Today is Monday. Welcome to Equilibrium, a newsletter that tracks the growing global battle over the future of sustainability. Subscribe here: thehill.com/newsletter-signup.
Rising seas are pushing inland toward the ancient trees of coastal North Carolina’s Three Sisters swamp, where one bald cypress has stood above the Black River since at least 605 B.C., according to The Guardian.
“They were here when Jesus was on Earth,” one resident told The Guardian.
Trees like this stand just 6 feet above the Atlantic, and creeping salt has left dead-white “ghost forests” as gloomy monuments, The Guardian reported. Data drawn from the cores of more ancient deceased cypresses reveal a grim truth: “Even very long-lived cypress trees in the ancient past can be killed very fast,” environmental archeologist Katharine Napora said.
Today we’ll look at the complications of slowing that rise. First, we’ll explore how fossil fuel companies are fighting to avoid disclosing how much carbon dioxide is released when customers burn their products. And then we’ll examine how Asian investment banks are struggling with the complications of quitting coal.
For Equilibrium, we are Saul Elbein and Sharon Udasin. Please send tips or comments to Saul at firstname.lastname@example.org or Sharon at email@example.com. Follow us on Twitter: @saul_elbein and @sharonudasin.
Let’s get to it.
Fossil fuel companies demand looser climate reporting requirements
Fossil fuel companies and trade groups are pushing back on plans by the Securities and Exchange Commission (SEC) to require publicly traded companies to disclose their impacts on — and risks from — climate change, according to the Financial Times.
The pushback comes after last week’s announcement by SEC Chairman Gary GenslerGary GenslerLaws that deter companies from going public cost our economy dearly Overnight On The Money — Presented by Wells Fargo — GOP senator: It's 'foolish' to buy Treasury bonds Gensler compares cryptocurrency market, regulations to 'wild west' MORE, who said that mandatory climate disclosures — a measure demanded by many investors — would be in place by the end of the year.
First steps: Gensler’s announcement addressed a glaring hole in the center of the booming business of environment, social and governance (ESG) funds: There is no uniform standard of proving which investments are sustainable.
That puts a lot of money at stake. ESG funds are expected to balloon to $53 trillion over the next four years — reaching a third of all assets under management by banks, investment houses and mutual funds, Bloomberg reported.
Assets invested in ESG-related mutual funds alone just hit $2.3 trillion after a steady climb since 2015, according to Reuters.
“Garbage in, garbage out.” But the numbers that ostensibly ESG companies provide are “garbage in, garbage out,” Jeff McDermott of Nomura Greentech, which advises clean energy companies on mergers, told Equilibrium “It’s very difficult for us to get good measures.”
Many investors want to see information about climate risks and impacts placed on Form 10-K alongside information such as risk factors to a company’s business and how much money the company made that year.
“There, the rules are so clear that CFOs go to jail if they falsify them,” McDermott said. “With ESG, there are no rules. It’s like the Tower of Babel: Everyone is speaking a different language.”
LIKE THE OLYMPICS?
SEC calls for mandatory reporting by year’s end. When it comes to risks from, and impact on, climate change, Gensler compared the situation to the Olympics. “It’s not like some sprinters run a 100-meter dash and others run 90 meters,” he said in a speech Thursday.
“It’s with mandatory disclosures that investors can benefit from that consistency and comparability,” he said, noting that the SEC will be rolling out such required reporting rules by the end of the year.
Oil companies want less disclosure, less legally binding. Oil companies such as Baker Hughes and Phillips 66 and trade groups including the American Petroleum Institute (API) are pushing back on two factors: how much to report and how legally binding those reports will be, according to the Financial Times.
First, the API wants members to only have to disclose emissions that come from producing fuel, not those caused when it’s burned.
Second, companies such as Chevron want disclosures to be filed in a nonbinding addendum, rather than on Form 10-K, which has other key financial indicators and carries heightened penalties for error — or fraud.
Takeaway: For decades, fossil fuel majors such as BP, Chevron and Shell have hyped their commitment to renewable energy or to unproven new technologies like hydrogen, biofuels or carbon capture — while continuing to pump out ever more fossil fuels.
If the SEC requires only nonbinding disclosures of direct emissions — as the oil majors are requesting — it would let them continue to emphasize their use of, say, green pipeline technology or investment in carbon capture rather than how much fossil fuels they continue to sell.
Breaking up (with coal) is hard to do
Investors in Japan and South Korea, as well as some in China, have voiced intentions to stop or slow the influx of funds for new coal-fueled projects outside their borders, due to the increasingly risky nature of such ventures, The Wall Street Journal reported.
China’s growing hesitance follows ministerial guidelines published in mid-July that advised overseas lenders to take carbon emissions reductions into consideration, according to the Journal. One fear is that Chinese-backed coal plants abroad could get shut down before investment costs are recovered, exposing lenders to financial risk.
Why is this so significant? Because Asian banks are now the biggest backers of new coal projects in countries such as Vietnam and Bangladesh, now that American and European lenders have stopped funding such projects, the Journal reported.
