Net Zero

1. China anxiety
2. Truck tailpipes
3. Uncomfortable compromises
4. Financed emissions
5. Carbon caverns

Ingredients for a nuclear renaissance, and asset managers just can’t win on ESG.

China anxiety

Western governments are increasingly worried about China’s enormous lead in clean tech manufacturing. China has long dominated solar panel and EV battery production, and in 2023 supplanted Europe as the top producer of wind turbine equipment, according to new BloombergNEF data. The glut of low-cost clean tech hardware coming out of China is making it nearly impossible for other countries to stand up their own manufacturing sectors, U.S. Treasury Secretary Janet Yellen warned this week. “China’s overcapacity distorts global prices and production patterns and hurts American firms and workers,” she said, adding that she plans to raise complaints about overproduction when she visits China within the next few weeks. Australia, meanwhile, said it will release more than $650 million in loans and grants to domestic solar panel producers to help them compete with Chinese imports, which currently make up 90% of the country’s solar supply.

Truck tailpipes

The Biden administration released its latest climate policy on Friday: Tighter restrictions on emissions from commercial trucks.

The rules are meant to accelerate the adoption of low-carbon alternative technologies, mostly trucks run on electric batteries and hydrogen fuel cells, which today comprise less than 2% of trucks sold in the United States. By 2032, the administration hopes, that number will rise to 25% for the largest semi trucks and 40% for medium-duty trucks, including ambulances, moving vans, and garbage trucks. Commercial trucks account for just 5% of the country’s vehicle fleet, but 20% of transportation-related emissions. Truck-driver lobbying groups said the switching costs could be prohibitive, and are likely to challenge the regulations in court.

The U.S. is due for some uncomfortable compromises on mining

The Biden administration’s ambivalence toward domestic mining for copper and other minerals works against its own climate goals, and sets the U.S. up for long-term reliance on China, a new book argues.

In The War Below, longtime Reuters energy correspondent Ernest Scheyder chronicles the booming global demand for lithium, copper, rare earths, and the myriad other metals and minerals that are essential for electric vehicle batteries, grid transmission cables, solar panels, and other energy transition hardware. Ubiquitous consumer electronics have already driven a massive increase in demand for these minerals in the past two decades. Fighting climate change will require a whole lot more: A typical EV motor, for example, requires a mile of copper wiring and nearly 20 pounds of lithium. The International Energy Agency projects that by 2040, global copper demand will be three times higher than today; lithium demand will be 42 times higher.

That means the phaseout of fossil fuels will require a massive increase in mining — and present Western governments and voters with a series of uncomfortable, but unavoidable, choices and trade-offs between clean energy goals on one hand, and social and environmental impacts on the other.

“I wanted readers in the U.S. to realize the era of us relying on places we will never visit or never see for the building blocks of our everyday lives is essentially over,” Scheyder told Semafor. “Where did the cobalt come from in this battery? Did a seven-year-old take it out of the ground in the Congo? All of us recoil at that. That’s horrible. But is the answer then to produce more cobalt with higher ESG standards in Western countries? I would argue yes — and so we have to grapple with that as well.”

Financed emissions

Share of Citigroup’s clients in the energy sector that lack a science-based plan for reaching net zero, according to the bank’s annual climate report published Thursday. The figure, which the bank published in response to pressure from activist shareholder groups, illustrates a flaw in the way many financial institutions are dealing with their highest-carbon clients. While banks often say they continue to lend to fossil fuel companies because they want to help them transition to lower-carbon practices, in reality many of those clients — almost half in Citi’s case — so far show no real sign of wanting to reach that goal.

Carbon caverns

Major new carbon sequestration projects are taking shape — not always with the support of adjacent communities. In Louisiana, the Department of Energy delivered $50 million this week to a project that will capture CO2 from the atmosphere and store it underground. It’s the administration’s first payment in a planned $3.5 billion network of direct air capture hubs, and requires the project’s developers, including the Swiss startup Climeworks and the science nonprofit Battelle, to sketch out a plan for what they plan to bring to the neighboring community in terms of jobs and other benefits. The details of that plan aren’t finalized yet, but community activists are skeptical, based on decades of pollution from local oil refineries and petrochemical plants.

Meanwhile, on the other side of the globe, ExxonMobil and other oil majors are racing to snap up suitable underground carbon storage sites in Indonesia, Malaysia, and other southeast Asian countries. Fearing the prospect of becoming an international dumping ground for captured emissions, Indonesian officials decided recently to reserve 70% of the country’s potential carbon storage space for domestic emissions — although it may still be companies like Chevron and Total that profit from the process, Bloomberg reported.

New Energy

• The price of installing onshore wind power in China has fallen nearly by half in the last year, according to government data, making it the country’s cheapest form of electricity. The cost of building wind in China is now less than one-fifth the comparable cost in the U.S.

Fossil Fuels

• New England will close its last coal-fired power plant, becoming the second region in the U.S. to go coal-free. The plant will transition to a “renewable energy park” focused on utility-scale energy storage.
• The U.S. Department of the Interior released new restrictions on methane flaring from oil and gas drilling operations on federal and tribal lands. The rules are expected to allow federal tax authorities to capture more than $50 million in additional natural gas royalty payments each year.

Finance

• BlackRock may be barred from operating in Mississippi after Republican officials there accused the asset manager of making itself out to be less concerned with climate change than it really is. Secretary of State Michael Watson complained in a legal filing that although BlackRock professes not to adhere to ESG principles in its general exchange-traded funds, the firm does in fact encourage some companies to decarbonize.
• On the flip side, a federal court in Australia found that Vanguard misled investors about an ESG-labeled fund, which in fact held shares in fossil fuel companies. Following the ruling, financial regulators there may be able to impose millions of dollars in fines on Vanguard.

Tech

• The oilfield services company Schlumberger will pay $400 million to acquire most of the carbon capture company Aker, the latest foray by a fossil fuel firm into carbon management.

Politics & Policy

• The European Union’s top climate official warned the bloc is off-track for its climate goals. European cleantech manufacturers have struggled to compete with Chinese rivals and EU climate policies have faced stiff opposition from farmer groups and right-wing politicians ahead of EU elections in June.
• A conservative clean energy advocacy group in Washington is launching a program to place young people aligned with its priorities, including nuclear power and carbon capture, into junior Republican Congressional staff positions.

Jigar Shah, director of the Loan Programs Office at the U.S. Department of Energy. This week the LPO issued a $1.5 billion loan guarantee to reopen a nuclear power plant in Michigan. Shah will join me onstage during Semafor’s 2024 World Economy Summit in Washington, D.C. on April 17-18, along with more of the most consequential people in climate and energy — join us if you can.

• The Alabama Democrat who flipped a seat in Trump country.
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• Why Biden is spending $6 billion on green concrete and whiskey.