Axios Generate

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October 25, 2022

👋 Hi readers! Today's newsletter has a Smart Brevity count of 1,262 words, 5 minutes. 

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🎶 At this moment in 2000 Radiohead (an act Ben's trying again to like) was atop the Billboard charts with "Kid A," which provides today's intro tune...

1 big thing: Europe's energy crisis eases — for now

Temperature departures from average across Europe through Oct. 31.

Computer model projection of temperature anomalies across Europe from Oct. 24-31. Image: Weatherbell.com

Mother nature is giving Europe an economic reprieve as the bloc heads into winter with far less Russian gas flowing, Ben and Andrew write.

Driving the news: European power and gas prices have eased well off record levels amid mild fall weather, which eases demand.

  • That's helping countries fill up their gas storage levels, with the average now over 90%, per EU data and other sources.
  • Prices that smashed records after Russia's invasion of Ukraine have backed off too thanks to a combination of weather, alternative supplies, conservation and more.

Zoom in: Power prices in Germany, France and several other large economies are down by well over 70% from August peaks, per Rystad Energy.

  • October has been unusually warm across the continent, with monthly temperatures on track to rank among the warmest on record.
  • The forecast for Paris, for example, calls for temperatures to reach the mid-70s°F this week, about 20°F above average, and severe thunderstorms have struck England and France in recent days. Such storms are more typically seen there during the summer.

On the supply front, LNG imports "continued to be very strong in October...with high utilization across European LNG regasification terminals," Rystad said in a note.

Why it matters: The weather and price trends are both economically and geopolitically important as the bloc looks to break ties with Russian fuels.

Record gas prices have been crushing to a number of European industries, hurt consumers, and prompted governments to unveil expensive support packages.

What they're saying: "Europe is in a comfortable place concerning supplies now," Wood Mackenzie analyst Graham Freedman tells Bloomberg.

"The risks of blackouts and rationing are receding. But the real test will be when we have cold weather," Freedman said.

What we're watching: Where temperatures head this winter. A recently issued winter outlook for Europe shows a milder-than-usual season is likely, but that's the average. There are still likely to be significant cold outbreaks.

Yes, but: "Nations such as Germany and Italy have not dodged a bullet, merely deferred it. With 80 per cent of Russian gas supplies now offline, they may struggle to repeat their storage feat next winter," a Financial Times op-ed warns.

It calls for stronger conservation efforts, noting that Chinese LNG demand could rebound, boosting competition for supplies and that Russia could cut gas shipments to Europe completely.

2. Kerry speech lays out U.S. COP27 agenda

Photo illustration of John Kerry over an image of mountains in the Siani peninsula surrounded by abstract mailing shapes.

Photo illustration: Aïda Amer/Axios. Photo: Kyle Grillot/Bloomberg, Photo by Khaled Desouki/AFP via Getty Images

Breaking: Special climate envoy John Kerry is set to lay out the U.S. point of view this morning on a host of issues at the upcoming COP27 climate negotiations in Egypt, Andrew writes.

Driving the news: Here are three big things to know about his wide-ranging remarks prepared for delivery at the Council on Foreign Relations...

He fears Wall Street backsliding: Kerry emphasized the need to mobilize private capital to fund the clean energy transition and criticized "slowing" momentum among banks and financiers this past year given the Ukraine war and ensuing European energy crisis.

  • "For every $1 invested in low carbon energy supply, $1.10 is invested in fossil fuels," he stated in prepared remarks. "The math and the science unequivocally make clear, we cannot hit our targets unless we dramatically change that ratio."

He strongly calls for reforming the World Bank: Multilateral development banks are a key target for criticism, as Kerry and others want these institutions to funnel far more money toward low-carbon solutions abroad.

Kerry sees escalating climate disasters as motivation to act with urgency: Kerry cited the megadrought in the Southwest, heat waves and drought in China: "This past perilous year may well prove better than all those still ahead" without swift action, he said.

What we're watching: How Kerry's appearance today addresses the U.S. position on "loss and damage" at COP27.

