Sun. Nov 28th, 2021


Welcome back to Energy Source.

A release from the US Strategic Petroleum Reserve seems increasingly imminent – with Bloomberg reported yesterday it could come as soon as this morning.

The White House, which has been thinking of the move for some time as a way to tackle high prices at the pump, has tried to live up to expectations, insisting that “no decision has been made”.

From a spokesperson for the National Security Council:

“I would like to note that we have been saying for weeks that we are talking to other energy consumers to ensure that global energy supply and prices do not jeopardize the global economic recovery. The talks are ongoing and we are considering a range of tools for when and when action is needed. ”

Still, last week’s move to put Big Oil in the spotlight – with Joe Biden ask for an inquiry on “potentially illegal behavior” by ExxonMobil and Chevron – making it clear that the White House is still feeling the heat over high petrol prices amid rising inflation.

In some good fuel price news for Biden ahead of this week’s holiday here in the US, oil prices are almost $ 10 a barrel lower from their recent highs earlier this month and prices at the pump are likely to fall as well.

But pressure on the administration to act remains high. As we discussed in ES a number of weeks ago, while a SPR release – in collaboration with a handful of other countries – is perhaps the most powerful tool available to Biden to push prices, many analysts reckon it would not be as effective. Any drop in prices is likely to be short-lived.

And reported yesterday suggested that a release could encourage Opec to reconsider its increase in output, which would blunt any price effect.

We will keep an eye on the situation in the coming days. Keep an eye out FT.com for updates.

Meanwhile, Biden’s energy and climate agenda is slowly advancing through Congress. The House of Representatives last week finally passed his Build Back Better spending account – with $ 555 billion in climate and energy measures – but it is fate in the Senate is far from clear.

Our main point today is looking at the state of affairs with Biden’s climate agenda and the obstacles that lie ahead.

To all our American readers, enjoy the Thanksgiving holiday. Energy source will come to you on Thursday from our UK energy team.

Thanks for reading.

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What now for Biden’s energy agenda?

It’s been a little over a year since Joe Biden was elected the 46th President of the United States, with a promise of climate change – the “number one issue facing humanity” – at the heart of his to place administration.

Now the president’s lofty ambitions to clean up America’s energy landscape are being pushed through the meat grinder of America’s legislative and regulatory machinery.

Last week, there were some major legislative advances:

  • The president signed by law the long-awaited $ 1.2tn two-party infrastructure bill, which allocated substantial funds for energy and climate.

  • And the single most important weapon in its climate arsenal, the $ 1.75tn “Build Back Better” bill – the largest single investment in climate in U.S. history – finally cleaned the House of Representatives.

But the latter is some distance from becoming law, with a fragile debate expected when it is picked up by the Senate.

The White House has also announced some major regulatory victories. But things could get complicated on this front over the coming months.

So, taking a step back, what progress has been made domestically on the climate and energy front? And what lies ahead?

Rebuild better

The slim majority of Democrats in Congress slammed legislation for the president’s climate goals. This makes the final passage of the dual infrastructure bill a significant victory.

The Department of Energy has received its largest infusion of cash ever – $ 62 billion – with substantial funds allocated to batteries, carbon capture, hydrogen and advanced nuclear technology – as well as financial support to keep the current nuclear fleet operational.

There have also been major investments in “climate resilience” – preparing communities for extreme weather events such as floods and wildfires – electric vehicle infrastructure and clearing abandoned wells.

But it is the larger Build Back Better spending bill that excites climate proponents the most. In its current form, it would pump a record $ 555 billion in clean energy and climate supply.

Research by the Rhodium Group has estimated that it could contribute as much as half of the reduction in emissions needed to achieve Biden’s goal of halving U.S. emissions by the end of the decade from 2005 levels.

In terms of energy, the most important element of the bill is a $ 320 billion tax incentive program to drive the development of wind and solar power and to support nuclear power plants.

