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IMF SEES PRIVATE SECTOR FINANCING CLEAN ENERGY IN DEVELOPING COUNTRIES: The private sector will have to shoulder the burden of financing clean energy spending in developing countries through 2030, the International Monetary Fund said today, warning that governments risk high debts if they try to reach 2050 net-zero goals with public funds.
The IMF laid out the projections relating to developing countries – which currently emit around two-thirds of greenhouse gasses – in blog posts ahead of the IMF and World Bank’s annual meetings next week in Marrakech, Morocco, and the IMF’S forthcoming Fiscal Monitor and Global Financial Stability Report (GFSR). The two blog posts are two chapters within the IMF’s upcoming report.
Here’s what they found:
Private sector support needed for the bulk of investments: The private sector will need to supply about 80% of the necessary climate investments by 2030 – and that number rises to 90% when China is excluded.
As the report lays out, while China and other growing economies have the necessary domestic financial resources, many other countries do not have the infrastructure that can deliver large amounts of private finance. Attracting international investors is also a big challenge, as a number of developing nations lack the investment-grade credit that institutional investors desire. Furthermore, few investors have experience in these countries and are able to take the risk.
But here’s another issue that arises, the report outlines: “Beyond these challenges, climate policies and commitments at most major banks are still not aligned with net-zero climate targets, even when they do have policies intended to reduce emissions.”
Risk of high debt: Countries risk large fiscal costs relying heavily on spending measures, such as subsidies for renewable energy – which could possibly raise debt by 45-50% of gross domestic product by midcentury.
“High debt, rising interest rates, and weaker growth prospects will further make public finances harder to balance,” IMF says. “But prolonging ‘business-as-usual’ leaves the world vulnerable to warming.”
The issue with carbon pricing: The IMF also asserts that carbon pricing is a necessary baseline measure and should be an integral part of any policy package – but the measure alone is not always sufficient to reduce emissions.
The policy measure faces political opposition in a number of countries – the U.S. included – but the IMF identified Chile, Singapore, and Sweden as examples of where such resistance could be overcome.
But in the event that carbon pricing becomes more common, the IMF recommends that it should be complemented with other mitigation measures “to address market failures and promote innovation and deployment of low-carbon technologies.” The report suggests a proposal calling for an international carbon price floor, varied across countries at different levels of economic development. The revenues would be shared across countries.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). 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.
GREEN POLICIES COULD GET NEW LIFE THROUGH EPA PROGRAM: The EPA in September announced the details for a $4.6 billion program aimed at reducing greenhouse gas emissions by allowing lower-level governments to develop plans to fight pollution and compete for funding for their proposals. Birthed by funding from Democrats’ sweeping climate bill passed last year, the Climate Pollution Reduction Grants could pay for a bevy of green provisions that could not be passed at the federal level — including a clean electricity standard, cap and trade programs, carbon taxes, streamlining permitting for renewable energy projects, and more, Nancy reports.
But many of these policies had faced pushback from within the Democratic Party — particularly from centrist Democrat Sen. Joe Manchin, who has yet to decide if he wants to mount a tough reelection bid in 2024 or pursue a long-shot third-party run for the White House.
For example: A $150 billion clean electricity program, one that would reward utilities that switched to renewable energy from burning fossil fuel and penalize those that do not, was cut out of Democrats’ original Build Back Better bill after Manchin expressed opposition to the provisions.
The other provisions that are listed as possible funding initiatives have also faced notable opposition in Congress. Sweeping permitting reform has faced a deadlock in a divided Congress — and faces slim chances of passing both chambers before the election year. Democrats’ 2010 clean energy bill would have implemented an emissions trading system similar to the EU’s but was eventually stalled in the Senate. More on the program here.
U.S. SHALE PRODUCERS VOW TO HOLD BACK DRILLING, EVEN AS OIL PRICES RISE: U.S. shale producers have vowed to hold back on drilling even if oil prices surpass $100 per barrel, an extraordinary commitment that comes in the face of rising prices and as a response to what company leaders described last week as President Joe Biden‘s “war” on fossil fuel production.
At an energy conference last week in Oklahoma City, many companies cited the Biden administration’s recent decisions to limit drilling as the primary reason they’re lowering their investments—as well as ongoing permitting delays and sometimes hostile rhetoric from the administration.
“The US is blessed with amazing natural resources but we are walking away from them,” Chuck Duginski, CEO shale driller Canvas Energy, told the Financial Times.
U.S. shale companies reinvested roughly 65% of their capital in production this year, according to data from Rystad Energy. Rystad projects U.S. companies will continue to reinvest at slightly lower rates of 50% for the next several years.
Continental Resources founder and oil tycoon Harold Hamm argued that the administration is more focused on putting companies “out of business” than responding to high prices or boosting U.S. energy security.
“It’s political power. They believe that is what their base wants. But, I’m sorry, a lot of those people want to buy gasoline at decent prices and heat their homes,” Hamm told FT.
