Issue: 26 Tuesday, 23 June 2020
Dear ,
As the Covid-19 crisis continues to impact people and economies across the world, carbon markets have proven to be resilient, and climate policy developments are forging ahead. While all major ETS jurisdictions around the world saw prices dip in response to the crisis, most of these have already recovered, indicating that entities are confident in the stability and longevity of their ETS to provide a carbon price signal beyond this crisis into the future. In support, ICAP has been busy facilitating dialogue on a range of topics, such as the increasingly relevant aspect of free allocation. You are invited to delve into options to protect against carbon leakage while driving mitigation in the new ICAP publication “Carbon Leakage and Deep Decarbonization: Future-proofing Carbon Leakage Protection”.
As always, we are pleased to share the ICAP newsletter with you, a quarterly summary of the latest developments in emissions trading around the world and an update on ICAP activities.All the best,
On 16 July 2020, the ICAP Secretariat and representatives from two US member jurisdictions will present at a NASA webinar on opportunities that may exist for NASA satellite data to play a role in existing and upcoming ETSs. This event will provide an overview of ETSs around the world, lessons learned in their design and implementation, as well as thoughts on the use of satellite data to support ETS operations, including monitoring, reporting, and verification.ICAP will provide a link to sign up for the webinar on its website when it becomes available, but a link to the Nasa Carbon Research Program Policy Speaker Series that lists the webinar can be found here.
On 15-16 July 2020, alongside the Konrad-Adenauer-Stiftung and the International Energy Agency, ICAP will host a virtual workshop: “Carbon Pricing in Southeast and East Asia and COVID-19 response: Issues and opportunities for ensuring sustainable and low-carbon energy development”. As the region looks ahead to opportunities for cost-effective low-carbon transitions, experts and policymakers will present the state of play of carbon pricing and discuss the latest climate and energy policy signals against the backdrop of new market dynamics and green recovery plans. Participation in this event is by personal invitation only.
The societal and economic impacts of Covid-19 has had implications for carbon markets around the world. North America: Although California, Québec, and RGGI have not delayed auctions or compliance deadlines, secondary market prices in all three ETSs fell, with the linked California and Québec systems seeing prices drop below their 2020 minimum of USD 16.68. Carbon prices on the RGGI secondary market fell in March but have since steadily rebounded to pre-Covid-19 levels. California and Québec’s May auction marked the first time in about three years that all allowances from the current vintage on offer were not sold. Canada is giving emitters more time to procure offsets and surplus credits by proposing to push its 2019 reporting and compliance deadlines to April 2021. In May, the Transportation and Climate Initiative (TCI) postponed the release of its final memorandum of understanding until autumn 2020 due to the impacts of the Covid-19 pandemic. Read more here. Europe: Following announcements of increasingly restrictive virus-containment measures across Member States, EUA prices fell by 36.5% in eight days to about EUR 15 on 18 March. The 2019 compliance deadline is set to go ahead. In Switzerland, the compliance deadline has been postponed by four months to the end of August 2020, with March and June 2020 auction results invalidated. The much-awaited EU ETS-Swiss ETS linkage has been pushed back to September 2020.Asia-Pacific: The Korean ETS has revised its monthly auction schedules in the run-up to the end of the compliance year, which was postponed by two months to the end of August. Allowance prices initially remained stable but then dropped in May and have since been more volatile. Some Chinese pilot systems shifted key program dates, and price developments have varied across systems, without a clear impact of the crisis. In New Zealand, calls for a Covid-19 economic stimulus package developed through a climate perspective are expected to be addressed now that ETS reform legislation passed in June 2020. Read more...
Drawing to a close a five-year process, the New Zealand government in June successfully passed major ETS reform legislation, the Climate Change Response (Emissions Trading Reform) Act, and outlined detailed regulatory settings enabling the sweeping reforms to be implemented in 2021. The Act successfully passed its final reading in the New Zealand Parliament with 63 votes to 57, as opposition sought to delay the passing for one year due to the Covid-19 crisis. The Act introduces a cap on emissions under the NZ ETS, in alignment with New Zealand’s emissions budgets and long-term targets. Auctioning will be introduced under the cap, incorporating new price control mechanisms and a phase-down of free allocation for industry. The reforms include many operational and technical improvements to the NZ ETS, including a shift to “averaging” accounting for the forestry sector. The Act also lays out the introduction of carbon pricing for the agriculture sector from as early as 2022.Read more here and here…
On 21 April 2020, the Republic of Korea’s Ministry of Environment announced amendments to the Emissions Trading Act, allowing third-party participation in the secondary market from Phase 3, beginning next year. Brokerage firms and financial institutions will be allowed to trade both regular permits and offset units on the Korea Exchange (KRX), which services Korea’s secondary carbon market. Government auctions remain exclusively for entities regulated under the K-ETS. The amendments further reaffirm criteria for carbon leakage protection in Phase 3, obliging more companies to participate in auctions.Read more...
On 11 March 2020, New Jersey participated in the first 2020 auction of the Regional Greenhouse Gas Initiative (RGGI) after rejoining as of January 2020. New Jersey is the 10th US state to join RGGI. Originally a founding member, New Jersey left the program and abolished its ETS in 2011, before initiating talks to rejoin in 2018.
On 8 May 2020, the European Commission released the total number of allowances in circulation (TNAC) in the EU ETS in 2019. This figure, calculated annually, determines the number of allowances that will be placed in the Market Stability Reserve. A total of 1.4 billion allowances were circulating in the EU ETS by the end of 2019, a 16% reduction compared to the year before. In line with MSR rules, more than 332 million allowances will consequently be removed from auctioning volumes and placed in the MSR during the year from September 2020 to August 2021.
On 1 June 2020, the UK government confirmed that after leaving the EU it intends to establish its own domestic carbon market from 2021. It further published proposals for the major design elements of the future UK ETS, leaving open the possibility to link the standalone UK ETS with the EU ETS in the future. While the proposed design elements mirror many aspects of the EU ETS, they also contain notable differences, such as a price floor.
On 20 May 2020 the German federal cabinet agreed to a revision of the Fuel Emissions Trading Act, increasing the planned carbon prices of the new national ETS for transport and heating fuels starting in 2021. The revisions, which still need to be approved in parliament, will see fixed prices in the first five years of the scheme of EUR 25/tCO2 (USD 28) in 2021 rising to EUR 55/tCO2 (USD 62) in 2025. To compensate consumers for the projected price increase of transport and heating fuels, the cabinet has also decided to use the revenue from the sale of allowances to reform electricity tariffs, thereby reducing the cost of electricity.
Chinese ETS Pilots:- Beijing- Chongqing- Guangdong- Shanghai- Hubei- Shenzhen- Tianjin- Fujian
CNY 88.00 (USD 12.44)**CNY 22.50 (USD 3.18)**CNY 28.00 (USD 3.96)**CNY 35.59 (USD 5.03)**CNY 25.05 (USD 3.54)**CNY 20.37 (USD 2.88)**CNY 24.00 (USD 3.39)**CNY 9.10 (USD 1.29)**
20.03.202022.01.202020.03.202020.03.202021.01.202022.01.202023.01.202023.01.2020
Tanjiaoyi News Service (Chinese)
KRW 31,100 (USD 25.64)**
CommTradeNew Zealand
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