Sep 18, 2020

Axios Generate

Ben Geman

Good morning. Today's Smart Brevity count: 1,197 words, 4.5 minutes.

🚨 ICYMI: "The Federal Energy Regulatory Commission has passed a long-awaited order to open up the country’s wholesale energy markets to distributed energy resources (DERs) like rooftop solar, behind-the-meter batteries and electric vehicles." (Greentech Media)

🎵 This weekend will mark 26 years since Liz Phair released "Whip-Smart," which provides today's explosion of an intro tune...

1 big thing: Tallying Trump's climate changes
Reproduced from Rhodium Climate Service; Chart: Axios Visuals

The Trump administration's scuttling or weakening of key Obama-era climate policies could together add 1.8 gigatons of carbon dioxide equivalent to the atmosphere by 2035, a new analysis concludes.

The big picture: The Rhodium Group's research is an effort to look more holistically at a several separate policy moves and their effect on the country's long-term emissions.

Why it matters: Per the New York Times, which first reported on the study, the 1.8 gigatons is "more than the combined energy emissions of Germany, Britain and Canada in one year."

  • "This cumulative impact is equivalent to nearly one-third of all U.S. emissions in 2019," Rhodium notes.
  • They still see U.S. emissions being lower in 2035 than today, but it's a smaller reduction that would have occurred absent the rollbacks.

Threat level: "[T]he rollbacks we consider here are far from exhaustive. The current administration has reversed many more Obama-era rules with climate implications that are difficult to assess," the analysis states.

How it works: Rhodium looked at several different policies, as the chart above shows. They include...

  • The decision to weaken Obama-era vehicle mileage and CO2 standards through the mid-2020s.
  • Stripping California's power to impose tailpipe CO2 rules that a number of other states follow.
  • Easing regulation of the potent planet-warming gas methane from oil-and-gas development.

What we're watching: The election and the courts. Joe Biden has pledged to reverse President Trump's moves and impose even stronger emissions standards and policies than the Obama administration.

  • Also, a number of states and activist groups are challenging key Trump administration regulatory changes in court.

Go deeper: Trump's climate change rollbacks to drive up U.S. emissions (Politico)

2. Oil climbs but struggles to reach escape velocity
Expand chart
Data: FactSet; Chart: Axios Visuals

COVID-19's persistence is still weighing down oil prices, but the market had a rosy week by 2020 standards, capped by OPEC+'s new pressure on some members to stop cheating on their production limits.

Driving the news: Crude prices jumped Thursday after the meeting of OPEC+ (that is, OPEC, Russia and allied producers) addressed noncompliance by the UAE and some others.

  • "These false promises not only discredit those who make them, but also weaken our collective goal," Saudi Energy Minister Prince Abdulaziz bin Salman said at the virtual meeting.
  • A joint communique flagged the "critical importance of adhering to full conformity and compensating overproduced volumes as soon as possible."

Why it matters: The renewed commitment to the group's deal to withhold 7.7 million barrels per day through the end of the year (before tapering) helped boost prices of Brent crude and WTI, the U.S. benchmark.

  • Members also floated the possibility of new steps to tighten the market, per several reports. The joint statement also emphasized the need to weigh "further necessary measures when needed."

Where it stands: Prices ticked back down slightly this morning. They're still well below what key producing nations need for their domestic finances, and also too low to end the jeopardy for U.S. producers (more on that below).

What they're saying: "Although no amendments to the current supply-cut deal have been proposed by OPEC+ ... the producers group gave the impression that it does not sweep troubles under the carpet," Rystad Energy's Bjornar Tonhaugen said in a note.

Yes, but: The trajectory of the pandemic, which has hammered oil demand, is still what matters most.

  • VI Investment Corp. analyst Will Sungchil Yun tells Bloomberg that while the meeting helped prices, "this may be temporary since we need a strong and consistent signal that a real demand recovery is actually happening.”

