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LET DOWN: Environmental groups are feeling let down by the Group of Seven’s final communique, which embraces LNG and endorses public investment in the natural gas sector to help members deal with the global energy crisis.
G7 heads of state promised more financial support for green energy in the developing world but also emphasized the “exceptional” circumstances their economies are facing, with high energy prices driving inflation and an overwhelming imperative to break up with Russian energy, in granting their endorsement to spending more on gas infrastructure.
Greens object: Green groups accused the G7 of betraying their commitments to phasing out public financing of “unabated” international fossil fuel projects by the end of this year, something to which six of the seven G7 members agreed at COP26 in November. Japan, the holdout, came around and agreed to that timeline at the G7 environment ministers’ meeting last month.
Today’s conclusions made use of a caveat that both prior commitments on overseas fossil financing contained, which is basically that it could be permitted if it’s deemed consistent with the Paris Agreement.
The leaders’ communique said public investment in gas “can be appropriate as a temporary response” so long as it’s “subject to clearly defined national circumstances, and if implemented in a manner consistent with our climate objectives and without creating lock-in effects.”
But greens are insisting today, as they have since Europe and the U.S. agreed to pursue more LNG to the continent, that no expansion of fossil fuels or gas infrastructure is consistent with said climate objectives — or with President Joe Biden’s climate agenda.
“Public support for gas infrastructure is not the climate presidency Joe Biden promised,” said Kate DeAngelis, international finance program manager for Friends of the Earth. DeAngelis promised that climate activists “will not sit idly by while our tax dollars lock in another generation of extraction.”
“The G7 countries are failing as true climate leaders by abandoning their Glasgow commitments and holding up LNG as an energy response,” she said.
Alex Scott of Europe-based environmental think tank E3G expressed that the communique doesn’t mesh with the G7’s commitments to phase out most fossil fuel financing.
“With their confusing signal on short term temporary gas investments they risk undermining their own clear direction of travel,” Scott, who is program lead for climate diplomacy and geopolitics at E3G, told Jeremy. “It’s a strange choice for [German Chancellor and G7 host] Scholz to spend his G7 political negotiating capital on.”
The stage was set: Reporting and public statements by G7 leaders foreshadowed an outcome that would favor gas. Italian Prime Minister Mario Draghi said frankly over the weekend that “large investments in gas infrastructure in developing countries and elsewhere” would be needed.
Furthermore, the Biden administration and European Commission had already basically assented to the construction of new gas infrastructure to serve their joint energy task force’s aims of increasing LNG shipments to Europe.
Since then, Amos Hochstein, senior adviser for energy security at the State Department and a lead on the task force, told a Senate committee that he supports the U.S. expanding its financing of energy projects, including gas infrastructure, in Eastern Europe and elsewhere.
Silver linings for enviros: Scott said the G7’s conclusions had some “clear positives” where climate change mitigation is concerned. He made note of language in the communique expressing an imperative to expand renewable energy as fast as possible and to help fund developing countries’ shift to renewables.
“The G7 clearly recognise that climate change is a threat multiplier on top of all the geopolitical challenges they’re grappling with, and the need for better ways to work together to tackle it,” he said.
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G7 NATIONS COMMIT TO PURSUING RUSSIAN OIL CAP: Leaders of G7 countries said they will explore a price cap on Russian oil, in a move that leaders hope will stabilize oil prices and help limit Russian crude export revenue around the globe.
The decision was praised in a statement this morning from U.S. Treasury Secretary Janet Yellen, who said the decision to pursue a cap represents a “significant step” in advancing countries’ shared goals in reducing Russian oil profits.
To implement the price cap, leaders would target insurers and other services that enable the transportation and trade of Russian seaborne crude, officials said in a communique.
White House officials said yesterday they were still working out the official terms of the price cap deal, with national security adviser Jake Sullivan telling reporters that questions remain about how the caps will be implemented across various countries.
“It is a new kind of concept to deal with a particularly novel challenge, which is how to effectively deal with a country that’s selling millions of barrels of oil a day,” he said.
To that end, leaders acknowledged much work remains ahead: “This is a very ambitious and demanding project, and there is still a lot of work to be done,” German Chancellor Olaf Scholz told reporters following the summit.
FRANCE SEEKS TO GO FURTHER: Meanwhile, French President Emmanuel Macron is going even further, pushing for a cap on all global oil producers worldwide, Politico EU reports. That much more ambitious plan would include members of the OPEC cartel, and would be all but certain to face steep opposition from major oil-producing nations, including the U.S.
Asked today whether Macron is proposing a global cap on oil, an Elysée official confirmed: “Yes, not only on Russian oil. It must take into account all market players.” It is unclear how the price control measure would be implemented, however.
