May 29, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. I'm filling in for Ben Geman, who took a much-deserved mental health day yesterday — a wonderful perk Axios is offering to all of us Axions right now.

Today's Smart Brevity count: 1,082 words, or 4 minutes

1 big thing: Europe's natural gas balancing act

Illustration: Aïda Amer/Axios

In touting Europe’s just-released economic recovery plan whose core features clean energy, top government officials there are walking a fine line on the role of natural gas.

Why it matters: Europe is at the leading edge of a global debate on the fate of natural gas, the cleanest fossil fuel that nonetheless still emits carbon dioxide, as the world tries to drastically cut carbon and other heat-trapping emissions.

“There is no plan to phase out gas over the next 10 years. For the foreseeable future, gas will remain an important energy source for the European Union.”
— Ditte Juul-Jørgensen, director general for energy of the European Commission, at a (virtual) Atlantic Council event Thursday

The big picture: Natural gas emits half the CO2 when burned compared to coal, but its primary component is methane, which can leak and is a far more potent greenhouse gas than carbon.

  • Environmentalists around the world have increasingly opposed natural gas, even though it reduces emissions when displacing coal, because in the long term it doesn’t reduce emissions to the level scientists say is necessary.

Catch up fast: The European Commission proposed earlier this week an $825 billion package of policies aimed at helping reinvigorate the continent’s economy as it recovers from the pandemic.

One level deeper: Natural gas, which accounts for about a third of EU’s energy consumption, is not penalized in the proposal. Oil and gas companies could actually benefit because the plan directs billions of dollars for technologies capturing carbon and producing hydrogen for energy, according to Ronan Palmer, director of clean energy at E3G, a European environmental think tank.

  • That’s because most hydrogen used today comes from natural gas, which emits carbon. The EU’s recovery plan focuses on what’s called “green hydrogen."
  • This kind of hydrogen comes “from water with electrolysis, an energy-intensive but carbon-free process if powered by renewable electricity,” which is prohibitively expensive, per Reuters.
  • Any use of green hydrogen will likely need to first use natural gas — and its infrastructure — to make hydrogen, European government officials and other experts say.

Read more

2. Bonus quote: Carbon tariff elephant in the Zoom
“The last thing anyone would want to see is ... additional tariffs or regulations that would limit the robust energy trade.”

Who said it: Frank Fannon, assistant secretary for the Bureau of Energy Resources at the State Department, at the Atlantic Council event Thursday on Zoom.

Why it matters: When it unveiled the Green Deal late last year, the European Commission included plans for a “carbon border adjustment mechanism” — put simply, a tax — on goods coming in from countries with less stringent climate policies. That would surely include the United States under President Trump.

Between the lines: Fannon’s implicit knock was the only reference to the policy, which is the most controversial part of what Europe may eventually do to tackle climate change.

3. 135 year milestone: Renewables pass coal

America consumed more energy from renewable sources last year than it did from coal, the first time that’s happened since 1885, according to the Energy Information Administration.

Expand chart
Reproduced from EIA; Chart: Axios Visuals

The big picture: Coal has been declining as a source of electricity relatively rapidly in recent years due to a host of factors, including cheaper natural gas, tougher environmental regulations from the last administration, and growing renewables, which are becoming cheaper now too.

Why it matters: While it doesn’t change the fact that your lights turn on when you flip the switch, the transition has important repercussions — it’s reducing carbon emissions and shifting jobs and influence among different industries and companies.

Flashback: “Not since the 19th century have renewables been a bigger source of energy consumption than coal in the U.S., according to the EIA, which has energy consumption estimates dating back to 1635,” per the WSJ.

  • “Wood was historically the top source of U.S. energy, and the only commercial-scale source, until hydroelectric power plants emerged in the country in the 1880s.”

Go deeper: Coronavirus accelerates coal’s decline

4. Winners and losers in crude musical chairs

Illustration: Aïda Amer/Axios

Norway is poised to win and Canada is likely to lose, when it comes to oil and gas in a world tackling climate change.

Driving the news: Norway has the lowest carbon dioxide intensity per produced barrel of oil equivalent, while Canada has the highest, according to new data from consultancy Rystad Energy.

Why it matters: In a world drastically reducing heat-trapping emissions, producers with the cleanest fossil fuels relative to each other will fare best. That's because even in a 2050 future with drastically fewer emissions, society will still need oil and gas, it will just be a lot less — and cleaner.

Flashback: I likened this concept to a crude musical game of chairs in a column from September 2019.

  • The world’s oil, natural gas and coal producers are, metaphorically speaking, encircling a bunch of chairs, and as the world tightens its grip on heat-trapping emissions, the use of these fuels will drop — as will the number of chairs.

One level deeper: Not all oil and gas is the same. The producers remaining at the end will be there because they have the cleanest oil and gas. Canada, for example, relies on a heavy kind from its oil sands whose carbon intensity is high compared to other kinds.

The big picture: The U.S., as the world's biggest producer of oil and gas, is also the world's biggest overall emitter of carbon from oil and gas, Rystad found. Its intensity per barrel of oil equivalent is fifth, after Norway and three Middle Eastern countries.

Go deeper: Fossil fuels bracing for crude game musical chairs

5. Where it stands: National mobility keeps rising
Data: Descartes Labs; Chart: Axios Visuals

Driving keeps going back up as more states reopen their economies, according to the latest data from Descartes Labs.

How it works: Descartes Labs has created a "mobility index" based on geolocation data derived from phones and other devices reporting throughout the day, calculating the maximum distance moved from the first reported location, Axios' Ben Geman writes.

Flashback: Ben wrote about this index two weeks ago, when it was at 44.

Why it matters: How quickly people resume driving — and flying — will influence how quickly and robustly the oil industry recovers from its historic collapse in April.

  • Longer-term trends, such as how permanent working from home and flying less becomes, will naturally take more time to suss out.

One level deeper: Energy Department data published Thursday also shows gasoline demand going back up.

  • However, the biggest news of that release was the arrival of a bunch of Saudi Arabian oil, which sent crude inventories jumping, as seen in this chart by Bloomberg's Javier Blas.
6. What I'm reading

Go deeper: Do you like this “What I’m reading” feature? I send it periodically on my own channel, Harder Line, in Axios’ new app! Download it here.

Ben GemanAmy Harder