Welcome to the AFS Energy Weekly Roundup, your go-to source for insights on energy markets, renewable developments, carbon trading, and regulatory updates. Here's what you need to know this week:
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Macroeconomics

Oil Prices Surge Amid New U.S. Sanctions

Oil markets are witnessing a sharp rally as the United States announced new sanctions targeting Russian crude exports to China and India. Brent crude prices surged above $80 per barrel, marking a four-month high. Analysts at Goldman Sachs highlighted that the sanctions impact approximately 1.7 million barrels per day, or 25% of Russian oil exports. The tightened supply has widened backwardation in the oil market, signaling significant short-term constraints.

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Southern California Braces for High Fire Risk

Santa Ana winds are forecasted to intensify, exacerbating fire risks in Southern California. With the Palisades and Eaton fires already devastating 38,000 acres, preemptive measures include deploying additional fire crews and resources across the region. These fires rank among the costliest natural disasters in U.S. history.
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Carbon Markets

Compliance Carbon Markets

European carbon prices rebounded sharply on Friday, recovering from early losses. Boosted by rising crude prices and broader energy market momentum, European Union Allowances (EUAs) trimmed weekly losses to just 1.4%, reflecting robust market dynamics.

Voluntary Carbon Markets

South Korea and Honduras signed a partnership to enhance REDD+ projects. This collaboration aims to scale forest-based carbon credit generation, aiding South Korea in meeting its 2030 climate targets.

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Renewable Markets

Europe’s Wind Energy Set to Outpace Coal

Wind energy in Europe is poised to surpass coal-generated electricity in 2025, a pivotal moment in the continent's energy transition. Wind farms generated 616 TWh in 2024, just 4% shy of coal's 641 TWh. A shift in natural gas availability could temporarily bolster coal usage, but wind energy's upward trajectory remains strong.

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Gas and Biofuel Markets

US 45Z Tax Credit: A Boost for Low-Carbon Fuels

The U.S. Treasury released guidance for the 45Z tax credit, offering up to $1.75/USG for low-carbon fuels, including sustainable aviation fuel. This credit, active until 2027, prioritizes fuels with low lifecycle greenhouse gas emissions, incentivizing the use of waste-based feedstocks. However, potential political challenges, including debates in Congress, could reshape the policy landscape.

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Corporate Sustainability and Regulation

Sustainable Finance: Political Dynamics Take Center Stage

Sustainable finance is facing heightened political influences as global regulatory approaches diverge. In the U.S., conservative shifts may prioritize risk-adjusted returns, while Europe continues to enforce stringent ESG regulations. Despite these challenges, sustainable investments are expected to demonstrate resilience in 2025.

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Brazil Greenlights Offshore Wind Development

Brazil's President Lula has signed a landmark law enabling offshore wind farm development. This initiative underscores Brazil's commitment to renewable energy, which already accounts for 80% of its electricity generation. The law mandates environmental and community consultations to ensure a balanced approach to offshore energy projects.