May 19, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. Today's Smart Brevity count: 1,324 words, 5 minutes.

🎤 And happy 75th birthday to Pete Townshend of The Who, a band that opens today's newsletter with a beautiful and anguished deep cut...

1 big thing: Pandemic shatters the crystal ball

Illustration: Sarah Grillo/Axios

New analyses about electric vehicles underscore two things: the pandemic is creating unprecedented turmoil for all kinds of energy technologies, and attempts to assess the fallout are more art than science.

Driving the news: A brand new analysis from the research firm BloombergNEF projects that global electric vehicle sales will drop 18% this year, which would end 10 years of growth but represents a smaller decline than their estimated cut to sales of traditional cars.

  • Meanwhile, the International Energy Agency said in a short report yesterday that EV sales will inch above 2019 totals in their central estimate, while in early April the consultancy Wood Mackenzie projected a 43% drop this year.

Why it matters: All three outfits employ skilled analysts! And that goes to show how much we're in uncharted waters here. And not just with EVs.

  • Experts are also grappling with how much global CO2 emissions will fall this year, and struggling to adjust near-term and long-term oil demand estimates.

Quick take: Ok I know it doesn't take a pandemic to show that the future is ... the future. Modeling is always hard.

  • That said, COVID-19 is quite the curveball that's making even short-term forecasting hard (which you can also see in rapidly shifting projections of U.S. oil production), as well as adding yet another huge wrinkle to long-term projections and scenarios.

Consider this line from IEA's analysis of the overall car market in just the second half of 2020 alone...

"The extent and pace of the rebound will depend on a range of factors, including the pace at which confinement measures are eased, potential second waves of the pandemic, the pace of economic recovery and the willingness and ability of consumers and businesses to purchase new cars. Government policy will also be critical."

What they're saying: Megan Mahajan of the firm Energy Innovation, which recently analyzed the range of 2020 carbon emissions declines due to COVID-19, shared some thoughts about the topic.

  • "Modeling the short-term impacts obviously presents challenges, because the scale of this sudden shift in energy demand is unprecedented compared to recent recessions," she tells me.
  • "We can’t necessarily rely on historical data because this situation is so unique and projections may be highly uncertain," Mahajan adds.

The big picture: 'When we consider the big questions surrounding long-term climate policy, the answers come down to projecting whether COVID will change our overall activity patterns," she says, pointing to questions about the future of air travel, use of private vehicles vs. mass transit, and telework, among other variables.

  • "If the answer is no, then COVID impacts will likely be short-lived and emissions will return to a business-as-usual trajectory, unless policymakers prioritize low-carbon policies and a clean energy economic recovery that invests in technologies of the future."
Bonus chart: The future of EVs
Data: BloombergNEF; Chart: Danielle Alberti/Axios

Let's spend a little more time with BloombergNEF's latest outlook, which has some interesting takeaways for full electric and plug-in hybrids.

What they found: They actually don't see COVID-19 as a long-term inflection point, despite the near-term upheaval in sales. They see EVs growing to 58% of new passenger car sales worldwide by 2040, when they will represent 31% of cars on the road.

  • That's quite similar to last year's long-term outlook. BNEF analyst Colin McKerracher said in a statement that the pandemic is "raising difficult questions about automakers’ priorities and their ability to fund the transition."
  • But he adds: "The long-term trajectory has not changed, but the market will be bumpy for the next three years."

The intrigue: The new analysis is the first time BNEF projects an overall peak in global passenger vehicle sales during their forecast period that runs through 2040. They see that occurring in the mid-2030s, the result of "changing global demographics, increasing urbanization and more shared mobility."

What's next: The report points to diverging paths in different markets in the coming years as the auto industry recovers from the pandemic shock.

