Green Markets - June 16, 2024
Green Markets - June 16, 2024
News in environmental markets.
Green Markets is a daily series dedicated to highlighting events of interest that could impact investments within environmental markets.
This post recaps news from the last few weeks/months. Next week, this series will be released daily. Green Markets will remain free.
Government/Regulatory
The leaders of the G7 nations repeated their commitment to fighting the climate crisis, pollution, and biodiversity loss in recent meetings.
The World Bank is issuing a new bond to raise $200M for projects focused on sustainability and reforestation in Brazil’s Amazon forest.
As negotiations are ongoing for a UN global plastics treaty, Rwanda and Peru are proposing reducing the production of plastic by 40% over the span of fifteen years.
Agritech/Agriculture
The U.S. Department of Agriculture is releasing $300M in funding for more than 60 organizations that are working to diversify American agricultural exports.
The U.S. National Fish and Wildlife Foundation (NFWF) is releasing $10.2M in grants to support conservation practices on farms and ranches across 14 states.
ADM and Bayer are expanding their collaboration to promote regenerative agriculture in Europe. Key takeaways from iGrow News:
ADM and Bayer extend their collaboration to promote regenerative agricultural practices in Europe.
The program will expand to include more crops and regions in Eastern Europe.
Farmers will receive financial and technical support to implement regenerative practices.
Preliminary studies show significant carbon emission reductions with regenerative practices.
The initiative aims to build a resilient, sustainable supply chain with a lower carbon footprint.
Battery Metals
Goldman Sachs is “selectively bullish” on certain commodities, particularly mentioned copper, gold, and oil.
BHP, a global mining operator, has given up on a potential $49B bid for rival Anglo American (AAL) after it’s repeatedly refused buyout offers.
BHP is negotiating with a union representing workers at the Spence copper mine in Chile to avoid potential strikes.
According to Macquarie, inventory levels continue to rise in the lithium market, keeping a lid on any potential price increases, specifically Chinese inventories.
Occidental Petroleum and BHE Renewables are entering a joint venture to utilize TerraLithium’s Direct Lithium Extraction (DLE) technology to extract lithium from Berkshire’s geothermal facility in California.
Jeff Currie, previously global head of commodities research at Goldman Sachs, views the opportunity in the copper market as “the best of my career.” The International Energy Agency (IEA) predicts that existing mines and projects will only meet approximately 80% of the forecasted copper demand by 2030.
Copper production output from Codelco, Chile’s state-run mining firm, has dropped by 6% compared to April's data.
Codelco and SQM have finalized a partnership to increase lithium carbonate equivalent production by 300,000 from 2025-2030.
China's rare earth elements (REEs) exports have risen by 36% due to a spike in overseas buyers' restocking efforts.
Biofuels/Chemicals
The U.S. Department of Energy released a summary report on its findings regarding building out Sustainable Aviation Fuel (SAF) supply chains. U.S. agencies DOE, DOT, and DOA aim to fuel sufficient SAF production to meet all U.S. aviation fuel demand by 2050 and achieve at least a 50% reduction in life-cycle greenhouse gas emissions compared to conventional fuel.
The International Air Transport Association (IATA) projects that SAF production is going to triple in 2024. SAF is estimated to provide 65% of the carbon emissions mitigation needed for airlines to achieve net zero by 2050.
Cemex, a leading building materials supplier, has announced a renewable natural gas (RNG) fueling agreement with Clean Energy Fuels Corp to power 39 of Cemex’s cement bulk trucks in southern California.
Sevana Bioenergy, an operator of RNG facilities, has acquired the Rialto Bioenergy Facility in California.
Carbon Capture
The U.S. DOE has reaffirmed that there are opportunities to receive nearly $6B in federal funding thanks to 48C tax credits. These tax credits are available to any industrial facility on a path to decrease carbon emissions by a minimum of 20%.
Canadian Finance Minister Chrystia Freeland says that a major federal tax credit for carbon capture projects is almost in place. Legislation for the tax credit is in its second-to-last state in the Senate.
The Canada Growth Fund, a governmental financing agency, is signing an offtake agreement with waste-to-energy facility operator Varme Energy for 200,000 carbon credits per annum.
SLB is partnering with Brooke Holding, a Malaysian O&G firm, to develop a carbon capture and storage (CCS) hub in Sarawak, Malaysia.
Oxy Low Carbon Ventures (a subsidiary of Occidental Petroleum) has partnered with TAE Technologies to develop emissions-free power and heat for DAC facilities.
