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CASSIDY’S PLAN FOR A POLLUTION FEE: Sen. Bill Cassidy is convinced he has the policy that can challenge China’s geopolitical and military might, put a dent in its bountiful greenhouse gas emissions, strengthen the U.S. economy, and, perhaps most importantly, get to 60 votes.
Cassidy said he’s floating a proposal around to his colleagues, which he hopes to introduce later this year, to impose a “foreign pollution fee” on various product imports from fuel, to chemicals, cement, aluminum, steel, and plastics to deal with these various China-related political, environmental, and national security interests at once.
“I actually think that it’s the only way to address it, and I do think it’s got political legs,” Cassidy told Jeremy.
All about CBAM: Congress is increasingly preoccupied with countering Chinese military activities, which it feeds with a vast industrial base run largely on coal.
China is also planning significant new coal-fired power capacity to fuel its growing economy at a time when international authorities and the West are committing to phase out coal-fired power generation to blunt climate change.
The answer lies in a carbon border adjustment mechanism — a carbon tariff — which Cassidy prefers to call a foreign pollution fee.
The idea to levy a charge on energy- and therefore emissions-intensive goods such as steel and aluminum has been floating around Capitol Hill for a while, with support from both Republicans and Democrats. Sen. Sheldon Whitehouse introduced a bill during the last Congress that would employ the charge on carbon-intensive imports.
“It is a way for the U.S. to pursue climate, economic, and foreign policy interests in a peaceful way in which China has the ability to adapt and to adjust and to participate fully in a very positive way,” Cassidy said. “But it also helps prevent China from gaming, arbitraging, or cheating international norms when it comes to taking care of the environment, etc.”
How it works: The foreign pollution fee wouldn’t apply only to Chinese products, although they’d be front of mind.
Cassidy’s contemplating a phase-in period to allow other big emitters who are still developing some measure of flexibility.
“If it’s a lower-tier, middle income country, think India, we don’t want to thwart their development. They have an ability to transition in. The higher-tier, middle income, we would expect them to make the investments or to adapt their energy use so as to lower their — the carbon intensity of the goods that we’ll be selecting,” he said.
India, the globe’s no. 3 emitter, has incidentally been pushing back on the European Union’s brand new CBAM, promising to take the matter to the WTO.
Dealing with Chinese emissions — and managing tensions: Data show U.S. emissions falling considerably in recent decades, driven in large part by coal-to-gas switching in the industrial and power sectors.
Total direct and indirect emissions from the industrial sector alone declined by 20.7% between 1990 and 2021, according to EPA’s newest GHG inventory. Power sector emissions fell by 15.7%.
Chinese emissions are significantly higher and reaching new records, and the government’s decarbonization targets don’t envision them falling until at least early in the next decade.
Cassidy said he was hopeful his proposal would do something about this without inflaming tensions between the globe’s two economic superpowers.
“China is a frenemy. It is a great people. It is an incredible country,” he said. “It’s going to have to be part of any solution to major issues. We absolutely don’t want to go to war. Period.”
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BLM GIVES MOUNTAIN VALLEY PIPELINE RIGHT-OF-WAY THROUGH FOREST: The Bureau of Land Management approved right-of-way allowing for the Mountain Valley Pipeline to pass through the Jefferson National Forest in Virginia and West Virginia after the Forest Service signed off earlier this week.
The right-of-way gives MVP’s developers authorization to construct and operate an underground, 42-inch pipeline that would cross the JNF along a proposed 3.5-mile corridor.
The Fourth Circuit Court of Appeals has twice before vacated right-of-way authorizations for this section of the pipeline, both of which were issued during the Trump administration.
Sen. Joe Manchin celebrated the new authorization for advancing the pipeline, which still faces a number of legal hurdles on the path toward completion.
“The process to finally finish MVP has been long, and it isn’t over yet — but yesterday’s announcement and the Forest Service’s approval earlier this week is a sign that the Administration is finally realizing that the completion of MVP is vital for our nation,” Manchin said.
BLM ADVANCES MAJOR WESTERN TRANSMISSION PROJECT: The Bureau of Land Management issued a record of decision yesterday approving an amendment to the right-of-way for the SunZia Southwest Transmission Project, which will link power generated in New Mexico to markets in Arizona and California.
The electric transmission project will transport 4,500 megawatts of “primarily renewable energy” along the lines.
More on transmission: Democratic lawmakers announced legislation yesterday designed to improve the pace and scale of permitting electric transmission lines across the country, the no. 1 priority for the party within the broader permitting reform discussion.
