Net Zero

1. Oil jumps on Saudi cuts
2. Debt imbalance
3. 🟡 Carbon credit gold rush
4. $20 billion coal stalls
5. 🟡 What ‘cannot be ignored’
6. Cash for cathodes
7. 🟡 Taking out the trash
8. Too many batteries
9. 🟡 A costly invasion
10. 🟡 Bank account emissions

Oil jumps on Saudi cuts

The price of oil jumped to its highest level this year after Russia and Saudi Arabia agreed to extend production cuts. The move reflects a desire by OPEC+ to keep prices from dipping as the economy of China — the world’s top oil importer — slows down. Higher oil (and therefore gasoline) prices are a headache for the Biden administration ahead of next year’s election, but with U.S. production already at record highs and the administration pushing to refill, rather than drain, the Strategic Petroleum Reserve, there are few options other than encouraging Iran to drill more.

Debt imbalance

African governments are spending nearly as much to service their sovereign debt as their countries are receiving in energy investment. Rising debt payments are a major obstacle to Africa’s energy transition, a report today from the International Energy Agency concluded. A lack of public capital makes the continent’s energy market especially reliant on investment from the private sector and foreign governments. But because of real and perceived investment risks, the cost of capital for energy projects in Africa is exceptionally high. In the last decade, that has led investment to remain flat for clean energy and decline for fossil fuels. To hit Africa’s development and climate goals, energy investment needs to double from today’s levels to about $180 billion per year by 2030.

Can offsets fix Africa’s climate finance crisis?

By Tim McDonnell

THE NEWS

A major climate summit in Nairobi this week zeroed in on how Africa can raise the tens of billions of dollars it needs to adopt clean energy and adapt to the impacts of climate change. One option drawing an increasing amount of attention, money, and criticism: Selling carbon offsets.

On Monday, an investor group from the United Arab Emirates said it would buy $450 million in carbon credits via the African Carbon Markets Initiative, a nonprofit launched last year to facilitate the sale of credits derived from Africa-based carbon-cutting projects. A separate group led by HSBC Asset Management committed to buy $200 million in credits from ACMI.

Africa-based carbon projects — including renewable energy, forest conservation, replacing charcoal cookstoves with clean alternatives, among others — could be “an unparalleled economic goldmine,” Kenyan President William Ruto said in a speech Monday.

“GDP is about capitalizing on what you have,” he said. “We have the carbon sinks that serve the world.”

TIM’S VIEW

On the surface, carbon credits may make sense as a way to raise climate finance for African countries, especially since other sources, whether via private investors or foreign aid donors, are far behind where they need to be. But the existing carbon market is riddled with accounting and social justice problems, and requires more stringent oversight to avoid becoming a contributor to the climate crisis rather than a solution to it.

Africa has a huge climate finance deficit. The continent requires at least $250 billion per year in private investment and foreign aid to beef up its energy system and address climate impacts, but currently receives just 12% of that, according to the Climate Policy Initiative, a U.S. think tank. African countries draw just 2% of global annual investment in clean energy, in part because Western investors see the region as a risky environment.

Carbon credits could fill this gap and lower the high cost of capital for African clean energy projects by giving U.S. and European companies, and even governments, an added incentive to put their money into African climate projects: the ability to write down their own emissions. Africa-based carbon credits — predominantly from forest conservation projects — are already routinely sold to Western airlines, energy companies, and other big emitters, although they account for only about 11% of credits on the market globally, according to the International Energy Agency.

Growing that share could effectively convert Africa’s green development into one of its most lucrative export commodities. The ACMI estimates that African countries currently use less than 2% of their annual carbon credit production potential, and could raise $100 billion per year by 2050 through carbon credit sales. That idea was endorsed at the Nairobi summit by European Commission President Ursula von der Leyen and by U.S. climate envoy John Kerry.

Private companies aren’t the only potential buyers: The Paris Agreement allows carbon project developers to sell credits to foreign governments that they can apply toward their national decarbonization goals. Ghana was the first country to pioneer this strategy, with a carbon credit deal with Switzerland it organized last year. According to the IEA, sovereign carbon credit sales by African countries could raise even more money than sales to companies.

— For more — including a Room for Disagreement and a View from Gabon — click here.

Coal keeps coming

The world’s most expensive coal phaseout plan, in Indonesia, is stalled over disputes about funding sources and opposition from industry groups who say cutting coal use there could counterintuitively undermine the global energy transition. Ten months after the U.S. and other wealthy countries agreed to give Indonesia $21.5 billion in aid to wean itself off coal, essential details of the plan remain unresolved. It’s still unclear how much of the money will come as grants and how much as loans, and at what interest rates. Another problem is that Indonesia’s coal industry is tightly linked to nickel processing, an industry critical for the global EV battery buildout. Loopholes for the nickel industry could negate the deal’s overall climate benefit. And Western bankers are afraid to get involved at all, Bloomberg reported, over fears that any involvement with coal could draw the ire of climate activists.