Several Asian banks step away from coal: Japan’s Mitsubishi UFJ Financial Group and the Japan International Cooperation Agency now have no-coal pledges in their lending and bond-issuance policies, according to the Journal. In South Korea, state-owned Korea Electric Power Corp. (Kepco) said it would cease funding new coal projects overseas and convert two of its four plants abroad to natural gas — or eliminate them entirely.
Meanwhile, the state-backed Industrial and Commercial Bank of China announced in May that it would withdraw from two coal projects in Kenya and Zimbabwe, the Journal reported.
What about at home? China and India are the two biggest sources of new carbon emissions from coal — and both countries plan to continue expanding their domestic coal-burning fleets. China alone houses half the world’s proposed or in-process coal plant capacity, the Journal reported, citing data from Global Energy Monitor.
But economic pressure may be slowing that development. Chinese, Indian and Southeast Asian investment in new domestic coal plants — in terms of gigawatt capacity — was 80 percent less in 2020 than in 2015, International Energy Agency data said.
NERVOUS BANKS ERODING CASE FOR COAL
But other economic pressures are thwarting climate ambitions. China’s top policymakers are urging a coordinated response to reach carbon neutrality, in place of top-down enforcement that could hamper economic growth, Bloomberg Green reported.
Due to domestic efforts to limit coal use as well as a trade spat with Australia, coal prices in China are surging — impacting power supplies during heat waves, according to Bloomberg.
Different countries go green in different ways: “This transition away from coal has been happening for some years,” Morgan Bazilian, director of the Colorado-based Payne Institute for Public Policy, told Equilibrium. “It manifests differently in developing countries” than in developed ones.
While pressure from shareholders at European financial institutions has for years curbed coal plant funding, and while the World Bank no longer finances such plants, the Chinese National Development Bank has yet to take such a stance, according to Bazilian, a former World Bank energy specialist.
“Some [coal] projects are moving ahead with international finance, although they are limited to certain lenders,” he said. “Still, the risk profiles, and thus the cost of capital, for coal projects has been high for some time” — which can destroy the business case for new projects.
Countries can’t just switch off coal: As coal-intense nations move away from coal, strategies must be in place to support “communities that are hungry for the power those plants provide, to underpin economic growth,” Bazilian explained.
Without structured efforts to develop coal shutdown programs, such countries are facing both social and technical challenges that threaten the sustainability of such measures — such as maintaining grid stability and protecting millions of jobs worldwide, Bazilian and a group of co-authors wrote in the March 2021 Electricity Journal.
Embracing “just transition” principles — protecting workers from policy changes that lead to job losses — will therefore be critical to decarbonization efforts in developing economies, the authors argued.
Today we’re tackling traffic — looking at fuel-efficiency standards under discussion and evaluating the changes necessary to make electric vehicles more sustainable.
Recycling batteries to make electric vehicle use more eco-friendly
- While electric vehicles are “zero emission” when they are being driven, the mining, manufacturing and disposal processes for their batteries “could become an environmental disaster for the industry as the technology goes mainstream,” the Financial Times reported.
- JB Straubel, who served as Tesla’s chief technology officer for 15 years and designed its first batteries, founded Redwood Materials to break up and reconstitute discarded batteries in 2017.
- Each day, his team pulls out and pulverizes the metals from 60-tons of old smartphones, power tools and scooter batteries and chemically treats the metals so they can “reenter the supply chain as the building blocks for new lithium-ion batteries,” according to the Times.
- These metals typically originate in the Democratic Republic of Congo, Australia and Chile, where they must be mined or evaporated from desert ponds.
To reach global climate goals, developing countries also need to adopt electric
- Without bringing cleaner vehicles to the roads of poorer nations, the international community will not be able to keep global warming below dangerous levels, Bloomberg Green reported.
- Although most of the world’s growth through 2050 is expected to take place in developing countries, thousands of cities in Africa, Asia and Latin America will likely stick to fossil-fueled powered vehicles for decades, Rob de Jong of the U.N.’s environment program told Bloomberg.
- But most electric vehicles are sold in the U.S., China and Europe, where state-supported purchasing incentives and investment in charging infrastructure have made such sales possible, Bloomberg reported. Developing nations, however, lack the spending power to facilitate such a switch.
Will Biden’s fuel-efficiency standards exceed Obama’s — or fall short?
- The Biden administration will announce new standards for car and truck fuel efficiency in hopes of reducing “the country’s largest source of greenhouse gas emissions,” The Wall Street Journal reported.
- The Trump administration required automakers to reach a standard 40 mpg by 2025, reversing rules from the Obama administration that required 54.5 mpg. Top auto lobbyists want a standard “roughly midway” between those two numbers.
- But environmentalists want a higher standard. “Our children are going to pay a price if the auto companies win,” said Dan Becker, director of the Center for Biological Diversity’s Safe Climate Transportation Campaign.
And in an untapped electric vehicle sector, a team of former SpaceX rocket engineers have launched the Arc Boat company — a venture that has just raised $4.25 million and aims to develop the first commercial electric speedboat, The Guardian reported.
For a cool $300,000, you too can zip across the water in silent electric splendor.
Please visit The Hill’s sustainability section online for the web version of this newsletter and more stories. We’ll see you on Tuesday.