Post-COP26 pushback threatens climate goals, plus, new EU hydrogen target
Welcome to Callaway Climate Insights. Today is the 20th anniversary of the collapse of Enron. Just sayin'.
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The 2021 Atlantic hurricane season officially closed this week, with 21 named storms (the third highest on record), seven hurricanes, and four major hurricanes. Yale Climate Connections, in a great piece headlined Top-10 weirdest things about the bonkers 2021 Atlantic hurricane season, quotes researcher Brian McNoldy: “This has never happened before, not during the satellite era, not since records begin in 1851. This sustained level of tropical cyclone activity in the Atlantic is unprecedented even for four years, let alone six.”
Apres moi, le deluge. After me, the flood. The French expression attributed to King Louis XV of France is widely used and corrupted these days but was originally intended to describe a people who didn’t care about the future.
Hard not to think about it now, only three weeks after the UN’s COP26 climate summit in Glasgow, where 195 nations pledged to combat global warming by working together to reduce fossil fuel production and consumption.
The vapors from the private state jets were still hanging over Scotland when Australia’s prime minister said he had no intention of limiting coal and mineral production. Egypt, home to next year’s summit, and the largest oil producer in Africa, also quickly caved.
Brazil was covering up deforestation statistics in the Amazon Basin even before Glasgow, while Japan is reportedly urging fossil fuel companies to slow down their transitions to renewable energy. In Europe, implementation of new climate disclosure rules tied to the Sustainable Finance Disclosure Regulation (SFDR) were delayed this week for a second time, to January 2023.
In China, the world’s largest coal producer, an even more ominous development is taking shape. Nationalists are starting to push back on any government efforts to reduce fossil fuel consumption, arguing that the entire strategy is a Western plot to destabilize the country.
After the frenzy that was Glasgow, it’s natural to expect a hangover of some sorts, especially as world leaders return to the domestic energy troubles of their individual countries. But high energy prices, supply-chain issues, and a new Covid scare are combining to push climate back in the priority list this winter.
As one former colleague in London told me this week, “If half the world is too stupid to wear a mask to save their own lives, how can we expect them to work to save us all from climate change?”
Indeed. More to come on this in the next few weeks but if 2021 was the year the world was supposed to turn the corner on the climate transition, 2022 is suddenly looking make or break for the whole concept of diplomacy as a solution. Versus markets and technology. This business is not for the faint of heart.
More insights below. . . .
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Carbon market fans applaud as COP26 deal burns Rome
. . . . Fans of carbon markets, such as this newsletter, were optimistic after a deal at COP26 to resolve technical issues around the Paris Agreement that will allow the markets to scale internationally. But Mark Hulbert argues that a key part of the deal, which allows past carbon offsets to be included in the new initiatives, will not only make the markets more dangerous for investors but will encourage more greenhouse gas emissions from large polluters. Forget fiddling while Rome burns, now the audience is applauding, he says. . . .
EU notebook: Von der Leyen says green hydrogen prices to fall by half by end of decade
. . . . European Commission President Ursula von der Leyen says she is confident green hydrogen prices will fall by 30% to 70% by the end of the decade, enabling consumers and countries to transition away from fossil fuels without energy shortages, writes Daniel Byrne from Dublin. The promise comes as European politicians increasingly question the EC’s blueprint for leading the world in moving to renewable energy, arguing it’s leaving millions of consumers behind, particularly in Central and Eastern Europe. Meanwhile, public pressure is rising for Europe to do something more about the carbon footprint of its ancient buildings, which is responsible for up to a third of the region’s greenhouse gases. . . .
Thursday’s subscriber insights: The other electric vehicle tipping point
. . . . The adoption of electric vehicles involves several tipping points. The one most in the news now is an adequate number of charging stations. But there is also the cost of buying EVs. That could change as battery prices go down, and vehicles become cheaper to build, since they don’t have internal combustion engines. So far, prices remain stubbornly high, and take-up painfully slow. Read more here. . . .
