Global natural disasters caused $160 billion in damage in 2018 and climate change was a factor in the final tally, a new report released by German Insurance Company Munich Re says. In its annual report, the company estimates the cost of disasters that include weather events like tornadoes and hurricanes, wildfires, tsunamis and earthquakes.
As with the previous year the United States suffered the heaviest losses from disasters globally. Wildfires dealt $24 billion of damage in California, while Hurricanes Florence and Michael accounted for a combined $30 billion.
Also, Japan hit by an unusually high number of natural catastrophes. In 2018 Japan suffered at the hands of both weather-related disasters and geophysical natural catastrophe, including at least seven typhoons that either skirted or hit the country’s islands. The costliest was Typhoon Jebi with overall losses of $12.5 billion, making it the fourth costliest worldwide.
Another important data that we can highlight is that Europe was spared dramatic one-off disasters in 2018, but a long summer drought inflicted around $3.9 billion in direct losses, especially in agriculture.
Munich Re notes that human-caused climate change is playing a role in the devastation felt worldwide from disasters.
“2018 saw several major natural catastrophes with high insured losses. These included the unusual phenomenon of severe tropical cyclones occurring both in the U.S. and Japan while autumn wildfires devastated parts of California. Such massive wildfires appear to be occurring more frequently as a result of climate change. Action is urgently needed on building codes and land use to help prevent losses”, Munich Re Board member Torsten Jeworrek said.
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A report by the European Union’s Copernicus Climate Change Service showed last year was the fourth hottest since the organization began the study.
Average world surface air temperatures were 14.7°C last year, just 0.2°C off the highest record in 2016, scientists said in the first global assessment based on full-year data.
The report warned that the temperature of the last five years was 1.1°C higher than the average of the pre-industrial era.
Last year, Europe was especially warm and saw many countries in the Northern Hemisphere experience a rare, summer heatwave. However, Capurnicus said temperatures on the continent were less than 0.1°C below those of the two warmest years on record, 2014 and 2015.
Among other extremes in 2018, California and Greece suffered severe wildfires, Kerala in India had the worst flooding since the 1920s and heatwaves struck from Australia to North Africa.
Around Antarctica, the extent of sea ice is at a record low at the start of 2019, according to the U.S. National Snow and Ice Data Center.
The study also warned that CO2 emissions, one of the key greenhouse gases causing the greenhouse effect, have continued to rise.
You can read the full report here
Meeting the goals of the Paris Agreement could save about a million lives a year worldwide by 2050 through reductions in air pollution alone. The latest estimates from leading experts also indicate that the value of health gains from climate action would be approximately double the cost of mitigation policies at global level, and the benefit-to-cost ratio is even higher in countries such as China and India.
A WHO report launched at the United Nations Climate Change Conference (COP24) highlights why health considerations are critical to the advancement of climate action and outlines key recommendations for policy makers.
Exposure to air pollution causes 7 million deaths worldwide every year and costs an estimated US$ 5.11 trillion in welfare losses globally. In the 15 countries that emit the most greenhouse gas emissions, the health impacts of air pollution are estimated to cost more than 4% of their GDP. Actions to meet the Paris goals would cost around 1% of global GDP.
The same human activities that are destabilizing the Earth’s climate also contribute directly to poor health. The main driver of climate change is fossil fuel combustion which is also a major contributor to air pollution.
WHO’s COP-24 Special Report: health and climate change provides recommendations for governments on how to maximize the health benefits of tackling climate change and avoid the worst health impacts of this global challenge.
Some of these recommendations are:
-Identifying and promoting actions that both cut carbon emissions and reduce air pollution, and by including specific commitments to cut emissions of Short Climate Pollutants in their National Determined Contributions.
-Ensuring that the commitments to assess and safeguard health in the UNFCCC and Paris Agreement are reflected in the operational mechanisms at national and global levels.
-Removing barriers to investment in health adaptation to climate change, with a focus on climate resilient health systems, and climate smart healthcare facilities.
-Engagement with the health community, civil society and health professionals, to help them to mobilize collectively to promote climate action and health co-benefits.
