Jul 16, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back! There's a lot going on, but today's Smart Brevity count is still just 1,413 words, a 5-minute read.

And this week in 1983, Big Country released "The Crossing," which provides today's anthemic intro song...

1 big thing: Plastic thrives in the pandemic

Illustration: Rebecca Zisser/Axios

The war against plastic has lost, for now, to the war against the coronavirus, Axios' Amy Harder reports.

Where it stands: Reusable everything, from bags to utensils, is considered a potential spreader of COVID-19, so many businesses are swapping multi-use products for single-use alternatives, most of which are plastic.

Why it matters: Plastic was polluting virtually everywhere on Earth before the pandemic, prompting a global outcry to improve recycling or get off the petroleum-derived material altogether.

Now, the coronavirus is leaving its mark with plastic masks and gloves washing up on beaches around the world — just one of many stark examples.

How it works: Oil and gas companies also make the products that eventually become plastic, and they have been betting on the world’s steadily growing consumption of plastic even before the pandemic hit.

But experts say COVID-19 won't provide a long-term boost to demand.

  • “In terms of oil demand, this spike has more to do with a very temporary unique situation,” said Rob Gilfillan, a plastics expert with the consultancy Wood Mackenzie.
  • “Plastic packaging remains under the microscope and brands won’t back down from those pledges they made pre-coronavirus,” Gilfillan said.

By the numbers: Forecasts suggest a big — but temporary — spike in plastic use, per Wood Mackenzie data on flexible packaging, which is made from plastic 90% of the time. It’s used for storing items like food and medical equipment (see below for more about this).

The intrigue: While some governments have delayed bans on plastic material because of the pandemic, none have been scrapped altogether despite increased plastic industry lobbying, according to Judith Enck, an Obama-era EPA official.

Enck is the founder of Beyond Plastic, an initiative out of Bennington College where she teaches.

What’s next: More than 100 organizations, including Enck’s group, are sending a letter Thursday to food delivery companies like GrubHub and UberEats urging them to make it the default position on their apps to not include plastic utensils and other single-use items unless the user explicitly asks for it.

Bonus: charting the plastic spike
Data: Wood Mackenzie; Chart: Andrew Witherspoon/Axios

Use of flexible packaging is set to increase 8% in the U.S. this year, compared to a pre-pandemic forecast of just 3.2%, per Wood Mackenzie's analysis. That forecast drops back down to 2% by 2021 though.

This data does not capture the increased use of different kinds of plastic that may have longer uses, such as plexiglass to divide people in restaurants and offices.

Yes, but: The assumption the greater demand will drop off should face scrutiny, according to Ben Locwin, an epidemiologist and consultant for the Centers for Disease Control and Prevention.

"The whole reason behavioral economics field exists is because people don’t act rationally. To assume everyone will go back to how they used to behave when the new disposal lifestyle is more convenient isn’t true," he said.

2. OPEC's new balancing act

The OPEC+ coalition is entering the next phase of fraught market-management efforts that have repercussions for the battered U.S. oil industry.

Driving the news: The group yesterday agreed to press ahead with plans to begin increasing output as demand haltingly recovers.

  • The coalition of OPEC and Russia (among other producers) will ease their joint curbs by roughly 2 million barrels per day starting next month.
  • It hews to a deal struck in April, as COVID-19 shattered demand, to cut 10 million barrels daily from the market for three months before beginning to relax the curbs.

Why it matters: The oil sector is in uncharted waters amid uncertainty over the recovery from unprecedented demand loss and the severity of the COVID-19's trajectory.

"Oil market balance is progressively improving…But risks and uncertainties are huge, be they related to the pandemic or to the economic consequences," Algerian energy minister Abdelmadjid Attar said at yesterday's meeting, per the Associated Press.

What they're saying: KPMG analyst Regina Mayor said OPEC+ faces a delicate task amid its members' competition with U.S. producers, whose output is very price-sensitive.

"OPEC+ will have to work hard to ‘thread the needle’ to allow slight increases in production without unleashing U.S activity. Basically, this will be a classic case of how to boil the frog without it jumping out of the pot," Mayor said.

Go deeper: OPEC+ lauds oil price rebound as producers prepare to boost output (S&P Global Platts)

3. Oil giants agree to a new emissions target

Illustration: Sarah Grillo/Axios

A group of the world's largest oil-and-gas companies this morning pledged near-term cuts to greenhouse gas emissions from their operations.

