Axios Generate

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November 23, 2021

🍩 Welcome back! Today's Smart Brevity count is 1,353 words, 5 minutes.

🎶 At this moment in 1978, the great Donna Summer was #1 on the Billboard singles charts with today's intro tune...

1 big thing: The Fed's hazy green hue

Photo illustration of Jerome Powell wearing a green MAGA hat with the stitched phrase "Make America Green Again"
Photo illustration: Annelise Capossela/Axios. Photos via Getty Images: Andrew Caballero-Reynolds/AFP and Lev Radin/Pacific Press/LightRocket

The Federal Reserve is poised to increase its climate focus even as President Biden's nomination of chairman Jerome Powell to a second term disappointed advocates of policies to tilt the economy away from fossil fuels, Ben and Andrew write.

Catch up fast: Biden on Monday announced Powell's nod and said he's tapping Lael Brainard — a Fed board member who's outspoken on climate — as vice chair.

  • "[Powell's] made clear to me [that] a top priority will be to accelerate the Fed's effort to address and mitigate the risks that climate change poses to our financial system and our economy," Biden said.

Why it matters: The Fed has broad powers to weigh and ameliorate climate-related risks to the financial system.

However, it remains to be seen how far the Fed will go on climate, an area outside its traditional work that requires new staff expertise.

What we're watching: The Fed is already studying the risks that climate change poses to the financial system and has been deepening its work over the last year.

  • The Fed has set up two committees, one to study how climate change may affect the nation's economic stability and the other to examine the individual banks it oversees.
  • Both Powell and Brainard have said the Fed may conduct "scenario analysis" of climate risks, possibly focusing on individual banks.
  • Reuters reported last week that the Fed has been pressuring banks to analyze their portfolios for climate risks and may release findings to the public in 2023.

The intrigue: The Fed's moves so far stop well short of what environmentalists want from the central bank and other financial regulators.

  • Groups including Evergreen Action and the Sierra Club say the Fed should increase the capital banks must hold for their fossil portfolios. They want "portfolio limits" on the level of polluting assets banks can hold.

Yes, but: Christina Parajon Skinner of the University of Pennsylvania's Wharton School expects Powell will be "attentive" to ways climate affects the Fed's mandates "while also staying within the boundaries of the law and therefore not pushing the Fed into a drastically new role."

Read the whole story.

2. Biden finally goes there on oil release

Illustration: Aïda Amer/Axios

Weeks of Biden administration hints that it would tap the Strategic Petroleum Reserve came to fruition this morning as officials announced the release of 50 million barrels as part of an unusual coordinated release with several other nations, Ben writes.

Why it matters: It's the Biden administration's most direct effort yet to tamp down on high gasoline prices that have become a political headache for the White House amid wider inflation.

Gasoline prices are at their highest levels since 2014.

What they're saying: "The increase in gas prices has occurred because global oil supply has not kept pace with global oil demand, as the economy has recovered from the pandemic," a senior administration official told reporters this morning.

Where it stands: Oil prices have been declining in recent weeks and did not make big moves following the announcement, suggesting traders had largely baked the move into the cake after signals from the U.S., China, Japan and others.

It's unclear how much the new coordinated release will move crude prices and hence retail gasoline costs.

The intrigue: Today's announcement of a joint release is part of a wider geopolitical thrust-and-parry over oil, coming after OPEC+ has rebuffed pressure to expand the size of its output increases.

Rystad Energy analyst Louise Dickson said in a note that it's a "clear message to OPEC+ that it’s not the only actor on the global oil market stage."

"The coordinated effort represents the formation of an unofficial demand-side alliance that keeps OPEC+ in check if it fires up prices to a level seen as unsatisfactory to spur economic growth and keep consumer purchasing power in check," Dickson said.

The other side: Sen. John Barrasso, the top Republican on the Senate's energy committee, said tapping the SPR "will not fix the problem" and attacked administration restrictions on oil-and-gas development.

“We are experiencing higher prices because the administration and Democrats in Congress are waging a war on American energy," he said in a statement.

