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BIDEN SETTING LIMITS ON CHINA HAWKERY: President Joe Biden predicted a “thaw” in the contentious relationship between the U.S. and China in remarks after he and the rest of the Group of Seven agreed they need to work on “de-risking” relations rather than decoupling from the globe’s second largest economy.
The Biden administration, with this new take on China relations and several key policy decisions, is putting clear limits on the lengths it’s willing to go to challenge its primary geopolitical competitor in the CCP, whose cooperation it needs to reduce global greenhouse gas emissions.
The administration has sidestepped more aggressive decoupling between U.S. and Chinese industry with its recent tax guidance and solar tariff actions.
First with laxer IRA implementation: The Treasury Department’s recent guidance for the Inflation Reduction Act’s domestic content bonus credit is one area where the administration took a path more favorable to the status quo — or at the very least, one less punitive to Chinese industry than some China and trade hawks sought.
Treasury’s guidance requires solar projects taking advantage of the law’s renewable production and investment tax credits to use photovoltaic cells that are manufactured in America in order to get a 10% domestic content bonus credit. But the guidance excludes origin requirements for “subcomponents” that go into a cell, such as silicon ingots and wafers.
China controls some 98% of global ingot and wafer capacity, according to the DOE.
Then there’s solar tariffs: Biden’s solar emergency and tariff moratorium is protecting Asian cell and module imports that the Commerce Department found to be circumventing antidumping duties on Chinese products.
Biden vetoed the Congressional Review Act resolution last week that sought to cancel his moratorium, which he asserted again in his veto message is a “bridge” to keep the solar trade flowing while manufacturers at home can get their facilities built.
Members who voted for the resolution said allowing Chinese companies to continue to dump products allows Chinese companies to openly flout trade laws without consequence, and the issue was widely taken as another act in the U.S.-China competition saga.
House Ways and Means member Rep. Carol Miller, whose committee was responsible for advancing the solar CRA resolution to the full House, said Biden’s veto did a favor to the CCP and that the U.S. must “strategically decouple” from it.
“The U.S. must reorient its trade and foreign policies to focus on areas of comparative advantage, such as energy and agriculture exports,” she told us in a statement this morning. “For our national security, we must strategically decouple from China and promote American innovation and investment while building relationships with likeminded partners across Asia and Latin America.”
Democratic lawmakers overwhelmingly opposed the solar resolutions in each chamber, although no member really disputes the need to reshore manufacturing. The opposition was more about maintaining solar installations and heading off the ill effects to U.S. jobs of imposing tariffs on imports.
Samantha Gross, director of the Energy Security and Climate Initiative at Brookings, said Biden’s tariff decision made sense considering his climate goals and said, as other administration officials have, that China is the key player in climate change mitigation both for its manufacturing strength and globe-leading emissions.
“If you’re trying to think of an energy transition, if you want it sooner and cheaper, you’re not going to cut China out of the equation. You’re just not,” Gross told Jeremy. “There are some markets in which we’re just not going to beat China at their game.”
“I think the Biden administration understands how impossible [decoupling] is, and so they’ve been kind of trying to walk the middle,” she said.
How impossible is it? Congress wants to find out. The House gave overwhelming approval yesterday to a bill that requires the Treasury Department to conduct a study on the exposure of the United States to the financial sector of the People’s Republic of China.
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DOE CANCELS FUNDING OPPORTUNITY FOR CHINA-CONNECTED BATTERY COMPANY: The Department of Energy canceled negotiations with an EV battery manufacturer after Republicans raised objections to the prospect of the company, which manufactures batteries and performs research on battery technologies in China, receiving DOE funding.
The department announced last year that Microvast, a majority U.S.-owned company, was selected to receive a $200 million DOE funding award to build a separator facility for its battery manufacturing activities. The funding opportunity was as part of a $2.5 billion program authorized by the bipartisan infrastructure law for battery materials processing and battery manufacturing.
Some Republicans in Congress, most notably Energy and Natural Resources Ranking Member John Barrasso, asked the department to rescind the selection because of Microvast’s connections to China. Barrasso cited a declaration by the company that its operations “are subject to extensive PRC government regulation,” as well as findings by the SEC that the company failed to comply with the Holding Foreign Companies Accountable Act.