-Promoting the role of cities and sub-national governments in climate action benefiting health, within the UNFCCC framework.
-Formal monitoring and reporting of the health progress resulting from climate actions to the global climate and health governance processes, and the United Nations Sustainable Development Goals.
-Inclusion of the health implications of mitigation and adaptation measures in economic and fiscal policy.
You can download the report here
European carbon allowances ended December at €25.01, posting a 200% gain for the year. The much-anticipated expiry of the December 2018 options contract proved anti-climactic, and prices consolidated ahead of a widely-expected surge in January.
The market set numerous records in 2018, including a ten-year intraday high of €25.79 and the largest annual front-year screen traded volume on ICE Futures of more than 4 billion EUAs.
Carbon prices rose in 19 of the last 20 months, and analysts are generally bullish on the prospects for further increases in 2019.
The month of December saw EUA prices continue to recover from the collapse in October and November, rising 21% over the course of the month from €20.63 to €25.01.
Numerous traders began the month positioned for the expiry of the December 2018 options contract. Futures prices centered around the €20 mark for the first two weeks, reflecting the large open interest in options with a strike price at €20.
Once the options had expired, prices began to move upwards sharply and had risen back above €24 by the time the December futures expired on December 17.
Over the holiday period the December 2019 contract, which is now the benchmark for the market, consolidated at around €25 as trading activity fell away.
The outlook for January is generally seen as strong, as the Market Stability Reserve starts operation. The MSR will remove around 40% of all auction supply in 2019 as pat of a multi-year effort to remove the market’s approximately 1.6 billion EUA surplus.
However, additional upside risk has been added by a delay to German auctions, which are expected to resume later in the first quarter. At the same time, UK auctions have been suspended for the first quarter, as the UK government awaits Parliamentary approval of its withdrawal agreement.
Brexit will have a sharp but brief impact on the market, most sources agree. A failure by the UK parliament to ratify the withdrawal agreement may lead to a “no-deal” scenario in which the UK leaves the EU on March 29 without any transitional arrangements in place.
This may trigger a short-term surge of selling of surplus pre-2019 allowances by UK emitters, while others may also transfer allowances to affiliated companies on the continent.
However, if Parliament approves the Brexit deal, this would allow UK companies to continue participating in the EU ETS until the end of the current phase in 2020, and may lead to a slight drop in prices, since the UK is net long EUAs, most sources say.
Participants expect EUA prices to target the recent multi-year high at €25.79, before moving further ahead as the lack of new supply begins to bite.
COP24 annual UN climate conference concluded on Friday evening in Katowice, Poland, and we want to comment the outcomes.
The agreed ‘Katowice Climate Package’ is designed to operationalize the climate change regime contained in the Paris Agreement as it includes guidelines that will operationalize the framework by setting out how countries will provide information about their Nationally Determined Contributions (NDCs), which includes mitigation and adaptation measures as well as details of financial support for climate action in developing countries.
The main issues from COP24 still to be resolved concern the use of cooperative approaches, as well as the sustainable development mechanism, as contained in the Paris Agreement’s Article 6. The Article 6 would allow countries to meet a part of their domestic mitigation goals through the use of so-called “market mechanisms”.
In this aspect, specifically Article 6.4, intends to replace the Kyoto Protocol’s “Clean Development Mechanism” (CDM) for carbon offsets and the main discussion was centred on how or whether to carry forward the offsets, schemes and methodologies drawn up under the CDM – and whether to place limits on their use for meeting pledges under the Paris Agreement.
There were also arguments around how double counting relates to emissions cuts taking place in sectors not covered by a country’s climate pledge (“outside” the NDC, as opposed to “inside” it). These matters appear to have been unresolved as of the end of COP24 and governments look set to resume talks next year at the COP25 in Chile on a framework for international emissions trade under the Paris Agreement’s Article 6.
