Net Zero

1. The next EV battle
2. Carbon storage showdown
3. Most costly disasters
4. Offshore windfall
5. Hydrogen hopefuls

The biggest story in climate science, and a European renewables giant throws in the towel on the U.S.

How 2024 will define the EV future

New rules clamping down on eligibility for electric-vehicle tax credits in the U.S. have kicked off a pivotal period in the global EV sector, where plummeting prices will face off with falling government largesse to determine how fast the transportation sector can shift away from fossil fuels.

For U.S. EV buyers, 2024 will be a year with considerably fewer government-subsidized choices, but easier access to subsidies for EV models that still qualify for support. American and European automakers, meanwhile, will have to fight for market share amid increasingly punishing EV economics, while fending off competition from lower-cost Chinese rivals. The number of electric and hybrid vehicle models eligible for a full $7,500 tax credit in the U.S. fell from 25 down to 13 on Jan. 1, according to BloombergNEF, as officials tightened qualification rules to exclude vehicles with certain battery parts made in China or by Chinese companies. But buyers will now be allowed to cut the value of the credit from the purchase price at the time of sale, rather than receive it as a rebate on their annual taxes, which should ease sticker shock and make the credit accessible to lower-income households.

This year will be the first chance to see the impact of a compromise built into the Inflation Reduction Act. Making it harder for Chinese companies to benefit from the EV tax credits was guaranteed to slow sales in the near term, because of how much of the battery supply chain is controlled by China. Legislators believe that’s a sacrifice worth making to boost the nascent U.S. battery industry in the long term.

Are enough consumers willing to shell out more for some EV models to make it worth automakers’ while to keep scaling up their production lines? That’s the virtuous cycle that the Biden administration hopes will eventually lower prices for all models.

The coming carbon-storage showdown

The Biden administration will allow Louisiana regulators to approve carbon-storage wells in the state, clearing the way for it to become the U.S. epicenter of the emerging carbon-management industry. In all but two other states (Wyoming and North Dakota), carbon-storage wells must be approved by the federal Environmental Protection Agency, a process that can take more than five years. Louisiana officials had pushed to bypass those rules in the hope of drawing billions of dollars in investment, mostly from oil and gas companies. Environmentalists objected over safety concerns from potential carbon leaks, and the fact that carbon storage in general provides an ostensibly greener avenue for fossil fuel companies to continue drilling. With the carbon storage decision out of the way, another high-stakes climate battle is looming in Louisiana, as the White House weighs whether to allow construction of a massive new liquefied natural gas export terminal.

The world’s costliest disasters

The wildfire that ripped through Lahaina, Hawaii in August was the world’s most expensive climate-related disaster on a per-person basis, an analysis by the humanitarian group Christian Aid concluded.

Other top contenders include the tropical storm that battered the U.S. territory of Guam in May and the Pacific island nation of Vanuatu in March. The upshot of this analysis, the group concludes, is that low-income countries and communities with small carbon footprints are the most likely to face crippling economic impacts from climate change.

Housing wind fall

Drop in home values for properties located within a mile of a wind farm. A new study from U.S. government researchers found property values begin to drop as soon as a new wind farm is announced. But the effect is isolated to wind farms near urban areas, and negligible in rural areas. And values bounce back quickly, the study found — within a few years after construction, the effect of the wind farm is close to zero.

Hydrogen hopefuls

A new generation of green-hydrogen startups is lining up to take advantage of a lucrative new U.S. tax credit. At the end of December, Treasury Department officials proposed long-awaited rules for what types of green hydrogen — which, when made by using renewable electricity to strip hydrogen out of water, can be used to cut fossil fuels out of shipping, steel and fertilizer production, and other emissions-intensive industries — can qualify for a credit of $3 per kilogram. The proposal sets stricter limits for how renewable energy gets used than what many in the oil and gas industry, which is poised to invest billions in hydrogen infrastructure, had hoped to see, raising cries from some lobbyists that the Biden administration was effectively strangling the nascent technology in its crib.

But Hiro Iwanaga, the founder of Talus Renewables, is hyped: “Our systems were designed to work under the strictest interpretations of 45V [the tax credit]. So we’re excited about where it’s going.”

Talus closed a $22 million series A fundraising round in November to build modular systems powered by adjacent renewable energy to produce green hydrogen and turn it into ammonia, a key ingredient for fertilizer. Talus was originally focused on installing its systems on farms in sub-Saharan Africa, where fertilizer costs are among the world’s highest, and built its first last year on a nut farm in Kenya. Unsubsidized, the company’s product isn’t cost-competitive with traditional fertilizer in the United States. But with the green-hydrogen tax credit, Iwanaga thinks it will be.