Compliance Carbon Markets (CCMs)
Analysts estimate that the second emissions trading system in the European Union (EU ETS2) will see carbon allowance prices increase by 4x in the first four years of operation.
The Greek shipping sector could face over $1B in total costs from compliance with the EU ETS. This is according to the carbon consultancy firm OceanScore.
BloombergNEF predicts that EU emissions allowances (EUAs) prices will:
“Dip to an average of €65 per metric ton ($70/t) this year, before more than doubling to €146/t by the end of the decade. Prices could approach the €200/t milestone in 2035 if policy parameters remain unchanged.”
Taiwan may be introducing a new cap-and-trade framework.
Voluntary Carbon Markets (VCMs)
A carbon project ratings agency has found that poor-quality carbon credit issuances have been cut in half in 2024, thanks to new oversight changes by standards bodies in the VCMs.
Kita, a carbon credit insurance provider, is now allowed to insure companies throughout the EU and EEA. This is in addition to existing jurisdictional coverage for companies in the UK, USA, Canada, Singapore, and Switzerland. Carbon insurance helps derisk the purchasing of carbon credits, especially investment in early-stage project developments.
Oka, a carbon insurance company has partnered with carbon project developer DelAgua to provide the first Paris Agreement Article 6 carbon credit insurance. This product will specifically protect against credits potentially losing their designation as Corresponding Adjustments under Article 6.
The Integrity Council for the Voluntary Carbon Market (ICVCM), a carbon credit standards body, has announced its first set of Core Carbon Principles (CCP) approved credits. Seven carbon methodologies were approved in total, allowing around 27M credits to garner the CCP label.
Microsoft is taking delivery of nearly 1M nature-based carbon removal credits from carbon developer Anew Climate.
An Ex Goldman Sachs director has teamed up with law firm Linklaters and nonprofit Scope 3 Climate Capital to develop a potential alternative to carbon credits. This alternative financial product is known as a sector-transition acceleration contract (STAC). Here’s an example of how it works, from Bloomberg:
The product is a sector-transition acceleration contract, or STAC. While a carbon credit is supposed to represent one ton of avoided or removed CO2 from the atmosphere, often through environmental projects in developing countries, a STAC functions as a direct transaction between a company and its supplier. Companies that use STACs essentially reward their suppliers for emissions cuts by, for example, placing money budgeted for credits into escrow accounts, to be released to suppliers once they’ve met climate milestones.
Electric Vehicles & Energy Efficiency
Elon Musk's $45B pay package was approved by the shareholders of Tesla.
Volkswagen EV sales have surpassed Tesla’s in Germany. That said, overall EV sales in the country were down 30% year over year.
General Motors just recorded its best month of sales of electric vehicles ever.
China is providing $845M in funding to assist six firms in developing next-generation battery technology for electric vehicles.
According to Crunchbase, EV charging start-ups are still receiving significant levels of funding. The largest 10 recipients alone have received approximately $2.4B in investment capital.
Hydrogen
Seven EU countries (Estonia, France, Germany, Italy, the Netherlands, Slovakia, and Spain) are providing $1.5B in funding for hydrogen R&D projects across the European bloc.
The European Hydrogen Bank has announced a budget for an auction this year that would amount to €1.2B for hydrogen projects.
The Gas Authority of India (GAIL) just commissioned its first green hydrogen plant in Madhya Pradesh.
TotalEnergies and Air Products signed a 15-year agreement starting in 2030 to supply 70,000 tons of green hydrogen annually.
Meld Energy is developing a 100 MW green hydrogen production facility in Hull, UK. The project recently received outline approval.
UAE’s Abu Dhabi Department of Economic Development (ADDED) is partnering with Broaden Energy to launch a $272M hydrogen manufacturing hub.
Brazil’s Electrobras, Latin America’s largest utility company, has signed a memorandum of understanding (MOU) with infrastructure company Prumo to produce green hydrogen in Rio de Janeiro.
Origin Energy and Orica have been granted $137M from the Australian New South Wales government to build a new hydrogen hub.
Liquified Natural Gas (LNG)
Goldman Sachs analysis reveals that the LNG market could see an 80% increase in supply by 2030. This is primarily thanks to new projects in Qatar and North America.
The Abu Dhabi National Oil Company (ADNOC) is awarding $5.5B in contracts to build out the new Ruwais LNG facility by 2028. This project would more than double the UAE’s LNG production capacity.
