Energy, Politics & Money - 09 November 2022
Independent, objective, and politically neutral analysis of interconnected global developments in the world of energy, geopolitics, and money curated to help you thrive in chaotic times!
In this roundup, EPM examines the factors confirming our view that the world is not coming together at COP 27 to fight climate change. We at EPM believe this will translate into a slowing down of climate change action - certainly in the developing world - and reflects the growing gap between the developing world and the developed when it comes to climate change.
We also examine:
China’s decision not to accelerate decarbonization of power, steel and building materials, its numbers 1, 2 and 3 most GHG emitting industries.
India’s intention to continue buying Russian crude oil, despite US pressures to adopt its price cap plan.
S&P Global’s plan to start reporting Carbon Intensity for transportation fuels.
Chancellor Scholz of Germany’s visit to President Xi of China last week, which, rather than indicating a real step forward for Germany in geopolitics and geoeconomics, really indicates that the country is ‘lost at sea’ without clear direction.
The project announced by Egypt and the UAE to build a 10GW onshore wind farm.
The EU finally reaching the conclusion that a gas price cap is not workable – something EPM argued from the day the idea was first floated!
The new UN developed reporting standard for companies, to assess their climate change action and call out greenwashing, and which will have a consequence that Oil & Gas companies will no longer be allowed to claim they are “moving toward Net Zero” if they invest in fossil fuels in any way
General Energy
Subrahmanyam Jaishankar, India’s foreign minister said on Tuesday that India will continue buying Russian oil because it benefits the country after a meeting - for the fifth time this year - with his Russian counterpart. He added that the two countries were expanding trade ties, writes Nikkei Asia. India has become Russia's largest oil customer after China. The foreign minister is visiting Moscow for the first time since Russia invaded Ukraine in February. His trip comes as US Treasury Secretary Janet Yellen visits New Delhi this week to get the country to support the Russian oil price cap plan.
S&P Global Commodity Insights will launch the first carbon intensity assessments and daily carbon offset premiums for transportation fuels from November 15 at key oil hubs, reports Reuters. We could have reported this news under Climate Politics, but we consciously chose to report it here under General Energy, because we at EPM believe the day is not far off when Carbon Intensity starts to influence price just as contaminants (Sulfur, etc.) do already today.
Geopolitics
An opinion piece over at Nikkei Asia review the trip of German chancellor Scholz to president Xi of China last week. It notes the dilemma Germany has created for itself, which we explained here at EPM last week and is about its geostrategic dependency on the US while its economic dependency is on the US’s main adversary, China. Beyond this, it argues that there is no clear strategy in Germany for dealing with this, as too many factions are pulling the country in too many different directions – which is something that will have to be resolved before Germany as a country can make any real progress in reducing its dependencies. Our view at EPM is that the details of trip indicate Scholz did not so much take a real step forward for Germany in geopolitics and geoeconomics, but rather indicated his country remains like a ship lost at sea, without clear direction.
Energy Transition & Technology News
According to Reuters, on the sidelines of COP27, Egypt and the UAE agreed a very ambitious onshore wind project: 10 GW of capacity, which can produce 47,790 GWh of clean energy annually and offset 23.8 million tonnes of carbon dioxide emissions, equivalent to around 9% of Egypt's current CO2 emissions.
Iberdrola is of the opinion that the US’s inflation reduction act makes the country a bigger attraction for clean energy investment than the European Union, Iberdrola CEO told The Financial Times.
Climate Politics
As we mentioned yesterday, the gap is growing between the developing and developed world when it comes to climate change. While the developed world is calling for “more action to prevent disaster”, while at the same time saying “we ourselves have don all we can”, the developing world is not responding with “okay then we will do more” but with “if things are so bad why don’t you finally deliver on your long-standing promise to support us!”. According to Nikkei Asia, various leaders of developing countries unleashed a torrent of criticism against rich industrialized nations over unkept promises on climate action, demanding payments for the resulting economic losses in speeches at the United Nations climate conference on Tuesday. This confirms our view here at EPM that the world is not coming together to fight climate change. The “new issues” of inflation, energy security and war are pushing worlds apart, which we expect will translate into a reduction in climate change action over coming years, at least in the developing world.
Bloomberg zooms in on policies announced by China recently that are of relevance to the climate. First, China is moving forward with its plan to significantly increase coal-based power generation capacity – something we at EPM reported on earlier. Bloomberg describes this as a plan to increase coal-based power generation, but we at EPM are not necessarily convinced this is what will happen. We are of the opinion China is consciously overbuilding energy capacity, both fossil based and renewables, as part of its efforts to manage energy security. Second, Bloomberg discusses a recent retreat in the steel industry’s carbon goals. Third, the decision to set 2030 as the year in which emissions from building materials will peak. Since building materials are the number 3 emitter after power and steel, many had hoped this peak would be a few years earlier.
The Global Energy Crisis
The European Union’s executive body told its 27 member countries at a seminar on Monday that it was not possible to create a gas price cap that would not affect long-term contracts or supply security, two diplomatic sources told Reuters. At EPM we concluded this the very day the idea of a gas price cap was floated. It means the EU wasted valuable time looking at non-solutions, which they should have spent on real solutions.
ESG
As businesses around the world face mounting pressure from environmentalists, consumers and investors to operate responsibly and increase efforts against climate change, the United Nations has developed a set of standards to help assess whether claims companies make about their environmental credentials are genuine or simply “greenwashing”, writes Nikkei Asia. The standards cover everything from how companies invest in energy sources to the way they use carbon credits. One of the group's 10 recommendations says a company should not claim to be working toward "net-zero" if it invests in new fossil fuel resources, deforestation or other environmentally destructive activities.