Talus is working on deals with commercial farms in the U.S., as well as mining companies that have their own uses for ammonia and are under pressure from investors and regulators to cut their carbon emissions. Talus is not alone; according to Pitchbook, venture capital investment in hydrogen startups hit nearly $1.5 billion in 2023, and will likely surge higher into companies that qualify for the tax credit now that the rules for it are more clear.

January 14-19, 2024 | Switzerland

Semafor will be on the ground at the World Economic Forum in Davos, Switzerland, covering what’s happening on the main stages and lifting the curtain on what’s happening behind them.

Sign up to receive our pop-up newsletter: Semafor Davos (and if you’re flying to Zurich let us know so we can invite you to one of Semafor’s private convenings).

New Energy

• Spanish renewable energy giant Iberdrola called off an $8.3 billion acquisition of the U.S. power utility PNM. The acquisition would have made Iberdrola one of the top renewables companies in the U.S.; its cancellation leaves Iberdrola’s path to expand in the U.S. unclear and could chill future investments by overseas renewables companies.
• Solar panel manufacturer First Solar sold $700 million in tax credits to financial services firm Fiserv. The deal is one of the largest of a new kind of tax credit transfer made possible by the Inflation Reduction Act, allowing the solar company to pocket cash upfront.
• The first large-scale offshore wind farm in the U.S. missed a self-imposed deadline to deliver power by Dec. 31. Vineyard Wind generated some of its first electrons Sunday evening but the company said more testing was needed before they could be sent to the grid; a new deadline hasn’t been set.

Fossil Fuels

• The U.S. was the world’s top exporter of liquefied natural gas in 2023, knocking Qatar from the top spot. The boost was mostly due to the reopening of the Freeport LNG terminal in Texas, which had been taken offline by a fire in June 2022, and from surging demand in Europe.
• Chevron wrote down the value of oil and gas assets in California and the Gulf of Mexico by $3.5-4 billion. The charges stem from environmental regulations in California that will cut into future investment plans, the company said, and from costs associated with closing down old wells and pipelines in the Gulf.
• The amount of electricity the U.K. generated from fossil fuels in 2023 was the lowest since 1957, according to an analysis by Carbon Brief. But the government is still off-track for its goal to produce 95% of electricity from low-carbon sources by 2030.

Finance

• With the presidential election looming, U.S. financial regulators still haven’t completed an ambitious but contentious set of rules for climate disclosures. Time is running out, watchdogs say, for the Securities and Exchange Commission to make progress on its climate agenda.
• Reinsurance rates for U.S. properties that have been previously hit by natural disasters jumped 50% on Jan. 1. Wildfires and floods are causing insurance rates to skyrocket in many parts of the country, and in some cases driving insurers to leave markets where they can’t raise rates enough to keep pace with the cost of their own reinsurance.

Politics & Policy

• German officials are investigating whether fossil fuel companies are relying on a fraudulent emissions-reduction project in China to comply with the European Union’s carbon market. A group of German biofuel producers had complained that the site of a supposed biofuel plant in China that was generating carbon credits for the EU market doesn’t really exist.

Personnel

• Tesla signed on two new lobbyists to advocate for the company’s work on AI and autonomous driving, according to a filing. Gregory Sunstrum was a former chief of staff to Rep. Debbie Dingell (D-Mich.) and Geoffrey Burr was a senior official in the Trump administration Department of Transportation.

Michael Mann, professor of earth & environmental science at the University of Pennsylvania. Mann’s latest book is Our Fragile Moment.

Semafor’s 2024 World Economy Summit, on April 17-18, will feature conversations with global policymakers and power brokers in Washington, against the backdrop of the IMF and World Bank meetings.

Chaired by former U.S. Commerce Secretary Penny Pritzker and Carlyle Group co-founder David Rubenstein, and in partnership with BCG, the summit will feature 150 speakers across two days and three different stages. Join Semafor for conversations with the people shaping the global economy.

• Hispanic leaders have a message for the U.S. president: Latino voters remain unconvinced by Biden.
• Russia launches retaliatory strikes on Ukraine. The attack on Kyiv came as both Zelenskyy and Putin vowed to keep on fighting.
• Here’s what journalists got wrong in 2023.