Oct 19, 2018

Axios Generate

Happy Friday.

Situational awareness: IHS Market vice chairman Daniel Yergin, a prominent oil analyst who hosts top Saudi oil officials at the big annual CERAWeek energy event in Houston, says he will not be attending the Future Investment Initiative conference in Riyadh.

Today marks 45 years since the release of The Who's "Quadrophenia," so one of those songs will take us into the weekend...

1 big thing: CO2 tax lobbying starts modestly


A recently formed group that's using veteran K Street insiders to push for a carbon tax spent $150,000 on lobbying in the third quarter, a disclosure filing shows.

Why it matters: The amount reported on March 16 by the heavyweight firm Squire Patton Boggs on behalf of Americans for Carbon Dividends is, needless to say, quite modest by beltway standards.

But that amount — which tallies the group's initial formal lobbying since its formation — is slated to increase along with other aspects of the much wider, 7-figure advocacy push, according to Ted Halstead, the group's CEO.

  • “As our financial support grows, all facets of the campaign will expand,” he tells Axios.
  • The campaign also includes paid media, coalition-building, grassroots efforts and more, Halstead says.

Background: Americans for Carbon Dividends is the recently formed advocacy offshoot of the Climate Leadership Council, whose leaders include James Baker and other GOP senior statesmen.

The big picture: The groups are pushing a plan that includes...

  • Installing a rising CO2 tax that begins at $40-per-ton.
  • Returning the proceeds to the public.
  • Phasing out EPA's regulatory powers.
  • Shielding fossil fuel companies from tort claims over their emissions.

ICYMI: Americans for Carbon Dividends, backed by interests including the nuclear power operator Exelon and renewables companies, made headlines this month when ExxonMobil pledged $1 million over 2 years.

  • The group has raised $3.4 million so far for 2 years of work and that amount is slated to grow, Halstead recently told my colleague Amy Harder.

What's next: My eyes are peeled for the Q3 filing from the Alliance for Market Solutions Action, another group pushing for conservatives to embrace a revenue-neutral carbon tax married to repeal of regulations.

But, but, but: These filings don't capture all the lobbying action around CO2 taxes. For instance, Shell, which backs CO2 pricing, also lists the topic in its own reports.

  • But they're a useful reminder that when it comes to efforts to win conservative buy-in, there's a long, long way to go and the money behind the effort is still a drop in the beltway bucket.

Go deeper:

2. Tesla unveils less expensive Model 3 option

Tesla announced Thursday night that it's now selling a somewhat less costly, $45,000 version of its Model 3 sedan that has a 260-mile range.

Why it matters: The mass-market Model 3 is critical to the Silicon Valley automakers' future and, more broadly, pushing electric vehicles into the mainstream.

But, but, but: It's less expensive than models currently available, which start at $49,000 and go up significantly from there. But still not the $35,000 base price offering initially pledged when Tesla first announced the Model 3.

  • However, Tesla said via Twitter than with federal incentives and state tax rebates in California, the actual price "mid-range" battery option is around $35,000.
  • And Musk said via Twitter that "true cost of ownership is closer to $31k after gas savings."
  • Meanwhile, the actual $35,000 base model isn't available until next year.

Details: The new offering, according to Tesla, has a battery structure that's the same as pricier versions, but with fewer cells. It has a delivery time estimate of 6–10 weeks.

What they're saying: Over at Greentech Media, Julia Pyper notes that "Tesla supporters will likely see today's news as a positive development," and offers some important context...

  • "While the new Model 3 has a shorter range, rear-wheel drive and a slower top speed, Tesla succeeded in slashing $4,000 off of the price. That's something," she writes, noting it widens the number of people who can afford it.
  • However, she adds, the "Tesla website notes that the full $7,500 federal tax credit is only available to customers who take delivery by the end of the year (given the company has already hit the 200,000 unit tax credit limit)."
3. Latest in policy: FERC and Interior

FERC: Kevin McIntyre, the chairman of the Federal Energy Regulatory Commission, may imminently step aside due to health problems, according to multiple reports.

  • He was not at yesterday's monthly FERC meeting, the second in a row he has missed, and other members offered well wishes, including Neil Chatterjee, who said "my prayers are with him and his family."
  • FERC did not comment yesterday.

S&P Global Platts reports that McIntyre is "widely expected" to at least temporarily transfer the chairmanship to Chatterjee, who was interim chair before McIntyre's confirmation. More from their piece...

  • "Washington sources also raised the possibility that McIntyre might be forced to resign his seat on the commission, potentially leaving Chatterjee as permanent chairman."
  • "McIntyre, who joined FERC in December, this summer disclosed he had suffered compression fractures in two vertebrae affecting his mobility, and had injured his arm in a fall. Before joining the commission, he had surgery for a brain tumor found the previous summer."

