Sep 30, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning, and welcome back. Today's Smart Brevity count: 1,234 words, < 5 minutes.

My latest Harder Line column invokes a childhood game — seriously! — to talk about how I see fossil fuels faring in a world addressing climate change. I'll share a glimpse of that, and then Ben Geman will get you up to speed on other news. 

1 big thing: Crude musical chairs

Illustration: Aïda Amer/Axios

Let’s hark back to the childhood game of musical chairs to talk about fossil fuels and climate change.

My thought bubble: 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 drops — and so does the number of chairs.

Where it stands: The big question for fossil fuel companies — and efforts to tackle climate change — is when and by how much will demand for these fuels decline? That’s where this existential game comes in, because the possible futures are vastly different depending on the world’s appetite to curb emissions.

  • We’re at the beginning of the game, which will last at least decades and may never end. Coal companies are likely the first ones to lose chairs.
  • Risk is also materializing for oil and gas companies, which are increasingly seeking to differentiate their strategies to position themselves as the final chairs in this game. Even in a world with aggressive climate policies, they’re betting we'll still need some oil and gas.

But, but, but: In the actual game of musical chairs, eventually the music stops and only one chair remains. In this crude reality, we don’t know when the metaphorical music stops and the game ends — or that it even will.

Between the lines: Big oil and gas companies are employing divergent strategies to try to remain profitable in a widely uncertain future where we play the crude game of musical chairs at vastly different paces.

One future is business as usual, which continues rapid increases in wind and solar and also slow and uneven diminishing — but not abandoning — oil and natural gas.

  • This is the track we’re on now. This future lacks coordinated global policy. The chairs would be removed slowly.

Another future — the one scientists, activists, Democratic politicians and a growing portion of the public say we must pursue — includes rapidly cutting emissions in the next 30 years, which inherently means a drastic reduction in fossil fuels.

  • Big, global government policy is nearly essential for this future. Chairs would be removed far more quickly.

The bottom line: This isn’t fun like our childhood musical chairs, is it?

Go deeper 

2. How cities will drive EV adoption

Illustration: Aïda Amer/Axios

The U.S. vehicle market could finally be going electric — and faster than you might think, Axios' Joann Muller reports.

What's happening: While California and the Trump administration go to war over the state's right to set its own tailpipe emissions standards, large cities are taking steps to curb pollution and corporate giants like Amazon are launching their own green agendas.

Why it matters: EVs have been slow to catch on in the U.S., and Washington's anti-regulatory environment certainly isn't likely to change that. But in traffic-choked cities, momentum is building for cleaner urban fleets.

What we're seeing: Cities worldwide are taking steps...

  • New York City is getting ready to impose the country's first congestion pricing program as a way to regulate traffic, control emissions, and raise capital for infrastructure.
  • London's congestion zone restricts older pollution-spewing vehicles. Many companies have opted to upgrade their fleets rather than pay charges.
  • In China, megacity Shenzhen passed a draft policy that will require all future ride-hailing vehicles be electric. U.S. and European cities could easily do the same.
  • Los Angeles Mayor Eric Garcetti's version of a Green New Deal would require 80% of vehicles to be electric by 2035.

Corporate giants are getting more aggressive, too. Amazon CEO Jeff Bezos last week announced an order for 100,000 electric delivery vans from the EV startup Rivian.

The bottom line: Fleets and cities will drive EV adoption more than retail consumers and federal standards, Morgan Stanley said in a note.

Read more

3. Senate Dems drop a climate hint

Senate Minority Leader Chuck Schumer said a sweeping climate bill would be "one of the first things we put on the floor" if Democrats gain the majority in the 2020 election.

Why it matters: Political windows for major bills open rarely. The comments on a press call Friday sound like a commitment to spend political capital on climate if given the chance.

Flashback: One reason (but hardly the only!) that climate legislation collapsed when Democrats controlled Washington in 2009–2010 is that huge health care and financial reform bills were higher Senate priorities.

But, but, but: Using the phrase "one of the first things" leaves wiggle room. An aide declined to say whether that would mean votes in 2021 specifically.

  • Plus, moving a climate bill assumes Democrats regain the Senate (a huge uphill climb), win the White House and keep the House.
  • Schumer hasn't said whether he'd seek to end the filibuster. That matters because even if Democrats win the Senate, there's no pathway to a super-majority.
4. The shale oil slowdown
"The American shale boom is slowing as innovation plateaus — and just when shale’s importance in global markets has reached new highs following an attack on the heart of Saudi Arabia’s oil infrastructure."
The Wall Street Journal

Why it matters: Their piece explains why this year's slow oil production growth — under 1% through June — could signal a wider structural problem for the U.S. industry.

  • "[T]he slowdown this year is driven partly by core operational issues, including wells producing less than expected after being drilled too close to one another, and sweet spots running out sooner than anticipated," they report.
5. Catch up fast: the climate strikes

Swedish climate activist Greta Thunberg joins the climate strike protest in Montreal on Sept. 27. Photo: Cristian Mijea/Pacific Press/LightRocket via Getty Images

ICYMI, hundreds of thousands of people turned out in Montreal on Friday for a climate demonstration that featured Swedish teen activist Greta Thunberg.

Why it matters: It's the latest event in a wave of climate advocacy in the streets and came a week after big, youth-led demonstrations worldwide that drew as many as several million people combined.

The big picture: Friday brought events in cities throughout Canada.

  • "Large crowds filled the avenues in Toronto, Vancouver and Ottawa while smaller boisterous crowds gathered in at least 85 other communities from Victoria to St. John’s to Inuvik," The Globe and Mail reports.
  • Per the BBC, "Organisers say half a million people gathered in Montreal alone. Officials told local media the number was closer to 315,000."

Go deeper:

6. BP's latest solar move and what's next

BP's solar arm Lightsource BP, the power company Xcel Energy, and the steel producer EVRAZ North America announced plans on Friday for a 240-megawatt solar facility at EVRAZ's plant in Pueblo, Colorado.

Why it matters: It will be the "largest on-site solar facility dedicated to a single customer in the country," they said in a joint release.

  • "With its 20-year, fixed rate structure, the project provides EVRAZ North America with predictable electricity prices and allows the mill, which employs about 1,000 workers, to stay in Pueblo," they said.
  • The $250 million project is slated to go online in 2021. The Denver Post has more.

What to watch: While Lightsource is technically selling the power to Xcel under this deal, it brings the company a step closer to doing business directly with big corporations in the U.S.

  • In a recent interview with Axios, Kevin Smith, CEO of the Americas for Lightsource, said they're in negotiations about deals with multiple companies.

The big picture: Tech giants have been at the forefront of growing corporate renewables procurement, but Smith said interest is wider.

  • “It’s not just the tech side of the corporates. It’s the brick and mortars, the consumer products, pharmaceuticals, auto manufacturers — everybody is kind of looking at that renewable energy sector not only to meet their sustainability goals, but the cost side has become extremely competitive,” he said.

* * *

Speaking of deals, Monday morning brings one in the natural gas space.

  • Per Reuters, "Independent power producer NextEra Energy Partners LP said on Monday it will buy Meade Pipeline Co. LLC in a deal valued at about $1.37 billion, including some future capital contributions."
Ben GemanAmy Harder