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The carbon cost debate is about to become real as prices approach €100
Plus, Biden's climate end-around on Supreme Court, and Candela's new boat deal
In today’s issue:
— Carbon prices to hit €100, triggering new era of debate in Europe
— How President Biden used the new climate bill to work around the Supreme Court
— The economic impact of China’s heatwave could be worse than possibly imagined
— One month after Biden visit, Saudi’s mull oil production cuts
— Candela, Polestar in milestone electric boat deal
European rivers, drying up in the worst drought in decades, are revealing warnings from the past, most notably, the “hunger stones,” the revelation of which forecast famine. A carving on a rock in the Elbe River near the northern Czech town of Děčín has been revealed, saying “If you see me, then weep.” Děčín’s hunger rock is one of the oldest hydrological landmarks in central Europe, with its earliest carving dated at 1616. Photo: Wikimedia.
The August surge in natural gas prices tied to Russia’s threat to cut Europe off this winter is causing economic monsoons throughout the global economy. One of them is that corresponding carbon credit prices are approaching €100 ($99.8) for the first time, a milestone sure to spark a new era of debate on the cost of carbon pollution.
Prices briefly topped €98 on Friday and have since backed off, but in the past two years they have more than tripled, as big European polluters buy more carbon credits on the European Trading System (ETS). They do this in large part to pay for having to turn on coal plants again in the face of rising natural gas prices.
The rise threatens Europe’s bold plan to cut carbon emissions by 55% by 2030, as some countries say the costs are too high for them and level charges of market manipulation by speculators, a predictable complaint in any market when prices soar. But higher carbon prices also yield benefits, including making technologies such as carbon storage and removal, or hydrogen production from renewable energy, more competitive.
As natural gas prices hit $10 per million British Thermal Units (BTUs) today for the first time in 14 years, we should expect carbon credits on the ETS to hit €100 soon. They are also approaching £100 ($118) on the new London exchange, according to researcher Ember. (See charts: EU Carbon Price Tracker)
Against this backdrop, it’s difficult to envision a major economic step forward in Europe before the winter. But the long-term benefits of rising carbon prices in fighting global warming are at last starting to appear on the horizon.
More insights below . . . .
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Tuesday’s subscriber insights
. . . . Buried in the 730-page Inflation Reduction Act that will trigger a new era in America’s fight against global warming last week was a small but significant change that some legal scholars think will render useless the Supreme Court’s hostile ruling this summer against climate regulation, according to a smart New York Times piece today by Lisa Friedman.
The wording changed the classification of carbon dioxide to an “air pollutant,” which essentially gives Congress the ability to require that the Environmental Protection Agency regulate it as part of the Clean Air Act. The Supremes had ruled the EPA was not authorized to regulate against climate change because carbon had not been mentioned in the original 1970 document and said it fell under the “major questions” doctrine of issues that only Congress must decide.
Apparently, now it has. But given the skullduggery on Capitol Hill, we expect more lawsuits on this one. Over to you, Justices Thomas and Alito. . . .
. . . . In a summer of historic heat records, China’s heatwave and drought stand out as a preview not only of the human suffering, but of the economic devastation yet to come. More than 70 straight days near or above 100°F. (37.7°C.) in vast areas of China have reduced hydropower production of electricity and shut down factories this week. The country is now planning to seed clouds to make rain to save its primary fall harvest and is considering restarting coal plants to keep the economy running. As we said last week, 2022 will be the year the battle against global warming went from a culture war fought within nationalist borders to a worldwide defensive emergency.
Our old friend Bill Bishop has the smartest daily takes on this and anything else China in his daily Sinocism newsletter. . . .
. . . . Prices don’t have to soar for governments to cry manipulation and speculation. Sometimes this happens when they fall. As in the case of Saudi Arabia, which said this week it is considering cutting oil production just one month after agreeing to increase oil flows after a visit and request from President Joe Biden. The Saudis argue falling oil prices on global markets are not a correct assessment of global supply and demand, and so they need to cut production to push them back higher. Fortunately, the Saudis don’t have quite the pull they used to on world markets, though oil is back above $93 a barrel. . . .
. . . . Candela, the Swedish maker of those stunning electric boats that slice across the water, announced a major deal this morning with Polestar PSNY 0.00%↑ , the Swedish electric car maker, to supply batteries -- allowing the companies to vastly increase the number of electric boats they can put on the water. Candela is quickly establishing itself as the Tesla TSLA 0.00%↑ of the European boating market, and for Polestar the deal opens up an entire new market for its electric engines and batteries. . . .
. . . . Parting shots: Georgia Republican Senate candidate and former NFL star Herschel Walker, who has already provided a campaign season full of instant classics in terms of gaffes, adds this to the climate debate. While arguing the Democrats don’t care enough about the people, he said the climate bill is sending money to trees. “Don’t we have enough trees around here?
. . . . And a Louisiana commission has become the first government agency in the U.S. (at least that we’ve seen) to combine its hostility to climate with its hostility to abortion, withholding vital flooding relief funds from New Orleans because of the city’s opposition to the state’s harsh new abortion ban. Ah, campaign season is officially here. . . .
Editor’s picks: 45°C.? That’s 113°F.
China will try seeding clouds to save grain harvest from drought
China hopes it can protect its crucial autumn grain harvest from record-setting drought by seeding clouds with chemicals to increase rain and spraying crops with a “water retaining agent” to limit evaporation, officials say. The Associated Press reports that in addition to rainmaking efforts, the government has shut down factories in China’s southwest due to shortages of water to generate hydropower. Amid what the report notes is the hottest, driest summer since the government began recording rainfall and temperature more than six decades ago, “factories in Sichuan province were shut down last week to save power for homes as air conditioning demand surged, with temperatures as high as 45°C. (113°F.).” The AP reports Chinese Agriculture Minister Tang Renjian said authorities will take emergency steps to “ensure the autumn grain harvest,” which is 75% of China’s annual total.
Global drought and heat crises hit EV manufacturers
From the drought-drained Rhine River in Europe to idle factories in China’s southwest, and the threat of wildfires in the Mediterranean, businesses — especially electric car manufacturers — have been hit hard by this year’s droughts and deadly heatwaves. In a spotlight story this week, Time reports China’s Sichuan province — the source of about a fifth of the country’s lithium production — cut electricity to some industrial users. Power shortages have also affected Volkswagen factories and delayed deliveries. According to the report, Toyota TM 0.00%↑ and battery maker CATL have temporarily closed factories. Tesla TSLA 0.00%↑ and China’s SAIC Motor reportedly said they may not be able to maintain production if the power crunch continues to impact suppliers.
This week in wildfires
. . . . As of Aug. 22 the Fire Information for Resource Management System reported two new large incidents, five large fires contained and 22 uncontained large fires in the U.S. Fire activity remains high in the Northwest region, with 21 new fires reported overnight and six uncontained large fires. Late last week, a firefighter died while battling a wildfire in southwestern Oregon after he was hit by a falling tree, fire officials said. Collin Hagan, 27, died Wednesday while he was fighting the Big Swamp Fire near Oakridge, Ore. In Northern California, the McKinney Fire in the Klamath National Forest along the Oregon border is still burning, having now torched more than 60,000 acres and destroyed 185 structures. Across the nation, the National Interagency Coordination Center reports that so far this year, 43,427 fires have burned 5.97 million acres — that’s 23% more than the 10-year average of acres burned year-to-date. . . .