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‘THE PRIZE’ AUTHOR VERSUS IEA: Daniel Yergin, vice chairman of IHS Markit, is challenging the International Energy Agency’s surprising call this year that new oil and gas exploration should immediately stop in order for the world to reach net-zero emissions by 2050.
Yergin called the IEA’s stark new finding a “very strange thing” and “not realistic” and warned that “preemptive underinvestment” in oil and gas can “come back to haunt us,” speaking in an interview posted today with Josh and Neil Chatterjee for the latest episode of the “Plugged In” podcast.
Yergin, the Pulitzer Prize winning author of “The Prize” and oil historian, is influential with governments across the world and among industry leaders, and is considered a guru on energy, geopolitics, and the global economy.
His IHS Markit puts on the annual CERAWeek energy industry conference in Houston, which Yergin told us he hopes to resume next March in-person after it was held remotely this year and canceled in 2020 because of the pandemic.
Why the IEA report matters: Yergin said the findings from the group are already being used as justification for governments to restrict fossil fuel production and could accelerate investors cutting off funding for such projects.
He also claimed IEA’s report informed a decision by organizers of the U.N.’s COP26 climate conference to give the oil and gas industry no official role in the summit (although fossil fuel interests are very present at the event).
“If your issue is emissions, you might want to have the people who have the engineering muscle to do something about it there rather than a lot of declarations about what’s going to happen,” Yergin said, accusing wealthy countries such as the U.S. and nations of the European Union of being in “denial” about the energy crisis occurring during the conference.
“Policies being made about energy and climate should also include an understanding of the fundamentals of energy supply,” Yergin said.
Yergin accused IEA, a Paris-based group with a conservative reputation known for promoting global energy security, of being unclear about the purpose of the report.
“Is it meant to show how hard it is and what the challenges are [to reach net-zero], or is it meant to be a policy prescription?” Yergin said. “You get both messages. The IEA really needs to clarify what its scenario is because of how it’s being used.”
IEA Director Fatih Birol has said the group’s statement essentially means “no new exploration activity” but that oil and gas fields already approved for development can continue producing.
He underscored the IEA is basing its position on there also being a drastic fall in demand the group says must happen to reach net-zero emissions, but it’s an open question if governments actually impose policies to restrain fossil fuel use.
‘Square the circle’: The IEA, however, issued another surprising finding last month saying the way to address an energy investment shortfall — which could lead to price shocks happening now to continue throughout the decade — is to boost spending on clean energy considerably and to not increase oil and gas investments. Yergin found that distinction to be inconsistent.
“We are looking for IEA to square the circle,” Yergin said. “Where are they? IEA is the world’s energy watchdog, but it’s suddenly, overnight, changed its bark.”
Yergin warned of a looming “north-south” divide in which developed countries, representing 20% of the world, push to move off fossil fuels, while the rest of the world, led by China and India, is seeing its energy demand grow.
“The only answer [from the IEA] was, ‘Well, we should just have more renewables faster,’ but what we are seeing in the global supply chain disruption should be a cautionary word about getting the timing right,” Yergin said.
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WORLD NARROWS ‘EMISSIONS GAP’ WITH NEW PLEDGES, UN SAYS: New national emissions pledges announced before and during COP26, if enacted, could limit the range of global warming to between 1.9 and 2.1 degrees Celsius, the U.N. said this morning in an update of its “emissions gap” report from a few weeks ago.
That’s higher than the IEA’s revised estimate that new commitments could hold warming to 1.8 degrees Celsius. But it’s a significant improvement from findings in the U.N.’s report released Oct. 26 that only took into account new or updated pledges as of Sept. 30.
That report found pledges would leave the world on track for a global temperature rise of at least 2.7 degrees this century.
The U.N., in its amended report, reviewed 33 new emissions mitigation pledges for 2030, bringing the total of such commitments to 152, covering 88% of global greenhouse gas emissions.