* * *

Zinke under scrutiny: Via the Washington Post, "Interior Secretary Ryan Zinke’s approach to his wife’s travel and activities sparked concerns among the department’s ethics officials, according to a report issued Thursday by Interior’s inspector general office."

  • "The report determined that staff in the department’s solicitor office 'approved Lolita Zinke and other individuals to ride in Government vehicles with Secretary Zinke' although Interior policy prohibited this practice," the story adds.
4. An oil-infused economic hotspot
Expand chart
Data: U.S. Census Bureau via Brookings, Opportunity Insights; Note: “Economic mobility” is measured as the average income percentile of children whose parents were in the lowest income quartile; Graphic: Harry Stevens/Axios

The newest U.S. economic hotspot is not in or near Silicon Valley, New York, or any tech corridor, but in the Northern Plains — specifically oil-infused North Dakota.

What's happening: This region, in the middle-north of the country, leads the nation in a string of economic indicators since the financial crash, according to a new report by the Brookings Institution. And North Dakota is atop the bunch.

The region's prosperity has been driven in part by a massive expansion of shale oil and gas production in the Bakken region of North Dakota and elsewhere in the region.

  • "Energy creates cyclical but significant job creation, small firm growth, and consumer activity," Mark Muro, who co-authored the report, tells Axios.

Why it matters: Commentators often refer to the middle of the U.S. as a single entity, like "Middle America" or, more pejoratively, "flyover country." This makes the economic vitality of the Northern Plains all the more striking.

  • As is clear in the chart above, most working-age adults in the region have jobs. And people born into low-income households are moving into the middle class with greater ease than other Americans.
  • The top 6 metro areas in terms of upward mobility — defined as the average income of people with the poorest parents — are all in the Northern Plains.

Go deeper: Read the full story, first publishes in the Axios Future newsletter, for which you can sign up here.

5. The huge and untapped potential of efficiency
Screenshot of chart in IEA report "Energy Efficiency 2018"

A much larger investment in deployment of existing energy efficiency technologies and stronger policy measures would enable major progress toward meeting the goals of the Paris climate deal, the International Energy Agency said in a new report.

Yes, but: Nothing of the sort is happening right now, and in fact progress in energy efficiency is slowing, IEA warned.

What they found: The report lays out an "efficient world scenario" (EWS) — one that enables in gains in buildings, transportation, industry and buildings — to help energy-related emissions peak in 2020 and then fall significantly.

"Our study shows that the right efficiency policies could alone enable the world to achieve more than 40% of the emissions cuts needed to reach its climate goals without requiring new technology."
— Fatih Birol, IEA executive director, via statement

By the numbers: The scenario envisions global investment of $584 billion annually through 2025, rising to $1.3 trillion annually in 2026–2040 — but nothing on that scale is happening today.

  • In fact, the report finds that expansion of conservation policies — such as incentives and efficiency standards —has slowed.
  • Global energy efficiency investment grew by 3% to $236 billion last year. That's far, far below the levels in the EWS scenario.
  • And, check out the chart above, which shows higher energy demand growth last year than in the recent past.

Put it all together and global energy intensity — an efficiency metric based on energy used per unit of GDP — fell by its smallest amount since 2010 last year, IEA said.

My thought bubble: The EWS scenario is more of a thought exercise than anything resembling the present or where things are headed, as the IEA's own data shows.

  • But it's a useful frame for looking at how efficiency will need to be a major piece of the puzzle for limiting the scope of global warming.
6. Research corner: Impact of politics

President Trump's surprising election in 2016 had a rather modest effect on how the market valued publicly traded fossil fuel companies in the short-term aftermath, according to a new paper from researchers affiliated with the nonpartisan Resources For the Future.

Why it matters: Despite Trump's campaign vows to promote fossil fuels — especially coal — and kill regulations, the limited investor response shows how other forces play a stronger role in the future of these industries.

  • There was also rather modest response to the Paris agreement. But that's a little messier to analyze.
  • That may reflect that markets anticipated the outcome that was largely telegraphed in advance, and the deal is nonbinding, the authors note.

The bottom line: When looking at the future of energy sources, don't overweight the importance of political events. The paper's authors, Thomas Sterner and Samson Mukanjari of the University of Gothenburg, offer more...

  • "The lack of a stronger reaction by global coal markets to Paris and the U.S. election may be a sign that major events have somewhat less importance than generally believed in the media."
  • "One possible interpretation is that underlying fundamentals are most important, such as technological developments that have systematically been making renewables and natural gas cheaper in relation to coal over the past decades."
  • "A natural conclusion then, for both media and policymakers is to turn more of their attention to long-run changes in technology and maybe other parameters such as taste or resource availability."