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Global Financial Firms’ Upside Surprise on Coal, and More (Energy Transitions | Week in Review)

A weekly five-point roundup of critical events in the energy transition and their implications of climate change for business and finance.
Energy transition

A weekly five-point roundup of critical events in the energy transition and their implications of climate change for business and finance.

India: Hot, Without AC, But Has a Plan

What happened: “India is pioneering a strategy to shield its 1.4 billion people from increasingly scorching heat — a potential blueprint for low-income countries facing the same climate-induced challenges. If it works.”

Why it’s important: India has some of the longest, most brutal heat waves in the world. The trend lines suggest they’ll only get worse. “The government’s India Cooling Action Plan is a first-of-its-kind attempt to recognize rising temperatures as a systemic challenge.”

What’s next: “Small, low-scale interventions” are likely the best path to progress. But there’s concern and skepticism about India’s ambitions, given that the country’s plan has languished in drafts for the past few years. (By Lou del Bello, Semafor)

The West’s Water Shortage Is Making This Company Rich

What happened: A small company with fewer than a dozen employees got bought for $300 million by a large homebuilder because it specializes in a small market: water brokerage.

Why it’s important: “The [West] has grown twice as fast as the rest of the United States and national builders like Horton are relying on it to fuel future profits. If these companies want to capitalize on migration to the booming suburbs of Phoenix and Las Vegas, they’ll need to find creative new water supplies that will allow them to keep building even as regulators try to clamp down on unsustainable growth.”

What’s next: The unique business model and the homebuilder’s purchase may shed more light on suburban growth in dry exurbs. “While the homes they helped build will last for many decades, the water that supplies them may not. Without ample rain to replenish them, the small and fragile aquifers could someday empty out, leaving future homeowners high and dry.” (By Jake Bittle, Grist)

The Commitment to Drop Coal Digs an Even Deeper Hole

What happened: A new analysis shows that globally significant financial institutions are committing to divesting away from coal at a faster rate than initially assumed.

Why it’s important: The pace of coal divestments creates its own momentum. Whereas 100 financial institutions made the commitment in the first six years, that rate has doubled in the last three, helping persuade even institutions in developing countries to sign the pledge.

What’s next: “The number of institutions making this commitment is likely to continue to grow and more will strengthen existing policies. FIs in emerging markets are introducing their own coal exit policies and the rising risk of stranded fossil fuels assets accentuated by the consistent declining cost of clean energy generation.” (By Christina Ng, Institute for Energy Economics and Financial Analysis)

It’s Up to You, New York, New York

What happened: “Federal officials last week greenlit New York’s congestion pricing plan, allowing the state to move forward with its proposal to charge drivers a fee to enter certain parts of Manhattan in an effort to reduce traffic congestion, improve air quality and boost public transportation.”

Why it’s important: It isn’t just about reducing emissions from cars, but directing travelers to a low-carbon public good that already exists. “Congestion pricing would not only help New York raise funds for new climate initiatives, but it could also help to maintain one of the city’s most successful climate programs already in place: a healthy public transportation system.”

What’s next: The proposal is getting major pushback from legislators in surrounding states, where many New York City commuters live. The proposal is also limited to only one part of Manhattan, and even details like how much to charge have yet to be ironed out. (By Kristoffer Tigue, Inside Climate News)

Supply and Demand Comes for New Climate Bill

What happened: The Inflation Reduction Act’s clean energy manufacturing incentives have produced a higher than expected surge in new factory construction. But that means more demand for a small number of highly qualified employees and limited numbers of supplies.

Why it’s important: More companies building more factories means Democratic estimates for how much IRA tax credits would cost need to be refigured. If all proposed factories come on line and take advantage of manufacturing credits, the cost could run up to nearly $200 billion, far more than the initial $30 billion estimate.

What’s next: Expect fireworks. “The price of the tax credits has also become a focal point in the ongoing standoff between House Republicans and Mr. Biden over raising the nation’s borrowing limit and avoiding an economically catastrophic default.” And if Republicans get their way, the credits could go away forever. (By Jim Tankersley and Brad Plumer, The New York Times)

The astronomer Carl Sagan said, “It was easy to predict mass car ownership but hard to predict Walmart.”