As February unfolds, global energy markets remain in flux, with policy shifts, regulatory updates, and market developments shaping the landscape. Here’s a look at the key events that defined this week:

Carbon Markets

• ‍US CORSIA Exit and Its Impact on the EU ETS
  The potential withdrawal of the United States from the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) could have significant repercussions for the European Union Emissions Trading System (EU ETS). Analysts warn that such a move would weaken international efforts to align aviation emissions with global climate targets, possibly leading to increased compliance costs for European airlines and raising concerns over market stability. If the US pulls out, the EU may need to consider strengthening its own carbon pricing mechanisms to mitigate the impact.‍
• Canada’s Direct Air Capture (DAC) Offset Protocol
  During a dedicated webinar, Environment and Climate Change Canada (ECCC) addressed concerns regarding its newly introduced DAC and CO₂ storage protocol for federal offset credits. The initiative seeks to establish a framework for recognising direct air capture projects under Canada’s emissions reduction strategy. Industry stakeholders have raised questions about the feasibility of large-scale DAC adoption and its integration into existing offset markets, with some expressing scepticism over cost-effectiveness and long-term scalability.

Renewables & Biofuels

• ‍EU’s Draft Energy Plan and Competitiveness Concerns
  The European Commission has unveiled a draft strategy aimed at reducing energy costs across the bloc. The plan, which underscores the urgency of addressing high electricity prices, outlines measures to enhance affordability and bolster Europe’s industrial competitiveness. The proposal includes non-binding recommendations to EU member states, advocating for tax reductions on electricity for energy-intensive industries and households, the elimination of certain network costs, and the decoupling of retail electricity bills from volatile gas prices. A comprehensive revision of the EU’s energy taxation directive is also under consideration, with officials exploring potential pathways to streamline pricing structures and promote a more integrated energy market.‍
• Texas Wind Power Milestone
  Texas is on course to set a new renewable energy record, with wind generation expected to more than double by the end of February. This surge in wind power capacity is projected to push the cumulative share of wind and solar beyond the 30% threshold for the first time in 2025. The state’s clean energy growth has outpaced fossil fuel-based generation over the past five years, contributing to a broader decarbonisation trend within the US power sector. However, concerns remain over the grid’s ability to integrate fluctuating renewable supply effectively, particularly during peak demand periods.‍
• LCFS Credit Market Volatility
  California’s Low Carbon Fuel Standard (LCFS) market experienced a sharp downturn this week, with credit prices plummeting 22.8% following regulatory rejection of proposed programme updates. The decision has triggered concerns over future credit supply and demand dynamics, with market participants recalibrating their positions in response to the policy shift. The LCFS programme has long been a cornerstone of California’s clean fuel transition, and its evolving regulatory landscape will be closely monitored by industry stakeholders.‍
• Ukraine’s Dominance in EU Sunflower Oil Imports
  Despite a decline in domestic feedstock supply, Ukraine remains the EU’s dominant sunflower seed oil supplier, accounting for 94% of imports this season. The drop in production has led to tightened export availability, impacting pricing and refining margins across the European biofuel and food industries. As Ukraine continues to navigate supply chain disruptions, market players are exploring alternative sources to stabilise supply chains.

Macroeconomics & Trade

• ‍EU Tariff Policy and WTO Compliance
  With trade tensions escalating, Sweden’s trade minister reaffirmed the EU’s commitment to ensuring that any response to potential US tariffs remains compliant with World Trade Organization (WTO) rules. This stance underscores the bloc’s cautious approach to retaliatory trade measures, particularly in light of former US President Donald Trump’s threats to impose new tariffs on automobile, semiconductor, and metal imports. While some EU member states advocate for a more aggressive countermeasure strategy, Sweden’s position highlights the need for a multilateral approach within the WTO framework.‍
• Trump’s Shift on Ukraine and Geopolitical Ramifications
  Former US President Donald Trump’s recent remarks denouncing Ukrainian President Volodymyr Zelenskiy as a “dictator” have raised alarm in diplomatic circles. His comments, alongside overtures towards Russian President Vladimir Putin, signal a potential shift in US foreign policy that could leave Ukraine with limited strategic options. European officials have expressed concern that a reduction in US support for Kyiv could undermine the broader security structure of the West. Meanwhile, Trump’s administration has reportedly proposed a deal granting US firms partial control over Ukraine’s mineral resources in exchange for financial aid, a move that Kyiv has dismissed as unviable.‍
• China’s Interest Rate Policy and Economic Outlook
  China maintained its benchmark lending rates unchanged in February, prioritising financial and currency stability amid ongoing economic uncertainties. The decision reflects Beijing’s cautious approach to monetary easing, given pressures on its financial sector, the weakening yuan, and intensifying trade tensions with the US. Although Chinese banks saw a surge in new yuan loans in January, credit demand growth has slowed, indicating persistent challenges in reviving domestic investment and consumption.

Corporate Sustainability & Regulation

• ‍Australia’s $636M Green Iron Fund and Industrial Decarbonisation
  Australia has allocated AUD 1 billion ($636 million) to support green iron production, including an immediate AUD 500 million intervention to rescue the financially troubled Whyalla steelworks. The funding initiative is part of a broader push to position Australia as a leader in low-emissions steel and iron ore supply chains. As global industries transition towards greener production methods, this investment is expected to play a crucial role in securing the long-term competitiveness of Australia’s iron and steel sectors.‍
• EU Sustainability Reporting Dispute
  Divisions persist among major EU economies regarding the timeline and scope of corporate sustainability reporting requirements. While Germany and France advocate for delaying the Corporate Sustainability Reporting Directive (CSRD) to alleviate regulatory burdens, Spain and Italy argue for its timely implementation. The debate reflects broader tensions between pro-business regulatory rollback efforts and the EU’s commitment to enforcing stringent environmental and human rights due diligence requirements.‍
• Legal Challenges Against Trump’s Offshore Drilling Expansion
  Environmental advocacy groups have launched legal actions to block the Trump administration’s efforts to expand offshore oil drilling across large swathes of US coastal waters. The lawsuits challenge the reversal of former President Joe Biden’s drilling restrictions and highlight concerns over potential ecological damage, particularly in sensitive Arctic and Atlantic ecosystems. Given the broader pushback against Trump’s environmental deregulation policies, these legal battles are expected to shape the trajectory of US offshore energy policy in the coming years.

Looking Ahead

With shifting trade policies, regulatory developments, and clean energy milestones shaping the market, AFS Energy remains committed to closely monitoring these trends and their implications for the industry. As we move forward, expect continued scrutiny on carbon markets, renewable energy transitions, and geopolitical risks affecting global sustainability efforts.

Stay tuned for next week’s updates as we navigate these evolving trends together.