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DEFENDING EUROPE’S ENERGY POLICIES: The Europeans’ post-invasion energy strategy quickly became to survive the winter, and they’ve come a long way since one Czech ambassador’s grim pledge to “burn anything we can” to keep people warm and to generate electricity.
But it’s all left leaders needing to rationalize, to themselves and their environmentalist critics, the devotion of more time and resources to finding new sources of gas — and the burning of more coal — to buy more time.
Before his journey to the COP27 climate conference on Friday, EU climate chief Franz Timmermans said: “If we can’t get our citizens and industries through winter, there will not be a climate policy left.”
European leaders have been accused of walking back on their green ambitions for seeking out LNG imports and reopening or extending the lives of coal plants.
These criticisms have been leveled both by environmental groups, who want to see a swift phasing out of fossil fuels, and by those to the right who feel vindicated in their opposition to the path of energy transition that Europe chose.
Although the EU has accelerated decarbonization benchmarks since the war started, and may do so again, Timmermans said, he disputed the notion that Europe could reasonably be expected to fully replace Russian pipeline gas with wind and solar right now.
“You cannot overnight replace that with renewables – it takes time. So it is clear that because of these two reasons, we will have to look for alternative sources of fossil fuels in this interim period,” Timmermans said.
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EU LONG-RANGE FORECAST PREDICTS WARMER-THAN-USUAL WINTER: Europe should see a warmer-than-usual winter this year, according to a new seasonal forecast from the EU’s Copernicus Climate Change Service (C3S), further easing pressure on EU gas stocks at a critical moment for the bloc.
The C3S report says there is a 50% to 60% likelihood that temperatures will be “significantly” above historic norms across much of central and southern Europe, and in large swaths of the UK. Coastal regions along the Baltic, Mediterranean, and North Sea are also almost “certain” to see warm temperatures exceeding historical averages.
Altogether, the mild long-range forecasts have put the bloc in a stronger-than-expected position heading into this winter, and bolstered analysts’ expectations that they have enough gas stored to last through winter.
Countries in the bloc have filled their storage tanks to 95% capacity so far, while Germany, which previously relied on Russia for roughly half its natural gas supply, has filled its tanks to an even-higher 99% capacity.
YELLEN: RUSSIAN OIL PRICE CAP WILL BENEFIT CHINA AND INDIA: Treasury Secretary Janet Yellen said at the G20 summit in Bali that the G-7 Russian oil price cap plan will benefit both China and India regardless of their participation, reiterating the cost-saving benefits for buyers just weeks before the oil cap takes effect on Dec. 5.
Russian oil “is going to be selling at bargain prices and we’re happy to have India get that bargain or Africa or China. It’s fine,” she said.
Yellen also told Reuters that the U.S. is happy for India to continue purchasing Russian crude for prices above the cap, so long as it does not use any Western insurance, finance, and maritime services bound by the price cap plan to do so. (India now imports roughly 12% of its total crude supply from Moscow, up from just 2% from the start of the year.)
Yellen reiterated that Russia will still see a cut to revenues even without buy-in from China or India, due to an EU ban on Russian imports slated to take effect Dec. 5.
“Russia is going to find it very difficult to continue shipping as much oil as they have done when the EU stops buying Russian oil,” Yellen told Reuters. “They’re going to be heavily in search of buyers. And many buyers are reliant on Western services.”
… MEANWHILE, CHINA SLOWS RUSSIAN IMPORTS AMID UNCERTAINTY: Chinese refiners have started to slow their purchases of Russian crude for the month of December due to the broad uncertainty surrounding both the EU’s ban on Russian oil imports and the G-7 price cap plan.
So far, between five and seven December-loading cargoes have been sold to Chinese buyers—a sharp drop from the country’s average of 30 Russian cargoes per month. And independent refiners are opting to buy from more expensive alternative suppliers, such as Brazil or West Africa, as they seek to protect against a possible Russian oil disruption.
“It’s better to secure some cargoes, just in case Russian supply is not sustainable,” a Shandong-based oil trader told Reuters.
Meanwhile, state firms are weighing the risks of discounted Russian supplies versus potential sanctions for any cargoes loaded after Dec. 5.
Spot discounts for cargoes provided by Russia “need to be deep enough to warrant any meaningful risk taking,” said one state oil trading manager.
WORLD’S LARGEST FLOATING WIND FARM PRODUCES ITS FIRST POWER: Hywind Tampen, expected to be the “world’s largest” floating wind farm by the end of 2022, has started producing its first power off the coast of Norway, Equinor announced today.
The power was sent to an oil and gas field in the North Sea. Equinor plans to bring online seven additional turbines in the coming weeks, bringing capacity to an estimated 60 MW by the end of 2022. Its four remaining turbines will be brought online in 2023.
