🥞 Good morning! Today's newsletter has a Smart Brevity count of 1,127 words, 4 minutes.

🎶 This week marks 30 years since Liz Phair released the indie classic "Exile in Guyville," which provides today's intro tune...

1 big thing: U.S., China crack door open for new climate talks

Illustration: Sarah Grillo/Axios

Efforts by the U.S. and China to prevent further erosion of their relationship could provide new openings for collaboration on climate, Ben writes.

Driving the news: Secretary of State Antony Blinken name-checked climate after two days of meetings with officials, including Monday's chat with President Xi Jinping.

  • Blinken said the U.S. is "prepared to cooperate with China in areas where we have mutual interests, including climate, macroeconomic stability, public health, food security, counternarcotics."
  • "I would expect additional visits by senior U.S. officials to China over the coming weeks," Blinken said Monday in Beijing.

Why it matters: China is by far the world's largest emitter and the U.S. is second. The nations together are roughly 40% of global greenhouse gas output.

What we're watching: A potential visit by U.S. special climate envoy John Kerry, who earlier this year spoke to Axios about the damaged rapport with China.

  • Kerry told Reuters Monday that he's been invited to travel in the near term but that no date is set.
  • The State Department declined to comment.

Reality check: Relations remain extremely strained. Blinken said he has "no illusions about the challenges of managing this relationship."

  • Tensions are still evident in key areas, including Taiwan and human rights.
  • Blinken said China did not agree to set up a crisis military-to-military communications channel, one of the biggest hopes for the U.S. visit, Axios' Bethany Allen-Ebrahimian and Rebecca Falconer reported.

2. About that (short-term) breach of the 1.5°C target

Illustration: Shoshana Gordon/Axios

Global average surface temperatures (briefly) exceeded 1.5°C above the preindustrial average during at least the first week of June, Andrew writes.

Why it matters: Captured by the Copernicus Climate Change Service, the short-term breach of the more ambitious Paris Agreement target signals more frequent spikes are likely this year, given the added heating influence from an El Niño gathering strength in the Pacific Ocean.

Zoom in: The short but meaningful temperature gain shows how easily the 1.5-degree target can be exceeded in the current climate, which has warmed considerably since the last strong El Niño in 2016.

  • That year also saw some 1.5-degree breaches in Copernicus' data set, as did a short window in 2020.

Yes, but: The Paris target refers to a long-term increase (20 or 30-year average) in global average surface temperatures, not a weeklong or even monthslong bounce.

  • Still, this month's episode offers a warning, given that global emissions of greenhouse gases from burning fossil fuels, deforestation and other sources continue unabated.

What they're saying: After a week, Glen Peters, a scientist at Norway's Center for International Climate Research, tweeted: "Then will come a month, then a year, then a decade, then a 30-year average, ... This is a good indication of how close we are to 1.5°C."

  • "Every single fraction of a degree matters to avoid even more severe consequences of the climate crisis,” Samantha Burgess, deputy director of the Copernicus Climate Change Service, said in a statement.

3. Charted: A mixed global picture on energy VC

Data: International Energy Agency; Chart: Axios Visuals

There's good news and bad news in venture capital funding for energy tech, Ben writes.

The big picture: Venture investment in early stage startups is estimated to reach another record in 2023, a recent analysis by the International Energy Agency finds.

Yes, but: "Growth-stage funding, which requires more capital but funds less risky innovation, rose by only 1% in 2022 and was very weak in Q1 2023," IEA's Simon Bennett writes in a wider piece on global investment trends.

  • The value of growth-stage deals could fall by nearly 60% this year.
  • "Prevailing macroeconomic conditions have dented the amount of capital available and raised the cost of scaling up nascent businesses," he writes.

Zoom in: The agency also released a new sector-by-sector look at VC trends.

  • One takeaway: Early stage mobility deals have shifted from vehicles to charging.
  • Another: VC for industrial decarbonization is flowing mostly in the U.S. and Europe.

4. Petro notes: China's LNG deal and Gulf of Mexico drilling

Illustration: Annelise Capossela/Axios

🤝🏼 "Qatar on Tuesday secured its second large gas supply deal with a Chinese state-controlled company in less than a year, putting Asia clearly ahead in the race to secure gas supplies from Doha's massive production expansion project." (Reuters)

💰"Woodside Energy Group Ltd. gave the go-ahead for a $7.2 billion oil field off Mexico, the Australian producer’s first major fossil fuel investment since acquiring BHP Group Ltd.’s petroleum business last year." (Bloomberg)

5. Biden pressed to expand global EV mineral deals

A salt flat at Liex's 3Q lithium mine project near Fiambala, Catamarca province, Argentina. Photo: Anita Pouchard via Getty Images

Treasury Department regulators face pressure to expand the number of countries with resources that qualify under the climate law's consumer electric vehicle subsidies, Ben writes.

Driving the news: The government of Argentina — a big lithium producer — wants batteries made with its resources to count under the subsidy system.

  • Mining heavyweight Rio Tinto also wants Argentine lithium to be eligible.

The big picture: The South American nation isn't alone.

  • The Filipino government — citing its nickel, copper and cobalt resources — is urging Treasury to allow its materials to qualify.
  • Officials with Korea, a major battery supplier, also want Treasury to take a more expansive view of the origin of materials included in subsidy-eligible EVs.

Why it matters: Treasury's interpretation of the law affects which vehicles qualify for purchase subsidies up to $7,500. Half the incentives are tied to materials sourcing.

Catch up fast: Under the law, growing shares of batteries' "critical minerals" must be extracted or processed domestically, or from nations with formal Free Trade Agreements with the U.S.

  • That's creating a push for new minerals-related trade pacts and more leeway from Treasury in how the trade requirements are implemented.
  • The U.S. and Japan already have an FTA, but in March they reached a deal aimed specifically at flow of battery materials. Countries including Indonesia are also seeking new agreements.

Go deeper: Check out all the public comments flowing into Treasury.

Bonus: Ideas for Congress on minerals

A new report offers ways lawmakers can bolster domestic extraction of key minerals used in batteries, renewable power and other technology, Ben writes.

Driving the news: A couple of topline findings from the task force convened by the Aspen Institute suggest...

  • Congress should make it easier to extract and process critical minerals via a "place-based approach" to permitting and "timelines on project adjudication."
  • Clarifying and enforcing rights of Indigenous communities affected by mining is key, too.
  • "In addition, Congress should facilitate the ability of Tribal Nations to obtain equity in the form of an ownership stake in critical mineral projects."

The bottom line: "Without a plan, the United States faces serious risks to its economy and national security, not to mention an accelerated clean energy transition."

Full analysis

6. 💬Quote of the day

"Oil companies pulling back from renewables isn’t great for climate change, but it’s good for the existing competitors."
— Sanford C. Bernstein & Co. analyst Deepa Venkateswaran, via Bloomberg

Venkateswaran's take followed Shell's strategy update last week, which features a more cautious approach to renewable power.

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🙏 Thanks to Gail Hughes and Javier David for edits to today's edition, along with the talented Axios Visuals team.