Global energy-related CO₂ emissions for 2021 were a record 33.7Gt, up from 31.8Gt in 2020. AME forecasts 35.2Gt and 35.1Gt of CO₂ emissions in 2022 and 2023. Emissions increased as the world economy rebounded from the COVID-19 pandemic. Poor weather for renewables and high natural gas prices sent countries crawling back to coal to fuel this recovery.

World CO₂ emissions from coal in 2021 were 15.3Gt, up from 14.4Gt in 2020. AME forecast a further increase to 15.8Gt and 15.6Gt in 2022 and 2023. Oil and gas contributed 10.7Gt and 7.49Gt of CO₂ emissions up from 9.94Gt and 7.16Gt respectively in 2020. AME forecasts CO₂ emissions from oil to be 11.4Gt in 2022 and 11.4Gt in 2023. CO₂ emissions from gas are forecast to be 7.76Gt in 2022 and 7.86Gt in 2023.

EU Accelerates Renewables Uptake to Boot Russian Gas

The EU emitted 2.72Gt of CO₂ in 2021, up 7.5% in 2020. AME is forecasting EU CO₂ emissions to rise to 2.91Gt in 2022 and 2.88Gt in 2023. Europe is expected to source an average of 15GW from coal power in 2022, up from 11GW in 2021. These forecast increases are due to abrupt restrictions placed on Russian gas imports. In the medium-term, coal power will drop again as the EU prepares the REPowerEU plan to accelerate the replacement of fossil fuels with renewables.

The EU Commission unveiled their full REPowerEU plan on 18th May 2022. The package aims to decrease Russian gas consumption by 67% by the end of 2022 and 100% by 2027. A reduction in total energy consumption within the bloc of 13% by 2030 has also been put forward, an increase from the previous 9% target. REPowerEU also proposes an increase of the renewable energy target from 40% to 45% by 2030.

Up to EUR300bn (US$315bn) will be mobilised for the package, EUR75bn (US$79bn) in grants and EUR225bn (US$236bn) in loans. EUR20bn (US$21bn) will be raised via the sale of emissions allowances from the market stability reserve. The commission gave vague assurances that the sale of allowances will be gradual to soften any price impacts. However, there is fear that extra allowances at a lower price may incentivise increasing carbon emissions.

The proposal also targets 10Mtpa of EU hydrogen production and 10Mtpa of imports from outside the bloc by 2030. A target of 35bcm of biomethane by 2030 has also been proposed. EUR27bn (US$28.4bn) is to be allocated for hydrogen electrolysers and infrastructure. An additional EUR41bn (US$43bn) is proposed to be allocated to decarbonising industry, including utilisation of hydrogen and electrification. EUR200m (US$210m) has been allocated to hydrogen research.

While 95% of REPowerEu funding will go to renewables, the remainder will be for fossil fuel investment. The proposal includes EUR10bn (US$10.5bn) for new gas and LNG infrastructure and EUR2bn (US$2.1bn) for oil capacity.

The European parliament’s environment committee has also recommended a policy to drive a 20% reduction in carbon emissions from vehicles by 2025. The EU parliament will vote on the recommendation in June. This follows last year’s commitment to no new petrol or diesel cars by 2035.

Germany will push for EUR60/t (US$62/t) of CO₂ as a minimum price for the EU ETS in June. Poland, Spain, Hungary along with several eastern EU governments oppose the measure as they face voter backlash over rising inflation and energy prices. If the EU votes against the measure in June, Germany will ensure this standard is still implemented nationally.

Source: AME

Plug Power will supply a 1GW electrolyser to H2 Energy's offshore wind-powered hydrogen project in Denmark for 2024. The start of 100ktpa of green hydrogen production is planned for 2025.

The world’s second largest cement producer, Heidelberg Cement announced its aim to cut carbon dioxide emissions by 50% by 2030 (compared to 1990). Heidelberg will invest EUR1.1bn (US$1.2bn) per year in recycled materials and carbon capture from 2025. Heidelberg will aim to reduce CO2 emissions to 400kg of CO2 per t of cement. Their previous target was 500kg/t.

