Net Zero

1. Offshore oil rush
2. Stronger winds ahead
3. 🟡 ‘Post-industrial’ challenges
4. Solar import boom
5. Coal complaints
6. Geoengineering controversy
7. 🟡 Harder strikes
8. 🟡 Deadly feedback loop

Offshore oil rush

French oil major TotalEnergies said it would begin studying developing an offshore oil and gas project in Suriname. Total could end up investing as much as $9 billion in the project, roughly three times more than the country’s GDP. The announcement comes on the back of a boom in oil production in neighboring Guyana, which has gone from virtually no output as recently as 2019 to roughly 280,000 barrels per day last year. Suriname is hoping its fortunes will go the way of Guyana’s: Since Exxon discovered oil there in 2015, the country’s income per capita has more than tripled. Suriname also plans to become the first country to sell carbon credits under a system set up by the 2015 Paris Agreement, Reuters reported.

Stronger winds ahead

A mass sell-off of wind energy stocks has gone too far, Deutsche Bank cautioned. The industry has been through a rough patch in the last few months, as rising materials costs forced Siemens, Ørsted, and others to write down the value of projects by billions of dollars, knocking down their share prices. But in a note to clients, Deutsche Bank changed its rating for Vestas from “hold” to “buy,” arguing the company was less exposed to the specific supply chain snags that hit Siemens and Ørsted, adding that Vestas is undervalued, particularly “ahead of an influx of onshore orders in the US, fueled by the Inflation Reduction Act.”

China’s ‘post-industrial’ climate challenge

THE NEWS

After a summer of deadly floods in Beijing, oppressive heat waves in Shanghai, and intense rainstorms in Hong Kong and Shenzhen, China’s biggest cities are grappling with urban planning in a new climate reality.

To prepare for a more unpredictable future, they must ditch the large-scale industrialized projects that have till now defined Chinese megacities in favour of nature-based solutions, Yu Kongjian, the godfather of Chinese urban planning, told me.

XIAOYING’S VIEW

Although China’s central government recognizes that the country is facing rising climate risks, its urban centers have yet to put resilience at the core of their development strategies.

This is partly because even though local officials must now meet environmental targets, they still face pressure to develop cities by upgrading infrastructure and bolstering economic growth. Moreover, China’s current planning system, introduced after the country’s urbanization boom in the 1990s, is designed to spur, not limit, cities’ growth.

“It is hard for [the system] to respond to elements that will restrict a city’s growth, such as environmental protection and prevention of floods and droughts,” said Cui Guo, an urban planner and editor-in-chief of Urban China.

Yet, according to Yu, that is exactly what must be done. “We need to use a post-industrialized logic to respond to climate change,” he told me. Instead of pouring funds into “gray infrastructure,” such as concrete dams, Chinese cities must “befriend floodwaters” by harnessing nature, he said. The 60-year-old advocates one solution in particular: the concept of “sponge cities” where urban areas “provide more room” for nature to act as a giant sponge to retain and absorb rain, and slow down floods.

Solar import boom

The increase in South Africa’s imports of solar modules from China in the first six months of 2023, compared to the same time last year. The country imported 3.4GW of solar panels from China. Many South Africans have turned to rooftop solar to cope with a dramatic escalation in the intensity and frequency of power cuts. The trend was accelerated by the introduction of short-term tax incentives for rooftop PV installations on private homes. Despite the West’s efforts to diversify the solar supply chain and break the Chinese hegemony, China’s solar panel exports increased 34% in the first half of 2023. It shipped 114GW worldwide — equivalent to the U.S.’s total installed solar capacity, according to think-tank Ember.

The role of coal

Communities in Indonesia filed an official complaint against the World Bank for allegedly providing back-door financing to two new coal plants. The complainants say the project, which will add a combined capacity of 2GW to the existing Suralaya coal complex, will compound pollution in the area. They accuse the International Finance Corporation, the bank’s private arm, of supporting the plants through a $15.36 million equity investment in one of the projects’ financiers. Negotiations over an investment plan for how Indonesia will spend $20 billion agreed through a “Just Energy Transition Partnership” have stalled amid disputes with donor countries, particularly over the role of coal in Indonesia’s energy mix.