The new projections from the IEA and U.N. still exceed the Paris agreement’s more ambitious target of keeping warming to 1.5 degrees.
Even considering the recent updated pledges for 2030, annual global emissions would need to be roughly halved by 2030 to become consistent with 1.5 degrees, the U.N. said.
METHANE FEE WOULD HIT SMALL PRODUCERS, ANALYSIS FINDS: House Democrats’ methane fee in the Build Back Better Act, even in its compromised form, could cost the petroleum and natural gas industry $1.3 billion in 2025, according to an analysis released this morning by Rystad Energy, a research group.
Although the latest version of the bill softens some of the previously proposed provisions — by allowing a ramp-in period before the fee is imposed and providing funding to operators — the latest iteration will still have a “profound economic impact,” especially on smaller onshore producers.
But the group predicts the number of oil and gas producers that will be subject to the proposed fee — those with methane intensity levels above the allowed thresholds of 0.2% for production and 0.05% for gathering & boosting — will be “relatively low.”
Rystad’s estimated cost impact in 2025 assumes producers continue output and methane intensity at 2019-2020 levels on average, which is unlikely if operators are coaxed into improving by new regulations and subsidies provided in the bill for leak detection equipment.
“The actual impact in 2025 will be south of $1 billion based on base case production growth and expected improvements in methane intensity,” said Artem Abramov, head of shale research at Rystad Energy.
PLEDGE TO STOP OVERSEAS FOSSIL FUEL FUNDING GROWS: Germany and the Netherlands, along with El Salvador, have joined a group of more than 20 countries vowing to end government funding of overseas coal, oil, and gas projects by the end of next year and prioritize clean energy finance instead.
The non-binding pact emerged last week as one of the key pledges made at COP26, and originally included as signatories the U.S, United Kingdom, Italy, and Canada.
With the additions of the new countries, public investments to be shifted from fossil fuels to cleaner energy could now amount to at least $21 billion per year if signatories follow through with their pledges, according to Oil Change International.
Still, the three largest fossil fuel financiers, China, Japan, and South Korea, did not sign the pledge.
UK BACKS ROLLS-ROYCE SMRS: Rolls-Royce formally launched its small modular nuclear reactor business yesterday, having secured £210 million ($284 million) in grant support from the U.K. government after receiving £195 million in initial private investment.
The funding will support Rolls-Royce’s plan to build 16 SMR plants, each of which is designed to generate enough electricity to power about a million homes.
Rolls-Royce’s ambitions support a chief energy priority of Prime Minister Boris Johnson, who is chasing more nuclear generation in support of his government’s target to have 100% clean electricity by 2035.
STUDY COUNTS COSTS OF RETIRING DIABLO CANYON: New research from Stanford University estimates that California would be able to reduce its power sector emissions by over 10% of 2017 levels if it were to delay retirement of the Diablo Canyon nuclear plant until 2035.
That timeline would also save $2.6 billion in power system costs, while up to $21 billion could be saved by continuing the plant’s operations beyond 2045. Diablo Canyon, the last operating nuclear plant in California, is currently scheduled to be retired by 2025.
‘RENEWABLES ON THE RISE’: A new report developed by Environment America Research & Policy Center and Frontier Group details significant growth in the renewable energy sector over the past decade, with the U.S. now producing 23 times more solar power and nearly three times more wind power than in 2011.
California, Texas, and North Carolina saw the most growth in solar, and Texas, Oklahoma, and Iowa were top-three in wind growth.
IT’S ELECTRIC…VEHICLES: Washington Gov. Jay Inslee has announced a new executive order to electrify the state government’s light vehicle fleet by 2035. The order targets 2040 to transition the state’s heavy-duty fleets to zero-emissions vehicles.
The Rundown
New York Times Winter heating bills loom as the next inflation threat
New York Times Can Glasgow deliver on a global climate deal?
Bloomberg Net-zero alliance plans to reject gas, nuclear as green assets
Calendar
TUESDAY | NOV. 9
The House and Senate are out.
