Net Zero

1. Fossil fuel financing
2. China’s next green giants
3. Slowing oil demand growth
4. US clean-power tension
5. Climate change’s costs

A Ugandan climate activist’s critique of IEA efforts to clean up cooking in Africa.

Fossil-fuel finance falls

Fossil fuel financing by the world’s 60 biggest banks declined for a third year running, research published this week showed, but broader economic shifts leave open the possibility that such momentum could be reversed, one of the report’s authors told Semafor.

Overall lending and underwriting to the fossil fuel sector amounted to $705.8 billion in 2023, down from $916 billion in 2021 and $955.5 billion in 2019, the Banking on Climate Chaos report authored by groups including the Rainforest Action Network and the Sierra Club said. There are other qualified positives: fossil fuel companies are increasingly likely to opt for financing from non-bank financial institutions, largely because they face growing questions from banks, and 85% of all financing tracked by the report expires before 2030, suggesting banks are increasingly worried about fossil fuel facilities becoming stranded assets, as growing numbers of analysts project an impending decline in demand for oil and gas.

But there are warning signs, RAN Research Manager April Merleaux said. For one, fossil fuel companies have largely avoided borrowing with rich-country interest rates at multi-year highs, a strategy that could well shift if the Federal Reserve, European Central Bank, and Bank of England begin cutting rates this year, as expected. Companies have also used a protracted period of relatively high oil prices to retire debt, meaning their credit profiles have improved. And banks are not entirely eschewing long-duration lending to fossil fuel companies: One bond tracked by the report expires in 2084.

China’s next big clean-power push

In 2016, Taiyuan became the first Chinese city to begin converting its entire taxi fleet to electric vehicles. Now, it is leading the way again by scrapping them and, in the process, planting the seeds for what may be the world’s next big green industry.

National rules in China require that all taxis — electric or not — be scrapped after eight years or 600,000 kilometers (about 370,000 miles) on the road, to ensure safety and spur technological innovation. (Electric buses, by comparison, get 13 years and 400,000 kilometers.) Authorities in Taiyuan have chosen one company to recycle the cars’ bodies, and another to handle the used batteries.

Details about the scrappage program for the more than 8,000 cabs are scarce, but as with a number of other clean-tech sectors — solar panels, electric vehicles, and wind turbines, to name a few — a combination of early and aggressive state direction, mammoth scale, and pointed regulation leave China poised to dominate the nascent world of battery recycling.

The economic and climate consequences of China’s scrappage policy are enormous, and its efforts should be closely watched worldwide: This is a problem many countries racing to electrify their vehicles will inevitably have to face themselves.

Slowing oil demand growth

Global oil and gas demand is growing at a slower than expected pace, the International Energy Agency said. The Paris-based organization lowered its forecast for a second month running, blaming a mild winter and flagging economic growth worldwide. Although the IEA’s demand estimate for last year was revised upwards, its overall outlook remains more bearish on oil consumption than many analysts, leading to complaints in recent months from petrostates and some energy-market experts that its focus on climate change has undermined its projections. A George W. Bush energy adviser wrote in The Wall Street Journal in February of the IEA’s alleged “capitulation to political pressure,” and argued that “the world’s energy-security watchdog has gone missing.”

The US’ green tension

US rules unveiled this week appear likely to variously accelerate the energy transition and hamper it, illustrating a tension underlying clean-power politics more broadly. Federal regulators on Monday ruled that grid developers must plan 20 years in advance for new interstate electricity transmission projects, essentially requiring planners to increase accommodations for future solar, wind, and hydroelectric power. The rules nevertheless fall short of the broader permitting reform experts say will be necessary to truly bolster the US’ long-term renewables capacity, and Senate Majority Leader Chuck Schumer said any such deal was “virtually impossible.” The White House meanwhile announced sharply higher tariffs on Chinese-made electric vehicles and solar panels, likely slowing the deployment of those technologies in the US. The tariffs underscore the “deep tensions” between the White House’s goals of economic self-sufficiency in green tech production via good-paying jobs and reducing greenhouse gas emissions.

The costs of climate change

The global macroeconomic fallout of climate change is six times as large as previously thought: That’s the conclusion of a new white paper authored by economists at Harvard University and Northwestern University, and published by the US National Bureau of Economic Research. Prior estimates had suggested that each degree Celsius of temperature increase resulted in a loss of 1% to 3% of global GDP. Those estimates were largely based on within-country risks, the economists argued, and do not sufficiently account for how rising global temperatures change the world’s entire climate system, making extreme events more likely. As a result, they estimate each degree Celsius of warming results in a 12% decline in global GDP.

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New Energy

• Saudi Arabia generated a record share of its power from renewable sources last year, owing largely to the roll-out of solar projects. Although renewables made up just 3% of the total power production, capacity could more than quadruple by the end of 2026.
• The UAE and Oman signed a $35 billion partnership to collaborate on renewable energy and green metal production, among others. The agreement adds to the rapid deployment of energy diversification plans across the Middle East and North Africa, a region that could produce as much as 62 GW from renewable energies over the next five years, according to an IEA estimate.

Finance

• The European Union outlined final rules on the language investment funds can use to highlight their sustainability credentials without greenwashing. For one, a fund has to have at least 80% of its assets meeting ESG objectives.

Minerals & Mining

• The US and China are racing to control some of the world’s biggest deposits of copper as production of the metal becomes essential for securing the climate transition. Washington has relied on allies — including the UAE, Japan, and Saudi Arabia — to keep mines out of Chinese control to prevent Beijing “tightening its grip over the global supply of crucial metals and minerals,” The Wall Street Journal reported.

EVs

• Japanese car makers are pouring hundreds of millions of dollars into developing solid-state batteries they believe could replace the lithium-ion ones that currently power most EVs. Despite progress in their development, however, some believe the batteries are still decades away from mass production, Nikkei Asia reported.

Vanessa Nakate is a Ugandan climate activist and the author of A Bigger Picture. She was responding to the International Energy Agency’s Summit on Clean Cooking in Africa, in which the Paris-based agency sought to bring focus to the use of unsafe cooking systems on the continent. Such systems are blamed for around 500,000 deaths in Africa annually, mostly women and children.

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