Good morning, let's dive in.
I have an exclusive look into the latest positioning around the recently expanded tax credit for carbon capture projects. I'll share that, and then Ben will get you up to speed on the rest of the news.
Some of America’s biggest energy companies are lobbying Washington to change — critics say weaken — oversight of a federal tax credit going to facilities capturing carbon emissions.
Why it matters: The scramble shows the challenge of tackling climate change piecemeal through the nation’s tax laws in the absence of overarching policy.
Context: The technology at issue is considered essential to achieving the greenhouse gas emission cuts scientists have recommended, and the oil industry’s use of it could help spur its widespread adoption. But divisions and uncertainty are emerging after Congress expanded the tax credit earlier this year, which is aimed largely at companies that use captured carbon to extract oil.
“The tax credit is a game changer for carbon capture and incentivizing new projects. But, implementation of the credit by the IRS has to be done in a way that resolves uncertainty and ensures that the credit can actually be used to finance projects.”— Hunter Johnston, partner at Steptoe & Johnson and counsel to a proposed facility in Louisiana that would capture carbon emissions
Driving the news: A new industry coalition is pushing legislation allowing companies to receive the tax credit without submitting a monitoring plan to the Environmental Protection Agency, which would ensure the captured carbon stays underground after extracting oil. The coalition, called the Energy Advance Center, is also urging EPA to change its rules on the tax credit.
Go deeper: Read the full column in the Axios stream.
The thaw: ICYMI over the weekend, the U.S. and China announced a truce — for now — in their trade war, and energy is part of the deal.
Why it matters: China's energy thirst is massive. It's now the world's largest oil importer and second largest LNG importer, and also buys coal from abroad despite being the world's largest producer.
What's next, per Axios' Jonathan Swan: More talks. And miles of uncertainty between the two countries — with the added complication of the North Korea negotiations. Because it's President Trump, nothing can be guaranteed.
Be smart: Over in our expert voices section, Graham Allison unpacks the potential for major growth in U.S. LNG and oil exports to China. He writes:
"From the U.S. perspective, selling natural resources is less desirable than selling manufactured products. But by doing so, Trump could credibly claim to cut the bilateral trade deficit by more than half. Moreover, these contracts would allow American companies to secure loans to build oil and gas infrastructure whose construction would employ tens of thousands of American workers."
Go deeper: Bloomberg has a piece on how commodities now seem to be a major beneficiary of China's pledge.
The city of the future: 80% of worldwide city buses will be electric by 2040, according to a just-released report by the consultancy Bloomberg New Energy Finance.
Why it matters: It's BNEF's first long-term forecast of electrification of city bus fleets.
One level deeper: The new bus projection is part of their annual long-term forecast on electric vehicles. The new report's top line is similar to last year's — BNEF forecasts that 55% of new passenger vehicle sales will be EVs in 2040, similar to last year's 54% figure.
The big picture: BNEF expects that the transition to electric cars and buses will add 6% to global electricity demand in 2040. However, electrification is projected to displace 7.3 million barrels a day of transport fuel that year.
Iran: This morning Secretary of State Mike Pompeo will deliver remarks on what's next for U.S. policy toward Iran, now that the White House has walked away from the nuclear deal and triggered reimposition of energy sanctions.
Venezuela: Per Reuters, U.S. deputy secretary of State John Sullivan told reporters in Argentina yesterday that oil-related sanctions against Venezuela are under "active review" due to the re-election of Nicolas Maduro — a result the U.S. does not recognize.
Climate change: It will be a hot topic at Royal Dutch Shell's annual shareholder meeting tomorrow, where the company is opposing a resolution that calls for more aggressive steps to align its business with the goal limiting the global temperature rise well below 2°C.
Congress: Hearings and markups this week include...
Over in our Expert Voices section, Joshua Rhodes explains why the Texas power market is worth watching...
Stress test: The electricity grid that serves most of Texas, known as ERCOT, operates on a relatively rare energy-only electricity market. An energy-only market pays power plants only for producing electricity, while other markets provide "capacity payments" to generators to be available even when not producing power.
"Texas built this lean market to keep down costs, but this summer could pose a threat to its survival," Rhodes writes.
The big picture: A combination of sustained low natural gas prices and increasing supply from renewables has kept ERCOT’s electric wholesale market prices so low for so long that some power plants have been driven out of the market.
Go deeper: Read the rest of the piece by Rhodes, who is a research associate in the Webber Energy Group and the Energy Institute at the University of Texas at Austin.