PROGRESS REPORT ON THE PARIS CLIMATE
AGREEMENT PART 17
2022 OCTOBER ISSUE
By Andrew Sia
Opening Remark
The U.S. Congress can still pass a scaled-back version of the spending bill that has been in the discussion in the Capital Hill for months. Remember that there was a version of the bill that passed the House last year includes $300 billion in clean energy tax incentives for producers and purchasers of clean electricity and electric vehicles. Now with the Democrat Senate, Joe Manchin, who blocked the bill, and under the Senate rules, that bill must be passed by September 30. The Senate is in recess through the second week of July and will break again for the month of August, leaving Democrats limited time to reach agreement on a package that has eluded consensus for the past year.
Control of Climate Change at Current Situation
Although investors are optimistic that last year’s global summit in Glasgow would yield progress, most of the world’s biggest emitters have done very little to follow through on a deal to accelerate greenhouse-gas cut. It is largely due to the war in Ukraine which has caused shortages in fuel and food.
Many countries have restarted their coal power plants and rely more on oil and natural gas to deal with the energy crisis.
Having said that, in the first half of the year, countries have raised more than $20 billion for sustainability startups, which is slightly below last year’s number, but well ahead of 2019 and 2020.
The failure of Biden’s climate legislation in Congress and the U.S. Supreme Court’s decision to limit the power of the Environmental Protection Agency to regulate greenhouse-gas emissions have added the frustration to the environmental activists.
Startup financing is finding their ways to look for areas where they can help to promote green energy and unlike the government who is only looking for economic growth. Companies like NextEra Energy Inc., BP PLC, Microsoft Corp., Intersect Power LLC, TPG Inc., and U.S. Steel Corp are raising money for new industries like making hydrogen fuel from renewable electricity. To build more solar and battery-storage projects, producing green electricity, and these are all still being funded partially by government’s research fund.
Total public and private global investment in clean investment is expected to raise more than 10% for the second consecutive year to nearly $1.45 trillion this year. Such spending had remained flat from 2017 to 2020.
But under the current situation, the recent increase is being offset by inflation and this is insufficient to combat with the global warming in according to IEA. Roughly $2.8 trillion would be required to meet the current climate pledges by 2030 and $4 trillion will be needed annually to achieve net-zero emissions by 2050.
These numbers are really mind boggling and I just don’t know where are they coming from. And not to forget that there are the oil companies, coal miners and the car industry who have their lobbyists in the Congress and the two parties in the U.S. who are not going to let go their interest.
An Era of Guilt-Free Flying by Using Sustainable Aviation Fuel
Like many other industries, the aviation industry has made the promise to reach net-zero emissions by 2050. Right now there is the use of a sustainable aviation fuel (SAF), a jet fuel that is made from greener processes and materials that range from cooking oil, solid waste and crop residuals and synthetic kerosene made out of hydrogen and recycled carbon. Still pollution will spew from the jet engines as the fuel can still be considered as sustainable as most part of it would have been used and 80% of the carbon has been emitted. The reuse of these residuals would have been released if it has not been changed into jet fuels.
For the trial run, airlines are using the SAF in one engine. It is still waiting for an exemption to fuel regulations that limit the total amount of sustainable fuel an aircraft can use up to 50% blend with normal jet fuel. It needs to increase the flyers’ confidence in the safety and the benefits of the SAF simultaneously.
It is already being expected that by the end of this year we will need to produce 125 million liters of sustainable fuel from last year’s 100 million liters. But this is still under 1% of the total jet fuel consumption. By 2025, we will need to produce 7.9 billion liters. In 2030, we will need to produce 23 billion. By 2050, the goal is 449 billion liters. It is a very steep order.
Net-zero aviation in 2050 under which 65% of the emissions would come from the use of sustainable fuel. But it will need the governments to support this and to invest for an exponential expansion of the fuel’s production and investment in refineries that are estimated in trillion of dollars.
Probably it will still need to be accompanied with some purchases of carbon offset credits in order to add up the numbers.
Biden’s Goal for Climate Change
When Biden went into the White House, he made the promise to fight climate change but gradually his power has been stripped as the Supreme Court turned down the power of the Environmental Protection Agency to limit carbon emissions from the power plants. His earlier pledge to the world for limiting the emissions of the greenhouse gases in half by the end of the decade has failed due to the conflicts from his own party, and also the Republicans who are backed by the fossil fuel industry.
