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YELLEN WORKS ON PRICE CAP IN ASIA: Janet Yellen traveled to Asia for the first time as treasury secretary this week to build support for a cap on the price of Russian oil—a first-of-its-kind plan that, if successful, could cut funding for Vladimir Putin’s war machine.
Yellen began pushing for the plan at a private dinner in April before presenting it more broadly to G-7 ministers, who announced their support for the plan last month. Its early momentum shows that leaders, particularly in the U.S., are serious about enforcing the effort—dismissed in its earlier days as a pie-in-the-sky notion with little chance of global buy-in.
But Yellen has sought to change that during her trip to the Indo-Pacific—securing conversations with her counterparts in Japan and South Korea, where leaders hope to hash out specifics of the price cap plan.
Following their sit-down, Yellen and Japanese Finance Minister Suzuki Shunichi reaffirmed their countries’ mutual support for the price cap plan, saying in a joint statement that they “welcome G7 efforts to continue exploring ways to curb rising energy prices, including the feasibility of price caps where appropriate,” while also ensuring the “most vulnerable and impacted countries maintain access” to energy markets.
She also had early talks with China and India: Yellen also spoke by phone to Chinese Vice Premier Liu He, and plans to meet with Indian Finance Minister Nirmala Sitharaman on the sidelines of the G20 summit in Bali, which began today.
Both countries have benefited heavily from discounted Russian crude, and were considered to be key holdouts to adopting the price cap, though it is unclear what levers the U.S. could attempt to pull to incentivize them to get onboard.
(Yesterday, Chinese Ministry of Commerce spokeswoman Shu Jueting suggested the price cap could risk exacerbating the Ukraine crisis and instead urged countries to “pursue peace talks,” CNBC reports. India has remained silent so far on the proposal.)
Speaking at the outset of the G20 summit, Yellen characterized the oil price cap as both a powerful tool that would deprive Putin of revenue, but also one that would help drive down consumer costs.
An oil price cap will “put downward pressure on prices for consumers in America and globally at a time when energy prices are spiking,” Yellen said.
The brass tacks: The goal of the plan is to set prices slightly above Moscow’s marginal cost of production—but as close to the number as possible, analysts told Breanne.
Striking the right price point is key: too low, and leaders risk Russia retaliating and shutting down production altogether; too high, and the cap fails to achieve its intended effect.
If the price cap works, “you’re not going to see any difference in the price of oil,” James Stock, a Harvard Kennedy School economist who served the White House Council of Economic Advisers under Former President Barack Obama, told Breanne. “The only thing you’d see is a difference in the price of revenues to Russia, and the profits of the refiners who are able to purchase the Russian oil.”
Oil exports accounted for nearly $100 billion in revenue for Moscow during the first 100 days of its war in Ukraine, according to a report from the Center for Research on Energy and Clean Air.
But the risks of Russia shutting down production are high, too—and some analysts have predicted such a move could cause oil prices to rise above $200 a barrel. (Most expect a price closer to $140 a barrel, however—still a giant leap from the $120 peak seen in early June.)
Russia opting to shut down oil production would be a violation of its OPEC agreements, Simon Johnson, an MIT professor and former chief economist at the International Monetary Fund, told Breanne in a recent interview.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). 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.
MANCHIN CHALLENGES ACCOUNT THAT CLIMATE NEGOTIATIONS ARE DEAD: Sen. Joe Manchin is disputing reports claiming he said outright that he wouldn’t support any climate-related provisions in Democrats’ reconciliation package.
Manchin said the 9.1% inflation rate reported for June was “a whole new page” and that he told Majority Leader Chuck Schumer he wanted to see July’s numbers, as well as whether the Federal Reserve would touch interest rates, before putting his name next to green energy spending and tax hikes.
“I can’t make that decision on, basically, on taxes of any type and also on the energy and climate because it takes the taxes to pay for the investment into clean technology that I’m in favor of,” Manchin told a West Virginia radio host Friday morning. “But I’m not going to do something and overreach that causes more problems.”
The July figures will show whether Democrats need to adjust the scope of their bill, Manchin said. He also spoke positively about the state of negotiations over the past few months.
Where it started: The Washington Post reported last night that Manchin told party leaders he wouldn’t support a package that includes new spending and tax increases.
Democrats have been hoping to squeeze the climate and energy provisions into the budget reconciliation package after Manchin opposed the party’s $2 trillion “Build Back Better” bill in December.
Without Manchin’s support, the package is effectively dead in the water, since no Republicans will vote in favor of the effort.
