Net Zero

1. Woods wins
2. Carbon confidence
3. Sanction whack-a-mole
4. Hybrid barriers
5. Covered by solar

Can the US ever really catch up to China on EVs?

Woods wins

ExxonMobil CEO Darren Woods survived a campaign by activist investors and some of the world’s biggest institutional investors to unseat him from the company’s board. At its annual meeting Wednesday morning, Exxon’s leadership faced its biggest challenge since the activist hedge fund Engine No. 1 orchestrated a coup against several board members in 2021. California’s public pension fund and Norway’s sovereign wealth fund were among the big investors looking for a shakeup, in response to a lawsuit Exxon is waging against smaller activist investors over climate-related shareholder resolutions. A majority of shareholders disagreed, another setback for the ESG investing movement.

In a separate victory for Exxon’s Big Oil rivals this week, shareholders of Hess approved the company’s takeover by Chevron. The Federal Trade Commission still has to approve the deal, though, and yesterday Hess CEO Scott Sheffield filed a testy protest to the FTC about its recent decision to block him from serving on the board of the combined companies.

The White House is fueling the carbon offset market without fixing it

The White House issued a full-throated endorsement of carbon offset credits on Tuesday, laying out guidelines that are meant to calm anxieties about “greenwashing” and encourage companies to invest more heavily in a controversial climate solution. But the rules are toothless, and don’t resolve the critical question of whether the carbon market really is a solution at all, or a costly delaying tactic benefitting the biggest corporate emitters.

In announcing the guidelines, US Treasury Secretary Janet Yellen said companies “should prioritize reducing their own emissions” before turning to offsets, but that the purchase of offsets “should complement these efforts.” The White House proposal marks the closest thing yet to rules for those purchases. The guidelines themselves are mostly anodyne and commonsense, including that carbon credits should “represent real decarbonization” and that “credit-generating activities should avoid environmental and social harm.” But they do take the carbon trading industry’s side on a particularly thorny issue that has riled greenwashing watchdog groups, and say that companies should be permitted to count offsets against some of their Scope 3 footprint, attributed to customers’ and suppliers’ emissions. In a broader sense, they put the Biden administration’s imprimatur on a practice that companies had started to shy away from as evidence has accumulated of both outright fraud and lesser misleading marketing practices in the carbon market.

“Companies are now hearing from the US government that this isn’t just something you can do,” said Mark Kenber, executive director of the nonprofit Voluntary Carbon Markets Initiative, which is developing its own recommendations for market participants. “It’s something you should do.”

There are two key theses driving the administration’s embrace of carbon markets. One is that carbon trading, which amounted to $1.9 billion globally last year, can and should be a key channel through which to move money from the pockets of big companies into climate-impacted communities in poorer countries. The US is far behind most of its peers in its contributions to global climate finance, and facilitating a bigger carbon market is an alternative measure for the administration to tout in advance of the finance-focused COP29 summit this fall. The other thesis is that voluntary carbon markets can be a kind of warm-up act for an eventual transition to economy-wide mandatory carbon pricing, the long-held and elusive dream of climate economists.

Sanction whack-a-mole

Washington is looking for ways to tighten enforcement of oil sanctions on Russia, US Deputy Treasury Secretary Wally Adeyemo said in a press conference in Kyiv on Wednesday. The oil price cap imposed by Group of Seven countries in 2022 “is clearly not working,” an Atlantic Center report last week concluded, because Russia has managed to find new ships, traders, and insurers outside the sanctioning countries, and an eager buyer for crude oil in China. Still, all of that shifting has significantly raised costs and cut into Russia’s profits, Adeyemo said, so the sanctions can be said to be working even if oil is still being exported. But, he added, more oversight is needed to make sure Russia isn’t finding convenient workarounds.

Hybrid barriers

Amount that foreign automakers have pledged to invest in Brazil so far this year, sparking hopes of the sector’s revival after years of stagnation. However, manufacturers face a unique challenge selling to the Brazilian market: Flex-fuel hybrid cars — which can run on both ethanol and electricity — make up nearly 90% of passenger vehicle sales, the largest share in the world by a sizable margin. In response, automakers such as BYD have pledged to build ethanol-powered cars exclusively for the local market. Brazil’s reliance on flex-fuel cars has slowed down its rollout of full EVs, which remain prohibitively expensive for most of the country’s population. Full EV sales doubled last year, but only to 0.5% of total car sales. Considering Brazil’s electricity supply comes almost entirely from clean sources, transitioning to a fully electric fleet could significantly advance the country’s net zero goals.

Covered by solar

Solar power is on track to provide most of the increase in total power demand in the Middle East.

Fossil fuels currently provide all but about 7% of the region’s electricity, but demand for those sources is expected to peak and start to decline by the mid-2030s, according to a new forecast from Rystad Energy. Solar, meanwhile, is poised for a massive explosion, buttressed by a smaller but still significant boost in wind and battery storage. In Saudi Arabia, solar is now the cheapest form of electricity anywhere in history, in part because of low labor costs and the economies of scale achieved by massive solar farms. By 2050, as power demand nearly doubles, Rystad expects renewables to provide 70% of total demand.

New Energy

• The US Treasury Department will extend tax credits that have previously been available only for wind and solar power to nuclear, geothermal, and other forms of low-carbon power, creating a significant new revenue stream for those technologies.
• Vermont Governor Phil Scott, a Republican, vetoed legislation passed by state lawmakers that would require 100% clean electricity by 2035, ostensibly because of concerns about cost. Legislative leaders have vowed to override him.

Fossil Fuels

• ConocoPhillips will acquire its smaller rival Marathon Oil for $22.5 billion. It’s the latest in the wave of consolidations to hit the US oil patch, but that wave’s momentum could be slowing down. Marathon was one of the last big M&A targets up for grabs, and Conoco one of the last big potential buyers with cash to spend.
• Magda Chambriard, the new CEO of Brazil’s state-owned oil producer Petrobras, said the company is committed to finding new offshore oil deposits and turning a profit, despite President Luiz Inacio Lula da Silva’s climate ambitions.
• Saudi Arabia will sell up to $10 billion in shares of its oil company Saudi Aramco, to raise money for its 2030 plan to diversify its economy away from fossil fuels.

Tech

• Plans for a major carbon capture project in Australia, to be installed at a large coal-fired power plant operated by the mining and energy giant Glencore, were scrapped by local authorities because the plan to store it underground posed risks to water resources.

Politics & Policy

• Rich countries finally met a long-held goal to raise $100 billion in annual climate finance, the OECD reported. Rather than new funds, most of that money is just relabelled from existing foreign aid, Ian Mitchell, senior policy fellow at the Center for Global Development said.

EVs

• Tesla shareholders should vote to reduce CEO Elon Musk’s pay, the advisory firm Glass Lewis — which typically sides with management — said this week. Meanwhile, Musk’s chaotic leadership style for the company’s EV charging division has created an opening that rival charging companies are lining up to exploit.
• BYD is launching a hybrid EV model with a recharging range of 1,300 miles.

Food & Agriculture

• The top-notch Parisian chefs designing the menu for Olympic athletes are turning up their noses at butter and foie gras, and prioritizing sustainability.

Ellen Hughes-Cromwick, senior resident fellow for climate at the think tank Third Way and former chief economist at Ford.

• Young voters despair over US politics.
• Why the West needs to pay attention to Myanmar’s anti-junta forces.
• Forget AI — this week, the corporate world is focused on oil.