• D.C.
  • BXL
  • Lagos
  • Dubai
  • Beijing
  • SG
rotating globe
  • D.C.
  • BXL
  • Lagos
Semafor Logo
  • Dubai
  • Beijing
  • SG


In today’s issue, we preview a climate summit in Paris this week that won’t magically conjure trilli͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
 
cloudy Paris
cloudy Kyiv
sunny Palo Alto
rotating globe
June 21, 2023
semafor

Net Zero

Climate
Sign up for our free newsletters
 
Tim McDonnell
Tim McDonnell

Hi everyone, welcome back to Net Zero.

Rich countries have a geopolitical and economic — and some argue, a moral — interest in helping to finance the carbon emission reduction and climate change adaptation efforts of developing countries. But today the World Bank and other international financial institutions are not well equipped to fill the huge gap that exists between the money currently on the table and what is really needed. They’re undercapitalized, hamstrung by ineffective bureaucracy, and lacking in support from private sector investors because developing countries are perceived as risky.

A high-profile summit happening in Paris this week aims to explore some solutions to these problems, and get rich countries on the record about what they’re willing to support.

Also today: look at Ukraine’s post-war green recovery plan, and a strategy for shoring up the U.S. supply of critical minerals.

Warmups

The CEO of BP threw his support behind the controversial Emirati leader of COP28 — fellow oil executive Ahmed al-Jaber. In a letter published in the Financial Times, Bernard Looney wrote that al-Jaber “understands that the energy system of the future has to be more secure and more affordable as well as lower carbon,” language that environmental groups said underscored their frustration with al-Jaber: his coziness with fossil fuels.

Negotiations among European energy ministers on a plan to avoid energy shortages this winter stalled over disagreements about whether to extend subsidies to coal-fired power plants. The coal subsidies, sought by Poland and supported by Sweden, undermine the EU’s climate goals, ministers from Germany and elsewhere argued. Some eastern EU countries still heavily rely on fossil fuels and have resisted an accelerated clean energy transition because it could make their electricity less reliable and more expensive.

The Biden administration set new quotas for the use of biofuels in gasoline blends that were much lower than what industry groups had sought. The administration’s support for biofuels is cooling as it directs more attention to electric vehicles. Share prices in top ethanol producers tumbled following the quota announcement.

TweetEmail
Evidence

Investment in clean energy in emerging economies needs to triple by 2030 for the world to meet its climate goals, a new analysis from the International Energy Agency found. Most of that gap will need to be filled by private, not public, investors, who have until now largely avoided investing in what are perceived as riskier markets.

TweetEmail
Tim McDonnell

Rich countries face a moment of truth on climate finance

Prime Minister of Barbados Mia Mottley. UNCTAD/WikimediaCommons

THE NEWS

French President Emmanuel Macron and Barbados Prime Minister Mia Mottley will co-host a summit aimed at solving one of the biggest problems in climate policy: How to turn the trickle of international financial aid available for developing countries to cut emissions and adapt to climate impacts into a trillion-dollar torrent within the next decade.

On the table will be proposals for the most comprehensive overhaul of the global development finance system since World War II. Heads of state, finance ministers, and the new World Bank president are expected at the event in Paris on Thursday and Friday.

TIM’S VIEW

The Summit for a New Global Financing Pact won’t clear all the bureaucratic obstacles that are clogging up the climate finance pipeline. But it marks the first time the U.S. and other rich, high-emissions countries will be under pressure to take a position on proposals that will be front and center at the meeting rather than percolating on the sidelines of climate geopolitics, as they normally are.

These ideas include allowing developing countries to suspend payments on their sovereign debts in the wake of natural disasters; creating a new agency within the World Bank to insure private-sector investments in clean energy projects against fluctuations in the local currency exchange rate; and rewriting the lending protocols for development banks so that they are less risk-averse and prioritize projects with the greatest potential to cut emissions or blunt climate impacts.

“The summit is not about ‘cough up more money now,’ it’s about getting more out of what currently exists,” said Michael Jacobs, a senior fellow at ODI, a U.K. think tank, and a former climate adviser to the U.K. government. “This is a moment where there could be an inflection point on some of these ideas.”

One more tangible outcome of the summit, Jacobs said, is that Macron may announce a goal to collect $100 billion in “special drawing rights” — International Monetary Fund reserve assets that countries can exchange for cash — and redirect the funds to developing countries to help pay for climate projects. These rights were allocated to rich nations during the pandemic but went unused.

ROOM FOR DISAGREEMENT

The summit won’t magically conjure up trillions of dollars until the U.S. and other donors commit to raising their contributions to the World Bank. So far, the U.S. has ruled that out, at least until the World Bank gets better at investing the money it already has. So it will be important to watch whether Treasury Secretary Janet Yellen, who will be in Paris, sees any of the reforms under discussion there as the kind of ideas that would change her mind. On Wednesday, U.S. President Joe Biden and other world leaders published a letter that shifts responsibility for climate finance away from governments and more onto the private sector.

To read more of this story, click here.

TweetEmail
One Good Text

Oleh Savytskyi, campaign manager of Ukrainian environmental group Razom We Stand. This week the Ukrainian government proposed a $40 billion “Green Marshall Plan” for the country’s post-war recovery focused on renewable energy, and low-carbon steel and hydrogen manufacturing.

TweetEmail
Semafor Stat

Percentage of the surface area of the world’s oceans — one million square kilometers, about twice the size of France — that would need to be dedicated to seaweed farming for that nascent industry to remove one billion metric tons of CO2 from the atmosphere annually, according to a new study. That may not sound like much, but as a growing number of investors look to seaweed to churn out lucrative carbon removal credits, the industry may run out of viable space quickly, the study’s Stanford University authors warn.

TweetEmail
Watchdogs

The U.S. won’t be able to produce all the minerals it needs for the energy transition on its own, but to get close, Congress needs to make it easier for Native American communities to financially benefit from new mining operations.

That’s the conclusion of a new report by researchers at Columbia University and the Aspen Institute that studies the policies needed for the U.S. to have a reliable supply of lithium, nickel, and other clean energy minerals. The report highlights some interesting points about where exactly these minerals are located. For one, as the chart below shows, they are much more heavily concentrated in a small number of countries than oil and gas, which are more widely distributed around the world.

And while the U.S. is the world’s top producer of both fossil fuels, for mineral production it ranks in the top three only for rare earths. That means the only way to get a sufficient supply is through trade deals, and by loosening “buy America” provisions in electric vehicle tax credits, not tightening them as Sen. Joe Manchin (D-W.V.) and some other lawmakers want.

At the same time, mineral production that does (or will) happen domestically is nearly all in the backyards of Native American reservations. To avoid confrontations with these communities over cultural sites, water consumption, and other issues that can delay the permitting process, the report recommends Congress give tribal authorities more discretion to veto projects in their immediate vicinity — or ensure they have the necessary legal and financial assistance to obtain equity in mining projects if they desire.

TweetEmail
Hot On Semafor
  • Trump’s criminal justice reform package was a centerpiece of his 2020 campaign. But it’s getting a different treatment from Republicans now, David Weigel writes.
  • The man behind Alexa’s voice talked to Liz Hoffman about what AI can, can’t, and shouldn’t do.
  • South Africa is defending its high-profile attempt to lead mediation between Russia and Ukraine amid mounting criticism after its efforts fell well short, Sam Mkokeli reported.
TweetEmail
Semafor
Sign up now to get Semafor in your inbox.
Semafor, Inc. 228 Park Ave S, PMB 59081, New York, NY, 10003-1502, USA