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PRICE CAP IN THE MAKING: G-7 leaders’ are on the same page about the need for a price cap on Russian oil, or something like it, to cut further into Russia’s revenues, but are still working out the terms, national security adviser Jake Sullivan said today.
Sullivan told reporters there aren’t any holdouts to the price cap, per se, but said questions remain about how it could be implemented. He noted, too, that it’s a sanctions strategy that “can’t be pulled off the shelf as a tried-and-true method that has repeated historical precedent.”
“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.
The goal: The Biden administration and European leaders are looking for ways to restrict Russia’s money-making machine in petroleum exports.
President Joe Biden and European Commission President Ursula von der Leyen put out another joint statement today emphasizing their commitment to “further [reducing] Russia’s energy-derived revenues.”
So far, Russia has done pretty well in the face of sanctions pressure, rerouting more volumes to China, India, and some Middle Eastern buyers (although their options have limits, and the Biden administration maintains that its longer-term outlook for energy trade is perilous).
At the same time, Europeans are still buying lots of energy from Russia, and some EU countries increased their imports during the first 100 days of the war.
That won’t always be the case, as most Russian oil imports into the EU will be embargoed in six months’ time.
Waiting on specs: On the price cap, Treasury Secretary Janet Yellen revealed last week that G-7 governments were talking it over. She alternatively called it a “price exception,” with the idea being to restrict insurance or financing of Russian oil shipments.
The EU’s oil embargo will do this in some fashion once it kicks in. European operators will be prohibited from insuring and financing the transport of Russian oil to third countries, “in particular through maritime routes.”
Already at it: The Biden administration had already been trying to achieve something like a price cap on Russian oil with diplomacy.
Amos Hochstein, senior adviser for energy security at the State Department, recently told a Senate committee that the Biden administration has been asking friends, namely India, not to pay just any price for the increasing volumes of Russian oil it’s buying.
“One, don’t go too far and don’t look like you’re taking advantage of the pain that is being felt in European households and in the United States,” Hochstein said, recalling conversations he’s had with the Indians about oil purchases.
“Second, make sure you negotiate well because if you don’t buy it, nobody else is,” he said.
Tall order: European Council President Charles Michel said the goal with price cap “is to target Russia and not to make our life more difficult and more complex.”
Not much has been able to achieve both ends yet.
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BIDEN AND VON DER LEYEN PREVIEW COMING TASK FORCE MEETING: The joint U.S.-EU energy task force will gather soon to keep at work on reducing Europe’s dependence on Russian natural gas, according to Biden’s and von der Leyen’s statement.
A point of focus will be encouraging uptake of smart thermostat technology and heat pumps, and the two said they’ve set a goal of deploying at least 1.5 million smart thermostats in European households this year.
Checking back in: Today’s energy-focused joint statement is the third that Biden and von der Leyen have put out since January promising more cooperation between the U.S. and EU on energy matters.
The first emphasized the importance of LNG to Europe’s energy security; the second announced the task force and promised more U.S. LNG volumes to Europe; and today’s boasts of a near tripling of U.S. LNG exports to Europe.
How it’s gone over: Biden and von der Leyen said the task force will do more to limit the environmental impact of LNG production and consumption.
The task force had that focus from the beginning, but it’s not been enough to allay the frustrations of many environmentalist groups, which oppose the embrace of natural gas and the new gas infrastructure that will need to be built to support more LNG.
G-7 LEADERS RETHINKING OVERSEAS FOSSIL FINANCING: Some G-7 leaders are rethinking a commitment to ending financing of overseas fossil fuel projects that nearly 40 governments signed on to at COP26, because of Europe’s energy crisis, Reuters reported.
Italian Prime Minister Mario Draghi said yesterday that there are “short-term needs that will require large investments in gas infrastructure in developing countries and elsewhere,” and others agree with him that the G-7’s concluding document should acknowledge the need for spending on fossil fuel infrastructure.
With language endorsing new fossil infrastructure, the G-7 would effectively be walking back some of the aims, and the spirit, behind the six-month-old commitment, even if it falls within the agreement’s terms.
