Net Zero

1. EU’s weaker climate plan
2. Climate tech is off-target
3. The problem with buildings
4. Gonna need a bigger grid
5. Belt and Road loopholes
6. Climate going mainstream
7. Africa’s new green banks
8. Mixed nuclear signals

EU’s weaker climate plan

European Union officials backed down from adopting stronger climate targets in their official negotiating position for COP28. In a document adopted late Tuesday, the bloc said it will push for an agreement for “the global phase out of unabated fossil fuels” at the summit in Dubai starting next month. The inclusion of the word “unabated,” which refers to carbon capture technology, was criticized by environmental groups as a capitulation by newly appointed EU climate envoy Wopke Hoekstra to the summit’s Emirati leadership, who have pushed for that caveat rather than a blanket phaseout. Its statement does clarify, however, that abatement technologies should “exist at limited scale” and “should not be used to delay climate action.” Poland, Hungary, and Italy also blocked the EU from adopting deeper carbon reduction targets.

Climate tech is off-target

Investment in climate tech startups has fallen 40% globally so far in 2023 compared to the previous year, according to a new analysis by PwC, to about $65 billion. But as total tech startup investment fell even more during that period — 50%, thanks to “geopolitical turmoil, sinking valuations, inflation, and rising interest rates” — climate tech’s share of the startup funding pie actually increased to its second-highest point of the last decade, about 11.4%. Still, the report warns, much of that investment is not targeting sectors with the greatest potential emissions impact. Relative to the sectors’ share of global emissions, mobility and energy are greatly over-invested, while buildings, agriculture, and industrial facilities are under-invested.

The urgent climate problem finally getting some attention

THE NEWS

A sector responsible for around a quarter of energy-related carbon emissions could drastically reduce its footprint with solutions that are well-known, inexpensive, and easily deployable. So why doesn’t it?

That is the question vexing experts and officials about the so-called built environment — the buildings and homes we live and work in.

A growing number of countries and cities around the world are finally taking action, both when it comes to ensuring that new buildings are energy-efficient and erected in as sustainable a way as possible, and in making existing sites less carbon-intensive.

The latter is particularly important in rich nations, as much of the building stock has already been constructed. As a result, governments, notably in Europe, have promoted wide-ranging efforts to expand “retrofitting” to improve energy efficiency in existing homes and offices using well-known and tested systems: Italy offers a 110% tax credit on “green” home renovations; the Netherlands last year launched an energy-saving education campaign and a push to better insulate a third of its homes with grants and low-cost financing; Danish authorities aim to discontinue gas boilers by around 2030 and also switch large numbers of homes to district heating, where an entire neighborhood relies on a single heating source, allowing for greater efficiency. Businesses, too, see an opportunity: Schneider Electric last month promoted software it said could cut a building’s carbon emissions by up to 42%.

“Existing buildings are the biggest challenge and the biggest opportunity” for emissions reductions in the built environment, Peter Templeton, CEO of the U.S. Green Building Council, told my colleague, Tim McDonnell. The USGBC, which oversees environmental ratings for buildings, issued new guidelines last month that require owners to make deeper cuts to their energy consumption in order to maintain a high rating. “It’s something actionable that doesn’t take a decade-long permitting cycle.”

PRASHANT’S VIEW

Even though so many of the solutions to reducing carbon emissions in this sector are well known and understood, efforts to cut emissions in the “built environment” suffer from a number of real-world obstacles.

For one, the costs of energy inefficiency aren’t always born by the building owner: When it comes to residential and commercial property, renters typically pay electricity and gas bills, not landlords, who have little incentive to spend what can often be major sums (and leave their properties unoccupied) for improvements that do not measurably increase the rent they can ultimately charge.

And for new construction, many building and infrastructure developers are wary of trying new or higher-cost materials, particularly when concrete, for example, remains cheap. “A lot of this is just risk aversion,” Chris Bataille, an adjunct research fellow at Columbia University’s Center on Global Energy Policy, said on a recent CGEP podcast.

Finally, the issue — particularly retrofitting — is boring. Discussion of the energy transition inevitably focuses on cutting-edge technologies, sophisticated financial reforms, and controversial legislation and regulation. Politicians are rarely excited to trumpet policies that promote improved insulation or which tout turning the thermostat down a degree to save energy, meaning the effort is often drowned out by more headline-grabbing problems and solutions.

