Net Zero

1. EU’s China EV tariffs
2. Oil prices surge
3. Treasury’s H2 credits
4. A green turning point
5. Coffee’s climate challenge

Surging public and private money for the energy transition.

EU approves China EV tariffs

European Union member states approved tariffs on Chinese-made electric vehicles today. Given worsening US-China tensions and the imposition of 100% tariffs on their products by Washington, China’s automakers have long seen Europe as their “main battleground.” The EU, however, argues that Beijing has used illegal state subsidies to help its carmakers dominate the EV sector. Beijing is expected to retaliate with its own duties on European exports such as brandy, dairy, and pork, while its automotive companies will have to decide whether to absorb the EU tariffs or raise prices.

Beyond the tariffs, a new challenge looms for EU countries: Chinese carmakers building manufacturing facilities within the bloc itself. “European policymakers will try to ensure that such investments produce jobs for their citizens and lead to a sharing of technological know-how,” analysts at Rhodium Group wrote in a recent note. “In other words, they may seek to give China… a taste of its own medicine.”

Oil prices spike on geopolitics

Oil prices surged on growing worries over the possibility that Israel will strike Iranian oil facilities as part of the widening Middle East conflict. US President Joe Biden said yesterday Washington was “discussing” support for such a move, injecting fresh volatility into what had been a “complacent” oil market, an energy consultant told The Wall Street Journal. Traders had generally been less sensitive to Middle East oil shocks because of the US’ expanded role in energy production, as well as expectations that OPEC+ would ramp up output later in the year.

But a combination of tensions in the Middle East — Iran is an OPEC member, and fears are growing of a disruption near the Strait of Hormuz through which a third of global oil flows — and recent stimulus announcements by China indicating economic growth may pick up there, driving oil demand, have pushed prices higher: Brent crude futures topped $78 a barrel, while WTI hit $75 a barrel.

H2 tax credit clarity

The US Treasury plans to publish long-awaited rules regulating green hydrogen tax credits by the end of the year, a senior official told Heatmap. Several businesses have voiced frustration that more than two years on from the passage of the Inflation Reduction Act, the Biden administration’s mammoth clean-tech spending program, key details regarding the incentives on offer remain unavailable. The 45V tax credit offers up to $3 per kilogram of hydrogen produced, a hefty sum given the scale of the potential industry, but the Treasury has not yet defined how producers who use electrolysis should address the carbon emissions caused by drawing power from the grid. “The challenge, of course, is there’s only so many people here at the Treasury Department who are doing all this work,” Deputy Secretary Wally Adeyemo told Heatmap.

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Turning point for investor sentiment

Investor sentiment in electrification and decarbonization is at a turning point and should start to improve, analysts from Morgan Stanley argued in a recent note to clients. They pointed to growing power demand, driven in large part by data centers and artificial intelligence developments, a well-cataloged trend that appears to be accelerating. But they also highlighted expectations that wholesale power prices will rise, while costs will fall thanks in part to an easing of supply-chain issues and the broader distribution of major clean-energy technologies. Finally, they argued that capital expenditure in strengthening electricity grids was growing, suggesting one of the biggest bottlenecks in the energy transition may also be alleviating. “With a re-acceleration in electricity consumption,” they wrote, “we believe attention to the tailwinds in decarb themes could start to grow from here.”

Food’s climate fallout

An investment by Starbucks is bringing the climate impact on food into focus. The global coffee chain is buying research farms in Guatemala and Costa Rica to trial technologies to help growers and study climate-resistant variants of coffee, according to Bloomberg. Starbucks sources its beans from 400,000 farms in 30 countries, but coffee farmers are struggling with the effects of climate change, with bad weather pushing up global prices for coffee beans as a result. The two test farms are only the beginning: Starbucks also plans to open similar test farms in Asia and Africa. Climate change is driving long-term fluctuations in food prices, the World Health Organization recently noted, and Bloomberg reported this week that other crops are getting more expensive. One solace for consumers: Global rice prices fell this week the most in 16 years after India — the world’s biggest producer — lifted some export restrictions.

New Energy

• A Spanish energy lobby said the country faces an “enormous challenge” in reaching its wind capacity goals. According to the group, Spain needs to double its capacity to 62GW by 2030, but has only added one extra gigawatt this year.

Fossil Fuels

• Private equity firms in the US have plowed more than $1 trillion into fossil fuel projects since 2010. According to a new analysis, the projects release more than a billion tons of greenhouse gas emissions into the atmosphere every year, The Guardian reported.

Finance

• Brazil’s Tropical Forests Forever Facility, a fund first proposed at COP28, is in its final stages, and could ultimately pay as much as $4 billion a year to protect forests. “We’re at this stage where everybody’s saying, look, in principle, this is crazy,” an expert told The New York Times. “But it’s crazy in a kind of interesting way.”

Tech

• The UK will provide as much as $28.5 billion over the next quarter century to fund carbon capture and storage technologies. Britain has set itself the target of reaching net zero emissions by 2050, and it believes CCS tech will be needed to curb emissions from industrial sectors, Reuters reported.

Politics & Policy

• New research showed that hurricanes hitting the US have a longer, deadlier tail than previously thought. “The number so dwarfs previous estimates that it suggests tropical cyclones alone are a major determinant of public health” in the US, Heatmap reported.

Mineral & Mining

• Illegal small-scale gold mining in Ghana is devastating the country’s environment and harming its people. Despite government commitments to crack down on the practice, enforcement remains weak, DW reported.

Food & Agriculture

• Warmer weather and unpredictable rains in India are forcing scientists to develop more resistant seeds. “We really need these seeds to deal with these multiple issues created by global warming,” an expert told The Associated Press.

• China’s domestic struggles won’t change its trajectory in Washington.
• Gulf sovereign wealth fund in talks to invest in big US lender.
• Vance wants to be a ‘pro-family’ Republican. His party isn’t there yet.