TotalEnergies signs LNG agreements with Indian Oil Corp and Korea South-East Power for 5-10 years, starting from 2026-2027. In aggregate, TotalEnegies will deliver up to 1.3M metric tons of LNG to the two companies.
The Golden Pass LNG export terminal in Texas, owned by QatarEnergy and ExxonMobil, is set to continue construction as the previous engineering firm has struck a deal with two other EPCs to keep working on the new terminal.
Mexico Pacific Limited has announced another $15B investment in LNG projects located in northern Mexico over the next 2-3 years. This brings the firm’s total investments in Mexico up to $30B.
Saudi Aramco, the state-owned Saudi Arabian O&G company, signed a 20-year LNG offtake agreement with NextDecade for LNG from their Rio Grande LNG export terminal in Texas.
Tellurian is in discussions with Saudi Aramco and Woodside Energy Group to potentially invest in a LNG export project in Louisiana.
Pembina Pipeline Corp and Haisla Nation are expected to make their final investment decision on the proposed Cedar LNG floating gas-export project in British Columbia in the next few weeks. The project is expected to cost $4B.
According to Energy Intelligence, Japan is likely to increase its emphasis on LNG power generation in the government’s 2040 energy plan. The outline is set to be released by March 2025.
JERA, Japan’s largest power generation company, is selling some of its stake in the U.S. Freeport LNG facility to Japex for $380M. Freeport LNG owns 63.5% of the project and Osaka Gas owns the other 10.8%.
Shell is finalizing the purchase of Pavilion Energy’s LNG assets from the Singapore sovereign wealth fund Temasek Holdings. Shell will become the largest gas supplier of Singapore thanks to this deal.
Nuclear Energy
Goldman Sachs sees the potential for up to $1.5T in new investment in the nuclear power sector by 2050.
On May 13th, the Biden administration signed the Prohibiting Russian Uranium Imports Act, which banned uranium imports from Russia. The bill also released $2.7B in government funding to rebuild the U.S. nuclear fuel industry.
The U.S. DOE is dedicating an $180M fund to developing fusion energy technologies.
U.S. Senate Majority Leader Chuck Schumer is set to call a vote on the Accelerating Deployment of Versatile Advanced Nuclear for Clean Energy (ADVANCE) Act, a bipartisan nuclear package. It’s goal is to boost nuclear reactor deployment in the United States.
U.S. Energy Secretary calls for more nuclear power in the United States.
The U.S. Army is taking proposals for microreactor designs that could be commissioned on two domestic military bases.
Terrapower, Bill Gates’ nuclear energy start-up, recently broke ground on a new, advanced nuclear power plant in Wyoming.
France has recently announced its decision to build eight new nuclear power plants. The first reactors should be operational by 2035-2037.
If approved in a national referendum, Kazakhstan could potentially spend between $10B and $12B on construction of its first nuclear power plant. The referendum date will be set after public consultations.
Westinghouse, a leading supplier of nuclear reactor technology in North America, has opened a new engineering hub in Kitchener, Canada.
Renewable Energy
Turkey expects to invest over $73B in renewable energy projects over the next dozen years. The country is projecting to add 74,353 MW of installed renewable energy capacity by 2035.
Applications are now open to receive up to $1.3B in funding through an electric vehicle charging initiative from the Biden administration.
Switzerland recently approved a law dedicated to developing a secure electricity supply from renewable energy sources.
Google signs its first renewable energy power purchase agreements with Clean Energy Connect and Shizen Energy in Japan
Avangrid and CPS Energy have signed a power purchase agreement for a 161 MW portion of a wind farm in Texas.
Arevia Power and NV Energy (a subsidiary of Berkshire Hathaway) have signed a power purchase agreement for the largest solar and battery storage project in Nevada.
Ørsted, a leading renewable energy provider, has completed a 518MW wind and solar project in Texas
Water
U.S. EPA announced the final National Primary Drinking Water Regulation (NPDWR) for six types of per-and polyfluoroalkyl substances (PFAS). Public water systems have three years (2027) to start monitoring PFAS levels in drinking water, then they will have to implement solutions to limit these pollutants by 2029.
Two water utility associations are filing a petition with a federal court to challenge the EPA’s new rule for PFAS limits.
The Biden administration has announced a $1B investment to combat PFAS pollution in drinking water.
The U.S. Department of the Interior is providing an initial $700M investment in long-term water conservation projects for the Colorado River in the southwestern United States.