One Good Text

Oulie Keita, executive director of Greenpeace Africa.

Battery farming

It’s a good time to be in the battery recycling business in the United States. The last week saw two of the biggest equity fundraising rounds in the U.S. of the year, both in companies that recycle battery materials. Last week Redwood Materials locked in $1 billion from Goldman Sachs Asset Management and other investors, putting its valuation above $5 billion, according to The Wall Street Journal. And today Ascend Elements, which is building a massive recycling facility in Kentucky, followed suit with $542 million from BlackRock and Singapore’s Temasek. There’s little chance the U.S. can meet its EV targets with the existing mineral mines and supply chain, so recycling will be essential.

Taking out the government’s trash

If Big Tech giants like Uber and Airbnb embody the Silicon Valley ethos of “move fast and break things,” tussling with regulators along the way, Nest co-founder Matt Rogers takes the opposite approach: He’s enlisting the government to further his high tech trash can business, Mill. Rogers had the same mindset with Nest, convincing officials to buy devices to help consumers cut their energy consumption. And so far, he has enlisted cities including Tacoma, Washington and Pittsburgh to purchase Mill trash cans, which convert household food waste into chicken feed, aiming to become a service provider of sorts for cities trying to figure out what to do about the food waste problem. “It’s literally the same muscles,” Rogers told Semafor’s Reed Albergotti. “Instead of meeting with public utilities commissions, you’re meeting with waste commissioners.”

— Check out Reed’s story, out soon, by subscribing to Semafor’s Tech newsletter. Sign up here.

Overpowering

Excess gigawatt-hours of electric vehicle battery capacity produced in China last year compared to demand for them from both domestic and international customers. As China embarks on a massive buildout of its battery production facilities, some analysts — and Chinese leader Xi Jinping — are concerned the country is going too far and setting itself up for a bubble. By 2027, China’s EV battery production is expected to be four times higher than demand.

Invasive costs

Invasive species cost the world more than $400 billion — roughly 0.5% of global GDP — every year, an amount that has quadrupled each decade since 1970, a United Nations report found. At least 3,500 invasive species harmful to both the world’s flora and fauna have been spread by human trade and travel, sometimes causing species to go extinct or destabilizing a region’s ecosystem.

• The Americas are the worst affected region, with more than a third of all invasive species, followed closely by Europe and Central Asia. The problem, however, impacts almost all of the world’s ecosystems. “It would be an extremely costly mistake to regard biological invasions only as someone else’s problem,” one of the report’s authors said.
• Maui’s recent wildfires illustrate the destructive impact that invasive species can have on an ecosystem. The relentless spread of nonnative grass species — imported to feed livestock on lands formerly occupied by the island’s once-thriving sugar cane plantations — is largely to blame for feeding the wildfires that ravaged Maui last month. “These grasses are highly aggressive, grow very fast and are highly flammable,” said the coordinator of the Pacific Fire Exchange, a science-sharing project based in Hawaii. “That’s a recipe for fires that are a lot larger and a lot more destructive.”
• Invasive species are thought to be a major factor in around 60% of global animal and plant extinctions, a professor of Forestry Sciences at the University of Concepcion in Chile said. As the world’s climate warms, invasive species that used to thrive closer to the tropics are expanding their habitats towards the poles. Eradication programs — especially on islands which are disproportionately affected by invasive species — have had high success rates, according to the U.N. report. However, the authors emphasized that governments should focus their resources on prevention rather than eradication.

— Jeronimo Gonzalez

Watchdogs

Corporations are ignoring a major chunk of their carbon footprints, a group of financial advocacy groups argue: Their bank accounts.

Many of the largest U.S. and European banks invest heavily in fossil fuels, including in oil and gas production projects that exceed what the International Energy Agency says is compatible with reaching global net zero by 2050. To do so, they use cash left in their custody by depositors. Companies that have their own net zero ambitions are responsible for those emissions, said Allison Farjans-Turner, executive director of BankFWD, an advocacy group. Research by the group indicates that for some companies, these indirectly financed emissions may turn out to be the largest element of their carbon footprint — Google’s bankroll emissions could be 38 times larger than its operational emissions, according to the group’s research.

“The banks that get a company’s business but use that company’s cash to finance fossil fuels are actually undercutting the meticulous carbon-cutting and net zero plans of their corporate clients,” Farjans-Turner said.

Last week, BankFWD and a group of other researchers released a guide for companies to measure and address their financed emissions. In it, they argue that large corporate clients are uniquely positioned to demand emissions data from their banks — and pressure them to adopt more aggressive fossil fuel policies. “As cash rich clients with clout, companies can push their banks to exit fossil fuels faster, shrinking their own emissions totals and incentivizing wider transformation in the financial sector,” Farjans-Turner said.