 2020, China has shown that it is taking concrete implementing measures to achieve its climate target.

·       The ETS will provide an incentive for power companies to reduce their emissions and paves the way for a China-wide carbon price. We welcome indications that China will strive to  move from the current intensity based targets for CO2 emissions to one based on an absolute cap on emissions during the 15th five year plan 2026-2030 (so some time before end-2030). 

·       Once in operation, the Chinese national system is expected to evolve and expand over time. We expect it to increasingly play an central role in reducing China’s GHG emissions, driving innovation and the transition towards decarbonisation and climate neutrality.

·       The EU and China have been cooperating on carbon markets for many years, and we are ready to deepen this cooperation, to build on our respective experience and expertise.”

(Updates with photo and makes official’s title more clear, fixes garble in second paragraph of earlier version; adds comments by de Boer, adds chart; corrects name in ninth paragraph; updates with declining emissions in 2020; makes clear China may not cap its emissions during the whole of the five-year period starting 2026; adds on Jan. 29 complete EU response to my questions; China has not responded to my requests for clarity on the date from which the cap might apply)

EEX’s Open Positions in EU Carbon Futures Rise Year on Year Amid Brexit (1)

By Mathew Carr

Dec. 8, 2021 — LONDON: Open interest, a measure of trading positions that have not closed, advanced 23% to 157,470 EU carbon futures contracts by the end of the year vs the same time in 2019, according to EEX.

The exchange uses the measure “synthetic net OI futures,” which has advanced slightly since then to 158,754 contracts, according to the EEX website.

Still, the exchange has a small portion of the market versus ICE Futures Europe, based in London, which had open interest of 1.18 million lots at the end of the year, including options.

So, as the U.K. exited from the EU market, the world’s biggest carbon program by traded volume, there were apparently no huge shifts, according to traders.

But prices have repeatedly hit higher record levels as EU nations have halted daily auctions until Jan. 29.

See this:

December volumes for EU carbon futures rose 69% to 52 million tons vs Dec. 2019, EEX said today by email.

See figures for carbon futures here (Note the Dec. future is the most commonly traded, so interest drops each year from end of Nov. to end of Dec. as the future gets delivered):

From EEX email

EEX summary data for all markets here: