Sep 9, 2020

Axios Generate

Ben Geman

Good morning. Today's Smart Brevity count: 1,252 words, < 5 minutes.

🚨 Situational awareness: "[C]limate change threatens U.S. financial markets, as the costs of wildfires, storms, droughts and floods spread through insurance and mortgage markets, pension funds and other financial institutions," per a federal report. (NYT)

🎵 Let's wish happy birthday to the late soul pioneer Otis Redding, who has today's intro tune...

1 big thing: It's a shattered crystal ball season

Illustration: Aïda Amer/Axios

Modeling the long-term future of global energy sources and demand was a fraught and dicey thing even before the once-in-a-lifetime pandemic, but we're about to see a bunch of analysts take their best swings.

Driving the news: It's long-term outlook season!

  • Next week BP will unveil the big annual look-ahead to 2050, while next month will bring midcentury outlooks from the International Energy Agency and the Energy Information Administration.

Why it matters: These big reports will provide a fresh look at how experts are weighing the ripple effects of the COVID-19 crisis that has upended energy markets and demand this year.

  • But long-term outcomes are packed with uncertainties around things like the future of remote work, the energy-related provisions of governments' economic recovery plans, and a lot more.

Of note: Analysts who do these exercises will tell you that they're far from omniscient. But these big reports are a stab at grappling with what's ahead and, in some of them, what would need to happen to slash emissions.

What they're saying: "The pandemic is further increasing the uncertainty of our forecasting," Sverre Alvik, program director for energy transition with the risk advisory firm DNV GL, tells me via email.

What we don't know: "Economic stimulus packages from politicians around the world has the potential to speed up or slow down the transition, and 6-8 months after the outbreak, we don’t know which direction these will go (at the moment we see a lot of both, in sum making it a neutral impulse for the time being)," he said.

  • "And human behavior is very likely to permanently change, but we don’t have yet an overview of the extent of this."

What's new: DNV GL yesterday released the full version of their annual Energy Transition Outlook that looks out to 2050. A few takeaway projections...

  • CO2 emissions peaked last year, but future declines are nowhere near enough to meet the Paris Agreement goals.
  • The world is on track for warming of 2.3°C above pre-industrial levels by mid-century.
  • Crude oil use "likely" peaked last year, an inflection point brought forward by COVID-19.
  • Natural gas will become the world's largest energy source this decade and remain so until 2050, despite the renewables surge. "However, only 13% of natural gas used in 2050 will be decarbonized."
  • Overall, global energy demand will recover from the pandemic-fueled decline, but it's still an inflection point.
  • Demand levels from now until 2050 "will be from a lower base" — meaning it will fluctuate 6% to 8% below pre-COVID forecasts.
Bonus: One possible transportation future
Reproduced from DNV GL; Chart: Axios Visuals

The DNV GL outlook sees declining energy demand from transportation as electrification increases in the coming years and decades.

  • "Transport is ... one of the great engines of the energy transition, where electrons gain primacy over molecules of fossil fuel."
2. The yin-yang of Trump's drilling policy

It would be easy to feel some whiplash over recent Trump administration moves on oil-and-gas industry access — or lack thereof — to areas currently off-limits.

Driving the news: Trump used a Tuesday stop in Florida — a swing state with a huge electoral vote bounty — to announce an order that keeps the eastern Gulf of Mexico off-limits through 2032.

  • Florida's East Coast is a no-go zone too.
  • The same order — reversing earlier administration plans — also bars leasing off the Atlantic shores of Georgia and South Carolina.

The intrigue: The move comes roughly three weeks after the administration touted its plans under a 2017 law to open the Arctic National Wildlife Refuge to drilling.

  • It's an area where industry interest in expensive, remote projects could prove tepid.
  • Yet the eastern Gulf, adjacent to the heart of the U.S. offshore drilling industry in Louisiana and Texas, has long been coveted by the sector.
  • Oil industry groups, in a somewhat rare split with Trump, yesterday criticized the decision.
  • The politics of Florida drilling have been dicey for decades though amid bipartisan opposition there.

