Daily on Energy, presented by API: ‘Carbon trade war’ standoff between Trump and the EU

“Depending on what form the carbon tax takes, we will react to it — but if it is in its essence protectionist, like the digital taxes, we will react,” Commerce Secretary Wilbur Ross told the Financial Times.

Treasury Secretary Steve Mnuchin also spoke out against carbon taxes at the World Economic Forum in Davos Switzerland last week, calling the idea “a tax on hard working people.”

The EU’s executive president Ursula von der Leyen has proposed a “carbon border tax” as part of her “Green Deal,” a package of regulations to go carbon-neutral in the bloc’s 28 member countries by 2050. She is not expected to finalize the border tax until 2021.

The EU is seeking to level the playing field with import tariffs to make their products more competitive with those produced in countries that don’t tax or otherwise put a price on carbon — like the U.S.

Forcing exporters of carbon-intensive goods like steel, aluminum, and cement to buy carbon allowances, as EU producers do under the bloc’s emissions trading scheme, would remove the incentive for European companies to move overseas to avoid paying the domestic carbon price.

“There is no point in only reducing greenhouse gas emissions at home, if we increase the import of CO2 from abroad,” von der Leyen said. “It is not only a climate issue; it is also an issue of fairness towards our businesses and our workers. We will protect them from unfair competition.”

First strike in a ‘carbon trade war’? Kevin Book, managing director of research at ClearView Energy, has previously predicted to Josh that the unequal performance of countries under the Paris agreement could spark a “carbon trade war,” where countries doing more to reduce emissions seek to penalize those that are not.

“You can’t have a regulated economy doing more, and a less regulated economy doing less without some sort of trade equalization,” Book said. “Tariffs are very likely to happen if differential compliance with the Paris agreement continues, which seems likely.”

Book said he interpreted Ross’s latest comments as a sign of escalating trade tensions with Europe, which have bubbled for months over other issues, such as automobiles.

“The Trump Administration has been signaling escalation with Europe for months, and as we have been long predicting, trade war seems to have moved to the Atlantic theatre,” Book said.

He dismissed the possibility that the Trump administration would retaliate by imposing carbon tariffs on other countries, which most experts say would be unfeasible until the U.S. imposes its own domestic carbon price.

“I interpreted his comments more as a willingness to strike back at Europe — period, full stop — than to do so specifically for carbon reasons,” Book said.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

THE PROMISE AND PERILS OF SMALL NUCLEAR REACTORS: Republicans and many Democrats have high hopes for small nuclear reactors as an answer to climate change, but the nascent technology faces daunting regulatory and economic obstacles.

“I am not optimistic that any kind of nuclear reactors will have any significant impact on climate change for the next 20 or 30 years,” said Allison Macfarlane, a former chairman of the Nuclear Regulatory Commission who is now a professor at George Washington University. “It’s really hard to make the economics of nuclear power work,” she told Josh.

Trump favors small nuclear: The Trump administration is betting on nuclear, even as it opposes most government-led initiatives to curb climate change. It is investing money into the research and development of new reactors and fuels, promoting faster permitting approvals, and even signing up to buy power from NuScale, the company racing to be the first to operate a small modular nuclear reactor. The Energy Department has invested more than $300 million in NuScale since 2014.

“I am very optimistic this can be a low-carbon tool moving forward,” Rita Baranwal, the Energy Department’s assistant secretary of energy for nuclear energy, told Josh in an interview. “It is essential to any country or community looking to minimize their carbon footprint.”

There are currently 25 different advanced reactors proposed by U.S.-based companies in various stages of development, according to the Energy Department.

Time and cost not on nuclear’s side: NuScale’s reactor, the farthest along, won’t be in commercial use until 2026, the company says.

Even if NuScale’s reactors begin operating on schedule, some nuclear experts doubt they’d be widely adopted.

While the smaller reactors have lower capital costs, they produce less electricity than a traditional reactor, meaning they don’t enjoy the same economy of scale.

New nuclear reactors could have a hard time competing in power markets with cheap gas and renewables, a disadvantage amplified when the federal government has no policy to price carbon.

Read more of Josh’s story in this week’s Washington Examiner magazine.

