A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.
The Biggest Dedicated Climate Fund Is Getting Much Bigger. It Doesn’t Matter.
What happened: The Green Climate Fund, the U.N.’s flagship climate fund and the world’s largest dedicated fund, wants to get bigger. Three times bigger, bringing its capitalization to $50 billion by 2030. (The GCF describes itself as achieving its goals ”by investing across four transitions – built environment; energy & industry; human security, livelihoods and wellbeing; and land-use, forests and ecosystems.”
Why it matters: “The GCF is the world’s largest dedicated climate fund, a pillar of the grand bargain between rich and poorer nations which underpins the 2015 Paris Agreement: Developing countries agreed to cut emissions in exchange for financial support from their wealthier peers. On its own, however, the GCF is too small to move the needle… when compared to the additional climate finance needs of developing and emerging economies other than China, estimated at around $1.8 trillion a year by 2030.”
What’s next: The hope that risk-taking by a fund that doesn’t need to consider risk will inspire others. (By Chloe Farand, Semafor)
We’re Europe’s Security Blanket (And Heated Blanket As Well)
What happened: The EU’s top energy official admitted that in the continent’s effort to wean itself off of Russian natural gas and until its renewables sector was ready to pull its weight, Europe would be almost entirely dependent on American natural gas to stay warm through harsh winters.
Why it matters: “The statement is one of the strongest signals from Brussels that EU states will consume US LNG well past the end of the decade in spite of concerns expressed by some politicians and environmental campaigners that it could dent the bloc’s ambitious climate goals. Brussels is walking a tightrope between its need to boost energy security by weaning itself off Russian gas and reaching goals of net zero carbon emissions by 2050 and cutting emissions by more than half by 2030 compared with 1990 levels.”
What’s next: The new battleground are individual infrastructure projects. It’s one thing to admit you’re dependent, quite another to build facilities that will make that dependence easier to carry into a new decade or two. (By Amanda Chu, The Financial Times)
Germany: From First to Worst
What happened: Germany is now the world’s worst-performing major developed economy and almost every explanation for why goes back to a sudden inability to source cheap energy.
Why it matters: A manufacturing and industrial powerhouse is going to have a really hard time when it phases out its nuclear reactors at the same time that it loses access to cheap Russian natural gas. But it could go from bad to worse if the problems persist enough that the country deindustrializes and sees the high-paying jobs it built its economy on leave for cheaper countries nearby.
What’s next: A country that considered itself a model for others to follow when it comes to the energy transition may do some unthinkable things, like cap electricity costs for big, high-emitting plants. (By David McHugh, The Associated Press)
Beating China In the EV Supply Chain Game Is Next to Impossible
What happened: Though China may not be the main miner of the metals needed to supply EVs, it is by far the biggest refiner and producer of battery cells and the cars they power.
Why it matters: “China’s dominance of the transition to electric vehicles is the latest source of geopolitical tension with the US and Europe, where policymakers face a costly catchup effort to avoid long-term dependency. The European Union earlier this month heightened tensions with an investigation into Chinese subsidies for electric cars it says are flooding the market. The move brought the EU closer in line with the US, which has long had China in its sights.”
What’s next: Almost every big economic confrontation over the next few years will come as a result of the EU and U.S. being terrified of a wave of cheap Chinese electric cars. (By Phoebe Sedgman, Bloomberg)
Lego Blocks Plans to Go Greener
What happened: “Lego is scrapping plans to make its toy bricks from recycled plastic bottles after determining that switching to the material would result in it producing higher carbon emissions.”
Why it matters: Disrupting manufacturing processes that have worked for decades often takes more work. Even if the material change involves less emissions, that extra work might more than make up for those energy savings. It’s nice to see companies try, but even better to see them make the most logical choice.
What’s next: Bless their hearts, Lego is going to keep trying different recycled plastics. (By Dominic Chopping, The Wall Street Journal)