“I’m not going to sugarcoat my disappointment here,” Senate Finance Committee Chairman Ron Wyden, who has been involved in the crafting of the reconciliation package, said in response to last night’s news.
Greens react: Environmental groups shared anger at reporting that Manchin is a no-go on climate, saying that Manchin has been stringing Democrats’ and the package’s proponents along.
“Senator Manchin has spent nearly two years subjecting us all to the whims of his chaotic bad-faith agenda,” said Jamal Raad, executive director of Evergreen Action. Raad said the party should remove Manchin from his post as chair of the Energy and Natural Resources Committee.
Wenonah Hauter, executive director of Food & Water Watch, said Biden must “take matters into his own hands” and declare a climate emergency, as well as act to halt all new drilling on federal lands and waters.
DC TO BECOME SECOND EAST COAST CITY WITH GAS BAN: Washington, D.C. is expected to be the second city on the East Coast to ban fossil fuel boilers and water heaters in most new buildings, following in the steps of New York City, after members of the D.C. city council voted unanimously to advance a pair of clean energy bills this week.
Supporters of the two clean energy bills—which would prohibit the use of fossil fuels in most new commercial and district-owned buildings beginning in 2027 and 2025, respectively—say the legislation would help D.C. in delivering on its clean energy goals, since building emissions account for roughly three-quarters of the District’s total emissions.
Both efforts are supported by D.C. Mayor Muriel Bowser, whose office described the pair of bills as a “huge step” in reaching the District’s goals of a “better, greener and more sustainable path forward[.]”
Support for the fossil fuel heat-banning legislation comes after New York City adopted a similar ban earlier this year. Momentum for the idea has also spread across the West Coast, and in May, Washington state became the first state in the country to mandate electric heat pumps for most new buildings beginning in 2023. Read more about the District’s effort here.
MACRON WARNS COUNTRY TO PREPARE FOR RUSSIAN GAS SHUTOFF: French President Emmanuel Macron warned the country yesterday to prepare for a total cutoff of Russian natural gas supplies, and urged citizens to prepare to conserve energy, including by turning off public lights.
Speaking in a national televised interview to mark the country’s Bastille Day holiday, Macron said Russia “is using energy, like it is using food, as a weapon of war.”
Macron said his country has been preparing a raft of contingency measures in the event of an abrupt Russian gas cutoff, including crafting a national “sobriety plan” to help residents conserve energy, such as by turning off lights when they’re not useful.
France, which imports roughly 17% of its gas from Russia, is less dependent on Moscow for energy supplies than some of its EU neighbors, including Germany, which relies on Russia for 35% of its supply.
Still, his remarks come as Western leaders warn with increasing urgency that Russia could be using a temporary shutdown of its key natural gas pipeline as a pretext to more permanently block gas delivery to the EU— sending the bloc into crisis mode as leaders scramble to secure energy alternatives and fill their gas storage tanks ahead of winter. Read more from Breanne here.
A CASE STUDY IN WHAT’S HOLDING BACK WIND: A new report from conservative clean energy group ClearPath charts out how local laws restricting the construction of wind farms and new transmission infrastructure limit the degree to which the country can rely on wind power to decarbonize the power sector.
Using the Hawkeye State as a case study, analysts found that even in a wind-friendly state like Iowa (which in 2020 got 57% of its electricity from wind — a higher share than any other state, per EIA) local regulations are holding back wind from carrying the load it must in order to decarbonize at scale.
Wind deployment must grow between 3 and 17 times 2020 capacity, depending on the net-zero-by-2050 scenario, according to the report. However, in Iowa, a number of counties have restrictions in place ranging from temporary to indefinite moratoriums on wind development to outright prohibitions.
There is also opposition to new transmission infrastructure, without which there is no place for new wind, the report said.
Rich Powell, ClearPath’s CEO, said the report shows “how challenging a clean energy transition would be if we put all our eggs into one basket” and that policymakers should support nuclear energy, as well as coal and gas matched with carbon capture, in addition to renewable sources in order to reduce emissions.
The Rundown
Politico EU EU green chief calls for day of memorial for climate victims
Reuters Singapore sets up first battery storage system to improve port energy usage
Calendar
TUESDAY | JULY 19
1:30 p.m. The Department of the Interior’s Interagency Working Group on Mining Regulations, Laws, and Permitting will hold the first in a series of three public listening sessions to gather information and develop recommendations for improving federal hardrock mining regulations, laws, and permitting processes.