Why it matters: It's the latest step by energy giants — including Exxon and state-owned behemoths like China's CNPC — to address climate change.

But activists say the industry as a whole is moving far too slowly compared to the scope of the problem, especially outside of Europe.

How it works: The 12-member Oil and Gas Climate Initiative's target is to cut emissions intensity from exploration and production operations by 2025.

  • The target is 20-21 kilograms of CO2-equivalent per barrel of crude oil equivalent, down from a "collective baseline" of 23 kilograms in 2017.
  • The goal encompasses emissions of CO2 and the potent greenhouse gas methane.

The intrigue: "Intensity" means emissions per unit of output, as opposed to promising absolute reductions.

But OGCI said that if production levels remain constant, the pledge amounts to absolute emissions cuts equivalent to the energy use of 4-6 million homes.

What they're saying: “I don’t think it’s a small achievement to bring all these companies together — national oil companies, who have their own pressures, European and U.S. companies have different government and shareholder pressures on them — actually work together, particularly during the pandemic," Bob Dudley, the group's chairman and former BP CEO, tells Bloomberg.

Meanwhile, the Environmental Defense Fund's Mark Brownstein, who carefully tracks industry methane emissions, offers a mix of praise and criticism here.

4. Catch up fast: Pipelines, EVs, research

Nord Stream 2: "Secretary of State Mike Pompeo said a sanctions exemption will be removed for a Russian natural-gas pipeline to Germany, paving the way for new penalties to be imposed on the contentious project." (Wall Street Journal)

Batteries: "BMW has signed a deal with Northvolt for 2 billion euros ($2.3 billion) of battery cells to power the automaker's electric cars." (Automotive News Europe)

Methane: "A California-based federal district judge on Wednesday tossed out the Trump administration’s 2018 rule weakening limits on the venting and flaring of natural gas from wells on federal land, saying the measure was based on 'myriad inadequacies.'" (Bloomberg Law)

Climate: "Nearly impossible without man-made global warming, this year’s freak Siberian heat wave is producing climate change’s most flagrant footprint of extreme weather, a new flash study says." (Associated Press)

Oil-and-gas: "California Resources Corp filed for Chapter 11 on Wednesday after defaulting on interest payments, becoming the latest U.S. energy company to seek bankruptcy protection in recent months following the slump in oil prices." (Reuters)

5. Mayors worldwide press for green pandemic recoveries

Illustration: Eniola Odetunde/Axios

Via Axios' Kim Hart...Urban economies need to be rebuilt to prioritize green investments to create a more resilient, just society that can withstand global shocks, big city mayors worldwide said in a report Wednesday.

Why it matters: "A return to 'business as usual' would not just be a monumental failure of imagination, but lock in the inequities laid bare by the pandemic and the inevitability of more devastating crises due to the climate breakdown," the mayors conclude.

Background: The report represents the recommendations of a COVID-19 recovery task force launched in April by C40 Cities, a network of mayors trying to meet the Paris Agreements' emissions goals at a local level.

Recommendations include:

  • Investing in clean energy, and job training for people to move from high-pollution to sustainable industries.
  • Improving mass transit and reclaiming roads for non-car infrastructure.
  • Investing in green roofs, permeable pavements and other climate change-resilient infrastructure.

The big picture: The COVID-19 pandemic has underscored the link between public health, the environment and the economy.

One connection: Exposure to poor air quality has predisposed some — particularly in low-income neighborhoods with higher pollution levels — to more severe COVID-19 outcomes.

Where it stands: A number of C40 mayors are already overseeing efforts in line with the recommendations.

One example: Montreal Mayor Valérie Plante has planned 203 miles of bike paths allowing citizens to reach the city's parks, and aims to have tree canopy cover 25% of the city.

Yes, but: There's only so much cities can do to cut emissions, which don't recognize country boundaries, let alone city limits.

Read more

6. Number of the day: $48 billion

That's the total combined first-quarter impairments, or write-downs of asset values, of 40 U.S. oil-and-gas producers tracked by the federal Energy Information Administration.

Why it matters: Wednesday's EIA report, which also tallies deep spending cutbacks among producers, is a snapshot of the pandemic's financial impact on the industry.

"Low oil prices contributed to significant declines in revenue and the value of proved reserves for these companies," it notes.

The big picture: The big impairments are hardly limited to the U.S. Companies including Shell and BP have announced massive write-downs in recent weeks.

Go deeper:

Ben GemanAmy Harder