Go deeper: Saudis turn up heat on OPEC+ laggards (International Oil Daily)

Bonus chart: Why the 40s can be so tough

Screenshot of a chart from the Dallas Fed's Energy Slideshow

The chart above comes via the Dallas Fed, and helps explain why middling oil prices matter for future U.S. production.

3. Jay Inslee waves off talk of possible Cabinet spot

Washington Gov. Jay Inslee indicated at an Axios virtual event Thursday that he’s not interested in a Cabinet post should Biden win the presidency, Axios' Amy Harder reports.

Why it matters: Inslee, who briefly ran a climate-focused campaign for president, has been rumored as a potential head of EPA or another role if Biden wins.

What they’re saying: When Amy asked whether he was in talks with the campaign, Inslee said no and added: “I’m running for the governor of the state of Washington.”

  • He said the state has achieved a lot of big policies on climate change, but that there is more work to be done.
  • Indeed, despite aggressive goals, carbon pricing ballot initiatives and bills have fallen short in the state thus far.

The bottom line: Pressed once more when the cameras weren't running if he would take the EPA post if offered, Inslee responded: “No, I’m running for governor. I love the state of Washington.”

Watch the event

4. Why Amazon got into climate tech VC finance

Matt Peterson, a senior Amazon exec, joined the "Axios Re:Cap" podcast to explain the thinking behind the tech and commerce giant's climate VC fund, which rolled out its first investments yesterday.

Why it matters: The fund, $2 billion to start, is beginning to invest on the heels of Amazon's late 2019 pledge to be net-zero emissions by 2040.

The big picture: Peterson, their director of new initiatives, made the case that today's clean tech VC investing isn't akin to the meltdown of a decade ago.

  • One reason, he said, is that it will help Amazon and other companies obtain new tech to fulfill emissions pledges.
  • “The way we are approaching this is from a demand perspective, not a supply perspective. We are asking ourselves, what does Amazon need as a company to decarbonize, then we are finding companies that produce those products,” Peterson said.
  • “We’re coming at it from the standpoint of, we will be a customer of this technology today if we can find the right company, and I think that’s a much more sustainable way to invest."

The intrigue: He said one kind of important tech they will be decarbonized aviation. "That is one of our biggest challenges, and there is really nothing out there today that can address that," Peterson said.

  • Electrified jets that could meet the needs of their operations are likely decades away, he said.

Go deeper: Amazon defends working with oil companies to reach its zero-carbon goal

5. Jacinda Ardern's pandemic energy politics

New Zealand Prime Minister Jacinda Ardern at the Manukau Institute of Technology in Auckland, New Zealand, this month. Photo: Hannah Peters/Getty Images

New Zealand's prime minister has pledged to achieve 100% renewable energy in the country by 2030 if her party wins re-election in October, Axios' NZ-based Rebecca Falconer reports.

Why it matters: NZ plunged on Thursday into its worst recession in over 30 years, after its GDP fell 12.2% following two straight quarters of negative growth amid some of the world's toughest pandemic restrictions, though the drop was less than the 23.5% decrease projected in the May budget.

  • Prime Minister Jacinda Ardern said during a briefing Thursday that the focus was now "about the rebound."
  • Robert McLachlan, a professor at Massey University's School of Fundamental Sciences, told Axios that Labour's decision to bring its renewable energy goal forward by five years for its COVID-19 economic recovery plans is "ambitious, but it's doable."

The big picture: Ardern said in a statement announcing the plans, "The COVID-19 economic recovery represents a once in a generation opportunity to reshape New Zealand’s energy system to be more renewable faster, affordable and secure."

Read more

6. Quote of the day
"Those market forces are unstoppable."

Who said it: Jeff Wilson, CEO of the coal producer White Forest Resources, quoted in this Wall Street Journal feature on the coal sector's structural decline.

The big picture: Wilson notes that "we’ve just gotten swamped with gas."

  • The story also explores the rise of renewables and the effects of the pandemic on U.S. coal production, which is falling sharply.
Ben Geman