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US AND EU VERSUS CHINESE STEEL: As they resolved their fight over steel and aluminum tariffs this weekend, the U.S. and European Union also announced a first-of-its kind initiative to promote low carbon trade of those two key commodities.
The idea is to establish a common way to measure the life-cycle emissions of steel and aluminum — among the most carbon intensive industrial sectors — and eventually place restrictions on imports that measure as dirty.
That’s bad news for carbon-intensive Chinese steel, which is responsible for 55% of global steel capacity and warranted a special shout-out in the announcement.
China emits 2.5 times the amount of carbon per ton of steel compared to the U.S., and the agreement aims to stop Chinese dumping of steel in the U.S. and EU economies that distorts prices.
“The EU and U.S. are really trying to form a climate club in the steel and aluminum sectors,” Shuting Pomerleau, a Niskanen Center climate policy analyst who studies trade, told Josh. “The most likely way that they will move forward is to have tariff-free trade in the two sectors between the U.S. and EU and potentially impose some sort of ‘green tariffs’ on steel and aluminum from other countries, especially China.”
Compromise on CBAM? The agreement softens the blow from the EU’s introduction in July of its “CBAM” proposal to impose a border carbon adjustment on imports from countries that lack aggressive emissions-reduction policies, including the U.S. because it has not imposed any form of carbon pricing at the federal level.
White House climate envoy John Kerry had unsuccessfully lobbied the EU to put off the import tax idea, which he called a “last resort” that could complicate the global fight against climate change as a form of protectionism.
“This was trade protectionist policy masquerading as climate policy and a number of countries promised to put reciprocating tariffs on European products as result, setting up a dangerous precedent that could poison the well on global climate negotiations,” said Stefan Koester, a senior policy analyst at the Information Technology and Innovation Foundation.
But the new agreement acts as a sort of carveout for the steel and aluminum sectors, which were to be among the initial targets of the EU’s CBAM, along with cement, fertilizers, and electricity. The EU, by reaching an agreement with the U.S., is essentially acknowledging that American steel and aluminum is already cleaner than most competitors’.
“This agreement strikes me as the U.S. trying to work with the EU to have the aluminum and steel sectors exempt from the EU CBAM,” Pomerleau said.
US steel wins out: American steel has a particular advantage compared to competitors, as about 70% of domestic steel is produced using electric arc furnaces that use entirely recycled scrap, producing a much lower carbon footprint than blast furnaces.
Of the seven largest steel-producing countries, the U.S. has the lowest carbon emissions per ton of steel produced, according to the American Iron and Steel Institute.
Indeed, the U.S. steel industry is supporting the new agreement, which is an example of how some American industries with low carbon intensity will benefit from incorporating climate considerations into trade.
Koester said the agreement will also incentivize China to decarbonize its steel sector and accelerate innovation in clean production methods like green hydrogen. The U.S. and EU invited other countries to join the pact.
“A climate club based approach is a much more cooperative and less antagonist trade policy,” Koester told Josh.
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BIDEN PREMIERS IN GLASGOW: President Joe Biden called climate change an “existential threat” and “challenge of our collective lifetimes” at the opening of the UN’s COP26 conference this morning in Glasgow, Scotland, boasting of his administration’s efforts to bring down greenhouse gas emissions.
Biden discussed the “short-term sprint to 2030” by which his administration seeks to reduce U.S. emissions by at least 50% and the “marathon” task of reaching net-zero carbon emissions.
“Every region in the world can tell similar stories,” Biden said of the United States’s recent experience with extreme weather. “And in an age where this pandemic has made so painfully clear that no nation can wall itself off from borderless threats, we know that none of us could escape but worse that yet to come if we fail to seize this momentum.”
High prices represent ‘call to action:’ In his opening remarks, Biden said the global energy crunch should not stop countries from boosting clean energy.
“As we see current volatility and energy prices, rather than cast it as a reason to back off our clean energy goals, we must view it as a call to action,” Biden said. “High energy prices only reinforce there is a need to diversify sources, double down on clean energy development, and adapt promising new clean energy technologies.”
INTERIOR SETS UP NEW HURDLE FOR OIL AND GAS LEASING: The Biden administration for the first time will start to comprehensively analyze emissions from oil and gas lease sales on federal lands in a move that could forestall drilling, a potentially major story that was news-dumped before the weekend and reported by Josh.