All of the G-7, with the exception of Japan, signed on to a nonbinding agreement in November saying they will end public financing of overseas coal, oil, and gas projects by the end of this year.
The agreement made a notable exception: Projects that serve “limited and clearly defined circumstances that are consistent” with the 1.5 degree warming target of the Paris Agreement could be allowed.
Draghi’s comments, and other actions favoring fossil fuel development taken since the war began, illustrate clearly the Europeans’ quandary in keeping the course on reducing emissions and preventing large-scale energy shortages at the same time.
WHITE HOUSE EYEING GOP SUPPORT FOR GAS TAX HOLIDAY BILL: The White House is calling on Republican lawmakers who have previously pressed to suspend or eliminate federal taxes on gas and diesel fuel to support Biden’s new proposed three-month gas tax holiday, which would require 10 Republican votes to pass the Senate.
As the Examiner’s Christian Datoc reports, at least seven sitting GOP senators have previously introduced legislation aimed at decreasing federal gas taxes in some capacity. Efforts have been introduced in previous years by Sens. Ted Cruz of Texas, Marco Rubio of Florida, and Mike Lee of Utah, who co-sponsored a 2018 bill calling for a four-year reduction of the federal gas tax to 3.7 cents per gallon. (They were joined in previous years by Sens. Lindsey Graham of South Carolina, Richard Burr of North Carolina, and John Thune of South Dakota, who each co-sponsored earlier bills also aimed at temporarily halting the federal gas tax.)
“It’s unfortunate that Republicans, including many who’ve supported this exact policy before, claim on TV that they’ve never met a tax cut they didn’t like but are suddenly opposed to a significant tax benefit for working people that will spare them financial pain at the pump,” White House deputy press secretary Andrew Bates told the Examiner.
Read more from Christian here.
JAPAN CALLS FOR ENERGY CONSERVATION AMID BLACKOUT RISK, RENEWED DEBATE OVER NUCLEAR: The Japanese government is urging businesses and residents in Tokyo to limit their electricity use, warning of a potential blackout for the second time this year amid scorching summer temperatures and lack of generating capacity.
Japan’s economic and industry ministry asked those living in Tokyo to conserve power in the afternoon—especially between 4-5 p.m., when demand is expected to peak. Kaname Ogawa, director of electricity supply policy at Tokyo Electric Power Co., blamed the shortage on “unusual heat for the season,” which he noted could extend into Tuesday.
“We are struck by unusual heat for the season,” Ogawa said. “Please cooperate and save as much power as possible.”
The news comes as meteorologists in Japan have predicted higher-than-normal temperatures throughout the summer, and a surge in power prices, which Bloomberg reports are already trading at a record high for this time of year.
Japan’s energy crunch also appears slated to revive a contentious debate about whether to restart its nuclear power plants, many of which remain shuttered in wake of the 2011 Fukushima nuclear meltdown.
(Nuclear provided roughly 30% of Japan’s energy prior to the 2011 meltdown, but following the disaster, the country took most of its plants offline.)
Japanese Prime Minister Fumio Kishida has called on the government to restart its reactors, seeking to combat a potential shortage of fossil fuels touched off by Russia’s war in Ukraine.
The Rundown
Bloomberg BP paid rural Mexicans a “pittance” for Wall Street’s favorite climate solution
E&ENews Abortion ruling may add hurdle to climate lawsuits
Reuters ‘Off the charts’ chemical shortages hit U.S. farms
Politico EU All aboard the climate hypocrisy helicopter at G7
Washington Post A ‘carbon bomb’ or desperately needed energy? Alaskan village holds key to Biden’s climate policy.
Calendar
TUESDAY | JUNE 28
10:00 a.m. 1100 Longworth Bldg. The House Appropriations Committee will convene to mark up the Energy and Water Development and Related Agencies appropriations bill for the upcoming fiscal year.
WEDNESDAY | JUNE 29
11:00 a.m. The Bipartisan Policy Center will host an event about natural climate solutions.
