Net Zero

1. So much for an iEV
2. Big Oil’s big profit
3. Buffett’s climate strategy
4. LNG scramble
5. Scaling carbon removal

ARPA-E is pumped for geologic H2, and John Kerry is not pumped about BlackRock.

So much for an iEV

Apple is killing its decade-long program to develop an electric vehicle. “Project Titan,” as it was known, faced cooling consumer demand for EVs, especially at the $100,000 price point that Apple was reportedly planning to offer. Even at that price, it would have been challenging to get the same profit margin the company is accustomed to from its other consumer electronic products. The project also faced engineering challenges on the car’s self-driving features. Employees from the car project will shift to work on generative AI instead, Bloomberg reported. Honda, meanwhile, released a new electric-hydrogen hybrid SUV, shifting back to fuel cell technology that most automakers have dropped in favor of batteries — in part because hydrogen fueling stations are few and far between.

Big Oil’s big profit

The top ten U.S. oil and gas companies earned $313 billion in net income during the first three years of Joe Biden’s presidency — triple what they pocketed under Donald Trump. The companies, which finished reporting 2023 earnings this week, have been well-served by commodity price spikes following Russia’s full-scale invasion of Ukraine, and have pushed U.S. production of oil and gas to record highs. Their fair fortunes represent a political windfall for Biden, who can credibly claim to be overseeing a fossil fuel boom without ditching his climate agenda, although industry lobbyists say he’s only reaping the benefits of policies adopted under Trump. Things aren’t all peachy for Chevron, however — this week the company warned its investors that its planned acquisition of the oil company Hess could be derailed by attempts by Exxon and China’s state-owned oil company to snatch Hess’s share of a major offshore drilling project in Guyana.

Reading Buffett’s green tea leaves

Warren Buffett’s new letter to Berkshire Hathaway shareholders offers a window into the storied investor’s outlook on the energy transition — projecting a long, bright future for U.S. fossil fuels.

The letter singles out Occidental Petroleum, of which Berkshire owns 27.8%, for special praise, saying the company is “doing the right things for both its country and its owners” by helping to free the U.S. from reliance on imported oil. Berkshire intends to hold stock in the company “indefinitely,” Buffett writes, elevating Occidental to the level of the “truly wonderful businesses” Coca-Cola and American Express.

“No one knows what oil prices will do over the next month, year, or decade,” Buffett writes. “But [Occidental CEO] Vicki [Hollub] does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and to her country.”

Energy security has long been a focal point for Buffett, and Berkshire’s holdings across the sector show a vision of the clean energy transition unfolding slower than what climate activists would like to see. Buffett is willing to stake out early positions on promising climate technologies — he backed Chinese automaker BYD in 2008 before it had even announced its first plug-in hybrid, and his letter also praises Occidental for its leadership among Big Oil peers on carbon capture. Berkshire’s subsidiary Berkshire Hathaway Energy (BHE) is also one of the country’s largest owners of wind and solar farms.

But Buffett evinces an old-school preoccupation with U.S. energy independence and sees no end in sight for natural gas. Berkshire is one of the few insurers that has not yet set a target to wind down emissions from its insurance and investment portfolios. The problem with Buffett’s all-of-the-above energy transition strategy is that — as some shareholders have complained, and as his letter this weekend itself articulates — the carbon-intensive companies in the portfolio put the value of other holdings that are exposed to climate impacts at risk.

LNG scramble

Tons per year of liquified natural gas that Qatar aims to export from a new LNG terminal by 2030. The expansion — coming just as the U.S. blocks new export terminal permits — could allow the country to regain its position as the world’s top LNG exporter. Qatar has lined up long-term sales contracts for about half of the LNG export capacity it is building, with buyers in Europe and Asia. Selling the rest means beating the U.S. and Australia to the punch before global gas demand peaks, likely in the early 2030s. In the U.S., meanwhile, fossil fuel lobby groups signaled this week they’re preparing to sue the Biden administration over its LNG permitting pause.