Also we want to publish here IETA observations of the negotiations in Katowice. IETA explains in the report published on their website that more than two weeks of tough negotiations in the city of Katowice reached agreement on the bulk of a plan to implement the Paris Agreement. It is being hailed as a major landmark for transparency and reporting, but it failed to agree on the chapter governing Article 6 of the Paris Agreement. Despite several days of talks at ministerial level, the impasse could not be broken, and Article 6 decisions were set aside, to be revisited in 2019.
The only positive market provision in the Katowice Package is a basic reporting provision for market transfers, found in the Transparency rules for Article 13 (paragraph 77). Even this section relies on the more detailed guidance that is still incomplete.
According to IETA, The key outcomes from the two weeks include:
-The Paris Agreement Rule Book, which elaborates rules governing the reporting of emissions, regular stocktakes on progress in mitigation, adaptation, financial flows, addressing loss and damage, and a commitment to boost the ambition of Nationally Determined Contributions (NDCs).
-Formal acknowledgement of the Intergovernmental Panel on Climate Change (IPCC)’s Special Report on Pathways to 1.5°C.
-Conclusion of the Talanoa Dialogue, the year-long process of sharing stories and experiences that was designed to build trust and confidence in the multilateral approach and encourage ambition.
-A proposal by the UN Secretary General Antonio Guterres to convene a Climate Summit in September 2019.
-A mandate for the chair of the SBSTA to continue negotiations over the implementation of Article 6 of the Paris Agreement.
-Agreement to meet in Chile for COP25, although the date and specific venue are still uncertain.
You can download the full report here
Carbon prices ended the month of November at €20.50, a gain of 25% from the closing price at the end of October. Screen trading volume in the front-year contract on ICE Futures totaled 432 million EUAs.
The market kicked off November by dropping to €15.10, its lowest level since July, as speculators continued to unwind length following the retreat from September’s ten-year highs.
But prices recovered very quickly to the €18.00-20.00 channel, and daily trading range steadily narrowed into a band between €19.20 and €20.50, representing the 38.2% and 61.8% Fibonacci retracement levels of the drop from September’s high to the November low.
Coincidentally at the centre of this band is the critical €20 level that is increasingly being viewed as the centre of gravity for the December futures market. Earlier in the year open interest in the December €20 call option was the highest of all strike prices, though open positions have tumbled as the contract expiry approaches.
Trading activity has become increasingly dominated by hedging activity around the outstanding €20 call options, and this was reflected in November’s increasingly narrow price band.
Energy fundamentals have also helped support carbon prices. German calendar 2019 baseload power gained 8.9% over the month, while calendar 2019 API2 coal declined 6% and TTF calendar 2019 gas edged up just over 1%. The result was a clear shift in favour of coal-fired generation and therefore demand for carbon.
By mid-month the calendar 2019 clean dark spread had risen to its highest levels so far this year as coal prices declined from the low $90s/mt into the mid-$80s/mt. At the same time, the clean speak spread continued its steady improvement, rising from around -€3.00/MWh at the start of November to around -€1.00/MWh by the end.
Traders believe EUA price volatility will pick up again over the first two weeks of December, as options hedging shifts into high gear as the expiry of the contract takes place on 12 December.
Preceding the option expiry is the much-anticipated vote in the UK Parliament on the negotiated WIthdrawal Agreement. At present, the odds appear to favour a rejection of the deal, and therefore an increased risk of a “hard” Brexit on March 29 next year.
This implies that UK installations may begin to either sell surplus EUAs, or shift their portfolios to registry accounts in other EU member states in anticipation of that date, as UK access to the EU registry will likely be stopped at the end of March.
Numerous participants have suggested that a significant sell-off is unlikely since many of the largest installations are affiliated to EU entities and will threfore simp[ly transfer their allowances across the Channel. However, there remains a strong possibility that some selling will take place.
The final major market event of the year is the expiry of the December futures contract on 17 December. Open interest in the benchmark is currently 413 million EUAs, the lowest it has been on November 30 since 2012.
General expectations are for prices to begin to recover after the holiday season, with some forecasts calling for levels in excess of €32 during the first quarter of 2019. Much will depend on how soon German auctions resume and on the UK government’s response to the Brexit vote in Parliament.
