US Official Talks Next Steps on Climate Policy

Copyright © 2021 Energy Intelligence Group
CCS Gets a Lift in Washington

After international climate talks in Glasgow, the Biden administration is turning its attention from cajoling other countries to pledge steeper emissions cuts to pushing for follow-through on those commitments. Washington’s own recently passed domestic legislation codifying spending on zero-carbon and transition technologies will only help, US Deputy Special Envoy for Climate Change Jonathan Pershing tells Energy Intelligence. “Unless you can walk the talk, people look at you and say ‘that’s nice, let me know when you’ve done something.’” Below, Pershing outlines key points on the US' approach to the energy transition in a Nov. 19 interview.

  • Natural gas has a role as a bridge fuel — if industry can clean up its act.

Because the next decade is so critical for keeping warming in check, industry’s positioning of natural gas as a bridge fuel between coal and zero-carbon sources of generation only works if potent methane is controlled, Pershing said. More than 100 countries are now signed up to the Global Methane Pledge backed by the EU and US to reduce emissions of the powerful but short-lived greenhouse gas (GHG), but the details are still being worked out. “It is not a no on gas,” Pershing said. “It is a yes, within the parameters of ‘how does it fit into a transition strategy?’”

In the near term, the administration appears open to increasing fossil fuel supply, if it’s temporary. That was evident in the White House's announced release of oil from strategic stockpiles in conjunction with other nations, and its pressure on Opec-plus to increase output. There is a different set of questions when it comes to possibly deploying new gas plants if net-zero goals in the next 25-30 years are to be met, Pershing says — including how to offset the corresponding emissions or contemplate the end of a plant’s life. At home, it’s not clear that all utility companies are taking those considerations into account, with the Energy Information Administration expecting 27.3 gigawatts of new natural gas-fired power capacity to come on line in the next three years, a 6% increase over today’s capacity.

  • Trade policies might serve to accelerate the transition, but not in all cases.

Discussion around a carbon border tax was clearly a “subtext” to the Glasgow talks, Pershing says, even if it wasn’t front and center the way developing rules for carbon trading across borders was. “Many would argue that it’s influenced the policies of places like Russia. How much? A little bit hard to say, but as much as Russia has been moving, it’s partly because it wants to retain Europe as an export market. Still, with the European Commission — the jurisdiction the furthest along — still formulating its approach it’s “very early” for the policy, “and the utility to be seen still.”

In the US, the idea of a carbon border adjustment fits well with the more protectionist bent to trade policy in recent years and the policy recently polled well at home, but it has yet to pick up momentum in legislation. Formulating a policy out of Washington would be doubly difficult because it’s unclear how to compare countries with direct GHG pricing systems to those where a price is only imposed indirectly, through regulation — so far the preferred method in the US. A lack of carbon pricing in other countries will also complicate Brussels’ execution of its own border taxes.

When it comes to trade in technologies necessary to deploy zero-carbon sources, Washington’s other goals will sometimes trump the focus on the energy transition. This is particularly visible when it comes to US tariffs on Chinese solar components for both anti-dumping and human rights reasons. “The optimal scenario would be if China were to switch its policy with regards to how it produces this capacity,” Pershing says. “Falling short of that, I think there’s going to be a huge effort to diversify the supply chain,” be it in the specific technologies used or where they are produced. Pershing pointed to Indian interest in developing a solar manufacturing supply chain as it works on its goal of deploying 450 GW of renewables.

  • Climate finance is about more than deploying zero-carbon renewables over GHG-intensive energy.

The $8.5 billion multinational deal with South African utility Eskom to refinance debt, retire coal plants, deploy renewables and retrain workers is a potential model for other countries, Pershing said. “That’s the first of what we hope will be many replicated examples. You can imagine it again in India, you can imagine it in Indonesia ... it plays out in a fairly broad frame.”

That comes as both multilateral development banks and export credit agencies are increasingly hesitant to lend to oil and gas projects, even when there aren’t outright prohibitions. “All of that has been moving, and I would argue it’s not just in the last few months, its been over the last five to eight years,” Pershing said. That’s only compounded as the price of renewables falls, although a lag in funding zero-carbon sources has persisted.

  • Producer nations may be embracing climate action more slowly, but they are moving.

Oil-producing nations that once were forthrightly skeptical of the need for climate action have shifted. “It’s striking to think about the shift in policy from Saudi Arabia, which used to not have really any room for a climate discussion,” Pershing says. Both Saudi Arabia and Russia now have 2060 targets for reaching net zero, with plans for lowering oil’s carbon footprint, embracing carbon capture and promoting lower carbon uses, such as hydrogen. At the root of the about-face is a desire by oil- and gas-producing nations to counter the vision of a world entirely weaned off fossil fuels.

Saudi Arabia’s investment in carbon capture is notable, Pershing says, for a low-cost producer which can expect to have customers even as demand begins to dwindle. Whereas the likes of Saudi Arabia and Russia in the past may have banked on continued demand, there’s an increasing awareness of a need to compete on fuels with a lower GHG footprint. Riyadh’s investments in solar and hydrogen — attempts to stake a claim in a lower-carbon economy — Pershing calls “very interesting, and not just marginal sums of support, right? They’re putting billions of dollars into those initiatives.”

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