Net Zero

1. Big climate spending
2. Riyadh’s life after oil
3. The LNG ‘carbon price’
4. Methane cuts are cheap
5. Repricing power

Bitcoin’s energy breakeven point, and new EV contenders.

Big climate spending

The Biden administration’s new budget proposal makes clear that congressional Republicans and even a second Trump presidency can’t eliminate federal spending on climate change.

The proposal asks for an additional $1.6 billion in clean energy infrastructure, $23 billion for climate impact adaptation, $3 billion for international climate aid finance, and bigger budgets for key environmental agencies, among other measures. All of these funds will face cuts in Congress and could be tossed if U.S. President Joe Biden loses in November.

But in a supplementary report to the budget, the White House also published new details on the significant financial risk climate change poses to taxpayers — costs that can’t just be vetoed. The U.S. Department of Agriculture, for example, projects that droughts will cause the number of ranchers seeking financial assistance to double by 2100, adding $800 million per year to the department’s spending. It also expects its spending on wildfire management to increase by about 25%, more than $1 billion, by then.

The report doesn’t have enough granular forecasting detail to get a comprehensive picture of how much the U.S. government expects to spend dealing with climate change. But it’s clearly more than enough to make the clean energy spending requested in the budget a bargain by comparison.

Inside Riyadh’s plan to dominate mining

Saudi Arabia sees vast riches beyond oil within its reach. The kingdom’s broad-ranging ambition, a top mining official told Semafor, is to extract the more than $2.5 trillion in metals in its soil, invest in minerals extraction around the world, and capture as much of the minerals value chain as possible.

“Saudi Arabia is being transformed. Through this transformation we want to be an economic powerhouse,” Khalid al-Mudaifer, the vice minister for mining, said. “To be an industrial [power], we need minerals. To build projects, we need minerals. Therefore, mining of Saudi Arabia [is] the first step, bringing minerals from outside is the second step, third step is to build Saudi Arabia as a hub.”

As part of its “Vision 2030” effort to refashion and diversify its economy, the kingdom is adding mining as a “pillar” of its industrial foundation — joining the mainstays of oil, gas, and petrochemicals — and creating a new economic backstop against the eventual decline of fossil fuels. It aims to use its targeted role as a commercial, refining, and research hub to attract companies in other minerals-dependent sectors, from electric-vehicle makers to battery manufacturers, while bolstering its domestic infrastructure along the way. It is, however, unlikely to join a largely Western club of buyers and sellers that Washington envisions as heading off the formation of an OPEC-like grouping for minerals.

“Saudi Arabia needs more minerals, and different types of minerals,” Mudaifer said. “We developed our mining strategy to make mining an economic driver … And we developed our mining strategy to also provide for developments for remote areas.”

The LNG ‘carbon price’

Record-breaking U.S. natural gas exports may be slashing the country’s domestic carbon footprint.

In a new National Bureau of Economic Research paper, economists at Harvard and the University of California, Davis, found that the mid-2010s fracking boom effectively decoupled the price of natural gas in the U.S. from the global oil price, which it had previously tracked. When oil got more expensive, U.S. gas stayed cheap. That began to change around 2017, when liquefied natural gas exports began in earnest. Linking U.S. gas to the global market “re-coupled” gas and oil prices, the economists found, resulting in gas prices “substantially higher than they would have been without LNG exports.”

This price increase — which, because of how the fuels are linked in the U.S. power system, also raises the price of coal — effectively operates like a modest carbon tax of $20-30 per ton of CO2, the economists argue, thereby improving the economics of renewables and driving grid decarbonization. By 2030, they estimate, U.S. power sector emissions will be about one-third lower with LNG exports than they would be without.

Methane cuts are cheap

40% of methane emissions from the oil and gas industry could be eliminated at zero net cost, the International Energy Agency reported. Energy-related methane emissions hit 120 million tons in 2023, close to a record, and are not falling anywhere near fast enough to hit the world’s 2030 net zero goals. Although many countries and energy companies have methane reduction targets, few have policies to achieve them, the IEA said (the U.S., which finalized methane regulations in December, is an exception for now). Nearly half of the total could be cut with technologies that are less expensive than the value of the gas they allow to be captured and sold. The remaining cuts needed for net zero alignment could be achieved for less than 5% of the global oil and gas industry’s 2023 profits, the report concludes.