We’re gonna need a bigger grid

Kilometers of electric grid transmission lines that need to be added or refurbished globally by 2040 to meet countries’ clean energy goals, according to an International Energy Agency report this week. That’s about the distance covered today by existing grids and enough to circle the Earth 2,000 times. The necessary buildout will require global grid investment to reach at least $600 billion annually by 2030, twice its current level. Otherwise, a huge number of otherwise viable wind and solar projects will go unbuilt. The IEA estimates that some 3,000 gigawatts of renewable energy — five times the capacity built globally in 2022 — remains stuck in “interconnection queues.”

Belt and Road loopholes

On its ten-year anniversary, China’s Belt and Road Initiative is aiming to be “greener and healthier,” Vice Premier He Lifeng said during a forum in Beijing on Tuesday. In the last decade, about two-thirds of the $235 billion China committed to overseas energy projects under the BRI went to fossil fuel infrastructure. Those investments have gotten greener since leader Xi Jinping promised in 2021 to stop financing overseas coal plants; in the first six months of 2023, half of BRI energy funding went to solar and wind projects. But China-backed coal projects are still slipping through loopholes in Indonesia and elsewhere. Meanwhile, on the sidelines of the BRI summit, Russian President Vladimir Putin is pressuring Chinese leaders to finally commit to a route for the Power of Siberia 2 pipeline, which aims to deliver Russian gas to Asia.

One Good Text

Megan Darby, outgoing editor of Climate Home News.

Africa’s new green banks

Institutional investors based in Africa, including local pension funds and insurance companies, are increasingly putting money into the continent’s nascent climate tech and clean energy sectors, Semafor Africa reported this week. Using local currency lowers the cost of capital for projects that could otherwise be unbankable. But investors are still reluctant to move without help from the public sector, particularly from multilateral development banks. Audrey-Cynthia Yamadjako, an African Development Bank official, said the bank is expanding its new Green Bank Initiative to more countries in North and East Africa after a successful launch in Benin and Côte d’Ivoire. The idea is to help private investors feel less apprehensive about contributing more to the $2.8 trillion the continent needs by 2030 to meet its climate goals, she said: “About 87% of climate finance on the continent comes from the public sector, when we know that it should be the reverse.”

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Watchdogs

More than one-third of the $7 billion the Biden administration committed on Friday to scale up U.S. production and consumption of clean hydrogen could get canceled if tax officials adopt a narrow definition of “clean,” nuclear energy executives warned this week.

Of the seven projects selected as “hydrogen hubs,” three aim to use nuclear power to split hydrogen atoms from water. Nuclear has some advantages over the other methods employed by the hubs: It’s lower cost than hydrogen made from renewables, and lower carbon than hydrogen made using natural gas. In some places, existing nuclear power plants have a significant amount of downtime when their power isn’t needed for the grid. “There are times when the market goes into negative pricing” and the production capacity of those plants is essentially wasted, Maria Korsnick, president of the Nuclear Energy Institute, an industry group, said in an interview. “Why not use that to produce hydrogen?”

The trouble is, nuclear-derived hydrogen is still much more expensive than the fossil fuel-derived varieties that are widely used today in the manufacture of fertilizer and other industrial goods. It can’t compete without subsidies. The Inflation Reduction Act has a generous subsidy for clean hydrogen, up to $3 per kilogram, but Treasury Department officials haven’t yet clarified whether existing nuclear plants qualify. Some environmental economists argue the subsidy should be available only when the power supply has been expressly built for that purpose; otherwise, there’s a risk that electrons diverted for hydrogen production will be replaced in the overall grid with power from fossil fuel power plants, negating the hydrogen’s carbon benefit.

The administration risks sending mixed signals and wasting its grant money, Korsnick said, if it selects nuclear power for the hubs but not for the tax credit.

“Without those credits, projects like this one will not go forward,” Joe Dominguez, CEO of Constellation, the country’s top nuclear power producer and one of the hub awardees, said in a statement Monday.

Since Constellation and other nuclear companies invested millions of dollars in pilot projects in the interest of being selected as hubs, Korsnick said, they’re unlikely to give up quietly: “If the tax guidance doesn’t land the right way, I imagine this conversation will play out in court.”

• Israeli and American intelligence are tracking the movements of Iranian diplomats and military officers, fearing that Tehran could spur its network of proxies and allies to support Hamas in a coordinated war against Israel.
• KKR owes $2.5 billion to Goldman Sachs’ richest clients, a tab that stems from an unusual provision in a 2021 deal and that is only getting bigger.
• Among elected Republicans, there is little disagreement on Israel. But on the online right, the story has become more divisive.