Major transformations are underway for the global energy sector, from growing electrification to the expansion of renewables or upheavals in oil production. Across all regions and fuels, policy choices made by governments will determine the shape of the energy system of the future.
At a time when geopolitical factors are exerting new and complex influences on energy markets, underscoring the critical importance of energy security, World Energy Outlook 2018, the International Energy Agency’s flagship publication, details global energy trends and what possible impact they will have on supply and demand, carbon emissions, air pollution, and energy access.
The WEO’s scenario-based analysis outlines different possible futures for the energy system across all fuels and technologies.
Oil markets, for instance, are entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s. Solar PV is charging ahead, but other low-carbon technologies and especially efficiency policies still require a big push.
In all cases, governments will have a critical influence in the direction of the future energy system. Under current and planned policies, modeled in the New Policies Scenario, energy demand is set to grow by more than 25% to 2040, requiring more than $2 trillion a year of investment in new energy supply.
In power markets, renewables have become the technology of choice, making up almost two-thirds of global capacity additions to 2040, thanks to falling costs and supportive government policies. This is transforming the global power mix, with the share of renewables in generation rising to over 40% by 2040, from 25% today, even though coal remains the largest source and gas remains the second-largest.
This expansion brings major environmental benefits but also a new set of challenges that policy makers need to address quickly. With higher variability in supplies, power systems will need to make flexibility the cornerstone of future electricity markets in order to keep the lights on. The issue is of growing urgency as countries around the world are quickly ramping up their share of solar PV and wind, and will require market reforms, grid investments, as well as improving demand-response technologies, such as smart meters and battery storage technologies.
Electricity markets are also undergoing a unique transformation with higher demand brought by the digital economy, electric vehicles and other technological change.
The IEA’s Sustainable Development Scenario offers a pathway to meeting various climate, air quality and universal access goals in an integrated way. In this scenario, global energy-related CO2 emissions peak around 2020 and then enter a steep and sustained decline, fully in line with the trajectory required to achieve the objectives of the Paris Agreement on climate change.
More information here
An upsurge in demand for renewable energy from multinational companies is now shifting markets away from fossil fuels in more than 140 markets worldwide
A dramatic upsurge in demand for renewable energy from ambitious multinational companies is now shifting markets away from fossil fuels in more than 140 markets worldwide, a new RE100 report reveals.
RE100 is the corporate leadership initiative led by The Climate Group in partnership with CDP, bringing together the world’s most influential businesses committed to 100% renewable power.
Identifying Japan, Australia, Mexico, Turkey and Taiwan as growth hotspots, the RE100 Progress and Insights Annual Report Moving To Truly Global Impact shows a 41% increase in renewable electricity sourced by RE100 companies in 2017, compared to 2016.
With the falling cost of renewables strengthening the business case for switching, 37 companies are already over 95% renewable, and six members reached their 100% goal for the first time.
Other key findings of the report are:
-More than three in four members are targeting 100% renewable electricity by or before 2030;
-Most members are based in Europe (77), followed by North America (53), Asia (24), and Oceania (1) – with 10 of the 37 new joiners in 2018 based in Japan;
-On average, members are sourcing over a third of their electricity from renewables (38% in 2017);
-Several members have surpassed interim targets – showing businesses can go faster than they first expect;
-IT companies lead on progress (averaging 73% renewable electricity in 2017), and there has been significant improvement from Health Care and Financials;
-The highest share of renewable electricity is still being sourced in Europe (62% in 2017), with Denmark (93%), the UK (82%) and Switzerland (81%) coming out on top;
-Renewable electricity sourced via power purchase agreements (PPAs) almost doubled in 2017, compared to 2016 – an increasingly popular sourcing method;
-As last year, companies see the economic case as a key driver for going 100% renewable, and policy barriers are the most commonly cited barrier;
-Increasingly, members are engaging with policymakers and suppliers to further increase the uptake of renewable electricity.