. . . . Rising oil and gas prices have roiled the race for renewables this year, making them more attractive in terms of price, but less popular as high oil prices force countries to stock up. In Japan, as in Europe, there is suddenly great caution about moving away from polluting energy sources, especially ahead of winter. A reckoning may soon be coming. Read more here. . . .
. . . . Amazon has emerged as the largest corporate renewables buyer in the world after striking deals to procure output from 18 new wind and solar projects. That’s great, but unlike other major tech companies, it has a huge transport infrastructure – planes, trucks, etc. — that it must transform to be truly green. It will take more than a press release. Read more here. . . .
. . . . And finally, investors of a certain age will remember the panic in the market 20 years ago today when Enron collapsed. Billing itself as a new age energy trading colossus, the company crashed amid hundreds of millions of dollars of fraudulent accounting transactions. In the end, investors just walked away from its stock, letting it slide to nothing. A cautionary tale at a time when markets are looking for the next big idea in energy transition. . . .
Editor’s picks: Record weather, record renewables and record plastic waste
Another record year for renewables
It looks like this year will set another record for renewable energy installations, with 290 GW of new capacity expected to be built globally, the International Energy Agency said in its annual Renewables Market Report, released Wednesday. S&P Global Market Intelligence quotes Fatih Birol, executive director of the IEA, as saying that despite volatile energy markets and the rising cost of key raw materials used to make solar panels and wind turbines, the record additions are “yet another sign that a new global energy economy is emerging.” According to the report, by 2026, global renewables capacity is forecast to grow more than 60% compared to 2020 levels, surpassing 4,800 GW, the IEA projects. That equates to 1,830 GW of new additions in five years, or up to 380 GW annually. More than half of the growth to 2026 is expected to come from solar.
U.S. produces the most plastic waste
The U.S. is a major producer of plastics and in 2016, generated more plastic waste by weight and per capita than any other nation, according to a congressionally mandated report released Tuesday. The report, titled Reckoning with the U.S. Role in Global Ocean Plastic Waste, says that “although the U.S. solid waste management system is advanced, it is not sufficient to deter leakage into the environment.” The report calls for “a national strategy by the end of 2022 to reduce the nation's contribution to global ocean plastic waste at every step — from production to its entry into the environment — including by substantially reducing U.S. solid waste generation. This report also recommends a nationally-coordinated and expanded monitoring system to track plastic pollution in order to understand the scales and sources of U.S. plastic waste, set reduction and management priorities, and measure progress.”
Latest findings: New research, studies and projects
To be or not to be green
“Climate change has profound effects not only for societies and economies, but also for central banks’ ability to deliver price stability in the future.” The authors of To Be or Not to Be Green: How Can Monetary Policy React to Climate Change? start by documenting why climate change matters for monetary policy: it impacts the economic variables relevant to setting the monetary policy stance, it interacts with fiscal and structural responses and it can generate dislocations in financial markets, which are impossible for monetary policy to ignore. Next, they survey several possible ways central banks can respond to climate change. In the abstract, they write, “These range from protective actions to more proactive measures aimed at mitigating climate change and supporting green finance and the transition to sustainable growth. We also discuss the constraints and trade-offs faced by central banks as they respond to climate risks. Finally, focusing on the specific challenges faced by inflation-targeting central banks, we consider how certain design features of this regime might interact with, and evolve in response to, the climate challenge.” Authors: Lena Boneva, European Central Bank (ECB), Centre for Economic Policy Research; Gianluigi Ferrucci, European Central Bank; Francesco Paolo Mongelli, European Central Bank, Goethe University Frankfurt.
More of the latest research:
Words to live by . . . .
“We must acknowledge that progress was made. There are now new opportunities for countries to deliver on what they know must be done to avoid a climate catastrophe. But unless they sharply pivot to implementation and show substantial results, they will continue to have their credibility challenged.” — WWF Global Lead on Climate Manuel Pulgar-Vidal, speaking about COP26.