Just take Senator Joe Manchin II for instance, who is the Democrat from West Virginia, who has personal financial ties in the coal industry and been able to single-handedly set the limits for Biden’s legislative ambition as the key swing vote in an evenly divided Senates.
Centerpiece of the Biden’s climate plan is to set the legislation to replace coal and gas-fired power plants with wind, solar and nuclear energy and also focus on the nation’s top source of greenhouse gas pollution, which is the transportation.
Having been rejected by the Supreme Court, the Environmental Protection Agency will still push for tougher regulations to control methane, a potent greenhouse gas that leaks from oil and gas wells.
Meanwhile, private sectors have already been shifting away from fossil fuels toward renewable energy sources. With the cost of solar and wind energy dropping below the price of coal and natural gas in many parts of the U.S., renewable sources of electricity now make up 20% of the nation’s energy mix, up from 15% a decade ago.
Electric vehicle sales have doubled over the past year, making up about 5% of the new vehicle sales in the U.S. in the first quarter of 2022. It was 2.5% in the first quarter of 2021. General Motor has pledged to stop production of gasoline-powered vehicles by 2035. Ford Motor’s most popular model, the F-150 pickup truck in the electrical version, has received reservations for more than 200,000 of them.
Biden pledged for half of new cars sold in the U.S. in 2030 to be electric vehicles and all electricity coming from wind, solar and other zero-carbon by 2035. I really doubt if this is practical, not to say if it is achievable.
We can all agree that the climate change has been causing wildfires, droughts, extreme heats and intense storms that endangered our lives and livelihoods. We have to go back to the temperature of minus 1.5° Celsius to where it was the temperature before the Industrial Revolution. We have to know that during the time both fossil oils and coal have been playing the key roles as the source of energy. To replace them will need to take the gradual process that has to map out carefully and cleverly. But we have seen that this is used as the chips for bargaining between the politicians which can be the most unfortunate.
We have not to forget that the rich countries, such as the United States, Canada, Japan and most part of western Europe are responsible for 50% of all the planet-warming gases released from fossil fuels over the past 170 years. These rich countries are accounted only for 12% of the world’s population.
But if you add in developing countries like China, India, Brazil and Indonesia, we are talking about 70% of the world’s population and collectively they are responsible for 85% of the planet-warming gases.
We have not to leave out those under developed countries, and most of them are in Africa, where they are the continent which is growing, and if not because of the pandemic in the last two and a half years, we could have heard more about their developments. They have not enjoyed any of the benefits brought by the Industrial Revolution. We shouldn’t take away this privilege from them.
Tokyo Electric Power Constrain
The Fukushima nuclear disaster in 2011 prompted the closure of most of Japan’s nuclear reactors which supply about a third of the country’s need in electricity. The power crunch caused by the curbs of Russian gas exports caused by the war in Ukraine has added pressure on those countries who tried to phase out nuclear power earlier on.
Some European countries are thinking about activating the coal-fired power stations amidst the concern of carbon emissions.
Japan’s opposition for activating the nuclear power plants are strong, but the warning for the electricity shortage, which is the second time this year, is not going to let the Japanese to have many options this time. Already the Ministry of Economy, Trade and Industry has asked the businesses and residents in and around the Tokyo area to reduce power usage, as the supply is particularly tight in the late afternoon.
Japan has pledged for net-zero carbon emissions by 2050.
Malaysia Sovereign Wealth Fund is Setting Out Sustainability Target
Khazanah Nasional, a $30 billion sovereign wealth fund is setting out tough sustainability targets amidst its financing in the oil-rich states. Its big holdings in the national airline and power company that generates 45% of its electricity from coal last year.
It is now the latest sovereign wealth fund to commit to environmental, social and government standards. It is a challenge to its effort to achieve net-zero emissions by 2050. It is also on its way to ensure 30% of its board members and senior leaders at portfolio companies are held by women by 2025.
Khazanah Nasional is chaired by the Malaysian prime minister, has long had a strict mandate to support the economy.
Criminal Hotbed in the Amazon Rainforest
Amazon, almost the size of the continental US, is in a mix of growing environmental crime and violence. Already the Organization for Economic Cooperation and Development (OECD) is saying that under the Bolsonaro administration, the deforestation and the criminal activities, are making the objective very hard to achieve.
