Net Zero

1. The new supermajors
2. Emissions gap growing
3. Carbon removal deals
4. Crippling capital costs
5. Good week for EV stocks

Highlights from Semafor’s World Economy Summit, and investigating Big Oil’s tasty ‘escape hatch.’

A new ‘supermajor’ wants to expand its megadeal

One of the world’s biggest renewables investors wants to expand an already huge deal to build clean power for Big Tech, a top executive told Semafor. Brookfield Asset Management and Microsoft, which in May unveiled a 10.5-gigawatt green-power supply agreement potentially worth $15 billion, want to grow the deal, the Canada-based fund’s chief investment officer for renewables told Semafor in an interview. “They would be keen to expand it further, as would we,” Jeh Vevaina said. “And, it’s possible we do.” He added: “There’s a lot of interest out there. The market for these kinds of contracts, these kinds of partnerships… is very large.”

Vevaina’s remarks point to rapidly growing demand from Big Tech companies for electricity to power their data centers. They also reflect long-running trends in the energy transition. For one, whereas publicly owned fossil fuel companies dominated the energy system of the 20th century, privately held financial firms are playing bigger roles in that of the 21st and are strategically embracing a new identity as clean energy “supermajors.” And companies are scaling up to deliver globe-spanning green deals.

Madagascar’s solo climate action

The odds that the world can meet the Paris Agreement aspiration to limit global warming to 1.5°C above pre-industrial levels are essentially zero without drastic policy change, the latest UN analysis concluded.

As COP29 approaches, countries with large carbon footprints are dangerously neglecting their obligation to adopt stronger decarbonization policies, as they’ve promised, according to the UN Environment Program’s latest Emissions Gap report. Under current policies, the world is on track for 3.1°C of warming by 2100, with “catastrophic” consequences; if countries manage to follow through on the nonbinding national plans they’ve submitted through the COP process, that forecast could fall to a still-devastating 2.6°C.

Every year that passes without a marked drop in emissions makes it much harder and more expensive to close the future gap. And even though countries committed at each of the last three COPs to adopt stronger 2030 targets, so far only Madagascar — where per-capita emissions are among the lowest in the world — has actually done so.

Big deals for carbon removal

One thing Wall Street and Big Tech have in common: They’re hungry for carbon removal credits. Direct air capture startup Climeworks, which operates the world’s largest DAC plant in Iceland, signed its second-largest offtake deal to date, for 40,000 tons of CO2 with Morgan Stanley, following another massive deal last year with JP Morgan. Both banks are keen to offset the carbon footprints of their portfolios, and build up a stock of high-quality credits that could be a lucrative trading opportunity in years to come. Microsoft, meanwhile, agreed to the largest-ever ocean-based carbon removal deal with the startup Ebb Carbon. Both deals have important caveats: The Climeworks deal is for a relatively tiny amount of emissions, and Ebb still needs to prove that its technology can work at scale.

Crippling capital costs

The average cost of capital for clean energy projects in Africa, according to an analysis by the nonprofit Clean Air Task Force. That’s three times more than the average in the US and Europe, as investors in projects in African countries face a wide array of real and perceived risks. The high cost of capital makes many renewable energy projects in Africa infeasible and is a major barrier to the continent’s clean energy transition. But it’s an area where banks, governments, and development organizations could do more to intervene, the CATF report argues, including by offering government debt guarantees, government-backed offtake deals, and currency swaps.

Good week for EV investors

It was a good week for shareholders of two top players in the US electric vehicle market. Shares of General Motors rose to their highest price in two years after the company’s third-quarter earnings beat Wall Street expectations and it said it expects to earn at least $1 billion more this year than it had previously targeted. GM, like most automakers, slowed its pivot to EVs this year in response to tepid demand. But CEO Mary Barra has said the company is still committed to giving up selling gas-engine cars in the US by 2035. And as it streamlines its manufacturing process, GM expects to turn a profit on its EVs by the end of this year, a feat that so far only Tesla has achieved in the US.

And as for Tesla, it saw its share price jump after reporting a $300 million profit gain compared to the third quarter last year — but mostly because of growing sales of products other than EVs, including home batteries, chargers, and emissions credits.

The rise of new technologies like artificial intelligence means that “energy demand is going to way outstrip our ability to deliver that energy,” Majid Al Suwaidi, CEO of the Emirati state investment firm ALTÉRRA, told Semafor’s World Economy Summit on Thursday. He stressed that world governments and businesses need to take an “all of the above” approach when it comes to renewable energy, and that diversifying away from fossil fuels is an “important part” of the UAE’s economic agenda.

At ALTÉRRA, Al Suwaidi said, “we have shown a pathway for people to invest and to be smart about their investments in climate.” While the private sector will be crucial to realizing the climate finance goals of COP29, the transition to renewables needs “government action,” too, Al Suwaidi said, particularly in developed countries.

New Energy

• An internal investigation at GE Vernova found that more offshore wind turbine blades may be subject to failure, after one broke apart this summer in Nantucket.
• The Biden administration finalized tax credit rules for clean energy hardware manufacturers, which had been one of the last unresolved pieces of the Inflation Reduction Act, to much applause from US solar manufacturers.
• In the last four years, the US has built enough large-scale battery storage capacity to equal 20 conventional nuclear reactors.

Fossil Fuels

• Despite a pledge at COP28 last year to transition away from fossil fuels, most of the world’s top producing countries are still issuing licenses for swaths of new oil and gas drilling territory.

Finance

• Companies are quickly moving away from one type of carbon offset that most experts agree is junk. But negotiations on a UN-backed carbon market at COP29 could precipitate a revival.
• Hurricanes aren’t just making home insurance more expensive — they’re also causing a big spike in car insurance premiums.

Minerals & Mining

• The US is pushing for new sanctions on Russian exports of palladium and titanium, metals that are critical for industries from cars to computer chips.
• The Biden administration issued final approval for what could become the largest lithium mine in the US, Rhyolite Ridge in Nevada, over the objections of some environmental groups. “Obviously, we’re thrilled to complete the federal permitting process,” Bernard Rowe, managing director of the company behind the mine, told Semafor.
• Meanwhile, some lithium miners in Argentina are scaling back their operations as demand for EVs cools.

EVs

• Hyundai has developed a new tool — a “drill lance” — that it says can put out fires in EV batteries in minutes instead of the usual hours or days.

Food & Agriculture

• Brazil is trying to diversify its rainforest economy away from the traditional sectors of logging, ranching, and mining toward industries that can make more sustainable use of trees, including bioplastics, pharmaceuticals, and tourism.

Personnel

• Vicki Arroyo, the top policy official at EPA, will leave the Biden administration and return to her previous role as a law professor at Georgetown University.

Matthew Kessler, host of the new podcast Fuel to Fork.

Conservative group CatholicVote is targeting Catholic swing state voters with a $250,000 ad buy starring Robert F. Kennedy, Jr., who steers clear of topics like abortion in the television spot, Semafor’s David Weigel reported. “Republicans have been portraying the Harris campaign and Democratic Party as anti-Christian and anti-Catholic” with subtle messaging that avoids the most divisive issues, Weigel wrote.