Jun 18, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back! Today's Smart Brevity count: 1,186 words, < 5 minute read.

Happy belated birthday (from Sunday) to Eddie Levert of The O'Jays, who opens the edition with this soul classic...

1 big thing: The persistence of fossil fuel subsidies
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Reproduced from IEA; Note: In 2018 dollars; Chart: Axios Visuals

International Energy Agency data shows that worldwide subsidies that lower consumer costs for fossil fuels grew to over $400 billion last year, their highest levels since 2014.

Why it matters: The persistence of the payments, despite some progress in pricing reforms in recent years in several nations, are among the many headwinds in the effort to combat climate change.

  • And the IEA report doesn't even include various governments' support for fossil fuel production projects.

What they're saying: "The continued prevalence of these subsidies — more than double the estimated subsidies to renewables — greatly complicates the task of achieving an early peak in global emissions," IEA analysts said in a June 13 report.

Where it stands: Higher oil prices in 2018 than 2017 were one driver of the overall increase, while higher energy consumption was another.

  • Oil-related subsidies rose from $143 billion in 2017 to $182 billion last year.
  • Higher petro prices were a strain in countries where consumers faced higher retail costs, "particularly where national currencies were losing value against the U.S. dollar," IEA notes.
  • Indonesia, Iran, Egypt and Venezuela saw the biggest subsidy increases for oil products. Iran, Venezuela, Mexico, Egypt and China all saw higher subsidies for fossil-based power.

The intrigue: Tackling subsidies is tricky — as IEA notes, there's a need to make energy more affordable to poor and vulnerable populations.

  • "But many subsidies are poorly targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel," the report states.
2. New York State's big climate move

New York State is on the cusp of passing the nation's most aggressive climate and energy law.

The big picture: "The agreement to pass the so-called Climate & Communities Protection Act calls for New York to eliminate 85% of its overall planet-warming emissions by 2050, while offsetting or capturing the other 15%," HuffPost reports.

Why it matters: The deal that emerged between lawmakers and Gov. Andrew Cuomo early this week is among the most striking examples of states enacting tougher policies as the White House unwinds federal efforts.

  • California, building on existing mandates, enacted legislation last year requiring all state power to be carbon-free by 2045.
  • A cap-and-trade plan with steep reduction targets is heading toward passage in Oregon.

Where it stands: New York has small per-capita emissions compared to the country overall, but as of 2016 the populous state ranked 9th in overall energy-related CO2 output, per the Energy Information Administration.

  • New York is also under unified Democratic control after the party regained the state's Senate in 2018.
  • In addition to the economy-wide cuts, the bill requires 70% renewable power by 2030 and zero-emissions power overall by 2040, according to several reports.

Go deeper: New York lawmakers near landmark deal on greenhouse gas emissions (WSJ)

3. GM boss: EVs and AVs mean labor dislocation
GM CEO Mary Barr speaks to Axios reporter Joann Muller. Photo: "Axios on HBO"

GM CEO Mary Barra says the company will need to relocate workers to keep them in the family as part of its long-term vision for an electric, self-driving future.

The big picture: "I want to make sure this company is not around for the next 5 years but the next 50 and beyond," Barra told Axios' Joann Muller for "Axios on HBO."

Why it matters: With labor talks looming this summer, Barra's must convince workers that her plan to divert resources toward new technologies won't put their livelihoods at risk.

Why you'll hear about this again: After more than 100 years, automobiles are shifting away from gasoline, steering wheels and personal ownership.

  • It's a perilous transformation for GM, which needs to keep pumping out profitable trucks and SUVs so it has the capital to keep pace on innovation with new competitors like Tesla and Google.

And it's a painful transition that's already affecting thousands of American jobs.

  • Last November, GM cut 15% of its white-collar workers, even as its Cruise self-driving unit in Silicon Valley is doubling software and engineering staff to 2,000.
  • About 6,000 factory jobs were also cut.

Yes, but: Barra emphasized that GM acted while the economy is strong and most factory workers have been offered jobs in other GM plants.

What to watch: GM is eventually shifting its entire vehicle lineup to electricity and says it will introduce 20 new EVs by 2023. Many of those will be built and sold in China.

  • "But there's a very robust plan for the United States as well," Barra says.
  • So far, GM has only announced one: a new Chevrolet EV that will be built in Michigan.

Go deeper

4. Trump calls tanker attacks "minor"

The president, in a Time interview posted late last night, downplayed the alleged Iranian attacks against 2 tankers in the Gulf of Oman last week.

But, but, but: It published just hours after Secretary of Defense Patrick Shanahan announced U.S. is deploying an additional 1,000 troops to the Middle East in response to "hostile behavior by Iranian forces and their proxy groups."

The intrigue: "Trump argued that the Gulf of Oman is less strategically important for the United States now than it used to be," the magazine reports.

  • “Other places get such vast amounts of oil there,” Trump told Time. “We get very little."

Quick take: It's true that U.S. crude imports from the region have been plummeting for years as U.S. production has surged (as Bloomberg's Javier Blas notes here).

  • But roughly 18 million barrels per day — nearly a 5th of global demand — pass through the Strait of Hormuz.
  • Closure of the passage or a major conflict in the region would nonetheless send oil prices skyrocketing, affecting U.S. consumers and industries.
5. Chart of the day: Fueling the plastics boom
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Data: EIA; Chart: Axios Visuals 

Axios' Amy Harder reports ... America's oil and gas boom is fueling the rise of a lesser-known energy central to the plastics in our lives: ethane.

The big picture: Ethane, which is produced alongside natural gas, is the largest type of raw material in North America for petrochemicals, the building blocks of plastics.

By the numbers:

  • EIA projects U.S. ethane demand will reach 1.7 million barrels per day by year’s end, an 83% increase over 2012.
  • 7 new petrochemical plants have come online in the U.S. since early 2017, with at least a couple more expected this year, per EIA.
  • Ethane exports have grown from nothing in 2013 to more than 250,000 barrels a day.

Go deeper: Read the full story and our deep dive on plastics. Plus, listen to Axios Pro Rata podcast discussing plastics.

6. Catch up fast: OPEC, temperatures, shipping

Climate: Global average temperatures in May were the 3rd-warmest for the month in records dating back to 1880, according to the latest NASA data, while separate European Union data similarly put May among the top 3.

  • The big picture: Very warm Arctic temperatures helped to vault last month into the top 3. Last month was 0.87°C above the 1951–1980 average for the month, NASA said.
  • Why it matters: 2019 is on pace to be among the hottest on record as the human-driven, long-term warming trend marches on.

OPEC: Per WSJ, "Saudi Arabia is cutting its oil output and is set to push for the Organization of the Petroleum Exporting Countries to curb oil output in the second half of the year."

Shipping: Via Reuters, "A group of leading banks will for the first time include efforts to cut carbon dioxide emissions in their decision making when providing shipping company loans, executives said on Tuesday."

  • They include Citigroup, Societe Generale and others.
Ben GemanAmy Harder