  • When it comes to EVs, "the shape of the recovery varies around the world, with EV sales in China and Europe pulling ahead" thanks to EU emissions rules, China's domestic support and more.
  • "The U.S. falls further behind leading EV markets over the next few years, but catches up in the 2030s," the report states.
2. Tech player makes its move on CO2 removal

Illustration: Rebecca Zisser/Axios

The payment tech company Stripe is funding four carbon dioxide removal projects as part of its plan announced last year, which advocates had called a pioneering corporate foray into these nascent markets.

Why it matters: Pulling CO2 out of the atmosphere — not only cutting new emissions — will be an important tool for limiting global temperature rise, a major UN-led scientific report concluded in late 2018.

Driving the news: Stripe yesterday unveiled the first negative emissions purchase deals in its $1 million annual commitment. They're working with...

  • The Swiss direct air capture company Climeworks.
  • Project Vesta, a California nonprofit seeking to testing use of a mineral called olivine at beaches to capture CO2 (Reuters has more here).
  • The Canadian firm CarbonCure, which "sequesters CO2 in concrete by mineralizing it into calcium carbonate."
  • Another California entity, Charm Industrial, which is testing a process for "preparing and injecting bio-oil into geologic storage."

What they're saying: "This is really important to show that companies can take actions to advance carbon removal fairly quickly after making commitments to do so," Noah Deich, executive director of the group Carbon180, tells me.

  • "The biggest new entrant into the space is Microsoft which has pledged to remove their entire cumulative historical carbon footprint. But Stripe is still first in putting a strategy into practice," he says.

The big picture: Some of it is quite expensive. The projects range from $75–$775 per ton of CO2 removed.

  • Stripe's discussion of the Climeworks project — which has the highest per-ton removal cost — notes that one goal is to be among the early movers that helps drive costs much lower.
3. Trump's energy chief on climate and oil

Energy Secretary Dan Brouillette spoke recently with Axios' Amy Harder about America's oil boom, carbon emissions and more as they relate to the coronavirus outbreak.

Here are a few highlights (and find more coverage here and here), edited for space...

Amy: Isn’t the fact the U.S. had to get so involved in last month's oil-production deal led by OPEC a sign that we’re still heavily dependent upon the global market, and thus not energy independent, despite being the world’s biggest producer of oil?

"I see it the other way around. Forty years away ago, we couldn’t get involved because we were wholly dependent upon those imports for our economy. The mere fact we are independent, we are in fact energy dominant, allows us to have those conversations."
"There is a big difference between being dependent and exercising trade amongst nations and that’s what you see in the oil markets today. Refiners set up for heavy sour [oil] and they choose to be that way. We’re engaging in trade with countries. That’s just fundamental."
— Dan Brouillette

Amy: What's your response to the huge decline in emissions the pandemic is causing as large swaths of the world economy shuts down?

"It just gives you a sense of, perhaps, how unrealistic some of the [Paris Agreement] goals are. What more do we have to do? We’ve practically shut down the world economy and we still haven’t met the goals that were set in the Paris Agreement. What more can we do? If we’re going to be serious about this, we have to get more serious about things like nuclear energy."
— Dan Brouillette

Read more

4. Tracking the shale pullback

Oil production from big U.S. shale formations is projected to decline to roughly 7.8 million barrels per day next month, which is roughly 200,000 barrels per day below May levels, the Energy Information Administration said.

Why it matters: That would be the lowest level since August of 2018, Reuters notes. Producers are throttling back output in response to the price and demand collapse, even as recovery is underway in both.

  • And Bloomberg points out: "The expected decline would have been even more dramatic if not for a downward revision to May’s output estimate in the order of half a million barrels a day.
5. Two climate reports

Public opinion: "Americans’ positions on climate change have remained largely unshaken by the coronavirus pandemic and economic crisis, according to a new national survey that showed acceptance of the reality of global warming at record highs in some categories." (New York Times)

Science: "A new study provides observational evidence that the odds of major hurricanes around the world — Category 3, 4 and 5 storms — are increasing because of human-caused global warming." (Washington Post)

Ben GemanAmy Harder