The Promoting Efficient and Engaged Reviews Act from Environment and Public Works Chairman Tom Carper and Sen. Brian Schatz would seek to streamline transmission siting and direct FERC to establish rules for transmission planning and cost allocation.
It also allows transmission developers to ask FERC “to ensure project costs are allocated among all customers that receive proven electricity benefits,” according to a summary, opening the door for the allocation of costs for a given interstate transmission project among a wider group of ratepayers.
A number of Republicans, including Sen. John Barrasso, firmly oppose these cost allocation reforms, arguing that in his state’s case, ratepayers could be saddled with the costs of a transmission project connecting power generated from Wyoming wind farms to a place like California.
MORGAN STANLEY CLIMATE RESOLUTION FALLS FLAT: An investor proposal that would require Morgan Stanley to establish a time-bound phase-out of financing for fossil fuel exploration and development failed to pass during an annual shareholder meeting this morning.
The resolution, brought by the Sierra Club Foundation, received support from 4.8% of shareholders. It was the latest in a line of votes held this month and last on similar resolutions at various U.S. banking majors that sought more aggressive oil and gas financing targets but failed to receive overwhelming support among shareholders.
Jessye Waxman with the Sierra Club’s Fossil-Free Finance campaign said the vote this morning “marks the end of a disappointing season for investor accountability on Wall Street’s climate promises.”
“It is alarming that more investors did not support provisions calling for stronger action on climate risk mitigation practices,” Waxman said.
G-7 COMMITS TO DISPLACING RUSSIAN URANIUM IMPORTS: The Group of Seven agreed to reduce its reliance on “civil nuclear and related goods” from Russia and to assist other nations diversify their supplies, just as the G-7 has sought to do on fossil fuel energy.
Russia is a civil nuclear heavyweight with significant expertise and remains a top export source of enriched uranium, including for the United States.
Uranium has been spared from both U.S.- and European Union-wide Russian energy embargos so far, although legislation to ban imports advanced in both chambers of Congress this week.
Risks and concerns: The Biden administration deems Russia to be an unsavory and unreliable supplier in light of the war in Ukraine, but Energy Secretary Jennifer Granholm said she worries about the gap in supplies that would result from an import ban.
Europe lacks uniform support for sanctions on the Russian nuclear sector with Hungary, home to a Russian-built nuclear plant, standing against those measures.
EUROPEAN GAS PRICES IN NORMAL RANGE FOR FIRST TIME SINCE CRISIS: European natural gas prices fell back in the normal trading range for the first time since the start of the energy crisis, with prices for benchmark TTF dropping to €29.75, or $32.11, per megawatt-hour, for the first time since June 2021.
The low gas prices in Europe are part of a protracted trend – they’ve fallen for six consecutive weeks – and are a sharp reversal from last summer. Then, TTF prices skyrocketed to more than 10 times their normal level, to roughly $367 per megawatthour amid the energy crisis caused by Russia’s war in Ukraine, and as Moscow began throttling its piped gas deliveries to Europe.
The drop also comes as the EU ended its winter heating season with higher-than-expected gas storage, due in large part to mild weather. Since then, the bloc has continued to build up its gas storage ahead of next winter, with levels currently standing around 65% of capacity.
And more price drops are expected, Tom Marzec-Manser, the head of gas analytics at energy consultancy ICIS, told the Financial Times, due in part the lack of demand for spot LNG from Asia, which has helped push prices down for European buyers.
“Will we see more downside on the short-term contracts? Yes, no doubt,” Marzec-Manser said.
WILDFIRES HIT WESTERN CANADA, SENDING OIL AND GAS PRICES HIGHER: Wildfires in western Canada have burned through millions of acres of land this week, forcing tens of thousands of evacuations in the oil-rich province of Alberta, and prompting many oil and gas companies there to halt operations as the fires began to encroach on the many pipelines in the area.
The fires—which totaled 92 as of late yesterday–have also sent Canada’s natural gas flows to the U.S. plummeting. Flows are currently around 6.4 billion cubic feet per day (bfcd), or the lowest point in more than two years, sending natural gas futures climbing by around 2%.
Meanwhile, oil and gas firms have cut production by at least 319,000 barrels per day, or 3.7% of Canada’s total output.
Officials are also warning that conditions could get worse in the coming days as the region battles record-high temperatures and incredibly dry conditions.
The consultancy Rystad Energy warned 2.7 million barrels per day of Alberta oil sands production is in “very high” or “extreme” wildfire danger rating zones for the month of May, per Reuters.
The Rundown
New York Times To counter China, G7 countries borrow its economic playbook
Bloomberg In Zimbabwe, $1,000-a-night safari camps take on oil drilling