Glossary

A group of current and former political leaders called for international discussions and more research into the use of Solar Radiation Modification. The Overshoot Commission argued it would be “imprudent” not to investigate SRM, citing evidence that it could complement other approaches to reduce climate harms. But it also suggested a moratorium on large-scale outdoor experiments. Proponents say SRM offers a cheap and fast way to revert warming. Opponents charge SRM is too risky and allowing outdoor research is a trojan horse for future deployment of the technology.

Harder strikes

THE NEWS

Workers at Chevron’s two liquified natural gas plants in Australia — which accounted for 7% of global LNG supply last year — escalated their strikes. Workers may soon go on a total strike or hours-long work stoppages ahead of a tribunal hearing. Meanwhile, a fault at one of the plants temporarily shut output by 25% on Wednesday. LNG prices have risen on the back of the strikes, while analysts are bracing for increased volatility in gas markets in the months ahead.

INSIGHTS

• The strikes in Australia, the world’s biggest LNG exporter, have raised fears of increased volatility in European gas markets ahead of winter. Around three quarters of Australia’s LNG exports go to Asian buyers. Almost none go to Europe. But unpredictable supplies have put the market on edge. European gas prices jumped when industrial action got underway last week, despite Europe’s gas storage being almost at capacity. “Now, if it gets really cold in winter… we do have a problem,” the head of EMEA oil and gas equity research at JPMorgan told CNBC.
• Some analysts have called on Australia to encourage investment in the fossil-fuel industry to shore up domestic and international supplies. The country is already facing pressure on its energy supply as the government closes coal-fired power plants, with major buyers such as Japan raising concerns that their imports may be disrupted. “Without accelerated investment in both the exploration and production of gas, as well as in LNG infrastructure, Australia’s golden age of gas will soon come to an end,” the head of Crystol Energy, an advisory firm, said.
• Union action is also having a destabilizing impact on the U.S. economy. Members of the United Auto Workers union went on strike at three plants owned by Ford, General Motors, and Stellantis after a collective bargaining agreement expired. At the heart of their demands is an appeal for a 40% wage increase over the next four years. However GM boss Mary Barra claimed that automakers had little leeway after their companies invested tens of billions of dollars in transitioning their production lines to electric vehicles. “Make no mistake: If we don’t continue to invest, we will lose ground, and it will happen fast,” she said. “Nobody wins in a strike”

Watchdogs

The catastrophic floods that hit Libya this week, and the damage and deaths that followed, are representative of an escalating feedback loop between conflict and climate change. Storm Daniel struck several Mediterranean countries, but the impact was by far the most severe in Libya, after two dams burst in the coastal city of Derna. At least 11,000 people were killed, and huge numbers remain missing.

The storm itself was likely made more powerful by above-average sea temperatures. But Libya’s long-running civil war created conditions for a much worse impact.

“The decade-long string of wars, political crises, and neglect of infrastructure in Libya meant that it was incredibly vulnerable to such a strong storm,” said Erin Sikorsky, director of the Center for Climate and Security, a think tank, and a former climate official in the U.S. National Intelligence Council.

While dictator Muammar Gaddafi was still in power, there was a mass exodus of scientists and engineers from the country that hollowed out its ability to prepare for or respond to disasters, said Essam Heggy, a hydrologist at the University of Southern California who was born and raised in Libya.

“Those who remained are isolated in institutions that do not possess the minimum functionality to study or monitor these extreme events,” he said. “I’m saddened to observe that the international support for both sides of the civil war conflict significantly outweighs the support for scientists and rescuers to tackle this disaster.”

The aftermath of disasters — the devastated infrastructure, the torn families, the lost livelihoods — exacerbate the social and economic tensions that contributed to vulnerability in the first place.

“This tragedy underscores the fact that programs focused on peace-building, conflict resolution, and good governance are actually climate resilience investments,” Sikorsky said. “Standalone climate adaptation programs focused only on infrastructure or equipment will not succeed in countries like Libya going forward.”

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