The Interior Department’s Bureau of Land Management is deferring an unknown number of acres from lease sales in early 2022 that had been scheduled across 740,000 acres, primarily in Wyoming and Colorado, but also Montana, North and South Dakota, Nevada, New Mexico, and Utah.
Interior had scheduled those lease sales in response to a court ruling by a federal judge that found the Biden administration had acted illegally when it indefinitely paused new oil and gas leases.
What this is really about: The move is a step toward the Biden administration’s goal of reforming the leasing system by raising costs on producers and imposing stricter regulatory requirements.
Federal agencies previously have conducted reviews of potential greenhouse gas emissions from individual lease sales following court orders, but those often showed emissions to be small relative to a global scale.
Now, the Interior Department will begin to evaluate the cumulative impact of emissions from oil and gas leasing on public lands in multiple states, which would show a larger effect, and make it harder to justify new leases.
“What BLM has never done is complete a comprehensive analysis of the climate implications of the federal public lands oil and gas program,” said Erik Schlenker-Goodrich, the executive director of the Western Environmental Law Center.
In some ways, the move is similar to action Interior is already already taking to slow-walk oil and gas development in Alaska’s Arctic National Wildlife Refuge, or ANWR.
“They are getting closer to a world where they are trying to use environmental reviews to come up with reasons not to greenlight fossil fuel leasing,” said Kevin Book, managing director of ClearView Energy Partners. “The playbook is well established.”
BUT BIDEN STRESSES NEED FOR MORE FOSSIL FUELS NOW: Biden and Kerry say it’s not “inconsistent” for the White House to push for more oil and gas production in the short term to alleviate supply shortages that are leading to higher prices while also making the case for the world to move off fossil fuels at COP26.
“It’s just not inconsistent. If he [Biden] were asking them to boost their production over five years, I’d quit. But he’s not. He’s asking them to boost production in this immediate moment,” Kerry said on a call with reporters last night ahead of the U.N. climate conference.
Kerry said lower energy prices are essential to protecting economies as they make the transition to cleaner alternatives and that promoting stability in oil and gas markets will give countries the confidence to invest more in clean energy over time.
The conversations in Glasgow are being juxtaposed with an energy crunch in Europe, Asia, and to a lesser extent, the U.S., a problem that could produce a popular backlash against aggressive climate policies.
“If life is so miserable…and the prices go up and other things happen, I think it becomes more challenging to get the job done,” Kerry said.
Biden warns OPEC: Biden, too, was asked about his tricky balance during the close of the G-20 meeting this weekend.
“They have to get to their work, turn on their automobile, get their kids to school, the schoolbuses have to run,” Biden said.
High gasoline prices “have a profound impact on working class families,” Biden added.
He also continued to blame Saudi Arabia-led OPEC and its allies, led by Russia, for not doing more to increase their production, saying “it’s not right” for them to not come back from the sidelines more aggressively. Biden issued a vague threat if OPEC+ doesn’t do more.
“What we’re considering doing, that I’m reluctant to say before I have to do it,” Biden said.
G-20 FLOP AHEAD OF COP? Rich countries of the G-20 reiterated their commitment to “hold the global average temperature increase well below 2 degrees Celsius and to pursue efforts to limit it to 1.5 degrees Celsius above pre-industrial levels.”
The final communique released at the close of a G-20 meeting in Rome this weekend narrowed the timeline for getting to net-zero emissions, compared to language in the Paris agreement document, in which countries agreed to try and reach the milestone by the “second half of this century.”
The G-20, whose members are responsible for 80% of global emissions, agreed to reach carbon neutrality “by or around mid-century.”
But the most advanced countries in the world continued to disagree over the future of using coal in economies and could not agree to set an end-date to stop using coal-power within their borders.
Big coal users Australia, India, China and Russia pushed back hard against a target date, according to the New York Times.
The G-20 did agree to end financing overseas coal plants, but that was a mere formality since China — the last remaining funder — recently committed to stop its financial support.
Biden and Kerry disagree: Biden, in a closing press conference, said he is “disappointed” at the outcome and blamed China and Russia that “basically didn’t show up in terms of any commitments to deal with climate change.”
“More has to be done,” Biden added. “But it’s going to require us to continue to focus on what China’s not doing, what Russia’s not doing and what Saudi Arabia is not doing.”
