Net Zero

1. Last crack at the Gulf
2. Octopus snags cash
3. 2024’s big climate questions
4. Africa’s climate election
5. Climate abandonment zones

Broadcast news goes shallow on COP28, and an EV goes pole-to-pole.

Last crack at the Gulf

The U.S. will hold today what is likely to be its last offshore oil and gas lease auction until 2025. Oil majors including Exxon, Shell, Chevron, and BP are expected to line up to bid on about 73 million acres in the Gulf of Mexico, already one of the world’s busiest offshore oilfields. The auction almost didn’t happen: Oil companies had to take the Department of the Interior to court over a plan proposed by the agency to halt Gulf drilling lease auctions in some areas because of risks to endangered whales there. The court sided with the industry for now, but companies will be keen to get in before policymakers have another chance to throw up barriers. Another factor likely to drive up bids: Some of the blocks are well-suited for underwater carbon storage, a sideline business that Exxon especially has shown a keen interest in diving into.

Octopus snags cash

Britain’s Octopus Energy Group said this week that it won $800 million in new investment, valuing the company at $7.8 billion. Octopus is best known domestically as the U.K.’s biggest power supplier, but its efforts abroad are increasingly ambitious: It announced last month that it would build Sierra Leone’s first wind farm, the company’s first foray into Africa, and its Kraken software platform, used by utilities to manage their customers and loads, is being used by major companies in Europe, Japan, and Australia, along with several Octopus rivals in Britain itself. (Kraken today acquired a smaller software provider specializing in renewable-energy asset management.)

2024’s big climate questions

For the biggest emitters, 2024 will be a critical turning point for the energy transition, in which it will either speed up or miss the window of opportunity to keep 1.5 C within reach.

This year was a challenging one for the energy transition, pitting the human and economic costs of climate change against the big picture conditions of the global economy — war and nationalism, high inflation and interest rates — that tend to favor the fossil-fuel status quo. Those headwinds are unlikely to let up in 2024. These are the big questions that will shape whether COP28’s aspirations will remain within reach.

• Will global climate trade wars continue to heat up? Next year will be the first that European importers of industrial products like aluminum and fertilizer will need to report the carbon footprint of those goods. That reporting requirement will put pressure on suppliers around the world to start to decarbonize or risk losing market access when the EU’s carbon border tariff goes into full effect in 2026. The U.K. has outlined plans for its own version, and expect to see more political momentum to erect similar barriers in the United States. Meanwhile, Western companies and governments will continue to try to undermine China’s vise grip on the supply chains for critical minerals and clean-energy hardware, which could drive prices up in the near term, especially if Beijing weighs additional export restrictions of its own.
• Can clean-energy investors recover their nerves? Even though the costs of solar power hardware have fallen to record lows, and there have never been more government incentives for clean energy, investment in the sector is at risk of stalling out. Rising borrowing costs make the economics of renewable energy projects less attractive, and U.S. regulators are weighing new banking rules that could restrict lending even more. Share prices of clean energy companies have suffered this year, and in 2024 global clean energy investment could fall 9%, according to a forecast this week by the Swedish bank SEB. But the story isn’t all bad. Climate tech is drawing a growing share of venture capital investment, and there is enormous appetite from high-emitting companies to acquire decarbonization solutions. Carbon-removal tech had a banner year in 2023, and will probably have another in 2024. Investment in clean energy manufacturing facilities in the U.S. has been growing steadily and will likely continue next year as well.

Africa’s biggest climate election

Share of global cobalt supply sourced from the Democratic Republic of Congo. DRC President Felix Tshisekedi is up for reelection today, and is likely to remain in power in one of the world’s most strategically important countries in the energy transition despite lagging on key environmental and energy goals. Most of the DRC’s rich critical mineral resources today are exported to China for processing. Battery manufacturers in the U.S. and Europe are keen to shoulder in, but Tshisekedi has so far failed to curb corruption and labor abuses in the sector, stymying its ability to leverage the geopolitical competition for better prices. Meanwhile, even though Tshisekedi has touted the potential of the global carbon offset market to turn a profit from rainforest conservation, his government has delayed setting up the necessary regulations for that market to take off and keep revenue in the country.

Climate abandonment zones

Millions of Americans could already be considered climate migrants, a new study argues — but they’re not moving from the places you might expect.