Once completed, Equinor said, the Hywind Tampen project will bring 88 MW capacity online, and meet 35% of electricity demands from the Gullfaks and Snorre oil and gas fields in the North Sea.
HUNDREDS PROTEST AT COP27: Hundreds of environmental activists massed outside the COP27 climate summit in Sharm el-Sheikh this weekend, demanding among other things, that leaders of industrialized nations provide compensation to help vulnerable countries weather global warming.
The demonstration was by far the largest protest seen outside this year’s U.N. climate conference, and sparked complaints from Germany. “We expect all participants in the U.N. climate conference to be able to work and negotiate under safe conditions,” Germany’s Foreign Ministry said in a statement.
PERMITTING REFORM AMONG CONGRESS’S LOOSE ENDS: The House and Senate are back in session today, and leadership has a number of priorities to address before the new Congress is sworn in next year, including passing a defense bill and a government funding bill.
Permitting reform remains on that list, too (although where it ranks is unsure), after Sen. Joe Manchin’s Energy Independence and Security Act of 2022, designed to cut down environmental reviews and approval times across categories of energy infrastructure, floundered back in September.
President Joe Biden is totally on board. He urged Congress to pass a permitting reform bill in public remarks last month, saying the process is “too cumbersome and too time consuming,” and the legislative agreement Majority Leader Chuck Schumer struck with Manchin back in July provided for Congress to take up permitting reform this year.
Manchin, in remarks at an event at Stanford University earlier this month, indicated he wants to have another go at passing his permitting bill as a rider, this time by adding it to the defense bill.
HSBC EXPAT TAKES ON GREEN FINANCE IN NEW OP-ED: Stuart Kirk, the former HSBC executive who left the banking giant after a falling out with leadership over the merits of green finance, is taking on the sector again with charges of “pure virtue signalling” over net-zero goals.
Kirk, in an op-ed published Friday by the Financial Times, claimed the pledges among banks and asset managers to increasingly stem the financing of greenhouse gas emissions in pursuit of net zero are ill-conceived and based on bad math.
“What does it mean when an asset manager commits to a 30 per cent reduction in financed emissions? Nothing. Signatories can choose what assets to include in their calculations,” Kirk wrote. “Money market funds? Too hard. Multi-asset? Let’s worry about it later.”
Where the sector claims progress in selling equities or other vehicles representing permanent capital in the market, the real world impact on emissions is zero, Kirk said, because “permanent capital … cannot be withdrawn, it only changes hands.”
“If I’ve sold my oil shares, the buyer of them is now misaligned,” he wrote.
This debate over net zero and ESG more broadly continues to simmer in the U.S. and Europe. Executives of some of the top American financial institutions have said it’s necessary for the health of the economy to continue financing oil, gas and other non-green ventures, notwithstanding their firms’ commitments to reaching net zero emissions.
Proponents of ESG investing insist that disclosing risks related to climate change and directing capital to greener financial ventures over fossil fuel-related ventures is in the best interest of investors.
“Since all businesses affect social and environmental issues, for good or ill, all investment must consider risk, return and impact as part of fiduciary duty,” Al Gore and David Blood, who helped co-found green fund manager Generation Investment Management, wrote in the Wall Street Journal last week.
GERMANY NATIONALIZES GAZPROM SUBSIDIARY: Germany said today it has nationalized Gazprom’s German subsidiary, now known as Sefe— placing it under 100% federal ownership to help protect supply and prevent insolvency as Berlin braces for its winter without Russian fossil fuels.
The news comes just two months after Berlin took ownership of three refineries owned by Russian oil company, Rosneft, saying Russia is “no longer a reliable energy partner.”
The European Commission green-lit the plan over the weekend, deeming the $14.2 billion “necessary, appropriate and proportionate to remedy a serious disturbance” in a member state economy.
The move is part of a $250 billion rescue package adopted by Germany to help bail out energy companies and avoid a supply crisis this winter.
The Rundown
Washington Post As California’s wells dry up, residents rely on bottled water to survive
Bloomberg Electric truck stops will need as much power as a small town
Calendar
THURSDAY | NOVEMBER 17
10:00 a.m. 1324 Longworth The House Committee on Natural Resources will hold a hearing on Puerto Rico’s power grid development, and post-disaster reconstruction in the aftermath of Hurricane Fiona.
11:00 a.m. The Senate Energy and Natural Resources Committee will hold a hearing to consider the nominations of David Crane to be under secretary of energy for infrastructure; Jeffrey Marootian to be an assistant secretary of energy in the Office of Energy Efficiency and Renewable Energy; and Gene Rodrigues to be an assistant secretary of energy in the office of Electricity Delivery and Energy Reliability.