Biden’s comments were slightly off-key from Kerry, who rejected the idea that the G-20 agreement offered nothing new and reflected “more of the same.”
“This document says keeping 1.5 degrees within reach will require meaningful, effective commitments and so forth,” Kerry said in the call with the press last night. “And everybody is buying into the notion we’re now working towards the 1.5.”
WHITE HOUSE PLANS FINANCING OF GLOBAL CLIMATE ADAPTATION: The White House announced plans to create a new emergency fund worth $3 billion annually to help finance developing nations’ climate change adaptation efforts.
The President’s Emergency Plan for Adaptation and Resilience, or PREPARE, will “serve as the cornerstone of the U.S. government response to operationalizing the President’s pledge and addressing the increasing impacts of the global climate crisis,” the White House says in a fact sheet.
The plan accompanies a broader long-term strategy document released by the White House detailing how the Biden administration hopes to reach its goal of net-zero carbon emissions by 2050 — a goal that still hangs in the balance as Democrats work through negotiations on their budget reconciliation package.
XI TO WRITE IN TO GLASGOW: Chinese President Xi Jinping will not join his global counterparts at the Glasgow climate summit either in the flesh or on video, electing instead to send a note to the conference.
The leader of the world’s single largest emitter of greenhouse gases will address the conference via written submission, which the United Nations said it will put online, Politico reports this morning.
Xi won’t be the only major leader from a top-emitting country to miss the event, as Russian President Vladimir Putin will not attend. Both countries will be represented, though.
WHITE HOUSE ‘CONFIDENT’ GOING INTO EPA SUPREME COURT CASE: National Climate Adviser Gina McCarthy said the White House expects the Supreme Court will maintain that EPA can regulate emissions within the power sector when it decides on a challenge to the agency’s authority under the Clean Air Act.
The court decided on Friday it will hear a consolidated case brought by coal companies and Republican-led states seeking to limit EPA’s ability to regulate greenhouse gas emissions produced during power generation.
“We’ll see what the Supreme Court might have in mind,” McCarthy said during a call with reporters. “But we’re confident that the Supreme Court will confirm what those have before them, which is EPA has not just the right but the authority and responsibility to keep our families and communities safe from pollution.”
SPOTTING A METHANE FEE LOOPHOLE: Democrats’ compromise version of their methane fee as part of their climate and social spending bill includes a potential loophole that might limit its effectiveness.
Arvind Ravikumar, a professor in the petroleum engineering department at the University of Texas, noted an exemption written into the updated language for methane emissions “caused by unreasonable delay in environmental permitting of gathering infrastructure.”
Ravikumar told Josh that provision is “basically a carve out” for producers in the Permian, the largest U.S. oil and gas basin, where gathering pipelines and offtake infrastructure is lacking.
Companies generally resort to flaring, which is a source of methane emissions when done improperly, if there is insufficient pipeline or other infrastructure to transport the natural gas for use. That lack of transport infrastructure could enable operators to seek an exemption to the fee.
“It’s not clear to me how ‘unreasonable delay’ is defined, but it could potentially be a big loophole for Permian operators,” Ravikumar said.
Democrats have modified the methane fee to accommodate concerns from centrist members, providing $775 million in subsidies to help oil and gas operators install methane monitoring equipment so they can better comply with the fee. It’s unclear if the new version will make it into final language that can pass the Senate.
The Rundown
New York Times Michael Bloomberg announces an effort to shut down coal in 25 countries
Washington Post South Africa has one of the most coal-intensive economies in the world. Can it change?
Calendar
MONDAY | NOV. 1
1 p.m. E2 will hold a virtual panel and press briefing, featuring House Select Committee on the Climate Crisis Chair Kathy Castor, to discuss the release of its “Clean Jobs America 2021 | Clean Energy Jobs By U.S. Congressional Districts” report, which will detail clean energy jobs data by congressional district.
TUESDAY | NOV. 2
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a business meeting to consider various nominations, including Willie Phillips to be a member of the Federal Energy Regulatory Commission, Geraldine Richmond to be Under Secretary for Science at the Department of Energy, Camille Touton to be Commissioner of Reclamation at the Interior Department, and Brad Crabtree to be an Assistant Secretary of Energy for fossil energy and carbon management.
THURSDAY | NOV. 4
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to examine the potential non-electric applications of civilian nuclear energy.
