Dec 1, 2017

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back. Let's head for the weekend . . .

What Tillerson's exit would do for climate policy

Meet the new boss: Actually there is no new boss yet, but you probably know that yesterday brought fresh signs that the White House could push out Secretary of State Rex Tillerson and replace him with current CIA chief Mike Pompeo.

The climate stakes: At first blush this would be a move even further to the right atop the agency that represents the U.S. in global climate change talks.

  • Pompeo has voiced skepticism about the scientific consensus on human-induced climate change and, according to multiple reports, in 2015 called the Paris agreement a "radical climate change deal."
  • E&E News published a story yesterday on the potential move that looks at Pompeo's record. It notes that the former Kansas House member would "bring a careerlong skepticism of climate science with him to Foggy Bottom," but at the same time points out that Pompeo "has been more tight-lipped about climate science in recent months."

What we're hearing: While Pompeo is a contrast to Tillerson, who had unsuccessfully argued for remaining in the Paris treaty. He's also close to President Trump, which could make for a less disjointed U.S. posture at global summits, where nitty-gritty decisions are hashed out.

"Governments won't have to ask themselves whether or not the Secretary of State has the ear of the President," one veteran of global climate diplomacy tells Axios.

"Drilling down on the UNFCCC and Paris, that means we'll have more clarity on the strategic approach and fewer last minute decisions (as we saw with the delegation) once he's in place," this source adds, referring to the UN Framework Convention on Climate Change, which the U.S. has been a party to for decades.

One big question: How Pompeo currently views the nexus between climate change and national security now that he's been heading the CIA for almost a year.

  • "[S]ince the intelligence establishment has been so clear for so long that climate change must be taken seriously as a security threat, I do wonder if that has made any impression on Pompeo since going to the agency," Andrew Light, a senior State Department climate aide in the Obama administration, tells Axios.
The policy battles continue over trade, coal and tax

Solar trade: A group, informally called the Utility-Scale Solar Coalition, has registered to lobby via Smirnow Law, the firm of veteran trade attorney and solar expert John Smirnow. The coalition, which includes a dozen solar and broader energy companies, is battling potential tariffs on panel equipment imports.

  • Why it matters: The filing signals the intensity of the battle over the proposal by two distressed panel manufacturers for new trade restrictions — a plan that developers say would significantly raise project costs and slow deployment.
  • Go deeper: The New York Times is out with a detailed piece on the solar trade battle this morning. "The solar panel industry could be Mr. Trump's first test of whether his harsh rhetoric toward China will result in significant trade measures — and whether those moves would help restore American businesses," they report.

Congress, part 1: A dozen House Republicans are balking at the provision in Senate tax legislation that would open the Arctic National Wildlife Refuge to oil drilling. Read their letter here.

  • What it does not say: This very well could be a paper tiger. The members don't like the provision to open "one of the most pristine places left in America today," but ... nowhere does the letter say their vote on the tax package hinges on its removal.
  • Go deeper: Roll Call has a piece about the letter here.

Congress, part 2: Greentech Media unwraps a wonky portion in the Senate tax package — which could pass today — called the Base Erosion Anti-Abuse Tax measure that has renewable power developers sounding the alarm.

  • "We're looking at the end of the principal financing mechanism that has fostered growth of the renewable energy sector since the 1990s," Greg Wetstone of the American Coalition on Renewable Energy says in their piece.
Making sense of OPEC's deal

A few more observations on yesterday's move by OPEC and Russia to extend their production-limiting deal for nine months through the end of 2018...

Markets: Via Reuters, oil prices are up somewhat today on the heels of the deal, but really the expectation of the extension has been baked into the cake, so there likely would have been sharp dive had the agreement collapsed.

Cloudy future: An analytical piece out this morning from Bloomberg's team points out that the agreement left "big questions unanswered," including:

  • "If the cuts succeed in meeting their stated goal of bringing global inventories back down to their five-year average level, how will the deal be unwound? And if they don't, will the deal be extended in perpetuity?"

OPEC and Russia are still reckoning with the U.S. shale surge. Bloomberg notes that while the production deal has helped to elevate prices, it creates a "quandary" for OPEC and allied producers about how to keep those prices high without igniting even greater shale growth.

Russia's posture: A big question going forward is the ability of powerhouse producers Saudi Arabia and Russia to sustain unity, especially as Russian companies have reportedly chafed at the continued limits.

  • "This meeting was largely devoid of the witty banter and joint red carpet appearances between [Saudi oil minister Khalid] al-Falih and his Russian counterpart (and official meeting co-chair) Alexander Novak that characterized the May meeting, despite protestations that the relationship remained robust," RBC Capital Markets' Helima Croft said in a note last night.
  • To be sure: Barclays' analysts, in a note this morning, downplay the Russian corporate grumbling and its potential impact going forward, noting: "the geopolitical incentives to remain engaged with OPEC and its leading countries far outweigh the costs of frustrated companies."

What's next: The agreement text highlights that producers will take stock of where things stand mid-year.

  • While analysts have pointed out that this kind of review would have occurred at the mid-year OPEC meeting regardless, the decision to emphasize it in the communique is still sign that the status of the cooperation is subject to change.

Go deeper: Platts has a comprehensive rundown of the action in Vienna and the outcome here.

Sizing up Perry's coal and nuclear plan

Two researchers with the nonpartisan think tank Resources For the Future have published a new analysis of Energy secretary Rick Perry's plan to guarantee at-risk coal-fired and nuclear power plants sufficient revenues in some power markets to keep them running.

Some key findings:

  • Having the proposal in effect from 2020 to 2045 would prevent the retirement of dozens of coal plants and 20 gigawatts worth of nuclear power in that period.
  • The pollution from those preserved coal plants would cause an estimated 27,000 deaths during that period.
  • Total estimated net costs are $263 billion over 27 years, including $217 billion in environmental damages.
  • "We find that the policy's net cost for electricity end-users is $72 billion and its net benefit for generation owners is $28 billion," it states.

Why it matters: The paper is likely to be cited by critics of the plan at a time when the Federal Energy Regulatory Commission, an independent agency, is weighing Perry's controversial proposal.

What's next: Neil Chatterjee, FERC's interim chairman, wants the agency to take some kind of interim action by mid-December to provide a "lifeline" to at-risk plants while the commission weighs Perry's plan. But the prospects for his idea are highly uncertain.

Separately: The Wall Street Journal has a good look at the swirl of factors — notably the rise of renewables and gas plus flat demand — that are putting the squeeze on the coal and nuclear plants that the administration is trying to keep running.

  • "Wholesale electricity prices are falling near historic lows in parts of the country with competitive power markets, as demand for electricity remains stagnant while newer, less-expensive generating facilities continue to come online," the story notes.
One cool website

The "Beautiful Earth" portion of NASA's broader Global Climate Change website has all kinds of fascinating satellite imagery. The one above is Canada's Mackenzie River taken from the Landsat 8 satellite on July 18, 2017.

The site notes that the river "plays a major role in Arctic climate as warmer fresh water mixes with cold seawater."

Ben GemanAmy Harder