  • "Loss and damage" refers to industrialized countries agreeing to pay developing nations for the impacts of climate change that go beyond adaptation limits.
  • The U.S. and EU have signaled a willingness to discuss the topic at COP27 but resistance to a specific fund.

3.🛢️Catch up fast on oil: capital and collisions

A just-published Deloitte report shows how many oil companies remain cautious about investing in production growth even as they rake in more cash, Ben writes.

Driving the news: The survey of U.S. oil execs finds that nearly 40% "selected strengthening their balance sheets through debt repayments and distributing cash back to shareholders as their top cash deployment strategies."

Zoom in: Free cash flow per unit of oil and gas produced this year is up 68%, while upstream capital investments are up a smaller 29%.

  • "The industry’s capital discipline is likely to be a continuing trend as economic uncertainty grows and energy prices remain highly volatile."
  • But Deloitte also points out why capex is an imperfect barometer of future production plans, noting opportunities in efficiency gains, tapping drilled but uncompleted wells, re-fracking wells and more.

👀 An in-depth WSJ piece on the strained U.S.-Saudi relationship summarizes how much is coming to a head soon...

  • "The next big test comes in early December, when three events with major significance for global energy markets are set to collide: another OPEC+ meeting and plans by the European Union for an embargo of Russian oil and by the Group of Seven wealthy nations to cap the price of Russian crude."

4. Fake meat has real market problems

Illustration of a red burger with a green stem, resembling a tomato.

Illustration: Rae Cook/Axios

Companies that make faux burgers and other meat substitutes are laying off employees and staring down weak sales, amid what Beyond Meat describes as "ongoing softness in the plant-based meat category," Axios' Jennifer A. Kingson reports.

Why it matters: The biggest fast-food chains and meat producers have raced to cash in on fake meat, sensing consumer appetite for sustainable and animal-friendly alternatives.

  • Plant-based alternatives to beef and other animal proteins can help curb greenhouse gas emissions.

Driving the news: High prices and flattening demand have dogged the industry. Beyond Meat announced a 19% workforce reduction this month amid steepening revenue declines.

  • McDonald's shelved plans to introduce a McPlant burger nationally.

State of play: Despite the drumbeat of bad news, Beyond Meat introduced "Beyond Steak" yesterday — a new product available at more than 5,000 Kroger and Walmart stores.

Meanwhile, arch-rival Impossible Foods is gearing up to introduce its own plant-based steak.

Read the whole story.

5. Apple deepens climate push

Illustration of a tree with Apple logo shaped computer chips dangling from the branches. 

Illustration: Aïda Amer/Axios

Apple just unveiled new initiatives to expand renewable power, conserve forests, and further cut emissions from its mammoth supply chain, Ben writes.

Driving the news: Apple aims to "facilitate" the construction of enough new European wind and solar projects to "power all Apple devices on the continent with low-carbon electricity."

  • The tech giant called on its global supply chain to fully decarbonize by 2030 and pledged deeper cooperation. One effort involves pushing companies to cut emissions outside their Apple-related production.
  • Separately, Apple announced initial investments from the $200 million "Restore Fund" unveiled last year. These first steps are aimed at restoring and protecting 250,000 acres of forests, grasslands and wetlands in Brazil and Paraguay.

Why it matters: It's part of wider moves by tech giants to expand climate work well beyond cutting emissions from their direct operations.

What we don't know: What happens if Apple feels a supplier isn't doing enough.

Catch up fast: Over 200 suppliers have already vowed to use sources like wind and solar for all Apple-related production, Apple said.

Overall, Apple said it has cut emissions 40% since 2015 via energy efficiency, lower-carbon design and other steps.

6. Quote of the day

"It's difficult to get capital to commit if you don't know if you'll get a permit in 12 months or five years."
— Arne Frandsen, chief executive of mining investment group Pallinghurst

That comes via Reuters' in-depth look at why federal financial support for battery metals projects will "likely prove fruitless" without changes to permitting policy.

🙏Thanks to Mickey Meece and David Nather for edits to today's newsletter. We'll see you back here tomorrow!