January 10, 2019
Good morning and welcome back!
It's Rod Stewart's birthday, which is more than enough reason to give The Faces today's intro tune...
1 big thing: The evolving EV landscape
Several new developments in early 2019 provide a glimpse into the next wave of automakers' accelerating preparation for the mainstreaming of electric vehicles.
Driving the news:
- Ford and Volkswagen are on the cusp of announcing a major partnership at next week's Detroit Auto Show that includes EVs and autonomous vehicles, Reuters first reported.
- General Motors said Wednesday that it's collaborating with the EV charging networks EVgo, ChargePoint and Greenlots "so owners of the all-electric Chevrolet Bolt EV can have a more seamless charging experience."
- Infiniti plans to unveil its QX Inspiration electric crossover concept in Detroit.
- Nissan unveiled an upgraded, longer-range version of its electric Leaf at the Consumer Electronics Show (CES) in Las Vegas this week.
- “The future of Volkswagen will be decided in the Chinese market,” said Herbert Diess, CEO of Volkswagen. VW is spearheading a $300 billion (corrected)* spend on EVs with more than half targeting China. (Per Reuters and h/t to Dion Rabouin in Axios Markets)
The potentially big Ford and VW announcement is aimed partly at managing the costs of EV and AV tech, various reports point out.
- Per Reuters, it could involve Ford licensing VW's modular EV platform.
- It represents an expansion of previous plans to cooperate on commercial vehicles.
Why it matters: Both auto giants have ambitious EV plans — including Ford’s goal of launching 16 fully electric models in the next few years, while VW has been pivoting to EVs in the wave of its diesel scandal.
My thought bubble: Both companies are trying to gain ground on Tesla as well as some legacy automakers in the EV space, so collaboration makes sense as they try and close the gap.
What they're saying: "If VW is able to use Ford’s development in autonomy and if Ford is able to use Volkswagen’s development in electrification, it’s not just the cost savings that is important — and that would be big — but it's getting products to the market much, much faster," auto expert John McElroy tells the Detroit Free Press.
What's next: Look for more EV-related announcements around next week's auto show.
2. The race to shape the Green New Deal
A suite of groups on the environmental movement's left flank are out with a new open letter to House members about their legislative goals around climate change.
Why it matters: The statement endorsed by groups including Friends of the Earth and 350.org is an early sign of efforts to influence the shape of the Green New Deal (and climate policy more broadly).
What they're saying: The letter calls for various aggressive and "visionary" measures they say are needed to hold the global temperature rise to 1.5°C, such as...
- Ending fossil fuel leasing on public lands and halting approval of fossil fuel infrastructure.
- Moving the country to 100% renewable electricity by 2035 at the latest.
- Decarbonizing transportation with major investments in public transit, and phasing out sales of internal combustion vehicles.
- Using the "full power" of the Clean Air Act by setting strict deadlines for emissions cuts from transportation, smokestacks and other sources.
The groups behind the letter include the Center for Biological Diversity, the Climate Justice Alliance, the Indigenous Environmental Network, Food & Water Watch, Oil Change USA and more.
- All told, several hundred groups — a tally that includes a large number of local organizations — signed on.
- Yes, but: It does not include a number of the largest players in climate politics, like the Sierra Club, the Natural Resources Defense Council and the Environmental Defense Fund.
The big picture: It's part of a wider effort to both lay down markers and eventually craft policy specifics around the plan, both in Congress and on the campaign trail.
- A spokesperson for the Sunrise Movement, a group at the forefront of the Green New Deal push that also signed the new letter, tells me they've been meeting with the campaigns of 2020 White House hopefuls.
The intrigue: One notable omission from the new letter is a call for carbon taxes or other forms of carbon pricing.
- 350.org's Jamie Henn says his organization feels the letter is aimed at promoting ideas that are often missing or downplayed in Washington.
- He says it's not a statement against carbon pricing, but does signal that progressives don't see pricing as the central pillar of cutting emissions to the degree needed.
3. Exxon weighs EV charging investment
Axios' Amy Harder reports that ExxonMobil is actively considering whether to invest in electric-charging stations, according to an Atlantic Council report published this week.
Why it matters: Other giants like BP, Shell and Equinor have investments in electric-charging infrastructure, but Exxon has been an outlier among its peers in this space.
- Exxon's possible change of heart reflects Big Oil’s recognition that the world is transitioning away (albeit slowly) from oil-powered cars as part of a broader shift in the energy industry's response to climate change.
Where it stands: The nugget is included in a table within the report by senior fellow David Koranyi about Big Oil's diversification strategies.
- Koranyi tells Axios that he spoke with Exxon officials, along with officials at other companies, as he was writing the paper.