EXXON HEAD PREDICTS HIGHER OIL PRICES — AND CAPEX TO FOLLOW: ExxonMobil CEO Darren Woods said he expects oil prices to keep rising and that it’s only a matter of price until oil and gas companies start to spend more to increase production.
“They always say that the cure to high prices is high prices,” Woods said at an event in Brussels, “and that’s exactly what I think we’ll see. So it’s a question of how high prices eventually rise.”
Many energy companies have been holding back on approving new capital expenditures supporting production growth, even with oil at sustained $100-plus per barrel price levels.
The slow rates of spending is largely attributable to a preference among companies for increasing share value after the tough financial season wrought by the pandemic. A number have also said they aren’t ready to spend now because of volatility in the market, and because new spending won’t yield new production for many quarters to come.
Tracking prices: WTI is down from its June peak of $122 but has closed up for consecutive days. WTI is trading around $111 per barrel, and Brent $117, as of this writing.
GULF COAST OIL EXPORTS SET FOR RECORD HIGH: Crude oil exports from the Gulf Coast are expected to reach a record high of 3.3 million barrels per day this quarter, according to a new analysis from the global energy consultancy Rystad Energy, thanks to more supplies and limited capacity to refine them.
According to the data, more than 95% of those U.S. crude exports from the second quarter of 2022 will be transported via the ports of Corpus Christi, Houston, Beaumont, Port Arthur, and Louisiana.
In announcing the record-high Gulf Coast exports yesterday, Rystad analysts pointed to Biden’s push to drive down gas prices, including his decision to release 180 million barrels of oil from the U.S. emergency stockpile earlier this year, as a reason for the record-high export levels.
“Domestic refining capacity in the US remains depressed compared to pre-Covid levels, so it’s no surprise that government intervention to support crude supplies has resulted in an increase in exports of domestically produced light barrels,” Artem Abramov, the head of shale research at Rystad, said in a press release. Read more from Breanne here.
NET-ZERO JOBS ACCOUNT FOR 41% OF AMERICAN ENERGY EMPLOYMENT: U.S. renewable energy jobs grew from 2020 to 2021, according to a new report from the Department of Energy—including jobs in net-zero emissions-aligned areas, which comprised 41% of total energy jobs in 2021.
According to the new report, jobs in the U.S. energy sector increased from 7.5 million in 2020 to more than 7.8 million in 2021, with the U.S. adding 3,086,467 jobs in net-zero emissions-aligned areas. Prior to the COVID-19 pandemic, the U.S. energy sector was one of the fastest-growing markets in the U.S., the report notes—with growth at 3% from 2015 to 2019; doubling the 1.5% job growth in the U.S. economy as a whole during those years. Read more key takeaways from the report here.
BIDEN SHOULD HAVE MINIMAL ROLE IN ENERGY TRANSITION, INDUSTRY SAYS: On this week’s “Plugged In” podcast, host and former FERC chairman Neil Chatterjee spoke to Lauren Sher, the director of environmental policy at NextEra Energy, about the energy giant’s newly announced decarbonization goals and concrete steps to meet them, and discussed what role the government should play in helping the industry work to reduce greenhouse gas emissions.
Earlier this month, NextEra announced it is working to eliminate all carbon emissions from its scope one and two sources entirely by the year 2045.
The company outlined its five-year resources plan earlier this month, which includes reaching 70% reduction below 2005 levels by 2025, 82% by 2030, 87% by 2035, 94% by 2040, and zero emissions in 2045 without the use of carbon offsets.
“We needed to do this in a way that was not purely aspirational,” Sher said of the five-year plan, which she called a “first” in their sector. She also pointed to NextEra’s goal of publicly and transparently accounting for progress over time, rather than waiting “until the last minute” and hoping that some sort of technology comes around and is [a sort of] silver bullet” to help the industry decarbonize. Listen to the full podcast here.
The Rundown
Washington Post World pledged to cut methane. Emissions rising instead, study finds
Axios More global heat records are broken, from the Arctic to Japan
Bloomberg Sri Lanka under virtual lockdown with fuel supplies halted for private cars
Wall Street Journal Russian gas cuts threaten world’s largest chemicals hub
Reuters European fund managers set to go all in on ESG, survey says
Calendar
WEDNESDAY | JUNE 29
11:00 a.m. The Bipartisan Policy Center will host an event about natural climate solutions.
THURSDAY | JUNE 30
11:30 a.m. The House Energy and Commerce Subcommittee on Environment and Climate Change will convene for a hearing on the state of the U.S. recycling efforts and proposed solutions to help repair it.