HOW MUCH DOES TRUMP’S NEW WATER RULE HELP FARMERS?: Former EPA officials and environmentalists say the Trump administration’s rewrite of Obama-era clean water protections actually helps oil and gas companies, miners, and real estate developers more — even as farmers have been one of the most powerful voices fighting the 2015 regulation.

That’s in part because normal farming and ranching activities have always been exempted under the Clean Water Act, even under the Obama administration’s rule, they say. Many of farmers’ concerns about the 2015 waters of the U.S., or WOTUS rule, were overblown and stoked by partisan criticism, former EPA officials who helped write the Obama-era rule say.

Farmers, though, say Trump’s rewrite, which sets a much narrower definition of what waters are covered federally, helps alleviate concerns that much of what they do would be subject to federal control or enforcement actions.

“There’s always that concern in the back of your mind: Is this something that the federal government is going to have jurisdiction over or not?” Jamie Tiralla, a farmer from Maryland, told Abby.

More on the political and regulatory dynamics in Abby’s story published this morning.

‘BILLIONS OF DOLLARS’ OF CARBON CAPTURE PROJECTS ON THE LINE: The Treasury Department is moving too slowly in issuing the rules of the road for carbon capture tax credits, paralyzing potential projects, said top Energy Department fossil energy official Steve Winberg.

The Internal Revenue Service doesn’t have a lot to show yet for the nearly two years of work it’s done to craft guidance to implement carbon capture tax credits, which Congress extended and expanded in a bipartisan budget deal in 2018. Winberg said the Energy Department has been “very active” in attempting to speed along the IRS’ work, but the delay is keeping projects waiting.

The tax credits are holding up “capital we need to get out into the marketplace,” Winberg said in remarks Tuesday, as he kicked off a cross-country roadshow on carbon capture technology.

DOE’S BROUILLETTE TO PROMOTE NUCLEAR IN BRAZIL: Energy Secretary Dan Brouillette plans to visit Rio de Janeiro this weekend to bolster energy cooperation between the two countries, specifically on nuclear.

Brouillette and Bento Albuquerque, Brazil’s minister of mines and energy, will convene the first meeting of the U.S.-Brazil Energy Forum, which Trump and President Jair Bolsonaro launched in March 2019.

Brouillette on Sunday will lead a roundtable discussion with U.S. nuclear energy industry representatives.

Next Monday, Brouillette and Albuquerque will hold a press conference on the “importance of nuclear energy and bolstering the energy relationship between the U.S. and Brazil,” the Energy Department says. Exporting advanced nuclear technologies is a key plank of the administration’s agenda.

CONSERVATIVE CLEARPATH GIVES $500K TO SUSAN COLLINS: The conservative group ClearPath Action Fund is giving $500,000 to help re-elect Sen. Susan Collins, the centrist Republican trying to hold onto her seat in Maine.

ClearPath, in a press release Tuesday, cited Collins’ leadership on promoting energy storage technologies and her support for increasing R&D funding for the Energy Department.

ClearPath is spending $2 million overall to support Republican candidates in 2020, including Sens. John Cornyn of Texas, Cory Gardner of Colorado, and Martha McSally of Arizona, along with Reps. Dan Crenshaw of Texas, Tom Reed of New York, Fred Upton of Michigan, Cathy McMorris Rogers of Washington, and more.

GREENS TARGET VULNERABLE CORY GARDNER: The Alaska Wilderness League Action is launching a six-figure ad campaign targeting Gardner for his environmental and public lands record.

The campaign will include television ads in the Denver media market, as well as statewide digital ads, specifically focused on Gardner’s decision supporting the 2017 GOP tax bill that allowed oil and gas drilling in the Arctic National Wildlife Refuge.

Gardner is expected to face off against John Hickenlooper, the former Colorado governor and Democratic presidential candidate, in one of the most competitive 2020 races. Trump lost Colorado by five percentage points in 2016.

SIERRA CLUB FINDS FAULT WITH NYC TRANSMISSION LINE: Sierra Club is drawing heat from energy analysts for releasing a statement Monday opposing a planned transmission line to deliver hydropower from Montreal to New York City.

