Good morning! First things first: I inaccurately characterized a poll in yesterday's edition. The updated item is here.
Situational awareness: "Volkswagen AG aims to produce almost 50 percent more electric cars than it previously targeted, boosting a bet that has already strained profit margins," Bloomberg reports.
1 big thing: Climate chasm on display in Houston
HOUSTON — A huge gathering of oil industry titans underscores the gulf between their blueprint for the transition to cleaner energy sources and the demands of activists wielding new influence in Democratic politics and European debates.
Where it stands: Major executives at the big CERAWeek by IHS Markit conference here acknowledge the industry has to change with the times.
- Executives are talking up their investments in carbon-capture tech, renewables, and steps to cut methane leakage.
- Yes, but: Alternative energy remains a very small part of their business.
What they're saying:
- Equinor CEO Eldar Saetre said in a speech that the sector is facing a "crisis of confidence" and a "lack of trust" that will "increasingly reduce our ability to influence and shape our own future." "It is, in fact, a real threat to our license to operate, unless we proactively and collectively address it," he added.
- BP CEO Bob Dudley is expected to give a speech tonight that will "call for the industry to do more to respond to new demands for climate action, even as energy use continues to rise," per the Wall Street Journal.
The other side: The sentiment here is a sharp contrast to the activism that's on display from youth-led movements in Europe to the Democratic primaries in the U.S.
- Motivated by scientific reports showing the urgency of steep emissions cuts to avoid runaway warming, they argue the time for incrementalism has long passed.
- In the U.S., that's evident in the prominence of the Green New Deal on the left, which has attracted support from several major Democratic presidential candidates.
- It's all very different from the gestalt in Houston, where discussion centers on the evolution of business models that still rely on huge investments in oil and gas for decades.
The intrigue: Several moments captured the divide between the conference and where the energy is on the left.
- For instance, Sen. Joe Manchin of West Virginia was the Democratic lawmaker who addressed the conference. He's a coal advocate and one of his party's most conservative members.
I chatted with Maarten Wetselaar, a senior Shell exec, about whether they will increase the $1 billion to $2 billion per year they're investing until 2020 in low-carbon efforts.
- Shell's out front among majors, but it was a reminder that the industry sees the transition happening on their terms.
- “We’re hoping to increase it. That is the base plan. But we need to prove to ourselves and to our shareholders that it is commercially attractive enough to do it,” he said.
The bottom line: I asked former Energy Secretary Ernest Moniz about the tenor of the conference compared to where things stand on the left.
- “One discussion does not have the urgency attached that it needs to have to the carbon transition. On the other side, sometimes there are solutions offered that ... are impractical, and in my view that does not help advance the conversation," Moniz said.
My thought bubble: Despite the chasm between activists and the industry, both groups stand well apart from President Trump on climate change. A tweet this morning displayed, again, Trump's rejection of the scientific consensus on human-caused warming.
2. Scoop: Oil heavyweight moves on methane
HOUSTON — Facing investor pressure, one of America’s biggest oil producers has committed to setting targets to reduce emissions of methane, a potent greenhouse gas, from its oil and gas wells, Axios' Amy Harder reports.
Why it matters: The move by Houston-based EOG Resources represents the latest in a growing trend of oil companies working with investors on increasing transparency and committing to addressing climate change.
The big picture: Annual shareholder meetings are becoming an alternative battleground on climate as the Trump administration abandons or weakens Obama-era federal policies.
- It's a hot topic here at the annual CERAWeek conference by IHS Markit, where executives of the world's oil and other energy companies have gathered.
Where it stands: EOG's plan to set methane emissions targets stems from a previously unreported agreement between the company and Trillium Asset Management, which uses shareholder advocacy to push companies to get more aggressive on climate change.
3. The future of BP's venture strategy
HOUSTON — I caught up with Lamar McKay, BP's deputy chief executive, to chat about the company's venture and low-carbon strategies.
