Net Zero

1. EVs hit the gas
2. Floating ambitions
3. Offshore consolidation
4. ESG conspiracy
5. Fossil finance turnaround?

Elon wins, and a carbon cleanup strategy “makes no sense.”

EVs hit the gas

Global EV sales will hit a record this year, and double by 2027 to more than 30 million, according to a new BloombergNEF forecast.

Sales of internal combustion engine (ICE) vehicles peaked in 2017, and the size of the global ICE fleet will peak by 2025, BNEF projects, putting EVs on track to account for at least one-third of the global passenger vehicle fleet by 2035. Adoption is faster in some places — Nordic countries and China, especially — and slower in others, but overall the pace of EV adoption is close to what’s required for the Paris Agreement targets, and battery prices are continuing to plunge. Electrification of commercial vehicles and trucks, however, is behind, and in “urgent” need of more targeted policy support.

Japan is banking on an unproven technology to solve its clean energy problem

Japan is a climate laggard among its North American and European peers, recording the lowest clean electricity generation rates of rich countries. Its solution: To bet big on an advanced and largely untested form of wind power, one that is hugely complex, but which could be vastly lucrative.

The technology — floating offshore wind, where turbines float on the water rather than sit fixed to a shallow seabed — was at the center of one of the deals struck between Washington and Tokyo during Japanese Prime Minister Fumio Kishida’s trip to the US in April, and is increasingly a focus of his government’s as it looks to accelerate its energy transition.

Floating offshore power could be a game changer for Japan, and the world. Building an entire industry, infrastructure, and supply chain for a technology that has yet to be commercialized, however, will be a massive undertaking.

Offshore consolidation

Average price per day for offshore oil drilling rig contractors. That’s the highest price of the last several years, thanks to a post-pandemic increase in drilling. That price is likely to tumble by 2030 as demand for high-priced offshore oil falls, Leslie Cook, principal analyst of upstream supply chain for Wood Mackenzie, told Semafor. The desire to curb competition and keep prices elevated is what drove leading rig contractor Noble Corp. to pay $1.6 billion to acquire its smaller rival Diamond Offshore Drilling this week, and what will likely drive an extended round of consolidation in the industry. Transocean, which operates the world’s largest rig fleet, is a probable buyer, and is likely targeting small drillers in the crowded markets of Norway and Brazil. Like their peers onshore, offshore drilling companies see consolidation as one of their only remedies for the clean energy transition, Cook said.

ESG conspiracy

The ESG conspiracy is spreading, according to a report this week by Republicans in the House of Representatives. In the report, the House Judiciary Committee accused Wall Street of orchestrating a wide-ranging “climate cartel” with the eventual goal of “the ‘decarbonization’ of American industry,” including everyone from activist groups and California’s public pension to BlackRock and the advisory firm Glass Lewis. The efforts of Vanguard, State Street, and other top asset managers named in the report to downplay their links to the ESG investing movement, including by walking out of the main group targeted in the report, is apparently not enough to take them out of lawmakers’ sights.

One curious thing about this cartel is that it apparently isn’t very effective: Once again this year, most climate-related shareholder resolutions at banks and other companies failed to pass. Still, to the extent that there is a shift toward climate consciousness at large asset managers, there are two more obvious reasons than an activist conspiracy: One, that climate change is a genuine threat to long-term portfolio returns, and two, as my colleague Liz Hoffman pointed out, asset managers’ customers are asking for it.

Fossil finance turnaround?

The Biden administration will have a chance to change course on global climate finance next week at an OECD meeting in Paris. At the meeting, officials are expected to discuss rules for investing in overseas energy projects through export credit agencies like the US Export-Import Bank. Despite a 2021 commitment by the US to end public financing for foreign fossil fuel projects, the Ex-Im bank has continued to pour billions of dollars into oil and gas projects in developing countries, a practice that drove two of the bank’s advisors to resign in protest this year. The EU, Canada, and the UK are backing a proposal at the OECD meeting that would require an end to that type of financing. While the US is unlikely to support it, Treasury Department officials have hinted that they may counter with a weaker but still meaningful proposal to put an emissions-intensity cap on future Ex-Im lending, said Kate DeAngelis, who works on international finance at Friends of the Earth.

EVs

• Tesla shareholders approved Elon Musk’s $46 billion pay package, an endorsement of his erratic management style. Musk’s continuing leadership of the company may be good for its share price, for now — but whether it can claw back a commanding position in the EV market remains uncertain.
• Ford is building a secret team to develop low-cost EVs by poaching talent from the likes of Rivian and Tesla.

New Energy

• China’s top solar companies, including Tongwei and GCL-Poly, now produce almost as much energy as global oil majors like ExxonMobil. But intense infighting in the industry is drawing President Xi Jinping to call for a pause in investment, which could be a solution that doesn’t help any of them.

Fossil Fuels

• G7 leaders agreed to tighten their enforcement of oil price cap sanctions on Russia, which the Kremlin has largely been able to dodge so far.
• US exports of liquified natural gas scored two big new customers this week: Ukraine and Saudi Arabia.
• The American Petroleum Institute, the leading trade group for oil companies, sued the Biden administration over its tailpipe emissions standards that effectively mandate an increase in the share of EVs in US car sales over time.

Tech

• Tech firms are begging NextEra Energy, the largest operator of renewables in the US, to bring on enough new capacity to power entire cities, CEO John Ketchum said.
• Extreme weather is causing wild swings in electricity prices, and a growing number of power traders see a chance to pocket a windfall using forecasting tech.

Food & Agriculture

• Italian Prime Minister Giorgia Meloni wants to invest more in sustainable agriculture, but may have trouble raising cash for it.

Rob Jackson, professor of earth science at Stanford University and chair of the Global Carbon Project. His new book Into the Clear Blue Sky is “a how-to guide for restoring our health and atmosphere.”

• Immigration activists are starting to miss Bob Menendez.
• G7 agrees outline of $50B deal to fund Ukraine using frozen Russian assets.
• Renewable energy alone can’t save Ukraine’s faltering grid.