Feb 12, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. Today's Smart Brevity: 1,292 words, < 5 minutes.

🎵 This weekend marks 45 years since Rush released the album "Fly By Night," so with another RIP to Neil Peart, they'll play us into today's edition...

1 big thing: BP vows to "fundamentally" change with net-zero target

Photo: Lance King/Getty Images

BP says it's reorienting its business with new climate targets — including first-time emissions commitments for its products' use in the economy — and a new team to help countries, cities and other companies cut carbon.

Why it matters: It's the latest sign of how multinational oil-and-gas giants — especially European-headquartered players — are expanding climate pledges under intense pressure from activists and investors.

  • It also shows how new CEO Bernard Looney hopes to steer BP in a world moving to cleaner sources even as fossil fuels remain dominant in the global energy mix and, even with the new pledges, the heart of BP's business.
  • "The world’s carbon budget is finite and running out fast; we need a rapid transition to net zero," he said in a statement.

Driving the news: BP this morning announced it would "fundamentally transform" its business. The company rolled out...

  • An overall goal of reaching net-zero emissions from its oil-and-gas production and operations by 2050.
  • A target of cutting emissions intensity — that is, emissions per unit of output — from the products it sells by 50% by 2050. These emissions, known as Scope 3, are far larger than emissions from companies' direct operations.
  • A pledge to increase what's now the small proportion of its investments outside its core oil-and-gas business, such as in clean energy, although they did not provide a specific target.
  • Plans to install methane monitoring at major oil-and-gas processing sites by 2023 and subsequently (I can't immediately tell when) cutting intensity there by 50%.
  • Plans for expanded relationships with outside parties via a new internal team to create "integrated clean energy and mobility solutions" that help cities, countries and other companies.

By the numbers: BP said that its net-zero goal will encompass much of its emissions of all types, including Scope 3.

  • BP currently emits roughly 55 million tonnes of CO2-equivalent from its direct operations per year and that emissions that ultimately come from oil-and-gas it produces total about 360 million tonnes, according to a spokesperson.
  • "Taken together, delivery of these aims would equate to a reduction in emissions to net zero from what is currently around 415 MteCO2e a year," BP's statement said.

The intrigue: Beyond the specific targets, BP says it's changing its corporate posture.

  • The company said it would be more active in lobbying for policies including carbon pricing and would set "new expectations" for its relationships with trade associations.
  • On the latter point, BP said it would make its case internally, be "transparent" about disagreements, and prepare to leave groups if "alignment cannot be reached."

The big question: Whether oil majors are truly readying to bail on the most powerful lobbying groups.

  • So far the steps have been limited. Both Shell and Total left American Fuel and Petrochemical Manufacturers, but as of now, the majors have stuck with larger groups like the American Petroleum Institute and U.S. Chamber of Commerce.
Bonus 1: What they're saying about BP's pledge

BP's new pledge could increase pressure on U.S. oil-and-gas giants that have been less active on climate than their European peers, one advocate tells me this morning.

  • "This is a major step forward, and means that there is absolutely no excuse for every oil and gas company not to make a similar commitment," said Andrew Logan of the sustainability group Ceres.
  • "There will be intense pressure on U.S. companies like Exxon to follow suit," he added.

But, but, but: Via Reuters, "Greenpeace said BP’s plan left many questions unanswered." Charlie Kronick of Greenpeace U.K. said in their piece...

"'How will they reach net zero? Will it be through offsetting? When will they stop wasting billions on drilling for new oil and gas we can’t burn?'"

What's next: Jason Bordoff, head of a Columbia University energy think tank, pointed out in this Twitter thread...

"BP will need to explain how new [oil-and-gas exploration and production] investments are consistent with net zero from all the energy it produces by 2050."
2. House GOP to unveil climate specifics

Illustration: Aïda Amer/Axios

House Republicans will detail one pillar of their three-pronged climate plan on Wednesday, focused on capturing carbon emissions, Axios' Amy Harder reports.

