Policy news round up - April 12 2023
April 12, 2023
Sylvera’s mission is to be a source of truth for the carbon markets. One way we do this is by tracking all policy and regulation developments that make headlines and offer key takeaways.
Here’s a round-up of the most relevant carbon market policy news from the past two weeks:
1. TNFD releases long-awaited final draft on nature-related financial disclosure rules
- Summary: The Taskforce on Nature-related Financial Disclosures (TNFD) released its long-awaited last draft framework for managing and reporting risks and opportunities related to nature, ahead of the final rules slated for publication in September. Full article here.
- Why does it matter? The TNFD is likely to set the global framework for corporate reporting on biodiversity impacts, applying the lessons from its older climate-focused sibling, the TCFD. It may come to encompass nature-related offsetting, but even if not, the way that it frames and quantifies impacts on nature will likely drive the growth of biodiversity credits and nature markets, which could come to rival the VCMs.
2. Lead EU lawmaker on ETS urges immediate deployment of DAC
- Summary: The EU should allow direct air capture to be included in the bloc’s emissions trading scheme and enable offsets from carbon removals projects in non-EU countries after 2030, according to a leading lawmaker. Full article here.
- Why does it matter? The European Parliament's lead rapporteur on the ETS, German MEP Peter Liese, said this week "I want it [DAC] in the EU ETS immediately.” This could turbocharge the DAC market.
3. Canada budget proposes carbon contracts for difference, new clean energy tax credits
- Summary: Canada's budget will introduce a system to lock in future carbon credit prices, a move meant to boost investments by giving businesses certainty to develop low-carbon technologies. Full article here.
- Why does it matter?: Creating a price guarantee for carbon credits would change the market for project developers. If this proposal goes through and is seen as successful it could be copied elsewhere. The eligibility requirements for participation (which could conceivably include minimum quality thresholds) would then have a major role in shaping which projects get set up.
4. India consults on draft carbon credit scheme plan
- Summary: As part of its proposals for a national carbon credit trading scheme, the Indian government set out plans for a market stability mechanism for carbon credits to ensure price stability. Full article here.
- Why does it matter?: Same as for Canada, but applied to one of the biggest issuers of credits in the world.
5. Japan, India announce intention to forge carbon trading partnership under the JCM
- Summary: India is set to become Japan’s next Article 6 carbon trading partner, after the two nations on Friday, March 31st announced they had signed an agreement to initiate talks over signing a Joint Crediting Mechanism (JCM) deal. Full article here.
- Why does it matter? This is a major statement of intent from Japan, and aligns with their rapidly growing ambition for emissions trading. While Japan already has these deals in place with numerous countries, including Indonesia, Mexico and Saudi Arabia, India is by far the biggest in terms of emissions and crediting volumes.
6. Vitol, Nigeria sovereign fund launch carbon joint venture
- Summary: Commodity trader, Vitoland Nigeria's sovereign wealth fund have launched a joint venture to invest in carbon projects in the country, starting with clean cookstoves Vitol and the Nigeria Sovereign Investment Authority (NSIA) will invest in both carbon avoidance and removal projects and said they are close to reaching a final decision on the first projects to finance under a new scheme called CarbonVista. The article also mentions Nigeria "working on a carbon tax". Full article here.
- Why does it matter? This is quite a big bet for Vitol. We can expect to see a lot of those credits hit the market, potentially pushing down prices. Unclear whether the credits will come with a corresponding adjustment, though the option could be on the table for buyers.
7. London Playbook: Green Day — Taking out the trash — Starmer to Swindon
- Summary: Green Day 2023 saw hundreds of pages of energy security and net zero policy popping up on gov.uk in a long-awaited green blitz. Full article: here
- Why does it matter?: These policies contained some positive voices for VCMs. Highlights from section 3.4 page 104 of the UK's latest Green Finance Strategy: -‘The UK government has confirmed its intention to position the UK as a global hub for trading in voluntary carbon markets' -'UK government will consider the potential for their [VCMI & IC-VCM] outputs to serve as a basis for international best practice on market integrity, and the extent to which they could be incorporated within relevant regulatory regimes'
8. General Assembly adopts resolution requesting International Court of Justice provide advisory opinion on states’ obligations concerning climate change
- Summary: On March 29th, the UN General Assembly passed a resolution to request such advice. The initiative was kicked off by the Pacific Island Students Fighting Climate Change, championed by Vanuatu. The ICJ will clarify states’ climate obligations and the consequences under international law if they fail to do so. Although not legally binding, the ICJ's advice carries legal authority and moral weight. Full article: here
- Why does it matter?: “The Court’s advisory opinion will put a spotlight on the obligation of States to ensure that all countries have a right to a healthy and sustainable environment,” the representative of Seychelles said.
9. VCM Integrity Council publishes core carbon principles, programme assessment framework, in next step of offset quality drive
- Summary: The IC-VCM launched its updated Core Carbon Principles and details of how standards will be assessed. This included a slight change in CCPs. Project-category level assessment criteria are expected to be released later this year. Full article here. For more on the CCPs, read here: The role of Core Carbon Principles and Carbon Credit Ratings
- Why does it matter?: Soon, carbon crediting programs, such as Verra's Verified Carbon Standard (VCS), can apply for approval to be labeled as meeting the CCPs if they fulfill the criteria outlined in the newly released Assessment Framework.
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