You can download the report here
Governments need to raise carbon prices much faster if they are to meet their commitments on cutting emissions
Governments need to raise carbon prices much faster if they are to meet their commitments on cutting emissions and slowing the pace of climate change under the Paris Agreement, according to an OECD report.
Effective Carbon Rates 2018: Pricing Carbon Emissions through Taxes and Emissions Trading presents new data on taxes and tradeable permits for carbon emissions in 42 OECD and G20 countries accounting for around 80% of global emissions. It finds that today’s carbon prices – while slowly rising – are still too low to have a significant impact on curbing climate change.
The report shows that the carbon pricing gap – which compares actual carbon prices and real climate costs, estimated at EUR 30 per tonne of CO2 – was 76.5% in 2018. This compares favourably with the 83% carbon gap reported in 2012 and the 79.5% gap in 2015, but it is still insufficient. At the current pace of decline, carbon prices will only meet real costs in 2095. Much faster action is needed to incentivise companies to innovate and compete to bring about a low-carbon economy and to stimulate households to adopt low-carbon lifestyles.
The vast majority of emissions in industry and in the residential and commercial sector are entirely unpriced, the report finds. The carbon pricing gap is lowest for road transport (21% against the EUR 30 benchmark) and highest for industry (91%). The gap is over 80% in the electricity and the residential and commercial sectors.
Country analysis on 2015 carbon prices shows large variations, with carbon pricing gaps ranging from as low as 27% in Switzerland to above 90% in some emerging economies. France, India, Korea, Mexico and the United Kingdom substantially reduced their carbon pricing gaps between 2012 and 2015. Yet, still only 12 of the 42 countries studied had pricing gaps of below 50% in 2015.
New carbon pricing initiatives in some countries, such as China’s emissions trading scheme and renewed efforts in Canada and France to price carbon, could significantly reduce these gaps.
EUA prices snapped a 17-month winning streak in October, losing nearly 23% as the market tumbled from €21.21 on September 28 to close at €16.36 on October 31. In euro terms, it was the largest monthly drop in ten years.
On the way down the front-December contract set a new volume record on Ice Futures, with screen trades totaling 576 million EUAs, as traders scrambled to unwind profitable positions.
Most of the damage was done in the second half of the month, as the pace of profit-taking increased following the Carbon Forward conference in London. At the event, senior traders and analysts warned of increased volatility between now and the end of the year as speculators managed massive options exposure, a significant price drop in December, while price forecasts ranged between €25-40 in 2020, and €17-29 by 2030.
The market came away from the conference with the sense that the year’s bull-run was well and truly over, and this triggered a slump in prices starting from €19.27 on October 17 (the first day of the event), representing about two-thirds of the monthly loss.
Timespreads had also enjoyed a strong performance in the previous two months, with the December 2018-December 2019 spread wideing from €0.27 in mid-August to €0.98 two months later. This took the implied cost of carry well beyond the market norm, and traders increasingly sold the spread on the basis that they could finance the carry trade internally much more cheaply.
After mid-month, however, spreads began to shrink as outright prices retreated and buying interest at the wider differentials disappeared. This opened up a profitable buying opportunity for those traders who had shorted the spread, and by the end of October the December 2018/2019 differential was back below €0.30.
There were political headwinds too. The Polish government called for EU intervention in the market, saying that prices had reached a level where additional EUAs could be injected into the market. However, only Romania voiced any support, and as the month ended the “trigger” point for intervention seemed further away.
Continuing uncertainty over Brexit continued to underpin the market, with the UK government issuing an advisory note to business on what may happen in the event of a “no-deal” Brexit. Coupled with statements by the Energy & Climate Minister Claire Perry, there seems to be a growing sense that the UK’s long-term objective, “no-deal” Brexit or not, is to set up its own emissions trading system and link it to the EU’s market.
In the meantime, a no-deal outcome would see UK industry paying a new Carbon Emissions Tax of £16/tonne, while the present Carbon Price Support will continue at £18/tonne. Numerous observers pointed out that this may mean UK industry would get a “free pass” in the first quarter of 2019 if the UK crashes out of the EU with no deal, as the tax would only take effect from April 1 2019.