Jun 24, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. Today's Smart Brevity count: 1,302 words, 5 minutes.

🎶 And let's wish happy birthday to Hope Sandoval of Mazzy Star, who provide today's achingly beautiful intro tune...

1 big thing: Big Oil's transatlantic divide
Reproduced from Goldman Sachs Investment Research; Chart: Axios Visuals

Big Oil's transatlantic split on climate change is really on display of late, with a couple of recent reports highlighting the differences.

Driving the news: "Royal Dutch Shell will announce a major restructuring by the end of the year as the energy company prepares to accelerate its shift towards low-carbon, CEO Ben van Beurden told employees," Reuters reports.

  • Meanwhile, a detailed new report from the nonprofit Carbon Tracker Initiative finds a "widening Atlantic divide" on companies' emissions plans.
  • The study out this morning also highlights differences among the European majors, putting Eni, Repsol and BP in their top tier.

Where it stands: The chart above is from a wider Goldman Sachs report about the economic potential of clean technology, which we covered last week. It shows how renewables, which is almost all of what's captured in the chart, are a growing, though still small, share of European oil majors' capital spending.

  • One finding is that oil-and-gas investment cuts during the downturn boost the percentage of renewables spending, Goldman notes.
  • Nonetheless, they also write that "the transition of the European Big Oils into Big Energy is accelerating" as companies also move into not just renewables but also retail power markets, EV charging and more.

The intrigue: European majors have also been boosting their climate pledges in recent months, setting ambitious long-term targets eschewed by U.S. giants ExxonMobil and Chevron.

  • A number are vowing to become "net-zero" emissions by mid-century, though the pathways to get there remain somewhat vague and aspirational.
  • And setting targets for Scope 3 emissions — that is, CO2 from the use of their fuels in the economy — is now the coin of the realm.

Yes, but: A brief Wood Mackenzie note Friday highlights the European-U.S. divide, but also points out that for European companies "zero carbon is a big growth opportunity globally, but the Majors’ pipeline of projects is still modest."

  • "Sizeable acquisitions, including renewables and utility companies, will be needed if they are to achieve scale in new energy, broaden reach and build capability," WoodMac's Simon Flowers writes.
  • And Carbon Tracker Initiative, in summarizing their study, points out: "Most oil majors have set climate ambitions that leave them free to increase production or ignore the full impact of burning their future oil and gas."
2. Ford vows to be "carbon neutral" by 2050

Ford Motor Company this morning became the latest corporate titan to set an ambitious long-term climate goal, vowing to "achieve carbon neutrality" by 2050.

Why it matters: It's part of a wider move by some of the world's largest corporations to create aggressive climate targets.

  • The pledge includes a vow to create interim, "science-based" goals, including goals for emissions from use of its vehicles, not just its own operations.
  • That matters because, as The Verge reports, "Three quarters of the planet-heating CO2 emissions Ford is responsible for come from consumers driving its cars."

Yes, but: As we wrote about in last Thursday's newsletter, lots of these plans rely on forces outside of companies' direct control, and Ford is no different.

What they're saying: I had an email exchange with Ford spokesperson John Cangany about the role of policy in meeting the climate goals...

  • "Government policies are one set of factors that could impact our ability to reach carbon neutrality, and when," he said.
  • "For example, given their progressive policies, we expect the EU, California and other states following California’s lead to be carbon neutral before other parts of the world, and the interim targets we are working on will reflect these differences."
  • He also cited other factors, like consumer acceptance of EVs and energy price changes.

What's next: "We will continue to monitor and advocate for enablers that support our carbon neutrality goal, including carbon pricing systems," Cangany said.

3. The GOP's generation gap on energy
Reproduced from Pew Research Center; Chart: Axios Visuals

New Pew Research Center polling brings more evidence of a generational divide among Republicans on climate change and energy policy.

Driving the news: "[Y]ounger Republicans give more priority to alternative energy development — and are less supportive of expanding fossil fuel sources — than older Republicans," they write.

  • 49% of Republicans who are millennials or younger say the federal government is doing too little to reduce the effects of climate change.
  • That's compared to 38% of Republicans in Generation X and 25% of Republicans who are baby boomers and older.
  • The poll also shows generational divides among Republicans on conservation and wildlife protection.

The intrigue: "Among Democrats, there are hardly any gaps in views on these questions by generation or gender," Pew analysts note in the memo alongside the data.

Of note: The margin of error on the generational questions for Republicans is plus-or-minus 2.9% for boomers and older; 4% for Gen Xers, and 4.6% for millennials and younger.

4. The public pulse on emissions policy
Reproduced from Pew Research Center; Chart: Axios Visuals

A top-line takeaway from the big new Pew survey is that roughly two-thirds (65%) of adults say the federal government is doing too little to curb the effects of climate change.

Why it matters: Overall, the poll finds both persistently deep partisan divides on climate and energy, but also some areas of agreement on policy (which you can see above).

The big picture: The chart above shows some areas of overlap between Democrats and Republicans on policy, which could become more relevant after the 2020 election.

  • But like many other polls, it also shows deep divides.

By the numbers: 89% of adults who are Democrats (or lean that way) say the government is doing too little on climate, compared to 35% of Republicans or Republican-leaners.

  • 79% of adults say energy policy should emphasize the development of "alternative" sources like wind and solar, including 45% of Republicans and nearly all Democrats.
  • Overall, 56% of Republicans favor more fracking, compared to 21% of Democrats. The poll shows a drop in Republican support for more coal mining, but it's still at 54%, compared to 16% among Democrats.
  • "About seven-in-ten Democrats (72%) say human activity contributes a great deal to climate change, compared with roughly two-in-ten Republicans (22%), a difference of 50 percentage points," it states.
  • A quick reminder: The scientific consensus is that human activity is the overwhelming driver of global warming since the mid-20th century.

Of note: The overall survey of nearly 11,000 U.S. adults conducted between April 9 and May 5 has a margin of error of ± 1.4%.

  • It's higher for responses broken down by party, age, race, gender and education, and you can find those margins here.
5. New details on DOJ's probe of automakers

Illustration: Lazaro Gamio/Axios

A career Justice Department lawyer says political leaders in the antitrust division initiated a probe of four automakers' carbon emissions agreement with California a day after President Trump tweeted criticisms of the preliminary deal.

Driving the news: John Elias, in prepared testimony to the House Judiciary Committee holding the hearing today, says the since-abandoned probe into Ford, BMW, Honda and VW initiated on August 22, 2019, did not follow the typical procedures.

  • "Ordinarily, decisions of import — here, an investigation of a $630 billion automobile market — take time and care to evaluate, especially when the action would face defenses. Here, in its opening memorandum, staff acknowledged that it had not fully examined the public record," Elias states.

Why it matters: Makan Delrahim, the head of DOJ's antitrust division, has denied the probe was undertaken for political reasons. The department did not provide immediate comment Tuesday.

  • Elias' statement provides new details into the inquiry into automakers who reached an agreement with California regulators to meet emissions standards for their nationwide fleets that are more stringent than Trump administration policy.

Read more

6. Petro-notes: shale and offshore drilling

Onshore: "Looking out 18 months, U.S. output will still be around 16% below its peak in February, according to the average of five major forecasters surveyed by Bloomberg. It will probably be at least 2023 before the U.S. again hits its record close to 13 million barrels a day." (Bloomberg)

Offshore: "The companies that operate offshore drilling rigs for major oil producers face a second wave of bankruptcies in four years amid a historic drop in energy prices that likely will leave surviving drillers more closely tied to big oil firms." (Reuters)

Ben GemanAmy Harder