Aug 21, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning! Today's Smart Brevity: 1,073 words / ~ 4 minutes.

Yesterday marked the 1982 release date of "Upstairs at Eric's" by Yaz, which provides today's intro tune...

1 big thing: Big Auto's rupture with Trump
Giphy

Get ready for Mercedes-Benz to join the agreement between California and several big automakers to increase carbon emissions standards — a pact that rebuffs White House plans to freeze the Obama-era CO2 and mileage rules.

Driving the news: Per the Los Angeles Times late Tuesday, California Gov. Gavin Newsom confirmed anonymously sourced NYT reporting that Mercedes would join Ford, BMW, Honda and VW in the deal rolled out last month.

  • Mercedes declined to comment yesterday.

Why it matters: It's a sign that the deal is expanding to cover a huge swath of the industry.

  • NYT reports that another automaker — GM, Toyota or Fiat-Chrysler — intends to comply with the stricter rules for at least the next 4 years.
  • Newsom also told reporters that discussions are under way with a 6th major automaker, per LAT.

Quick take on Mercedes: Per Axios' Joann Muller, Mercedes' apparent decision makes sense because...

  • They're part of the Daimler group, which has a joint venture with BMW combining their mobility services around electric vehicle charging, ride-hailing and more.
  • The luxury automaker also has a number of EVs in its pipeline.
  • That move toward EVs will enable a break with their past method of complying with mileage rules by purchasing credits, rather than making cleaner cars.

My thought bubble: The pact is the starkest example yet in a wider movement of states, companies and local governments rebuffing or counteracting the White House posture on global warming.

But, but, but: In this case it's not black and white. Automakers initially backed the White House goal to revisit Obama-era mandates, and only later chafed at plans to freeze annual increases next year.

  • As one veteran advocate pointed out to me recently, the agreement with California is written in a way that's "significantly weaker" than the rules issued under former President Obama.
2. Harris joins climate forum after criticism

Sen. Kamala Harris will soon be on TV to share her views on global warming after all.

Driving the news: Her campaign said yesterday that she'll take part in the Sept. 4 CNN candidates forum on climate.

Why it matters: The California Democrat's campaign has said rather little about her climate platform compared to detailed plans from some other top-tier hopefuls.

What they're saying: "We were happy to change our schedule to accommodate such a critical conversation," spokesperson Lily Adams told multiple outlets.

  • "As Senator Harris has said, this is a climate crisis and is one of the most urgent reasons we need a new president," Adams added.

The intrigue: Harris' reversal followed criticism from some climate activists, including the Sunrise Movement, over her initial decision against participating.

One big question: Whether Harris will have unveiled details about her plans ahead of the event. The campaign did not respond to inquiries.

Go deeper: 10 Democratic presidential candidates will participate in CNN climate town hall (CNN)

3. Walmart vs. Tesla on solar panel fires

Walmart filed a lawsuit against Tesla on Tuesday, alleging that "no fewer than seven Walmart stores" experienced fires due to Tesla's solar panel systems as of November 2018, Axios' Orion Rummler reports.

The big picture: The retail giant wants the New York State Supreme Court to force Tesla to remove panels from 240 stores, pay those costs and other damages.

Why it matters: The lawsuit's timing isn't great for Tesla, which just days ago relaunched its struggling solar business with a new residential rental option.

  • In addition, Walmart has very deep pockets, so it can easily afford a long fight if the case doesn't settle fast.

Where it stands: More than 240 Walmart stores have leased or licensed roof space to Tesla for solar panels. The lawsuit says, "Many of the problems stemmed from a rushed, negligent approach" to installation by Tesla.

  • It also accuses energy service company SolarCity, which Tesla acquired in 2016, of using "an ill-considered business model" that installed panels "haphazardly" to "turn a profit."
  • Tesla did not respond to a request for comment late Tuesday.

Go deeper: Walmart sues Tesla for negligence after repeated solar system fires (Reuters)

4. Chart of the day: the state of U.S. shale
Screenshot of chart from Rystad Energy release on U.S. shale

A note Wednesday morning from the consultancy Rystad Energy finds something new in the U.S. shale patch.

The big picture: "In a remarkable turnaround, the second quarter of 2019 is the first three-month period on record when US shale operators achieved positive cash flow from operations after accounting for capital expenditures," they said.

Why it matters: The results come as shale producers are under investor pressure to actually make money, not just increase output.

What they did: Rystad examined 40 shale oil producers' financial performance and found enough cash flow to make the group net-positive overall.

  • "In the second quarter of 2019, 35% of operators in the peer group balanced their spending with operational cash flow, and reported an accumulated $110 million surplus in [cash flow from operating activities] versus capex," they said.
  • They also showed a drop in new debt financing.
5. United Airlines and EDF launch emissions effort

United Airlines and the Environmental Defense Fund unveiled a partnership Wednesday aimed at helping the aviation heavyweight meet its existing pledge to cut its carbon emissions by 50% in 2050.

Why it matters: The agreement arrives at a time of growing attention to the growing climate effects of air travel, which already accounts for 2% of human-induced carbon emissions and is rising.

  • Greta Thunberg, the prominent young climate activist, launched a high-profile sailing trip across the Atlantic to attend a UN climate summit in New York next month.

But, but, but: "This decision is not in response to the recent focus (primarily overseas) on environmental advocacy in relation to commercial air travel," United spokesperson Charles Hobart tells Axios in an email.

How it works: "EDF and United will analyze options for identifying high-quality carbon offsets that represent real, permanent, verified emission reductions; that deliver local environmental benefits; and are properly accounted for," the announcement states.

6. Trump's ethanol troubles

The Trump administration is "scrambling to stem the tide of rising anger" in farming states over recent EPA moves to ease ethanol blending requirements for some oil refiners, per Reuters.

Where it stands: "Trump held a two-hour meeting on Monday with members of his Cabinet after hearing blowback from farmers after the decision to grant exemptions from the nation’s biofuel laws to 31 refineries," according to the report, citing sources familiar with the discussions.

Why it matters: The story, plus a separate account in Bloomberg, shows how the administration is caught in the politically tricky territory of responding to longtime oil industry complaints about biofuels mandates that are popular in the farm belt.

  • Reuters also notes that "Trump’s re-election campaign team also took notice of Democratic presidential candidates seizing on the unrest."

What's next: The administration is weighing options for responding to the tumult, both outlets report. Here's Bloomberg...

"Administration officials suggested expanding environmental credits that encourage production of 'flex-fuel' vehicles that can run on high-ethanol gasoline and requiring government agencies to use more of them — both steps that could increase the use of corn in fuels."
Ben GemanAmy Harder