Nov 6, 2020

Axios Generate

Good morning. Today's Smart Brevity count: 1,259 words, 4.7 minutes.

🎶And at this moment in 1974, the brilliant Stevie Wonder was atop the Billboard singles charts with today's intro tune...

1 big thing: Why Biden's return to Paris would be both easy and hard

Photo illustration: Sarah Grillo/Axios. Photo: Win McNamee/Getty Images

Joe Biden this week pledged again to immediately rejoin the Paris agreement, but meeting his ambitions for the U.S on the world stage will be much tricker.

Driving the news: The Trump administration's withdrawal from the 2015 pact became official Wednesday, but that's super-easy for Biden to reverse (if he's indeed won).

Why it matters: Biden would face big challenges and complex decisions after announcing the U.S. is back on the climate diplomacy circuit.

  • Remember his platform calls for not only getting back in but pushing other countries to boost their emissions goals and transform them into concrete steps.
  • One thing to watch: how Biden interacts with China, the world's biggest emitter that recently pledged to become "carbon neutral" by 2060, but has not offered detailed plans.
  • But given the long odds that Democrats will control the Senate next year, Biden will face checks on his ability to implement new U.S. cuts, even as he presses other nations.

What's next: Under the nuts and bolts of Paris, in which nations submit their own nonbinding CO2 targets, Biden would be expected to update the Obama-era pledge.

  • Obama's submission called for cutting U.S. greenhouse gas emissions 26%-28% below 2005 levels by 2025.
  • The next big UN climate conference is slated for late 2021, which would give the new administration a long window to prepare its plan.
  • There's also a lot of discretion in how to structure the pledges, notes Jonathan Pershing, a senior Obama-era climate official. He said setting a 2035 target might be an option, given Biden's vow to move the U.S. power sector to 100% carbon-free sources by that date.

The intrigue: This good E&E News story ($) points out that "world leaders likely expect an impressive new climate commitment" from Biden.

But given the long odds of moving a big climate bill through Congress, Biden's diplomatic leverage will depend on showing other policies will breathe life into the new pledge.

  • "For increased ambition, they are going to have to scavenge for more cuts," one veteran of global climate diplomacy tells Axios.
  • Options include stimulus provisions; tariffs on carbon-intensive goods; new regulations Biden's administration would seek to implement, and more, the source said.

What they're saying: Pershing cautioned against assuming there would no avenues for working with a GOP-controlled Senate.

  • He points out that the early 2018 budget deal expanded key tax credits for carbon capture projects.
  • Pershing also noted the potential for climate-friendly spending provisions in the pandemic recovery package expected to be an early priority.

Yes, but: Overall, Biden's climate agenda would need to rest heavily on executive actions (again, if he's indeed won and Republicans keep the Senate).

  • Pershing, who now heads the environment program at the William and Flora Hewlett Foundation, sees "all sorts of ways you can create leverage" with executive powers.
  • There are of course new regulations, but also support for states' climate policies, using the power of federal procurement, and more.
  • “Executive authorities and actions shape investment, and those shape the direction of the U.S. economy,” he said.
2. Clean energy stocks shrug off post-election dip
Expand chart
Data: Money.net; Chart: Axios Visuals

After dropping in the post-election chaos earlier this week, stocks of a bunch of solar energy companies jumped yesterday. The chart above provides a snapshot of companies in different segments in the solar market.

The big picture: This Bloomberg piece explores how investors in the clean energy sector more broadly are weighing the prospect of the election boosting efforts to move away from fossil fuels:

"The S&P Global Clean Energy Index, made up of 30 companies from around the world, surged toward a record on Thursday, bouncing back from losses a day earlier, as Biden’s path to victory in the presidential race appeared clearer, while Republicans’ ability to maintain control of the Senate looked less certain," it reports.

3. Trump changes FERC's climate

President Trump has removed Neil Chatterjee as chairman of the Federal Energy Regulatory Commission and replaced him with James Danly, the other sitting GOP member of the panel.

The intrigue: Chatterjee remains on the commission, but there's immediate speculation — including from Chatterjee himself — that his stance on climate change may have cost him the gavel.

Why it matters: FERC is a powerful body with jurisdiction around electricity markets, interstate natural gas and power transmission, liquefied natural gas (LNG) facilities and more.

The big picture: Chatterjee, a former aide to Senate Majority Leader Mitch McConnell, has recently helped boost the commission's work on climate.

  • Last month FERC issued a policy statement encouraging regional power market operators it oversees to consider incorporating state-based carbon pricing policies into those markets.
  • "These rules could improve the efficiency and transparency of the organized wholesale markets by providing a market-based method to reduce GHG emissions," he said at the time.

The intrigue: The White House declined to comment on why it removed Chatterjee as chairman, a role he's held for multiple years under Trump.

  • But Alex Flint of the Alliance for Market Solutions, a group that pushes conservatives to embrace carbon pricing, said Chatterjee's recent moves are behind his ouster.
  • "Chairman Chatterjee demonstrated tremendous integrity and independence by acknowledging the need to address climate change," said Flint, a former senior GOP aide on the Senate's energy committee.

What they're saying: Chatterjee told Axios that he was not provided a reason for the decision.

  • But he noted FERC has been taking steps of late that he called “smart, market-based approaches to the energy transition and reducing carbon emissions," including removing barriers to entry for distributed energy resources and its move on carbon pricing.
  • And he told The Washington Examiner that "perhaps" his removal was retaliation for his climate moves.

Read more

4. Shell's revealing refinery closure

Illustration: Rebecca Zisser/Axios

Shell is closing down its refinery in Convent, Louisiana, after failing to find a buyer for the plant that processes over 200,000 barrels of oil per day, the company said Thursday.

Driving the news: Shell said the move is partly a result of its long-term plans to transition its portfolio to lower-carbon sources as it aims for "net-zero" emissions by 2050.

  • Shell cited its strategy to invest in a "core set of uniquely integrated manufacturing sites that are also strategically positioned for the transition to a low-carbon future."

Why it matters: Most signs of Big Oil's climate plans have involved acquisitions and venture deals around renewables, batteries and other tech.

  • But this move shows how the plans will also involve shedding assets in various parts of their business.
  • On the exploration and production side, BP plans to cut its oil-and-gas production by 40% over 10 years.

Yes, but: All that said I don't want to overstate the climate angle in what's mostly a market story as the industry grapples with COVID-19.

  • "Refineries have come under increasing financial pressure worldwide, as fuel demand has dropped during the coronavirus pandemic," the Houston Chronicle notes.
  • Per Reuters, it's the ninth North American refinery slated for shutdown or idling since the pandemic began.

What's next: The shutdown process at the plant, which employs 675 people, will begin later this month, Shell said.

5. Equity markets are wild for EVs

Want more evidence that the stock market hive mind is really psyched about electric vehicles? Consider this: The Chinese EV company Nio now has a market capitalization higher than General Motors!

Why it matters: Nio's nearly $58 billion market value, compared to GM's $53B, is based on potential, certainly not market share. As Business Insider (where I first saw the crossed streams) points out...

"Nio has cumulatively delivered just 63,343 of its current model line up of 3 electric vehicles, with the first vehicle going on sale in 2018. General Motors sold 2.9 million cars and trucks in 2019 alone."

The big picture: GM, of course, is betting big on electric vehicles too, with a $20 billion, five-year investment program, and Thursday brought more news on that front. Via the Cleveland Business Journal:

"General Motors Co. said it’s beginning to hire 1,100 employees at its Lordstown, Ohio plant that will make Ultium batteries for the automaker’s upcoming electric car models."