Where it stands: BP Ventures is mix of equity investments, acquisitions, and collaborations in technologies like fast battery charging, advanced monitoring of oil-and-gas operations, artificial intelligence and more.
- It’s part of BP's wider, $500 million-per-year mix of low-carbon and alternative energy investments.
What's next: That $500 million figure could get higher. “We hope it grows going forward. We think it will. ... We see a lot of opportunity,” he said.
China: BP recently made a venture move in China via an investment in PowerShare, a digital platform that connects EV drivers, charging station operators and power suppliers.
What I didn't know is that BP has set up a small venture office in the country to sniff out other opportunities.
- “There is innovation occurring in China at a scale and at a pace that is probably not matched in the rest of the world," McKay said.
- “They are leap-frogging technologies. ... They are skipping conventional progression on some of these things,” he said.
- “Obviously with the amount of activity going on in EVs, advanced mobility is an area that will continue to be interesting there, but [it's] really across the spectrum," he added.
Carbon removal tech: McKay said BP Ventures is exploring frontier technologies for removing CO2 from the atmosphere. I asked about tech for removing CO2 at the early stages, such as via direct air capture, soil-based techniques and more.
- “We are looking at some of those, whether they will result in an investment, I don’t know yet, but yeah, absolutely we are keeping an eye on that,” McKay said.
- BP already invested in Solidia Technologies, which absorbs CO2 in the concrete production process.
4. The upside of solar geo-engineering
Axios' Andrew Freedman reports ... Researchers studying the potential consequences of dispersing tiny particles into the upper atmosphere, where they would reflect incoming solar radiation and offset global warming, have come up with a way to avoid producing ill effects in some regions, such as drought.
Why it matters: Solar geoengineering, which would involve dispersing sulfate aerosols into the stratosphere, is viewed as a possible way to offset some of the global warming that would result from doubling the amount of carbon dioxide in the atmosphere compared to preindustrial levels.
- However, concerns have been raised about its potential to unintentionally harm particular countries or regions.
What's new: The study, published Monday in Nature Climate Change, finds that this futuristic fix is neither the panacea that some advocates portray it to be nor is it an option that would automatically cause significant harm to some parts of the globe.
5. CERAWeek lightning round
Gender: Bloomberg reports that just 16% of the speakers at this week-long event are women. "It’s a reflection in part of the lack of female executives in oil and natural gas," Rachel Adams-Heard writes.
Markets: Via Reuters, "U.S. oil production could become less responsive to crude prices as major oil companies take a larger share of the nation’s shale output from smaller independent producers, International Energy Agency officials said at an industry summit on Monday."
EPA and cars: EPA Administrator Andrew Wheeler, in an interview with the Washington Examiner, shuts the door on further talks with California over auto mileage and efficiency rules.
- "Wheeler ... said the Trump administration won’t compromise on its final proposal to be introduced early this spring, and will officially move to revoke a cherished waiver granted to California and other states to set tougher fuel efficiency rules," they report.
6. Trade policy as a climate tool
Axios Expert Voices contributor David Livingston breaks down the news that a House Democrat on the committee that oversees trade policy is expected to send a letter asking the Commerce Department to investigate whether “imports of carbon emissions” pose a national security threat.
The big picture: The maneuver by Rep. Bill Pascrell, first reported by Politico, highlights a new tactic among climate hawks: treating Trump's aggressive use of executive powers as a template for action.
Where it stands: Pascrell's request cites the authority granted under Section 232 of the 1962 Trade Expansion Act, which Trump availed himself of to justify the imposition of tariffs on steel and aluminum imports from a variety of countries, including key U.S. allies.
- Although the Trump administration is unlikely to respond enthusiastically, the Commerce Secretary is statutorily required to "immediately initiate an appropriate investigation" on the national security effects of the imports in question.
Why it matters: This isn't the first, nor will it be the last, such maneuver. Trump's declaration of a "national emergency" to fund a wall along the Southern border could set a precedent for a similar declaration around climate change.
Livingston is the lead for climate and advanced energy and deputy director of the Atlantic Council’s Global Energy Center.