The research group First Street compared block-by-block population census data from 2000 and 2020, linking all 11 million blocks in the U.S. to social and economic indicators that can influence relocation decisions: Crime rates, school quality, job opportunity, etc. They also factored in flood risk. In some major metropolitan areas with significant flood risk — think Miami or Houston — they found that the population has grown over time, as the social benefits of those locations outweigh the risk of floods. But they identified about 818,000 blocks that should have a growing or stable population based on the socio-economic indicators but, because they had high flood risk, actually lost population.

Most of these “climate abandonment zones” are in the Midwest and Northeast, study author Jeremy Porter said. The counties in the chart all experienced above-average population growth overall, but had the highest portion of individual climate abandonment blocks, suggesting that residents are becoming more perceptive and responsive to hyper-local flood risk. The data also suggest that some flood-vulnerable counties with high population growth overall aren’t growing as quickly as they would without the flood risk, he said.

“The big-picture statistics mask negative demographic trends that are creeping into these communities,” he said. “But if you just change the resolution of the question, we actually see that people are taking climate into account.”

New Energy

• Shares of SunPower, one of the largest U.S. solar installers, lost nearly half their value on Monday after the company warned it was at risk of defaulting on its debts. Rising interest rates have cut into the company’s sales.
• Wind giant Ørsted announced it will build the world’s largest offshore wind farm off the coast of Britain. The 2.9 gigawatt project — which could power as many as three million homes according to Bloomberg — comes amid months of woes for the wind industry after supply chain issues and rising financing costs made many projects inviable.

Fossil Fuels

• The U.S. is producing more crude oil than any country in history. According to an S&P analysis, the U.S. has gone from net oil exports of zero in 2008 to exporting more than either Saudi Arabia or Russia produce in total.

Finance

• Barclays is at risk of losing a 300-year-old client relationship with Cambridge University as the school seeks to cut the carbon footprint of its finances. The bank is the top European financier of oil and gas projects.
• On the opposite end of the spectrum, Oklahoma’s biggest public pension fund will dump $184 million in shares of financial institutions it deemed hostile to fossil fuels. The list includes BlackRock and Bank of America; BlackRock CEO Larry Fink has previously said that any business the firm loses to anti-ESG clients is more than offset by business gained among pro-ESG clients.

Deals

• Japan’s Nippon Steel will acquire U.S. Steel for $14.1 billion. The acquisition creates the world’s second-largest steel producer and will increase pressure on Nippon to speed up its decarbonization plans. Currently the company is aiming to reach net zero by 2050.

Batteries & Minerals

• Protests are mounting against one of the world’s largest copper mines, in Panama, over its environmental impacts. The protests underscore a challenge of the energy transition that has environmentalists deeply divided: The urgent need to scale up critical mineral mining.
• A San Francisco startup says it has used AI to locate several promising lithium deposits around the world. KoBold Metals has raised about $500 million to chase untapped stores of critical minerals using cutting-edge computing technology.

EVs

• Canada will require all cars sold in the country to be electric by 2035. The decision follows a similar timeline to mandates announced by the U.K., California, and New York.
• Electric scooter company Bird filed for bankruptcy. After becoming an early climate tech “unicorn,” Bird struggled to turn a profit amid high operating costs, mounting regulation from cities, and safety concerns.
• At least 18 EV and battery companies that went public in the last few years are at risk of running out of cash by the end of 2024, according to a Wall Street Journal analysis. Demand hasn’t materialized at the level needed to justify the companies’ high production costs.
• An EV became the first car to drive from the North Pole to the South Pole. The nine-month, 17,000-mile journey happened in a modified Nissan Ariya.

Personnel

• Trevor Milton, founder of the EV startup Nikola, was sentenced to four years in prison for fraud. A federal judge ruled that Milton had pumped up the company’s stock price by making wildly exaggerated claims about its technology and sales.

Evlondo Cooper, climate and energy senior researcher at Media Matters. Cooper calculated that broadcast and cable news outlets dedicated 5 hours and 42 minutes of coverage to COP28, a two-hour bump over COP27.

• Democrats and Republicans band together to prevent a major third party candidate from emerging.
• Emirati passports have become the hot new thing for global power players.
• A little-known organization is playing a key role in hostage negotiations with Hamas.