- Exxon said that “they are actively considering investments into EV charging infrastructure,” per Koranyi.
- Exxon did not immediately respond to an Axios request for comment.
The big picture: Andrew Logan of Ceres, a sustainable investment advocacy group, says it would be surprising if Exxon invested in EV charging.
- That's in part, Logan says, because Exxon has been among the least ambitious with its forecasts on EV adoption rates — less so than even OPEC.
- “While this would be a small step, it would be a sign that Exxon — long the most bearish of the oil majors on electric vehicles — is capable of changing its mind," says Logan, who directs Ceres' oil and gas program.
- "Along with recent shifts like the company's decision to join OGCI [the Oil and Gas Climate Initiative] and set methane reduction targets, steps the company had long resisted, this move suggests that a cultural shift may be underway," he says.
4. U.S. LNG's survival in the China trade war
An interesting new paper for the Center for Strategic and International Studies by Nikos Tsafos looks at China's strategies for meeting its growing LNG import needs.
Why it matters: China is already the second-largest LNG importer and isn't far from overtaking Japan for the top slot.
- The IEA chart above on Asian LNG imports lays out where things are headed.
The intrigue: There are a lot of good points in the paper, but one part that caught my attention — China is obviously an important player, but they're actually not decisive per se when it comes to determining whether proposed export projects get off the ground.
- That's important these days because the U.S. oil-and-gas industry is worried about the effects of the White House trade battle with China.
Threat level: Per the paper...
"[M]ost LNG projects since 2012 have advanced to [final investment decisions] either without Chinese customers at all, or with Chinese buyers accounting for a small share of long-term contracts — this despite China being a major LNG market."
"Chinese buyers are rarely acting as foundational customers for projects to advance, which means that taking FID does not, in practice, mean engaging directly with Chinese companies (although LNG might be resold and delivered to China eventually)."
5. On my screen: Saudi oil, EPA, scooters
Crude oil: Via Bloomberg, "Saudi Arabia published the first audit of its vast oil reserves since it nationalized its energy industry about 40 years ago, saying its reserves total 268.5 billion, slightly more than the 266.3 billion figure that the government published previously."
- Why it matters: Not because every last drop will be produced. I mean, that's roughly 7 decades worth at current production rates. But Bloomberg's piece notes that the outside audit comes as the Saudis are trying to generate interest in the delayed Saudi Aramco IPO, which the kingdom is now eyeing in 2021.
- And CNBC notes that the assessment by the firm DeGolyer and MacNaughton "may help put to rest skepticism over the nation's oil and gas wealth, which has persisted in some corners of the market for years."
EPA: President Trump has formally sent Andrew Wheeler's nomination for administrator of the Environmental Protection Agency to the Senate for confirmation, the White House announced Wednesday.
- Why it matters: Wheeler, currently the acting EPA chief, is a former coal lobbyist who is expected to run a more conventional and inclusive policy process than former administrator Scott Pruitt, Amy notes. But, per Amy, the end result will likely be policies similar to those of Pruitt.
- What's next: Wheeler is slated to appear before the Senate Environment and Public Works Committee for a nomination hearing on Jan. 16.
Scooters: E-scooter startup Bird is raising $300 million in new funding led by Fidelity, Axios' Kia Kokalitcheva reports. Bird would maintain its existing $2 billion pre-money valuation, as this is being structured as an extension of its prior round.
- The big picture: Bird continues to battle for "micromobility" supremacy with rival Lime, which is said to be seeking $400 million in its own new funding round. A Bird spokesperson declined comment.
ICYMI: Billionaire climate activist Tom Steyer is not running for president.
6. Quote of the day
"This change in oil markets that has diminished OPEC has actually enhanced Russian geopolitical power in a way that I don’t think any American strategist foresaw."
Who said it: Harvard University's Meghan O'Sullivan, speaking on the new episode of Resources Radio, a podcast from the think tank Resources For the Future.
Context: O'Sullivan is sizing up one of many — and, in this case, unexpected — ways the U.S. oil boom has reshaped global oil markets and geopolitics.
- She's discussing how the erosion of OPEC's leverage has strengthened Russia's hand, because the cartel increasingly needs Russian cooperation.
- “OPEC ... needs Russia and other non-OPEC producers if it is going to make cuts to production that are substantial enough to have an impact on global markets over a sustained period of time because the growing dominance of the US in these markets,” says O'Sullivan, who served in the George W. Bush administration.
Yes, but: Overall, she says the U.S. oil-and-gas production surge has been beneficial to U.S. geopolitical interests. It's a topic she explores in her book "Windfall," which we wrote about early last year.
*Editor's note: The top story was corrected to show Reuters reported VW is spearheading a $300 billion spend on EVs (not $300 million).