Lately the murder of Dom Philipps, a British journalist and Financial Times contributor, and Bruno Pereira, a Brazilian indigenous people expert, took place near the Peru border have exposed the increasing problem. Brazil leads the world in the number of murders related to land rights and environmental issues, and most of them happened in Amazon. Between 2012 and 2020, there were 317 murders.
Deforestation in the Amazon has soared to 15-year high. Every day, rainforest equivalent in size to 2,000 football fields is razed. This is despite its government’s promise to end illegal deforestation by 2028.
The murders are the result of attacks on forest defenders who are trying to protect the environment. The Brazilian president, Jair Bolsonaro, is notorious for his tolerance in illegal loggers, gold miners and land grabbers, who the environmentalists are accusing for the destruction of the rainforest. Together with the violence against indigenous communities have driven them out from the forest.
Coal Comes Back to Haunt the Climate Change
With natural-gas and oil being held hostage by Russia against the Western countries, the world has no choice but to switch back to coal—the dirtiest fossil fuel. Earlier on their pledges to reduce the carbon footprint, have to give way now to ensure sufficient supply of electricity.
Coal has been in short supply after years of declining investment in new mines and resources has driven up the price to a new record this time. Spot prices for coal in Australia topped $400 a ton for the first-time last month.
With the unusual hot temperatures pushing power supply to its brink.
China, as the world’s biggest coal consumer, is expanding its import of coal for its power generation. India is doing the same as its energy demand has increased. Both countries have not fall short of supply of oil from Russia. According to the report from International Energy Agency, both countries have already increased its investment in coal production by 10% in 2021, it is expected to do the same this year.
Coal miner, Glencore PLC, an Anglo-Swiss giant in coal mining reported that it was expecting a profit of $3.2 billion in the first half of this year, compared with $3.7 billion for the whole of last year.
Over the years, we have found that natural gas became more plentiful because of the fracking boom in the U.S. and the Russian’s export to Europe. Renewable energy sources such as wind and solar power gained some market share but play down by falling prices and government subsidies and mandates. Still the demand of coal has remaining strong.
We know that coal emits almost double the carbon dioxide as burning natural gas. This has threatened the international efforts to keep the global temperatures under 2° C from the preindustrial levels, better still by 1.5° C, by the end of the century. This is the goal agreed by 190 countries under the 2015 Paris Agreement to avoid the potential of global warming.
The surge of using coal during this war in Ukraine as Russia is holding the world under hostage is considered as something in the shorter term. In the longer term, some countries are signing contracts with the U.S. and Qatar for liquefied natural gas, also known as LNG.
For coal, the European Union agreed to ban imports from Russian coal. Before the war, Russia was accounted for 70% of the supply that European power stations were using. They are turning to the U.S. and Australia for supply. The market is looking for high-quality coal which is more efficient and cause lower carbon emissions. Russia is trying to offer to India by shipping it through Baltic Sea ports and selling at a relatively bigger discount.
Instead of phasing out the use of coal, Germany, Italy, France, the U.K., and the Netherlands and Austria are preparing to restart their coalfired generations. They are also started to build up stockpiles of natural gas ahead of winter.
Supply of Liquefied Natural Gas to Europe
Europe imports of LNG increased by more than 50% compared with the period a year ago in the first five months of 2022. The increase in liquefied natural gas have helped Europe to compensate for shortfalls from Russia, and most import, to reduce their dependence on Russian gas.
Russia has long supplied a wide range of energy commodities to Europe and they are largely used for heating, cooking, generating electricity and industrial use. They supported a third of Europe’s consumption in recent years.
Europe import a wide range of commodities, but the major increases have come from the United States. Because of the shale gas output, which started eight years ago, the U.S. has become one of the world’s three largest LNG exporters after Qatar and Australia. It even has exceeded the flow of Russian gas. About half of the ships that are docked at Grain LNG over the last year came from the U.S.
Britain is in a relatively better shape in terms of energy security than most of the European counterparts. It produces substantial amount of gas from its offshore fields. Whereas most Europeans have very little of their own output. And through its three terminals, it sends its gas to the continent through pipes under the North Sea.
Unlike most natural gas, which comes through pipelines, LNG can be shipped from anywhere but will require investment in facilities that can chill it into liquid form. It is a multibillion-dollar investment. Chilling of the natural gas to minus 260° F reduces its volume to one six-hundredth of its volume as a gas. A large tanker can carry enough fuel to light up to 70,000 homes for a year.