Go deeper: Biden to Release U.S. Oil Reserves in Challenge to OPEC+ (Bloomberg)

3. Uncertainties lurk in warming projections

Illustration: Annelise Capossela/Axios

A new analysis casts doubt on whether scientists can precisely estimate how much nations' combined emissions-cutting pledges will stem global warming, Andrew writes.

Why it matters: Leaders need to know how big of a gap exists between their emissions pledges and the Paris Agreement's temperature goals. The new study shows a risk of placing too much faith in these temperature projections.

Threat level: For the new study, published in the journal Nature Climate Change, scientists used seven different computer models to simulate how future emissions may play out. It reveals the folly of focusing too much on specific global warming figures.

What's new: The study focuses on the range of warming the models projected to evaluate uncertainty.

  • The models showed that current policies, which would not involve stringent emissions cuts, would lead to between 2.3°–2.9°C (4.1°–5.2°F) of warming by 2100.
  • When including countries' voluntary pledges, called Nationally Determined Contributions (NDCs), that range would come down somewhat to 2.2°–2.7°C (3.9°–4.9°F).

Yes, but: When including uncertainties in how the climate will respond to additional amounts of greenhouse gases, the study shows a far wider range — potentially reaching as high as 3.8°C (6.84°F) above preindustrial levels.

What they're saying: "Really we are quite uncertain about where current policies and NDCs take us, contrary to a lot of the media and communication during COP26," co-author Glen Peters of the CICERO Center for International Climate Research in Norway, told Axios in an email.

Read more

4. A challenge for clean car buyers: confusion

Data: IHS Markit Data; Chart: Thomas Oide/Axios

Americans are more open than ever to trading in their gas cars for electrified vehicles — but they're flummoxed by the confusing array of green options arriving in showrooms, Axios' Joann Muller writes.

Why it matters: Getting up to speed on the differences among hybrids, plug-in hybrids and battery-electric vehicles will be a challenge for car buyers — and salespeople, too — as we transition away from gas-powered vehicles.

What's happening: Overall car sales are down, but sales of electrified vehicles — hybrid, plug-in hybrids and electric vehicles (EVs) — nearly doubled in the third quarter, to 10.4% of total sales from 5.5%, per Kelley Blue Book.

Yes, but: While consumers are more aware of these alternatives, they don't fully understand them, says Toyota, which introduced the Prius 25 years ago and dominates the U.S. market for hybrids.

For instance, 75% of consumers surveyed by Toyota believe hybrids need to be plugged in. That's not true.

Here's a quick primer on some terms buyers are likely to encounter:

  • Mild hybrid — sometimes called e-assist, it's a gas-fueled car with an electric motor for added oomph during acceleration.
  • Full hybrid — Toyota's Prius is a good example: The car has both a battery-powered electric motor and a gasoline engine, which operate independently or together.
  • Plug-in hybrid — With a larger battery and a more powerful motor, a plug-in hybrid can go 10-50 miles on electricity.
  • Battery-electric vehicle — The car must be plugged into the electric grid to recharge the battery, or it won't run.

Read the full primer.

5. GM plunges into electric marine transport

Electric personal boat on a lake
Photo courtesy of Pure Watercraft

General Motors' expanding electric vehicles' business left dry land Monday when the auto giant announced it's acquiring a 25% stake in the electric boating company Pure Watercraft, Ben writes.

Why it matters: "The investment in Pure Watercraft represents the first time GM will commercialize all-electric marine products and applications," Mark Lubin, a GM spokesman, tells Axios.

  • He notes GM has previously invested in "exploratory all-electric proof-of-concept marine propulsion projects," and that work will inform their collaboration with Pure Watercraft, he said.

Details: The deal is worth $150 million, Pure Watercraft CEO Andy Rebele tells CNBC, which includes cash and other commitments. "The company is not disclosing the split between cash and payment-in-kind," it reports.

Go deeper: GM invests in outboard motor startup to make all-electric boating (Detroit Free Press)