The US Carbon Capture Compromise

The US emitted 4.65Gt of CO₂ in 2021, up from 4.35Gt in 2020. AME currently forecasts US CO₂ emissions from energy to be 4.87Gt in 2022 and 4.87Gt in 2023. The US Energy Information Administration (EIA) forecasts a 2% increase in carbon emissions in 2022 followed by stabilisation in 2023.

The EIA expects petroleum and natural gas emissions will both rise by 3% in 2022. Petroleum emissions will increase by 1% in 2023 while natural gas remains the same. Coal-related emissions are expected to drop 2% in 2022 and 5% in 2023. US plans to retire 12.6GW of coal power in 2022, helping facilitate this decrease. The retirements include the 1.3GW William H. Zimmer plant in Ohio. Renewable’s share of electricity in the US will increase from 20% in 2020 to 22% in 2022 and 23% in 2023.

US decarbonisation efforts are being funnelled into carbon capture as US state and federal governments struggle to pass climate legislation. The Biden government’s biggest decarbonisation package is $12bn within a broader infrastructure bill. Carbon capture in the US has become the compromise between environmental and energy security lobbyists. The Biden administration’s renewables legislation has remained at the mercy of the Democrat Senator for West Virginia since the end of 2021 as they cite energy security concerns.

The Pennsylvania governor entered the Regional Greenhouse Gas Initiative (RGGI)—an initiative of 11 New England and Mid-Atlantic states to reduce GHG emissions from the power sector while generating economic growth—in April 2022 by Executive Order.

Republican lawmakers and the coal industry are pursuing a legal challenge to Pennsylvania’s participation in the RGGI. Joining the RGGI aims to lower Pennsylvania’s CO2 emissions by 97Mt-225Mt by 2030. The Department of Environmental Protection said that Pennsylvania could have raised up to US$200m in 2022 through its involvement.

The First Movers’ Coalition has committed US$10bn to various decarbonisation programs. The First Mover’s CDR program requires verification of carbon removal and the ability to be stored for over 1,000 years.

Frontier Group, including Alphabet, Meta, Shopify and McKinsey, committed to US$925m of carbon removal in April 2022. Alphabet, Microsoft and Salesforce have committed to buying US$500m worth of carbon removal by 2030. Boston Consulting Group has committed to remove 0.1Mt of carbon by 2020. AES, Mitsui OSK Lines and Swiss Re have each committed US$25m to buy 0.05Mt of carbon removal. These commitments come after the First Movers’ Coalition added carbon dioxide removal (CDR) to their program at the 2022 World Economic Forum.

Summit Carbon Solutions will capture and store 12Mtpa of CO2 from 32 corn ethanol plants in the US Midwest. The project has raised more than US$1bn, including from Continental Resources, Tiger Infrastructure Partners, TPG Rise Climate and SK Group.

The Bayou Bend offshore project will inject and store 225Mt-275Mt of CO2 from industry over 25-30 years. It will initially store 4Mtpa-5Mtpa of CO2 and ramp up to 8Mtpa-10Mtpa. University of Texas researchers estimate the carbon storage capacity of the US Gulf Coast at 1000Mtpa.

US-based Sempra Energy has signed a participation agreement with French TotalEnergies SE and Japanese companies Mitsui and Mitsubishi Corporation to develop a carbon capture and storage (CCS) project in Louisiana. The Hackberry Carbon Sequestration project could store up to 2Mtpa of CO2 from Cameron LNG

In May, Spanish utility Naturgy Power Group SAbegan construction of a US$278m 300MW photovoltaic (PV) solar farm in Texas. Commercial operation will commence by end of 2023 and produce around 560GWhpa. The Spanish utility plans to invest over EUR1bn (US$1bn) in the US, targeting an operational capacity of 500MW in 2023 and 1.2GW in 2025.

China Hesitates on Decarbonisation

China emitted 11.95Gt of CO₂ in 2021, up from 11.39Gt in 2020. AME is forecasting CO₂ emissions for China to be 11.79Gt and 11.77Gt in 2022 and 2023. China has not reneged on its plans, announced in 2021, to build an estimated 43 new coal-fired power stations and 18 new blast furnaces.

