Nov 5, 2019

Axios Generate

Good morning! Today's Smart Brevity count: 1,294 words, ~ 5 minutes.

And yesterday marked the 1970 release of David Bowie's "The Man Who Sold The World" (h/t @JakeRudh), which brings us into the news...

1 big thing: Trump's ticking Paris clock

Illustration: Aïda Amer/Axios

By now you probably know the U.S. just started the one-year clock to formally abandon the Paris climate deal. (And Axios' Amy Harder can bring you up to speed.)

One big question: Will the U.S. move affect other big polluters' climate efforts, especially as new national pledges under the pact come due next year?

  • Andrew Light of the World Resources Institute says the U.S. was a key player in getting other nations to put up meaningful pledges in the first round a half-decade ago.
  • The question now, he tells me, is to what extent other nations step forward and fill that role as countries craft their updated submissions.

Where it stands: The federal posture going forward depends on the 2020 election outcome. The NYT's Lisa Friedman reports that "supporters of the pact say they have to plan for a future without American cooperation."

Speaking of the election, every Democratic White House candidate has pledged to re-enter the pact, which can happen relatively fast under its rules.

  • One thing to watch, however, is if President Trump's move shakes loose how exactly the candidates would write the updated U.S. pledge (called a "nationally determined contribution").
  • The next U.S. target would extend through 2030, and Light says what's important is not only the targeted emissions-cutting level. “The next president is going to have to not only articulate a number, but explain how they can do this," he said.

The intrigue: Trump's rejection of Paris puts him at least rhetorically at odds with some major corporate interests.

  • But for all the chatter about K Street splitting with Trump on climate, two key groups — the U.S. Chamber of Commerce and the Business Roundtable — kept a low profile yesterday.

What they're saying: If you asked the Chamber, you got this statement: "The Chamber supports U.S. participation in the Paris Agreement because greater collaboration between governments and businesses is essential to tackling the climate challenge."

  • It notes that they're an observer at UN climate talks and will keep working with overseas business partners on the matter.
  • The Business Roundtable, in response to a query, said: "Whether or not the U.S. is participating in this international agreement, Business Roundtable supports actions designed to address risks associated with the changing climate."

Go deeper: Trump makes it official: U.S. will withdraw from the Paris climate accord (The Washington Post)

2. Why the Aramco IPO is a climate story

This is an important line from the NYT's coverage of the Saudi Aramco IPO plan...

"Aramco’s ability to attract investors may [be] undermined by doubts about the future of fossil fuels, as climate change drives interest in renewable energy."

Why it matters: At this point, it's tough to think about long-term investments in a major oil producer — the world's biggest, in fact — without climate entering the equation.

  • A huge number of brain cells are devoted to gaming out when global oil demand may peak and what future climate policies mean for the sector.
  • Some forecasters, like the International Energy Agency, don't see a peak before 2040 absent far stronger climate efforts. Others think it could be sooner.

But, but, but: It's not so clear that carbon constraints or peak demand would be Aramco's enemy, at least not for decades.

  • Saudi oil, compared to other petro-states and companies, has a lower carbon intensity when produced, lessening emissions. It's something Aramco is keen to tout and did when announcing that the IPO is finally, actually, really, truly (theoretically) happening.
  • So it's not impossible to imagine a scenario when Aramco has a comparative advantage if the world gets more serious about reining in what are still rising emissions.

What they're saying: Atlantic Council energy and climate expert David Livingston notes that once crude demand peaks and begins to decline, there will still be decades with lots of oil thirst, but perhaps at lower prices.

  • He tells me that Saudi production costs are relatively low, "so in a world of lower average oil prices they would be able to sustain high levels of production even as other high-cost projects (including offshore and some shale) are forced to shut down."
  • Livingston also argues that Saudi oil would be well positioned to compete in a world with carbon pricing and carbon border adjustments due to their per-barrel emissions and resources to invest in CO2 capture.

The bottom line: "Whether being king of a slowly atrophying industry is attractive enough to justify a premium from investors is another question, however, and one that we will all be watching closely in the months and years ahead," Livingston said.

3. One reason why cutting energy use is hard
Expand chart
Adapted from IEA's Energy Efficiency 2019 report; Chart: Axios Visuals

The new IEA report on energy efficiency offers a bunch of reasons why efficiency gains are slowing. One that caught my eye: the way we live.

The big picture: "In residential buildings, structural changes have consistently matched or outpaced efficiency gains since 2014," IEA notes in a summary.

  • "These include increased device ownership and use and a significant growth in average per-capita residential floor area in all economies."

Go deeper: Global energy efficiency gains are slowing (Axios Generate, Nov. 4)

4. More cash for a battery unicorn

The battery startup Sila Nanotechnologies has raised another $45 million and expanded its leadership team with two clean tech industry veterans.

Why it matters: The San Francisco Bay-area company's technology uses silicon-based anodes instead of graphite as a way to create more energy-rich batteries.

Where it stands: Bill Mulligan, a former executive VP at SunPower, will be the first COO. Kurt Kelty, a former Tesla and Panasonic exec, will be Sila's VP of automotive.

  • The new $45 million comes from the Canada Pension Plan Investment Board, joining various current investors including Daimler AG and Bessemer Venture Partners.

The big picture: It brings total funding to $340 million for the company whose CEO says it has a value of over $1 billion.

Go deeper:

5. Let’s talk it out: climate change


Amy reports ... The American Psychological Association is holding its first-ever conference on climate change, the group announced Monday. 

Driving the news: The event, to be held Nov. 14–16 in Lisbon, Portugal, includes a keynote speech by UN Secretary General António Guterres.

One level deeper: The organizers hope to emerge from the conference with a unified voice for aggressive action on climate change from psychology groups, which are not a well-known voice on a matter dominated by energy and environmental interests.

What they’re saying: A draft resolution on the event’s website says in part that “the resistance of some individuals worldwide to accept evidence of climate crisis reflects a variety of psychological, social, economic, and political factors.”

Our thought bubble, per Amy: A host of factors is stifling action on climate change, including lobbying from fossil fuel companies and Republicans who don’t engage on the topic much at all.

  • But lurking beneath those political hurdles is basic human psychology, like the tendency for us to prioritize short-term gain over long-term sacrifice. 

Go deeper: Read two of Amy’s recent Harder Line columns on the topic... 

6. Petro-notes: OPEC and ANWR

OPEC: S&P Global Platts offers important details from OPEC's just-released World Energy Outlook. The annual report forecasts that "global oil producers would need to pump 12% more oil in 2040 from current levels to meet expected demand of 110.6 million b/d."

  • By the numbers: "OPEC's share of global liquids supply, including [natural gas liquids], is expected to rise to 40% in 2040 from 37% in 2018, as non-OPEC production peaks in 2026 and then declines, according to the outlook," they write.

Arctic: Alaska Public Media reports that the Trump administration won't hit its goal of selling drilling leases in the Arctic National Wildlife Refuge this year. The bureaucratic procedures won't happen fast enough.

  • Why it matters: Their piece notes the slipping schedule is a "setback" for the Trump-backed effort. But it also quotes a former Alaska state official who says the administration is seeking to ensure its reviews and plans are complete because they will inevitably face court challenges.