More European countries are trying to build facilities to receive LNG and Germany is the first one to plan to build as many as four receiving units, while Finland, Estonia, Italy and the Netherlands are all considering to build terminals or to expand existing ones.
LNG has found its market largely in Asia with countries like China, Japan and South Korea. But lately the Asian demand has fell by 8% as caused by the shutdown in China. Soon LNG found its market in Europe but price is becoming a problem as future prices have been around $40 per million British thermal units which is roughly $200 per barrel for oil. It is double of Brent crude, the international benchmark.
European’s gas price is roughly six time of what the U.S. consumers are paying. For European businesses that use large volume of gas find themselves at a great competitive disadvantage.
For the moment Europe has to rely on coal until its energy problem can be solved. There is no easy solution as the LNG is inadequate, and it will take few years to replace Russia’s gas export to Europe.
Solar Industry’s Dilemma in the U.S.
After the U.S. Commerce Department announced to investigate whether Chinese companies are circumventing U.S, tariffs by moving companies for the solar panels through four Southeast Asian countries, solar firms across the U.S. are frozen.
Plans to install 60 square kilometers of solar panels in Vermont are suddenly on hold. In Maine, a solar farm that would power hundreds of homes is partly built but might not be completed. A project in Texas that would have powered more than 10,000 homes was weeks away from breaking ground has been postponed until at least next years.
Around the U.S., solar companies are stalling projects, shutting down construction sites resulted tens of billions dollars and tens of thousands of jobs are at risk.
Lack of any evidence of trade violence can be found from Cambodia, Malaysia, Thailand and Vietnam, but it has stopped importation of crystalline silicon panels and components.
Already 318 solar projects in the U.S. have been cancelled or delayed. Companies are considering layoffs.
Tariffs on Chinese solar panels have been imposed in 2012 during the Obama administration in hopes of promoting domestic manufacturing and preventing China from dominating the emerging market. By then the tariffs was at 25%. In 2018, under Trump administration, it was increased to 250%. Biden extended the tariffs in February of 2022.
In 2021, the United States installed 24 gigawatts of new solar capacity which was a record. But only one-fifth of those panels were produced domestically. The rest were imported from the four Southeast Asian countries—Cambodia, Thailand, Malaysia and Vietnam.
On March 25, Auxin Solar, a tiny solar panel manufacturer based in California, led by Mamun Rashid, filed a petition requesting an enquiry whether China was circumventing rules intended to prevent state-subsidized solar parts from flooding in the U.S. market. And by one company’s request it has brought the industry to the halt and resulted to closing of companies and layoffs workers. It is a threat to 100,000 jobs from the industry.
This has collided with Biden’s aim to annual pace of solar installation nationwide to coincide the reduction of the U.S. emissions by 50% below the 2005 levels by the end of this decade. But the last we read that in June this year, Biden administration granted a two-year exemption from any possible tariffs levied on the importation. That may ease the situation in the U.S. for the while.
Closing Remark
Environment minister from over 40 countries met at the Petersburg Climate Dialogue in Berlin on July 18-19 to prepare for the ground for this year’s annual United Nations climate conference. This year’s Conference of Parties (COP27) will be held in Sharm el-Sheikh, Egypt from November 7-18.
On the other hand, the Latin America and Caribbean Climate Week (LACCW2022) met in Santo Domingo for the Climate Week and wrapped up their meeting on July 22. It reported that they have helped to build crucial regional momentum in the fight against climate change ahead of the UN Climate Change Conference COP 27 in November. They have brought together more than 1,700 participants from government, multilateral organizations, the private sectors and civil society, for more than 160 sessions, discussing climate finance to build resilience to climate change.
The World Meteorological Organization discussed the state of climate in Latin America and Caribbean. It pointed out deforestation rates in the region are highest since 2009. Also the Andean glaciers have lost more than 30% of their area in less than 50 years and this will increase the risk of the increasing sea-level rise and ocean warming. This will affect the coastal livelihood, tourism, health, food, energy and water security.
This meeting created the awareness to tackle the ongoing environmental crisis and involve the countries and organizations in the region to develop this allies and practice the strong partnerships to realize a truly transformative change. This will set the region’s course during the COP27 for a better future.