What they're saying: "In our view, the Eastern GOM may have represented the single biggest target of opportunity for offshore drillers," the research firm ClearView Energy Partners said in a note.

Go deeper: In reversal, Trump to ban oil drilling off coasts of Florida, Georgia and South Carolina (Washington Post)

3. It takes a village to decarbonize Uber

Illustration: Sarah Grillo/Axios

Uber isn't shy about acknowledging that they don't really control their own destiny when it comes to their newly announced climate goals.

  • “We can’t do this alone,” CEO Dara Khosrowshahi told reporters on a call yesterday, citing the need for “unprecedented” collaboration.

Driving the news: Uber is immediately expanding its "Green" program to new cities and setting a longer-term target of having fully electric cars account for 100% of rides on its platform in U.S., Canadian and European cities by 2030.

  • Those plans — and other new climate pledges Uber unveiled Tuesday — come as ride-hailing firms face growing scrutiny over their carbon emissions amid evidence they're cannibalizing public transit and increasing congestion.

Why it matters: Big, ambitious and increasingly common corporate climate pledges often assume that substantial policy and technology shifts and steps by other industry players will help achieve them.

How it works: Uber's moves include...

  • Launching Uber Green — which provides rides in EVs and hybrids — yesterday in San Francisco, Los Angeles, Seattle, Vancouver and a bunch of other cities.
  • An $800 million commitment aimed at helping "hundreds of thousands" of Uber drivers worldwide overcome cost barriers to transitioning to EVs over the next five years.
  • New steps to integrate their ride-hailing with micromobility and public transit.

The big picture: Uber's longer-term goal is that by 2040, 100% of worldwide trips on their platform are via EVs, public transit or micromobility.

What's next: Uber's plan requires steps by policymakers and other industry participants to spur EV and charging infrastructure deployment.

  • They got that ball rolling by announcing new partnerships with automakers like GM and Renault to help make EVs more affordable to Uber drivers.
  • GM has agreed to provide Uber drivers the same discount it gives its own employees on the purchase of a Chevy Bolt EV and accessories.
  • They're working with the nonprofit World Resources Institute on a "global road map" to enable more urban EV adoption.
4. GM gives Nikola a jolt
Expand chart
Data: Money.net; Chart: Axios Visuals

The chart above shows the quick market effect of yesterday's announcement that GM is taking an 11% stake in the startup Nikola Corp. and will engineer and build its Badger pickup.

  • GM will also supply fuel cells for Nikola's planned semitrucks, among other aspects of the deal.
  • GM's stock rose on the news, too.

What they're saying: "GM’s backing provides a much-needed dose of credibility for Nikola, whose shares added a more than 30% gain on Tuesday to a high-flying streak that belied a lack of meaningful revenue thus far," Bloomberg columnist Brooke Sutherland writes.

5. In Memoriam: Ted Halstead

Ted Halstead, who had been leading a carbon tax advocacy effort for three years, died suddenly in a hiking accident last week, his group announced Tuesday.

The big picture: We are saddened to hear of his passing. We corresponded with Halstead closely over the past three years as he worked to form a wide coalition of companies, environmental groups and others to back a long-shot carbon tax policy.

Details: Halstead was CEO and president of the Climate Leadership Council, which was founded in 2017 by former Republican leaders to pass a carbon tax whose revenue is returned to taxpayers.

  • He previously founded and ran the nonprofit New America.
  • “While Ted’s passing is a tremendous loss to the Council and the climate cause, we are committed to honoring his legacy by seeing his plan enacted into law,” the group said in a statement Tuesday. “We extend our deepest sympathies to his family.”

What’s next: The council’s board of directors appointed EVP Greg Bertelsen as acting CEO.

Go deeper: This article Halstead wrote in 2011 about his sailing adventures with his wife sheds more light on who he was as a person. It's worth a read.

— Amy Harder

Ben Geman