The liberal environmental group contributed to a report with the Independent Power Producers of New York, which counts fossil fuel generators among its members, finding that the Champlain Hudson Power Express transmission line “will not reduce climate-related emissions and, in fact, may increase overall emissions.”

The report claims reductions in carbon emissions from hydropower displacing fossil fuels would be “offset by increased emissions elsewhere” by “squeezing out” in-state renewables and energy efficiency.

Noah Kaufman, an energy economist at Columbia University’s Center for Global Energy Policy, took exception to Sierra Club’s position, noting transmission lines are key to delivering clean energy from producing to consuming areas.

“Long distance power transmission lines are critical to deep decarbonization. Why is @SierraClub peddling this propaganda?” Kaufman tweeted.

Such projects have historically been hamstrung by local opposition from people living near the planned power lines — a problem known as not-in-my-backyard-ism, or NIMBYism.

CORPORATIONS BUYING MORE CLEAN ENERGY THAN EVER BEFORE: Total corporate clean energy purchase agreements were up more than 40% in 2019, according to new data from Bloomberg NEF.

Corporate purchases of clean energy totaled more than 10% of all renewable capacity added worldwide last year, the group found. The bulk of these purchases were in the U.S.

The data shows corporate buyers “are reshaping power markets and the business models of energy companies around the world,” said Jonas Rooze, BNEF’s lead sustainability analyst.

Tech companies lead the way: Google alone signed agreements to purchase more than 2.7 gigawatts of clean energy in 2019. That number includes a September announcement of 1.9 GW in contracts in six countries, which is the largest single clean energy purchase by a company to date. Facebook, Amazon, and Microsoft were the three next biggest corporate buyers in 2019.

‘OK GOOGLE, STOP SPREADING CLIMATE MISINFORMATION’: House climate committee Chairwoman Kathy Castor of Florida is accusing Google of allowing YouTube, its subsidiary, to spread false information about climate change science.

The millions of views YouTube drives to such videos runs counter to Google’s promise to proactively address climate change, Castor wrote in a letter Monday to Google CEO Sundar Pichai. Her letter comes after a recent report from the nonprofit Avaaz that found “climate misinformation” videos have nearly 21 million collective views on YouTube.

Castor is asking Pichai that YouTube immediately remove “climate disinformation” videos, stop monetizing such videos, and add “climate misinformation” to its list of borderline content, which the video service flags as harmful false information.

GOP SENATORS QUESTION EV TAX CREDIT ENFORCEMENT: The group of senators wants the Internal Revenue Service to explain reports that potentially up to $72 million in electric vehicle tax credits could have been erroneously claimed between 2014 and 2018.

“It is troubling that these improper payments continue and have more than doubled in size in the eight years since they were first reported,” the senators, led by Wisconsin’s Ron Johnson, Iowa’s Chuck Grassley, and Wyoming’s John Barrasso, wrote IRS commissioner Charles P. Rettig in a letter Monday.

The senators say the erroneous claims, and the lack of an IRS process to identify and prevent them, is “even more concerning” amid a debate in Congress to expand the EV tax credits. Barrasso in particular, as well as other oil-state senators, have strongly opposed any extension and have sought to eliminate the incentives.

GREAT LAKES SENATORS SEEK MORE FUNDS FROM TRUMP: The bipartisan group of senators are asking the White House at least maintain funding for the Great Lakes Restoration Initiative at the $320 million appropriated in fiscal year 2020, if not increase it.

Their plea comes as Trump readies his latest budget request and may not make much of a difference, given recent history. The White House has consistently proposed to slash funding for the Great Lakes initiative, though Congress has typically restored it.

The Rundown

New York Times With 130-mile coast, New Jersey marks a first in climate change fight

Associated Press Northeast governors slow to embrace regional climate pact

Bloomberg Cheap natural gas is about to kick more coal out of Europe

Greentech Media BlackRock targets storage with new multibillion-dollar renewables fund

Calendar

WEDNESDAY | JAN. 29

10 a.m. 406 Dirksen. The Senate Environment and Public Works Committee holds a hearing entitled, “Stakeholder perspectives on the importance of the U.S. Chemical Safety and Hazard Investigation Board.”