UNDO Monthly Climate Roundup

EU Carbon Permit Forecasts Lowered Amidst Rising Renewables and Weakening Industry Outlook

Analysts have reduced their average price forecasts for EU carbon permits over the next three years due to lower demand from the power sector, as renewable energy generation increases and the European industry outlook weakens. The expected average prices for EU Allowances (EUAs) are 85.58 euros per metric tonne in 2023 and 92.68 euros in 2024, down 0.7% and 3.6% respectively from earlier predictions. The forecast for average prices in 2025 also fell by 4.3% to 100.28 euros/tonne. The European Union’s Emissions Trading System (ETS) requires manufacturers, power companies, and airlines to pay for each metric tonne of carbon dioxide they emit, as part of the EU’s climate targets. Prices in the current year are anticipated to be influenced by reduced fossil fuel power generation and industrial demand, driven by slow economic recovery across Europe and lower energy consumption. Analysts predict a decrease in the amount of emissions covered by the ETS in 2023, as renewable power increases and demand for emission permits decreases. The European Commission’s plan to sell more allowances over the coming years as part of its “REpowerEU” initiative, aimed at reducing reliance on Russian fossil fuels, is also expected to impact prices. The update of the auction regulation in Q3 and the timing and quantity of additional allowances hitting the market will likely play a significant role in shaping future price trends, according to experts in the field.

Global Shipping Industry Sets Emission Reduction Targets, But Questions Remain on Climate Commitments

During this week’s International Maritime Organisation talks, the global shipping industry agreed on new emission reduction targets, aiming to cut emissions by 20% by 2030, 70% by 2040, and achieve net-zero emissions “by or around 2050.” While this represents progress, some argue it falls short of the 1.5°C target necessary to combat climate change effectively.

The much-anticipated tax on shipping emissions, discussed during the recent Paris talks, was a minor focus during the current negotiations. Governments agreed to study the tax with a potential implementation target of 2027, but specifics on its level and allocation of funds remain unresolved. Environmental Minister Zac Goldsmith’s resignation letter, citing dissatisfaction with the UK government’s climate change approach, added to the uncertainty surrounding climate finance pledges, raising concerns among developing countries. The outcome of these talks holds implications not just for developing nations but also for the UK’s commitment to climate action.

Global Development Banks Commit to Climate Goals, but Skepticism Remains on Fossil Fuel Financing

Leading global development banks, including the World Bank, have agreed on principles to align new financing with national and international climate goals, aiming to limit global warming in line with the Paris Agreement. The principles require projects to align with countries’ climate strategies submitted to the UN, known as nationally determined contributions. While some analysts and campaigners are sceptical about whether the rules will divert funding away from polluting activities and effectively prevent global warming, the principles are seen as a step towards more climate-friendly operations for the banks. However, critics point out that the framework does not explicitly prohibit financing for fossil fuel activities, leaving room for ambiguity in investment decisions. The implementation of these principles will depend on the interpretation by the banks’ officers and the political dynamics of their governance and shareholders.

Heineken’s £25 Million Investment Paves the Way to Net Zero: Brewing a Sustainable Future in Manchester Brewery

Heineken plans to invest £25 million in its Manchester brewery to reduce reliance on fossil fuels and lower emissions. The investment includes installing heat pumps and a heat network to replace natural gas-powered steam boilers. The heat pumps will use electricity to generate heat, and a distribution and recovery pipe network will capture and reuse heat from various processes in brewing and packaging. The project aims to achieve a 45% reduction in natural gas usage and support Heineken’s climate goals of reaching net zero in its own production by 2030 and across its entire value chain by 2040. System supplier GEA will design, supply, and install the new network and modify Heineken’s existing equipment. Heineken’s Head of Sustainability, Chelsey Wroe, emphasizes that heat pumps are crucial for their decarbonization efforts, enabling a circular process with excess heat from brewing. GEA’s Sales Manager, Matthew Hadwen, hopes that this approach will inspire other companies to follow Heineken’s sustainability example. The project is expected to be completed by the end of 2024.