Net Zero

1. Another fossil-fuel COP
2. Climate tech in limbo
3. Banks’ green pile
4. A record US project
5. LPO claps back

A conservative climate hawk’s new bid for the Senate, and infighting in the US solar industry.

Another fossil-fuel COP

This year’s global climate summit will again be led by a fossil fuel executive. Azerbaijan’s environment minister Mukhtar Babayev will lead the COP29 talks this November in Baku. Prior to his time in government, Babayev worked at Azerbaijan’s state-owned oil company SOCAR for 26 years, most recently as vice president of ecological affairs, a position in which he was tasked with limiting the company’s environmental impact. Babayev is sure to come under intense scrutiny in the year ahead, much like his predecessor in the climate talks, COP28’s Sultan al-Jaber. Still, al-Jaber was ultimately effective at forming a diplomatic consensus to “transition away from fossil fuels.” The job of COP president requires deep diplomatic connections and negotiating skills, something on which Babayev, who skipped COP26 and COP27, is untested.

Climate tech’s murky future

Just at the moment when a new generation of technologies needs to scale up to decarbonize the global economy, private investors are slamming on the brakes. The last quarter of 2023 was the worst for global climate-tech fundraising since 2020.

Climate-tech companies raised a total of $32 billion in 2023, down 31% from the previous year, according to data published today by intelligence firm Sightline Climate. There were also fewer deals overall, the first annual dip since 2020. The size of deals and their total number shrank or stagnated across all stages of the fundraising cycle, from seed to growth, keeping pace with a broader contraction across startup fundraising more broadly as investors confronted rising interest rates and the possibility of a recession. 2024 looks like it could hold more of the same.

Climate tech is stuck in second gear, with investors in a kind of holding pattern while they wait both for overall economic conditions to brighten and for bets from the last few years to pay off. It’s no surprise that they are playing it safe, given how many got burned in the clean-tech bust of the 2010s. The contraction in early-stage deals is also a sign that fewer entrepreneurs are willing to roll the dice on new ventures. But time is also running short to bend the global emissions curve; breaking through will require more investors to be willing to take first-mover risk, and require more mature companies to prove they were worth the investment.

Banks seeing green

Fees earned by big banks for financing clean energy projects in 2023, more than they earned from fossil fuels. It’s the second year in a row that banks made more money backing green projects than they did from fossil fuels, according to Bloomberg, with BNP Paribas leading the pack. A key reason for the shakeup is new regulations in Europe that penalize banks if they mismanage their exposure to climate risk, which has made banks there more wary of doing business with oil, gas, and coal companies. The U.S. remains fossil-friendly; Wells Fargo was the top fossil fuel banker in 2023, Bloomberg found.

Huge new US project

What could be the largest clean energy project in U.S. history closed an $11 billion financing package and started full construction in Arizona and New Mexico. SunZia is centered on a new large onshore wind farm. But what makes it unique is that the farm will be linked to a 550-mile high-voltage transmission line to carry power to Southern California and other demand centers. High-voltage transmission lines — critical for hooking up more renewable energy and connecting cities and factories to the sunniest and windiest spots — comprise just 1.3% of the U.S. grid. China, by contrast, has about 20 times as many high-voltage lines. The SunZia project also took 17 years to be approved. As long as that’s the standard, the U.S. will never reach its clean energy targets.

The LPO claps back

An investigation by Congressional Republicans into a Department of Energy office that lends money to clean energy companies is causing frustration within the agency but not slowing the office’s work, an official there told Semafor.

Sen. John Barrasso (R-Wyo.) and Rep. Cathy McMorris Rodgers (R-Wash.) have asked the DOE to hand over a mountain of documents related to the Loan Programs Office, one of the most well-endowed agencies carrying out President Joe Biden’s climate agenda. They’ve also asked DOE’s inspector general to investigate the possibility that LPO director Jigar Shah favors personal contacts from his long career in climate tech in deciding how to distribute the nearly $400 billion in loans and loan guarantees his office is endowed with. Republicans have focused on Biden’s climate agenda ahead of this year’s presidential election, and the LPO is emerging as a key target.

The LPO official, who was granted anonymity in order to speak candidly, argued the office was catalyzing investment and job growth, saying in an interview that its work was “like apple pie, mom, and baseball.” Republicans were, the official said, “throwing something against the wall and seeing if it sticks.” The accusations were “laughable and frustrating,” the official continued, insisting that at least 150 people across several departments beyond DOE reviewed individual loan applications.

The LPO is an easy target because of its ultimately doomed bet on the solar company Solyndra during the Obama administration, which kicked off months of investigations and ultimately left the office almost shuttered, with only a few projects approved in the years between Solyndra and Biden taking office. After the new investigation, “Solyndra is going to look like chump change,” Barrasso has warned.

One challenge in targeting LPO, however, is its relative success so far. Even though it has to take bets on companies that — because they are doing something innovative — can’t easily raise capital, meaning some degree of failure is inevitable, LPO’s portfolio has, if anything, out-performed most private clean-energy lenders, said Dan Reicher, a former senior official at DOE and a senior research scholar at Stanford University’s Woods Institute for the Environment.

So far, the LPO official said, the inquiry hasn’t gummed up the works of its review process. But it’s an unwelcome distraction at a time when the office is racing to get as much money out the door as possible before the election.

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

• Offshore wind is getting off to a rough start in 2024. BP and Equinor canceled plans to build a 1.3 gigawatt farm off the coast of New York, saying the power price it had negotiated with the state was no longer sufficient to make the project worthwhile.
• The world’s largest green hydrogen project, in China, will take at least two years longer than initially planned to reach full production. One of the key problems: Its electrolyzers are running at a very low rate because of inconsistencies in the power supply from local renewable sources.
• Scientists in Iceland are planning an unprecedented effort to drill directly into an underground magma chamber. The project aims to develop a potentially unlimited source of supercharged geothermal energy.
• A fight is brewing within the U.S. solar industry over tariffs on imported panels from China. At the urging of solar installation companies who rely on low-cost imports, the Biden administration had agreed last year to pause the tariffs. Now, that decision is being challenged in court by two U.S. solar manufacturers, who say it puts them at an unfair disadvantage.

Fossil Fuels

• China was the world’s top buyer of LNG in 2023, ousting Japan from the top slot. Surging post-pandemic demand for LNG in China could create a price war with Europe, which has been racing to snatch up more of the world’s relatively limited LNG supply to replace Russian pipeline gas.
• ExxonMobil will write down $2.5 billion in offshore oil assets in California. State regulators have restricted the company’s ability to move crude oil by trucks, as the company has worked for years to reopen a pipeline that leaked in 2015. Chevron also wrote down billions in California assets this week, citing environmental regulations.

Finance

• Despite some bad press, demand for carbon offset credits remained strong in 2023, according to a research note by Australian financial firm Macquarie. Total purchases fell only 3% from the previous year, and included a number of new buyers, which the firm said is evidence that the carbon market’s appeal is broadening.

EVs

• Short sellers are targeting China’s BYD, now that it has emerged as the world’s top EV maker. The company’s edge may wear off, they believe, as price-cutting competition between it and other automakers intensifies.
• GM will offer its EV customers a $7,500 discount on models that are no longer eligible for U.S. tax credits. All of GM’s EV models except the Bolt, which is temporarily going out of production, lost access to the credits on Jan. 1 because they include some battery components from China.

Rep. John Curtis (R-Utah) announced his candidacy this week to replace Mitt Romney as a Utah senator.

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.

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