Barrasso then introduced legislation last week to bar the department from issuing funding awards to firms “beholden to Communist China.”
DOE confirmed yesterday that it elected to cancel negotiations with Microvast, although it declined to disclose the reasons.
“As responsible stewards of American taxpayer dollars, the Department of Energy maintains a rigorous review process prior to the release of any awarded funds, and it is not uncommon for entities selected to participate in award negotiations under a DOE competitive funding opportunity to not ultimately receive an award,” a department spokesperson said.
The spokesperson noted that applicants must disclose a significant amount of sensitive information during the negotiation process, suggesting the process may have run aground there.
The breakdown in negotiations plays into a larger debate about the future of U.S.-China business ventures, especially on advanced manufactured technologies like semiconductors and EV batteries where U.S. firms want to take advantage of Chinese expertise but are running into opposition.
DEMOCRATS RESIST DEBT CEILING DEAL WITH FOSSIL FUEL PROVISIONS: Liberal Democrats are drawing a line in negotiations over the debt ceiling against pro-fossil fuel permitting reforms.
Leading House and Senate liberals said yesterday that permitting reforms designed to speed oil and gas projects, repeal of any of the Inflation Reduction Act’s clean energy programs, and reductions in funding for agencies such as Interior or EPA are all off the table for them.
“The Republicans have taken tax breaks that Donald Trump gave billionaires off the table. The Republicans have taken defense spending off the table. We can make sure fast tracking of fossil fuel projects is also taken off the table,” Sen. Ed Markey said during a press conference yesterday.
House Republicans, including Rep. Garret Graves, who has been a leading negotiator on behalf of Republicans throughout, have said they’re optimistic the final deal will include permitting reform. The debt ceiling package Republicans passed late last month includes much of HR 1, which seeks to reform NEPA and facilitate more domestic energy production.
Negotiators are still working through permitting reform, something the White House has endorsed in a different manifestation, namely Sen. Joe Manchin’s bill.
O&G SECTOR METHANE DOWN AND WIDELY VARIABLE BY REGION: Reported methane and greenhouse gas intensity in the oil and gas sector declined 28% and 30% between 2019 and 2021, according to a new report, despite a rise in production over that period.
The 2023 Oil & Gas Benchmarking report, put together by Clean Air Task Force and Ceres using data reported by more than 300 companies in the sector, found the decline in methane was driven by reduction of emissions from pneumatic controllers, which operators use to control liquids and pressure at well sites.
Pneumatic controllers were still the largest source of total reported production-segment methane emissions and made up 67% of total reported methane emissions.
EPA’s supplemental methane proposal for oil and gas sources targets pneumatic controllers directly, proposing a zero-emissions standard for all “pneumatic pump affected facilities,” requiring controllers to be driven by electricity rather than natural gas.
Other highlights: The report’s top 100 producers include familiar names such as ExxonMobil, EQT Corporation, and Occidental.
ConocoPhillips was found to be the top GHG emitter and no. 4 emitter of methane in terms of volume, although its emissions intensity was significantly lower compared to smaller operators.
“It just shows how much of methane emissions are really just choices that companies make,” Andrew Logan, senior director of oil and gas, at Ceres, told Jeremy. “Anyone who’s in that bottom quartile could be much higher up if they wanted to, if they wanted to spend the money to replace equipment, to find leaks, to shift to different ways of producing.”
Total GHG emissions in the Permian Basin surpassed all other producing regions by a wide margin, although methane made up a much smaller proportion of its emissions than in Appalachia or the San Juan of New Mexico.
One reason the San Juan has a higher methane intensity is the prominence of older infrastructure throughout the basin that hasn’t been upgraded, Logan said.
HOUSE LAWMAKERS INTRODUCE BILL TO COMPLETE MVP: Rep. John Joyce of Pennsylvania and Rep. Miller introduced legislation yesterday to expedite completion of the Mountain Valley Pipeline.
The bill unilaterally approves all authorizations, permits, verifications, extensions, biological opinions, incidental take statements, and other approvals required for the construction and operation of the 303-mile pipeline and directs relevant agencies to issue permits within 21 days of passage.
