May 28, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back. Today's Smart Brevity count: 1,201 words, 4.5 minutes.

Reminder: World Central Kitchen is working to feed vulnerable people and help the badly distressed restaurant sector at the same time. You can donate here.

🎤 And next month marks 40 years since Bob Marley released the album "Uprising," which provides today's beautiful intro song...

1 big thing: The end of the beginning on net-zero pledges

Illustration: Rebecca Zisser/Axios

Activist investors' push to make the world's largest energy companies commit to ambitious climate targets is entering a new phase.

Driving the news: Power giant Southern Company yesterday pledged to reach net-zero emissions by mid-century, joining a bunch of other big utilities who made similar vows over the past year or so.

  • The move came the same day that BP officials, at their annual meeting, said the COVID-19 pandemic would not alter the wide-ranging climate plans the company rolled out in February.

Why it matters: These kinds of long-term pledges are growing in the power sector. And "net zero" is the coin of the realm for European headquartered multinational oil giants (though resisted by U.S.-based majors ExxonMobil and Chevron).

  • But even as advocates push more companies to make commitments, a key thing to watch now is whether and how energy giants start providing more granular information on how to transform the pledges into concrete steps.
  • Thus far, while there have been varying levels of specifics, there remain very large blanks to fill in across the board.

The big picture: "[P]ressing for more detail on how these plans will be implemented is definitely the next step at all of these companies," says Andrew Logan of the sustainable investment advocacy group Ceres.

  • "There is particular concern about whether the near-term goals companies have set are ambitious enough to actually get them to the 2050 goals without having to assume some miraculous development on the technology front," says Logan, whose work is focused on oil companies.
  • And check out yesterday's statement from investors affiliated with the Climate Action 100+ network, which welcomes BP's steps but calls for more clarity on how they'll start getting there in the near- and medium-term.

What they're saying: Advocates similarly called for specifics from Southern Company — which has a power mix heavily reliant on gas and coal — even as they praised the new goal.

  • Lila Holzman of the shareholder advocacy group As You Sow says they "look forward to more clarity on how it will achieve this new target, especially with regard to its large natural gas fleet."

Flashback: Axios' Amy Harder recently looked at Duke Energy's plan, which provides some specifics but also "relies heavily on a vague bucket of low-carbon technologies that aren’t commercially viable yet."

What's next: BP is planning to unveil details of its plan in September.

  • "I think that BP's September announcement — assuming it is sufficiently detailed — will lead to some pointed questions and hopefully some more detailed plans from BP's peers," Logan adds.
2. BlackRock pushes U.S. majors harder on warming

Illustration: Eniola Odetunde/Axios

Investment behemoth BlackRock is using its shares to push U.S. oil majors harder on climate, efforts that come months after BlackRock joined the advocacy group Climate Action 100+ and announced a new sustainability strategy.

Driving the news: BlackRock, citing concerns about Exxon's climate posture, yesterday voted against re-election of two members of Exxon's board and in favor of a resolution to create an independent board chair.

  • However, the members were re-elected and the push for an independent chair failed.

Why it matters: The votes nonetheless represent an escalation of BlackRock's push for Exxon to do more at a time when European-based majors are more active than their U.S. peers.

One level deeper: Yesterday BlackRock also used its shares to help pass a resolution, against the recommendation of Chevron's management, that prods the company to reveal more about its climate-related lobbying.

  • BlackRock cited the need for "greater transparency" into Chevron's approach, noting that Chevron says it backs the Paris climate deal.
  • More transparency "will help articulate consistency between private and public messaging in the context of managing climate risk and the transition to a lower-carbon economy," BlackRock said.

What they're saying: The shareholder advocacy group Majority Action, in a statement on the Exxon and Chevron votes, said BlackRock's vote at Chevron's meeting "was decisive in swinging the result to majority support."

But, but, but: "While these votes are important steps towards BlackRock fulfilling its new climate commitments, they do not constitute anywhere near the scale of overhaul BlackRock must undertake to systematically address climate risk across its outsized holdings," the group said.

3. An SUV milestone and the CO2 problem
Adapted from IEA; Chart: Naema Ahmed/Axios

SUVs reached a milestone last year, crossing 40% of worldwide new car sales for the first time, according to newly released International Energy Agency data.

Why it matters: The popularity of big, heavy cars and pickups is one challenge around decarbonizing transportation, even as fuel economy improves and electrics gain a beachhead.

  • Transportation is the largest greenhouse gas source in the U.S. and accounts for roughly a fourth of energy-related CO2 emissions worldwide.

The big picture: SUVs' share of new car sales has doubled over the last decade. There are now more than 200 million on the road and they account for 60% of the increase in the worldwide vehicle fleet since 2010, IEA said.

  • The increase in SUVs' market share accounts for 500,000 barrels per day worth of growth in oil demand for passenger vehicles between 2010 and 2019, per IEA.

The intrigue: Their popularity in the U.S. is well-known, but IEA notes that growth markets include China and other places where "SUVs are often considered symbols of wealth and status."

Where it stands: A number of legacy automakers and startups are bringing new electrified SUVs to market in the coming years. That includes GM's upcoming revival of the Hummer, and the startup Rivian's upcoming release of its SUV.

What we're watching: The fate of U.S. fuel economy standards. The Trump administration has substantially weakened Obama-era mandates that run through the mid-2020s.

  • But yesterday attorneys general from two dozen states sued to thwart the weakened rules.
  • The election will matter too. The court fight will continue past November, and if Joe Biden wins he'll seek to implement much tougher standards.
4. Oil's rally hits bump in road

Oil prices are down today, a move Reuters chalks up to "industry data [that] showed a surprise steep build in crude oil inventories, dampening hopes of a smooth recovery in demand as some countries ease coronavirus lockdowns."

Why it matters: The midweek declines after a month-long rally underscore how the market faces strong headwinds even as consumption is bouncing back from April's troughs and production cuts take hold.

The latest: This morning, Brent crude was trading around $34.68 and WTI at $32.47.

What they're saying: Rystad Energy analyst Bjørnar Tonhaugen said markets are watching new U.S.-China tensions over China's posture toward Hong Kong and the prospect of new sanctions, which would "surely affect demand and the oil market balances."

  • "Traders know that and such news were not exactly what they wished for their portfolios, in a time when a price recovery is what the market needs most," Tonhaugen said in a note.

What's next: The Energy Information Administration will release its latest data on U.S. crude oil stockpiles and fuel demand later today. Their weekly report often moves markets.

5. Catch up fast: markets, GE, renewables, Tesla

Finance: "Clean power stocks have weathered the coronavirus crisis better than their peers in oil and gas, new research has shown, as the oil price shock and pandemic shift the landscape for energy investing." (FT)

Electricity: "General Electric Co. is getting out of the business of making lightbulbs, selling a unit that defined the company for nearly a century and was its last direct link to consumers." (WSJ)

Tax policy: "The Trump administration is making it easier for renewable energy projects to take advantage of certain tax credits amid the coronavirus pandemic." (The Hill)

Electric vehicles: "Overnight on Tuesday, Tesla said it was cutting prices for its Model 3, S and X in North America by as much as 6%, and Model S and X vehicles in China by 4%." (CNBC)

  • They report that the move "shows some realism in the face of the coronavirus pandemic and subsequent spike in unemployment, which could hurt demand for vehicles."
Ben GemanAmy Harder