A methane tax will also be aimed at limiting the release of that powerful greenhouse gas. But this provision could struggle to survive the Senate as the oil and gas industry tries hard to remove it from the final bill. Another provision aimed at forcing power producers to decarburize – the so-called Clean Energy Performance Program – has already bitten into the dust in the face of industrial opposition.

Progress with regulation

The fate of these measures – and that of the briefly formulated carbon tax – underscores the fact that although legislation was a useful tool for climate roots, it struggled when it came to sticks.

This has led the president to rely on regulation to curb pollution.

There has been some progress on this front. The Environmental Protection Agency has stricter rules on fuel efficiency and vehicle emissions. But new regulation of methane leaks from the oil and gas sector was probably the biggest win. The details of the new rules are currently being expanded.

Yet it can take quite a while before the methane rules hit the books in some parts of the country. Lawyers have told me that setbacks by some states could delay implementation for up to a decade if local authorities drag their feet (more on this later in the week).

New EPA regulations on carbon emissions from power plants are also in the pipeline. But a case before the Supreme Court seems to make it difficult.

The surprising decision by the court to hear the case, taken by West Virginia and a host of other fossil fuel states, is likely to lead to some curtailment of the EPA’s authority on pollution by electricity generation, analysts told me.

And there is a possibility that the court, which is now more determinedly conservative, could go further and scrap the agency’s ability to regulate greenhouse gas emissions in any way – overthrowing 2007. Massachusetts vs. EPA case that allowed it to do so under the 1970 Clean Air Act.

Such an outcome, which could come as soon as next summer, would completely disrupt the EPA – and impartial regulation as a tool to tackle climate change.

The ‘whole government’ approach

Executive orders and appointments attracted a lot of attention. The scrapping of the Keystone XL pipeline and the interruption of new oil and gas leases on federal lands have upset the industry – which (unfair) blamed the president for increased prices.

Gina McCarthy’s installation as White House climate change has ensured that there is a “whole government” approach climate that permeates all agencies.

But for many progressives, it did not go far enough. The president’s decision to Renamed Jay Powell as chairman of the Federal Reserve, yesterday irritated some on his party’s left questioning the position of the current chairman on climate-related risks. (Powell has previously said climate is “an issue that is left to many other government agencies, not so much the Fed”.)

Jeff Merkley, a Democratic senator from Oregon, was unequivocal in his criticism:

“President Biden needs to appoint a Fed chairman who will ensure that the Fed fulfills its mandate to protect our financial system and shares the administration’s view that the fight against climate change is the responsibility of every policy maker.”

(Myles McCormick)

Data Drill

Companies are looking at carbon capture as a way to reduce emissions and make money. Global patents for carbon capture and storage have increased by 22 percent in the past year, according to a new analysis by financial services firm BDO. Most of these patents came from China, which is expected to rely heavily on technology to achieve its emissions targets.

“[Governments and corporations] whoever can patent the best technology will probably have a commercial advantage over their competitors as we switch to a green economy, ”said David Bevan, BDO’s corporate finance director.

The US and the UK are nowhere near China in terms of patents. The US has registered 9 per cent of global carbon capture patents this year and the UK has just registered 1 per cent. The energy sector has generated the most patents worldwide, as companies work to reduce their carbon footprint while continuing to burn fuel.

The International Energy Agency includes carbon capture as part of the road to a net zero energy system, although a small portion compared to the scaling up of renewable energy. Despite unprecedented growth over the past year, carbon capture capacity needs to expand 140 times its current size to limit global warming to 2C, according to a recent report by the Global Carbon Capture and Storage Institute.

“Carbon capture technology is important as we move away from fossil fuels,” Bevan said. “But it is not a substitute for the long-term transition to renewable energy.” (Amanda Chu)

Bar graph showing global patents for carbon capture and storage is 22 percent higher than last year

Power points

Energy Source is a twice-weekly Energy Times newsletter. It was written and edited by Derek Brower, Myles McCormick, Justin Jacobs and Emily Goldberg.

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