China's new trade wrinkle on COP29 sets stage for Trump conflict
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A dismal outlook for next week’s COP29 climate summit in Azerbaijan grew even more precarious this week after Donald Trump was re-elected as U.S. president and China said it wanted to use the talks to air trade grievances.
The United Nations Conference of the Parties (COP29) has never before been used to discuss trade disputes, mostly focusing on agreements to cut harmful greenhouse gas emissions and ideas for wealthier countries to help poorer countries fund their renewable energy transitions.
China’s demand, which was joined by India, Brazil and South Africa (known as the BASIC group), comes as tensions mount regarding global trade now that Trump is president-elect, and as several European trade regulations begin to take force. Those include a carbon border levy on products imported from emissions-heavy countries and a deforestation protection.
By turning the talks into a forum for trade disputes, China and the others threaten to blow up the summit even before it starts. But they also will attract Trump’s attention, and perhaps lure him to future summits if trade deals are indeed being made. Trump is widely expected to take the U.S. out of the Paris Agreement to reduce energy emissions for a second time when he takes over in January, and not to be much of a force at future climate summits.
The move is a clear example that China’s plan to rebuild its struggling economy is in part based on a strategy of becoming the world’s leading clean energy and clean energy products exporter. By trying to attach disputes over its entry to other countries to climate talks, it adds a new challenge to the UN’s ambitions to decarbonize the world.
And sets up what could be one of the early confrontations with the new U.S. president.
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Zeus: 5 things climate investors should watch for in Trump’s second term
. . . . Donald Trump’s stunning comeback win in this week’s presidential election is set to chart the U.S. on a new course of chaos and power-grabs in the coming years. But it’s not a death knell for clean energy investors, writes David Callaway. Instead, the renewable energy transition will be rebranded as a push for more energy security and global energy domination. It will include oil and gas, but also other forms of clean energy popular in red states, including solar and onshore wind. And it will include new tax breaks as well as tariffs and changing laws. At least one company has already benefited. Tesla’s shares rose 14% the day after the election. Callaway details five themes that investors should look out for, and who will win or lose in each.
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Data center power demand meets Scope 3
. . . . The rush to build data centers and demand for more power by tech companies looking to develop AI is quickly rippling across all industries, and in particular the battle between renewable energy and fossil fuels. Now it has attracted the attention of lawyers and regulators trying to hold companies to account on their environmental, social and governance (ESG) initiatives.
We haven’t written much about Scope 3 emissions lately, at least since the Securities and Exchange Commission punted on including them in proposed new rules for public companies to disclose emissions. But now they are resurfacing as part of concern about third party data centers.
Tech giants such as Microsoft MSFT 0.00%↑ and Google GOOGL 0.00%↑ are seeing the energy they use to power their data centers come back to bite them hard in terms of their pledges to lower their emissions. In short, that is not happening. But most companies can’t afford to build their own centers and are hiring data centers to crunch their rising AI data needs for them.
Those emissions fall into the category of Scope 3, and the debate about whether a company renting out part of a data center needs to account for that energy in its own emissions. It’s a complex legal debate that is just starting, like the data center/power demand issue in general, to bubble into corporate consciousness.
Under an incoming Trump administration, we can’t expect the SEC to be kneecapped when it comes to any type of ESG regulations. But investors and institutional fund managers are starting to pay attention. And to hold companies accountable for what could be a bleeding vein of emissions not currently on their books.
Editor’s picks: Riskiest places to live in the U.S.
Watch the video: In this story from Weathered: Earth’s Extremes by PBS, Maiya May looks at giant risk maps with NASA scientist Marshall Shepherd to learn the most significant impacts of climate change in each region of the U.S. Using some of the most powerful computers in the world, scientists can project how a warmer world will change the weather. Where are the riskiest places to live as the climate warms, and how can we prepare?
New efforts to cut emissions in Canada’s oil and gas industry
Canada is working on draft regulations that would cap greenhouse gas emissions from the oil and gas sector. The goal is a reduction of 35% from 2019 levels by 2030, Energy Monitor reports. According to EM, the proposed cap-and-trade system is designed to reward companies that perform better in reducing emissions and encourage higher-polluting companies to invest in cleaner production processes. The regulations would allow for growth in the sector, the report group of measures including financial support for carbon capture and storage and other clean technologies.
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Who’s feeding the coal fires?
The 2023 UN Climate Change Conference reinforced already existing pressure to transition away from fossil fuels, in particular for the most polluting source, coal. The authors of this IMF working paper titled Following the Money: Who is Keeping Coal Alive? use a comprehensive dataset on bank loans for coal projects to shed light on which type of banks continue to finance coal and how coal phase-out commitments affect coal financing. From the abstract: They find that coal financing is becoming increasingly concentrated, partly in banks with a very high coal exposure. They also find that many coal loans have maturities much shorter than the remaining lifetime of coal assets, thus exposing equity holders of coal assets to the risk of a more difficult loan rollover. An econometric analysis shows that countries with a strong commitment to coal phase-out, fixed in national law for example, receive less coal financing. Using an instrumental variable, they identify this effect as causal. Authors: Gregor Schwerhoff, IMF; Mouhamadou Sy, IMF.
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Words to live by . . . .
“If you cannot set a credible course for net-zero, with 2025 and 2030 targets covering all your operations, you should not be in business. Your core product is our core problem.” — António Guterres, UN Secretary-General.