Driving the news: The policies include subsidizing tree growth to build more wooden buildings, making permanent a subsidy for technology capturing CO2, and boosting federal support for that same tech.

Where it stands: The prioritization of climate change policies by top House Republicans is a sea change for a party whose leader — President Trump — dismisses the topic and whose members have either ignored or denied it for years.

  • The ideas still fall short of what Democrats — and most experts — say is needed to adequately address the problem.

The intrigue: The trees policy is the newest idea Republicans are supporting and has drawn the most scrutiny, in part because President Trump is backing a similar idea.

  • Sponsored by Rep. Bruce Westerman of Arkansas, the bill would create a new subsidy for buildings whose material captures CO2, which would be wood.
  • The name of the bill, the Trillion Trees Act, represents an aspiration to plant 1 trillion trees around the world over a decade, which would translate into about 3.33 billion trees a year in the U.S., Westerman said in a recent interview.

But, but, but: Critics are likely to find fault in the details and also the big picture of the measure.

  • The bill doesn’t address deforestation around the world, such as in Brazil.
  • The measure, along with the others being discussed Wednesday, doesn't have emission-reduction goals.

Read more

* * *

Speaking of Congress, yesterday over two dozen Senate Democrats — including Minority Leader Chuck Schumer — unveiled a broad framework that would require EPA to implement plans to achieve net-zero U.S. emissions by 2050, with interim targets along the way.

Quick take: The draft bill is pretty wispy, but I think you can see the influence of the cross-cutting Green New Deal concept, which tackles a suite of social and economic justice topics.

  • The new framework emphasizes, for instance, investments and job creation in low-income and communities of color.
Bonus 2: The big stall on CO2 capture

The New York Times explores roadblocks facing companies looking to use tax credits for industrial carbon available under existing law that House Republicans are seeking to extend.

  • "At least a dozen carbon capture projects, potentially representing billions of dollars in investments, have been announced since Congress passed its 2018 tax break," Brad Plumer reports.
  • "But two years later, those plans remain blocked because the Internal Revenue Service has yet to explain how, exactly, companies can claim the tax credit that would make the projects viable."
3. Where it stands: coronavirus and oil

The Energy Information Administration is trimming its 2020 oil demand forecast by 300,000 barrels per day, citing the effects of the novel coronavirus outbreak.

Why it matters: It's the latest sign of how the outbreak is changing oil market forecasts and creating headwinds for a sector already struggling with middling prices.

  • "EIA expects these oil consumption effects will be concentrated in China but some effects will show up in other countries as well," the agency said.
  • EIA's latest monthly analysis, out yesterday, now expects demand growth of 1 million barrels per day this year.

Where it stands: Oil prices are up this morning, with the U.S. benchmark WTI back above $50-per-barrel, which Bloomberg attributes to "tentative signs that Asia’s coronavirus may be easing."

The intrigue: A range of estimates are emerging for how the outbreak could affect global oil consumption.

  • The consultancy Rystad Energy yesterday reduced their global demand growth forecast 25% to 820,000 barrels per day, but said it could fall as low as 650,000.

What's next: Tomorrow, the International Energy Agency will release its closely watched monthly market analysis.

4. Catch up fast: EVs, natural gas, offshore wind

Transportation: "Hyundai Motor Group said it will jointly develop an electric vehicle platform with Los Angeles-based startup Canoo, the latest startup tapped by the automaker as part of an $87 billion push to invest in electrification and other future technologies." (TechCrunch)

Natural gas: "U.S. shale gas producers are ripe for further spending cuts and write-downs, investors and analysts said, with prices at four-year lows and China’s rejection of some gas imports weighing on earnings." (Reuters)

Renewables: "Vineyard Wind’s trailblazing offshore wind farm for Massachusetts will not reach completion in 2022, with the developer bowing to reality after the federal government confirmed a later-than-hoped permitting deadline for the project." (Greentech Media)

  • Why it matters: It's slated to be the first large-scale U.S. offshore wind farm at a time when deep-pocketed companies are planning a suite of Atlantic Coast projects.
Ben GemanAmy Harder