China’s methane emissions have spiked as a result of their coal boom. China increased coal production by 270Mt from July 2021 to October 2021. A report from Global Energy Monitor says this resulted in an additional 2Mt of methane or 74MtCO₂e emissions. China has 559Mtpa of coal production capacity under construction. This will lead to 6Mtpa (222MtCO₂epa) of additional methane emissions. China currently accounts for 73% of global coal mine methane emissions.

China’s increasing coal production contradicts President Xi Jinping’s previous pledge. In April 2021, he had pledged to limit coal consumption growth in the 14th five-year plan period, 2021-2025, and phase it down in the 15th.

China will also delay the expansion of their national ETS to include cement and aluminium until 2023. Government sources cite data quality for delays, but economic concerns are assumed to dominate thinking.

Most international banks, like HSBC and JP Morgan Chase, have committed to not funding new coal projects. Chinese banks have helped coal companies raise around US$10bn so far in 2022, more than double the US$3.8bn raised over the same period in 2021. China currently has 260GW of coal power planned or under construction. China is aiming for peak carbon emissions by 2030 and achieving net zero by 2060.

Canada’s Brookfield Asset Management plans to develop and build solar and wind plants to power BASF's under-construction US$8bn to US$10bn chemical plant in Zhanjiang, China. The two companies have signed a term sheet for a 25-year power purchase agreement (PPA) with a fixed cost mechanism, based on the levelised cost of energy concept. The Zhanjiang Verbund site is due for completion by 2030.

Source: AME

India

India emitted 2.54Gt of CO₂ in 2021, up from 2.30Gt in 2020. AME forecasts India will emit 2.48Gt of CO₂ in 2022 and 2.47Gt in 2023. The city of Mumbai has announced a plan for net zero by 2050. The city will invest INR130bn (US$1.7bn) in 2,100 electric buses by 2023. Low-income housing will also be retrofitted for energy saving. However, Mumbai currently has no plans for how to replace its 3.4GW of power generation with renewable electricity.

As of April 2022, Tata Power and a BlackRock Real Assets-led consortium have agreed to invest US$525m in Tata Power Renewables. Tata Power Renewables has 4.9GW of renewable energy capacity and is aiming for 20GW by 2027.

Japanese trading house Mitsui has agreed to invest in a US$1.3bn 1.3GW and 100MWh hybrid renewable energy project in India, ReNew Power. The project will begin operations by August 2023. Solar Energy Corporation of India (SECI) will buy 400MW of power at INR2.90/kWh (US$0.038/kWh), which will increase by 3% annually for 15 years.

Rest of the World

Japan emitted 1.1Gt of CO₂e in 2021 steady from 2020. Japan will be commencing a trial national carbon credit market between April 2022 and March 2023.

Indonesia will bring in a carbon tax by July 2022. A pilot program will target Indonesia’s coal power sector. A tax rate of Rp30kg (US$2.1/t) has been initially proposed but may be increased to be more competitive with global rates.

Israel will vote on its first climate bill in the next month.  As part of the legislation, they will aim to reduce their emissions by 27% by 2030 (compared to 2015).

The Australian Labor party has claimed victory in the 2022 Federal Election. Labor has promised emissions reductions of 43% by 2030 from 2005 levels. The Greens and independents of an expanded crossbench have proposed 75% and 50-60%.

Labor has also promised to amend the Safeguard Mechanism of Australia’s carbon market to implement a declining emissions baseline. The baselines will come into effect in 2023 and decline by 5MtCO₂e per year.

Japan’s J-Power and Australian Genex Power will develop up to 200MW of wind power in Queensland. The duo expects to break ground in 2023, while the wind farm could start commercial operations in 2025.

Conclusion

The EU’s decarbonisation plan, RepowerEU, sets ambitious goals, despite the energy crisis. The US is investing heavily in carbon capture, despite the struggle to pass legislation for renewables infrastructure. China’s hesitancy on decarbonisation will give short term economic gains at the cost of the developed world and further reputational damage. In India, the city of Mumbai has announced a net zero target, 20 years ahead of the rest of the country. Australia has elected a new government with greater ambitions to decarbonise. Japan is preparing a carbon credit market to commence within the year while Indonesia will apply a carbon tax in July 2022.