Their remarks come as the number of active U.S. oil rigs has dropped by 16% this year compared to the same point in 2022, according to data from Baker Hughes, and far below the peak of the U.S. shale revolution in 2014, which saw 1,609 active oil rigs nationwide.
DESANTIS AIMS AT BIDEN ELECTRIC VEHICLE GOALS ON SUNDAY SHOW CIRCUIT: Florida governor and Republican presidential hopeful Ron DeSantis took aim at Biden’s electric vehicle targets yesterday, vowing that, if elected in 2024, he would ditch the goals, which are for at least 50% of new car sales to be electric by 2030.
Those EV targets are going to “really hurt the whole automobile industry,” DeSantis said in an interview on “Fox News Sunday,” adding that, if elected, “we’re going to reverse all of those Biden EV mandates, we’re going to save the American automobile.”
“A lot of people don’t want EVs, a lot of Americans can’t afford EVs. It will make our country more dependent on communist China which we definitely don’t need to be doing,” he said.
DeSantis also criticized the Clean Truck Partnership, or the plan led by California that seeks to ban sales of new diesel-powered big rig trucks by 2036, saying the plan threatens to further harm the U.S. supply chain, worsen inflation, and hurt the economy. More on his remarks here.
OIL AND GAS PRODUCERS MEET IN ABU DHABI AHEAD OF COP28: Major oil and gas producers convened in Abu Dhabi this weekend in an attempt to firm up their decarbonization agreements and reach consensus on key climate commitments ahead of next month’s COP28 summit in Dubai.
The gathering included CEOs from more than 50 oil and gas companies, and covered issues ranging from carbon capture technologies, methane elimination, and commercializing hydrogen, according to a statement from COP28 leaders. U.S. climate envoy John Kerry was also in attendance.
The effort comes as this year’s COP28 president and oil company CEO Sultan Al Jaber seeks to include oil and gas majors in the conversation ahead of the conference—a major 180 from the 2021 COP event in Scotland, where energy producers said they were largely shut out from important conversations.
The goal of the conference was to get industry leaders to agree on decarbonization targets ahead of November’s meeting, according to COP28 CEO Adnan Amin.
“What we have done today is something quite unprecedented in the COP process, to bring together both the demand and supply side in terms of emissions,” Amin told Reuters.
“If the oil and gas industry signs up to decarbonization agreements and methane abatement that is a huge contribution to the debate,” he added. Read more on their gathering here.
… Meanwhile, UAE’s biggest oil producer announces plans to double its carbon capture target: The UAE’s biggest oil producer, Adnoc, said yesterday it is doubling its carbon capture target, an ambitious new goal that comes as the company seeks to bolster its net-zero progress as its home country prepares to host this year’s COP28 summit.
Adnoc, or Abu Dhabi National Oil Co. will now aim to capture 10 million tons of carbon dioxide annually by 2030, it said in a statement yesterday, up from its previous target of 5 million tons per year.
The UAE has come under criticism for recent decisions in the run-up to COP28, Bloomberg reports, such as announcing plans to raise its oil production capacity by roughly 20% by 2027, and appointing Jaber as the head of the U.N. climate summit.
Importantly, Adnoc’s new carbon capture target will only go so far in stopping emissions: Adnoc currently produces 24 million tons of CO2 annually at its oil and gas production facilities—an amount that does not cover emissions created by other customers burning fossil fuels. Read more here.
SOUTH KOREA’S KOREA ZINC EXPANDING NICKEL PRODUCTION TO MEET U.S. DEMAND: South Korean nickel refining company Korea Zinc is investing $370 million to build a new nickel refining plant in the county’s east, at it looks to help meet growing U.S. demand and reduce Washington’s dependence on China for EV batteries and materials.
Korea Zinc CEO Park Ki-deok said their new advanced nickel refining plant, which is due to start production in 2026, will increase the company’s nickel production capacity to 65,000 tonnes per year—a massive jump from its current capacity of just 22,000 tonnes per year, and making it the world’s largest non-Chinese producer of nickel sulfate. (China currently produces roughly 90% of the world’s rare earth materials, the Financial Times notes.)
“This China decoupling momentum is creating great opportunities for us and Korea as a whole,” Ki-deok told the outlet. “We are the best alternative to China to meet the IRA conditions.”
“We’re investing a lot to keep expanding our capacity and studying where to build our overseas plants,” he said, noting that the company plans to begin sourcing more nickel from Indonesia.
“Washington is yet to spell out the definition of foreign entities of concern, but the industry will have to reduce the portion of Chinese capital [in their joint ventures] to tackle the U.S. market,” he added. Read more from the Financial Times here.
The Rundown
Wall Street Journal PG&E’s $6 billion plan to prevent wildfires is in peril
Bloomberg UK creates policy vacuum with no net zero plan, energy boss says
