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Energy crisis crashes climate conference


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Hello and welcome back to The Source of Energy.

Control of Congress and states across the United States is in balance as Americans vote in today’s midterm elections. Polls point to a good night for Republicans, who appear poised to regain control of at least the House and possibly the Senate. We’ve looked at what’s possible makes sense for American energy last week. Follow FT.com for news and analysis as the results come out.

But the vote will also make the least sense for the environment. If Donald Trump-dominated Republicans regain control of Capitol Hill, the news will send Sharm el-Sheikh shivers across the Atlantic.

That’s where the climate negotiations are getting underway – and that’s our focus today. The energy crisis is the elephant in the room. The UN is calling for accelerated emissions cuts and hundreds of billions of dollars in funding for rich nations to help developing nations cope with climate change. Both will be a strong sell-off as the world faces the political and economic damage from energy inflation.

I also recommend following our friends at Moral Money who are on the ground in Sharm el-Sheikh and will have daily dispatch from the climate talks. You can sign up for Moral Money by multiply here.

Thank you for reading. – Justin

Energy inflation is undermining climate talks

The United Nations COP27 major climate conference has begun in the Egyptian resort town of Sharm el-Sheikh as presidents, prime ministers and executives join to campaign in support of the war. anti-climate.

Several UN reports before the conference sought to center the agenda. The first emphasizes the need for Bigger and faster emissions cuts. Second time called in rich countries to rise up their support for poorer nations dealing with the devastating fallout caused by climate change.

Both will be heavily sold at a time of high energy inflation and political upheaval due to Russia’s war in Ukraine.

The United Nations “Emissions Gap” report argues that nothing more than “major transformations must begin this decade, across all systems simultaneously”, including transport, electricity , buildings and industry, to accelerate emissions reductions.

According to a United Nations report, the world is still a long way from limiting the rise in global temperatures to 2 degrees Celsius, let alone scientists preferring the climate to 1.5 degrees. poison.

Some leaders at Sharm el-Sheikh can at least point to some domestic climate successes. US President Joe Biden has finally managed to pass the Inflation Reduction Act, which is set to channel hundreds of billions of dollars into wind and solar power, batteries, hydrogen, capture and storage. carbon and other green technologies in the coming years. The EU has stepped up its ambitions to deploy clean energy to replace Russian gas in the wake of Moscow’s invasion of Ukraine. China’s fleet of electric vehicles is running faster than anyone expected. Globally, renewable energy is clearly on the rise.

However, the emissions are still going up and the energy crisis has clearly undermined the climate conversation right now, even if there is hope that it will accelerate the transition to greener fuels in the long run.

Biden was forced to plead with domestic oil producers, Saudi Arabia, and other Opec+ countries to increase crude supplies to reduce high fuel prices, which drained his political capital. needed to continue pursuing its climate agenda. He also became a cheerleader for the nation’s booming liquefied natural gas export industry.

Meanwhile, Europe is investing billions of dollars in new fossil fuel infrastructure as it scrambles to replace Russian natural gas supplies. It was forced to return to coal plants to resume operations.

Developing countries – especially major emitters like China and India, whose leaders did not even attend this year’s climate meeting – will not overlook that when the push happens jostled, the US and Europe put energy security above climate change – even if that means higher emissions.

Meanwhile, the UN’s Adaptation Gap report is likely to take up more of the conference’s time. It calls on wealthy nations, which are largely responsible for carbon emissions into the atmosphere, to step up support for poorer nations to deal with the devastation from extreme weather events, such as Floods wreak havoc in Pakistan.

It said developing countries will need $160 billion to $340 billion annually by 2030 and $315 billion to $565 billion annually by 2050 to adapt to a changing climate – a figure five to ten times that. compared to the amount of money flowing now.

But the promise of a big cash move will be a tough sell for voters in the US and Europe grappling with decades of high inflation, largely due to energy prices.

Boris Johnson, former British prime minister, said at COP27 that the UK does not have enough financial resources to pay “climate compensation”,” adding that climate action is one of the “most important victims” of Russia’s invasion of Ukraine.

“On a per capita basis, people in the UK release a lot of carbon into the atmosphere,” Johnson said. “But what we can’t do, I’m afraid to make up for that with some kind of compensation, we simply don’t have the financial resources.”

Other Western leaders may not be vocal on the issue – but at a time when inflation has backed governments around the world, it will be difficult to devote massive new resources to the fight against climate in the regions. other country.

The US elections, which are expected to return Republicans to a majority in Congress, will further undermine the climate effort and serve as a reminder that America is a fellow changeable in battle.

Plus, the return to power of a Republican openly hostile to international climate action – and now in control of the government’s purse strings – will only undermine any agreement that Biden hopes to give at the conference.

It would also raise the prospect that a rising Republican, likely again led by former president Donald Trump, could take back the White House by 2024 and return to meddling in the gas talks. post-global. (Justin Jacobs)

PS Join Edward Luce, Rana Foroohar, James Politi and veteran commentator Norm Ornstein on November 10 for a dedicated subscriber webinar held with the Swamp Notes newsletter to discuss the results midterms of the United States. Sign up for free today here and submit your questions in advance to our panel.

Data Drilling Machine

Financing the clean energy transition is becoming a top concern for industry executives and investors. According to one new report of the international law firm White & Case, 42% of energy executives say investing in transition is a high priority, up from 14% in 2020.

Carbon capture is expected to account for the majority of these investments. 40% of executives said they plan to invest in carbon-reduction technology over the next 18 months, second only to greenfield renewables. The report surveyed 370 oil, gas and utility companies and more than 200 investors worldwide.

Private equity will be the most popular source of financing, with 40% of executives expected to access private equity investments in the next 18 months.

“A lot of these capital providers are seeing an opportunity to change their business model to get in sooner,” said Michael Watson, partner and head of energy transition at White & Case.

Participation has overshadowed divestment among companies and investors. 45% of investors said they engage with companies that use a lot of emissions to reduce emissions, compared with 34% of investors who said they divest. (Amanda Chu)

The Bar chart of the Survey that asked executives which of the following options they expect to pursue to fund energy transition initiatives over the next 18 months shows Private Equity is expected to be the main source of financing for the energy transition

Strength

  • USA and Europe are conflict of charges that American natural gas companies are profiting from rising prices on the continent.

  • US climate envoy John Kerry will announce a new carbon credit program at COP27 to help developing countries finance clean energy projects.

The Energy Source is a twice-weekly energy newsletter from the Financial Times. It is written and edited by Derek Brower, Myles McCormick, Justin Jacobs, Amanda Chu and Emily Goldberg.

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