It also bars any of the MVP’s authorizations issued before or after passage of the bill from being subjected to judicial review, mirroring language in Sen. Shelley Moore Capito’s permitting proposal, the RESTART Act.
It’s moving along on its own: The U.S. Forest Service last week gave its concurrence to issuance of right-of-way and temporary use permit to allow the pipeline to pass through the Jefferson National Forest, and the Bureau of Land Management subsequently granted right-of-way and the TUP.
But it’s hung up elsewhere lacking key permits, including a valid water quality certification from West Virginia after the Fourth Circuit tossed it.
The Biden administration recently endorsed completion of the pipeline. Secretary Jennifer Granholm said it would improve energy security, but in contrast to legislative proposals directing completion of MVP, she said the administration is not taking a position on outstanding authorizations or litigation surrounding the pipeline. The groups leading opposition to the pipeline and leading that litigation are generally politically aligned with the administration.
JP MORGAN MAKES $200 MILLION INVESTMENT IN CARBON REMOVAL: JPMorgan Chase agreed to invest more than $200 million to purchase carbon removal credits in an effort to help neutralize its carbon footprint and fight climate change.
“We’re jumping in the pool all in,” Brian DiMarino, JPMorgan’s head of operational sustainability, told the Wall Street Journal in an interview. “This is us putting our weight and our capital behind something we believe is truly important to bring to market now.”
The still-nascent carbon removal industry has gained traction in recent years, as it becomes clear that reducing fossil fuels alone will not happen quickly enough to reduce greenhouse gas emissions at the rate needed to fight climate change.
SAUDI OIL MINISTER WARNS OF MORE PAIN AHEAD OF JUNE 4 OPEC+ MEETING: “Speculators, like in any market, they are there to stay. I keep advising that they will be ouching,” Saudi Oil Minister Prince Abdulaziz bin Salman said today. “They did ouch in April. I don’t have to show my cards, I’m not [a] poker player … but I would just tell them, watch out,” he said, speaking at the Qatar Economic Forum in Qatar.
His remarks come after Saudi Arabia and other OPEC+ members announced more surprise voluntary oil cuts in April, causing a short-term spike in prices. Brent prices were trading mid-morning today at just under $77 per barrel, about $10 below where they were when OPEC+ announced the voluntary April cuts, according to Reuters.
TEXAS HOUSE PASSES BILL TO CURB RENEWABLE ENERGY GROWTH: Texas Republican House lawmakers voted yesterday to approve legislation boosting coal and natural gas power to increase grid reliability, legislation critics argue will hurt the state’s leading renewable energy sector and drive up consumer costs.
SB 7, which cleared the House in a 119-21 vote, is aimed at paying incumbent generators on the Texas grid more money so long as they can guarantee so-called dispatchable sources of energy, such as natural gas or other fossil fuels.
The vote comes after an earlier version of the legislation cleared the Texas Senate last month, but the version that advanced in the House was amended slightly. Now, the two chambers must iron out the final details and come to an agreement before it can advance to the desk of Gov. Greg Abbott.
Proponents say the legislation will increase reliability by rewarding power sources that can come online within two hours and run for at least four hours. The legislation is part of a Republican-led effort in the state to add additional gas-powered generation to the grid following Winter Storm Uri, the 2021 storm that caused 4.5 million Texans to lose power and resulted in 246 deaths.
FEW AWARE OF ESG: Public awareness of environmental, social, and governance framework in investing – or so-called “ESG investing” has not increased in the past two years, according to a new Gallup poll, despite a wave of pro- and anti-ESG legislation.
According to the survey, just 37% of Americans said they are “very” or “somewhat” familiar with ESG investing, nearly unchanged from two years ago, when 36% of voters said the same. Another 22% said they are “not too familiar,” while the majority of respondents, 40%, said they are “not familiar at all” with ESG.
In addition, a majority of respondents, or 59%, said they have “no opinion” when asked if they view the movement toward ESG as a positive or negative development, while the remaining 4 in 10 were nearly evenly split, with 22% saying they held a positive view of ESG investing, versus the 19% who held a negative view. Read the full survey here.
The Rundown
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