Repricing power

Britain yesterday announced a major shift in how it runs its electricity market, one that experts had cautioned against and the debate over which illustrated the globe-spanning reach of the U.S.’s Inflation Reduction Act.

The country will move from a single, national wholesale market for electricity to one based on several smaller regions — a model known as “zonal pricing.” London had been previously considering even smaller areas known as nodes (“nodal pricing”), a radical shift that would take years to implement. Analysts and officials had urged the government to dismiss that latter proposal, arguing that the uncertainty fostered by such a significant reform would deter much-needed investment in renewables that could just as easily divert to the U.S. or European Union.

Zonal pricing represents a compromise, resulting in a system in which prices are more closely tied to where electricity is initially generated: Britain’s demand and supply are geographically spread, with wind power generated in Scotland and electricity use concentrated farther south, in and around London. Prices will likely be relatively lower in the former, and relatively higher in the latter. The change has wide reaching impacts, affecting where renewables developers will situate projects, and how battery storage and interconnectors on the grid operate.

As a result, supply should better correlate to demand, helping Britain more quickly reach its target of cutting emissions from electricity consumption by 30% by 2030 compared to a 2016-17 baseline, with the aim of being fully net zero on power use by 2050, and reducing the need for transmission infrastructure. Advocates of the change point to other benefits. “Scotland and the north of England could have some of the cheapest electricity in Europe,” Rachel Fletcher, Octopus Energy’s director of regulation and economics, said in an interview. “So there’s the saving, but there’s also an opportunity to regenerate parts of the country that have been deindustrialized.”

Sen. Michael Bennet; Sen. Ron Wyden; John Waldron, President & COO, Goldman Sachs; Tom Lue, General Counsel, Google DeepMind; Nicolas Kazadi, Finance Minister, DR Congo; and Jeetu Patel, EVP and General Manager, Security & Collaboration, Cisco have joined the world class line-up of global economic leaders for the 2024 World Economy Summit, taking place in Washington, D.C. on April 17-18. See all speakers and sessions, and RSVP here.

New Energy

• Norway will invest $193 million to build floating offshore wind turbines in the Arctic ocean. Floating turbines are still much more expensive than anchored ones, but are necessary to push large offshore wind projects further from shore.
• Speaking of oversized wind turbines: A startup with a “unicorn” $1 billion valuation is building the world’s largest airplane to carry wind turbine blades. Super-long blades are nearly impossible to transport by land, limiting them to offshore wind farms, meaning air travel could open giant opportunities onshore.

Fossil Fuels

• The latest oil and gas merger is EQT’s $5.5 billion purchase of the gas pipeline operator Equitrans Midstream. EQT’s CEO said he sees a fortune in moving gas to areas where AI-crunching data centers are driving a massive increase in demand for power.
• Saudi Aramco hiked its shareholder dividend payments for 2023, even though its profits fell from 2022 on lower oil prices.

• Brazil’s government faces a tough choice between protecting the Amazon and cashing in on oil. State-owned driller Petrobras could soon be the world’s number-three oil producer.

Finance

• A growing number of U.S. companies are looking to delist from European stock exchanges, to avoid the EU’s stringent carbon reporting standards. Now that much looser reporting requirements have been adopted in the U.S., European markets face a risk of “regulatory arbitrage,” analysts say.
• A small Connecticut hedge fund cornered the $45 billion market for catastrophe bonds with a unique blend of business acumen, physics, and climate modeling supercomputers.

EVs

• General Motors is bringing back its electric Blazer SUV, with $6,000 off the price tag. The new models have resolved issues with charging and touch screens that plagued the original Blazer EVs, the company said.
• The newest entrant to the global EV sales race is Chinese smartphone giant Xiaomi. The company will deliver its first EVs (which are also its first cars of any kind) this month, it said — and has promised they can accelerate faster than Teslas.
• BYD, meanwhile, is hitting some bumps in its global expansion plans. The company’s EVs are piling up in European storehouses.

Personnel

• Mukhtar Babayev, the Azerbaijan official tasked with leading COP29 this year, said the country has no plans to slow down oil and gas production. Fossil fuels account for 90% of the country’s export revenue.

Brian Morgenstern, head of public policy at Bitcoin mining firm Riot Platforms.

• Ramadan in Gaza is characterized by mounting starvation.
• How Africans have become the solution to the UK’s elderly care crisis.
• What a rise in US inflation will mean for the elections and interest rates.