Scaling carbon removal

A carbon credit dealer has a new strategy for making its riskier offerings more palatable and affordable to companies: Packaging them with credits based on good, old-fashioned tree planting.

Almost all carbon credits are based on avoided emissions: Buy the credit, and a patch of forest that would have been cut down will be left standing. Most experts agree that a more credible and climate-beneficial approach is carbon removal: Activities, such as tree planting or high-tech carbon-sucking machinery, that draw down existing atmospheric CO2. An Oxford University report this week warned that today’s carbon market will have little long-term benefit to the climate unless that ratio flips within the next few years. The challenge is that most forms of carbon removal are orders of magnitude more expensive than carbon avoidance, with a pool of buyers limited to a handful of rich tech companies that are willing and able to shell out hundreds of dollars per ton.

Rubicon Carbon, a carbon credit company, launched a new product this week that allows buyers to purchase a share in a diversified portfolio of carbon removal projects. About 95% of the portfolio consists of tree-planting initiatives, which have the benefit of being cheap, but don’t guarantee permanent carbon storage (trees sometimes get cut down), and have geographical limits since there’s not enough space on Earth to plant enough trees to reach net zero. The remaining 5% is made up of a mix of more expensive, but longer-duration, tech-based carbon removal projects.

A share of the portfolio is cheaper than a standard carbon removal credit, and Rubicon promises to actively manage the portfolio to filter out removal startups that will inevitably fail, as well as bring in new technologies as they become available. The idea is to give buyers a way into carbon removal that’s more reliable and less prone to greenwashing than a typical carbon offset, but still cheaper for a company than directly reducing its in-house emissions, chief science officer Jennifer Jenkins told Semafor (she declined to say how much Rubicon is currently charging for a share).

That type of approach could help scale removals up. But government regulators still need to do more to weed bad credits out, Oxford researcher Kaya Axelsson said: “In any other market, there would be consumer protection standards that we simply don’t have in the carbon market today.”

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New Energy

• The U.S. Department of Homeland Security is expanding its scrutiny of U.S. solar companies. The agency is asking companies to hand over details about their supply chains, part of an effort to crack down on labor abuses in Chinese factories.

Fossil Fuels

• A “climate tech” incubator launched this month by Shell appears to be primarily a platform for recruiting workers to oil and gas jobs. “It’s a Trojan horse of legitimacy,” one researcher said.

Finance

• Former U.S. climate envoy John Kerry bashed BlackRock and other top asset managers for pulling out of a net zero group. Financial institutions that aren’t willing to take a firm line on decarbonization are succumbing to “disinformation and politics,” he said.

Politics & Policy

• The price of carbon credits in Europe’s cap-and-trade market is falling, an indication that EU heavy industries are decarbonizing faster than expected. The cap is set to come down significantly within the next few years, however, so the price is likely to shoot back up — presenting an intriguing opportunity for carbon traders.

Tech

• Google has a new strategy for cutting the massive carbon footprint of AI: Shifting data center computing loads around the world to chase clean power in real time. The idea is to ramp up data center operations in sunny, windy places, then ramp down when the grid falls back on fossil fuels. But the strategy could run into issues with data sovereignty laws.
• A startup backed by Boeing is building a demonstration plant in Singapore that uses seawater to carbon atmospheric CO2 and churn out green hydrogen. But scaling the project up from lab to commercial size is a daunting engineering challenge.

EVs

• Chinese EV maker Li Auto cut its expectations for first-quarter deliveries, following record-breaking profits in the second half of last year. The company is still orders of magnitude ahead of the U.S. EV startups Lucid and Rivian, which also tempered production expectations this week.

Evelyn Wang, director of the U.S. Department of Energy’s Advanced Research Projects Agency (ARPA-E). Wang will testify in a Senate hearing this morning about the opportunities and challenges of geologic hydrogen.

• Japan Inc. is finally ready for the global stage
• Google CEO calls AI tool’s controversial responses ‘completely unacceptable.
• Senate Republicans may be warming to Congress’s $78 billion tax bill.