Climate News Weekly: Record CO2 accumulation, US-China climate collaboration, Climeworks opens DAC plant, and more

James Lawler: [00:00:00] Welcome to Climate News Weekly. We have a full complement of hosts today. I’m here with Dina Cappiello, Julio Friedmann, and Darren Hau. Good to see you guys.  

Julio Friedmann: Woo hoo!  

Darren Hau: We have the whole crew here.  

Dina Cappiello: The gang is back together.  

James Lawler: Indeed. Very exciting. So, full complement of stories to digest this week. The first that we will cover are the new rules to overhaul electric grids that promise to boost solar and wind projects coming online and powering the grid. We’ve talked a lot about the need for additional renewables coming onto the grid and the concern again is that across the U.S., energy companies have proposed more than 11,000 wind, solar, battery projects, but many of these are, and I’ll quote the New York Times article on this, many of these projects are “in limbo because there’s not enough capacity on the grid to accommodate them. Individual developers today are required to pay for grid upgrades to accommodate their projects.” And this is, this is the analogy here that the, the times article makes is to a trucking company being required to [00:01:00] pay for an additional lane on a highway that all motorists ultimately use. So what are these new rules and how are they being received? 

Dina Cappiello: Yeah, so this is, I mean, this is huge news and really like a long time coming and was super welcomed by folks at RMI for a couple, for a couple of reasons. First of all, I just want to point out that it was hugely bipartisan, right? So, it was endorsed by 138 bipartisan federal lawmakers, corporate energy buyers representing 7 trillion U.S. revenue, former military leaders. I mean, this was, in this polarized world that we live in, a real moment when actually people came together for something that was really, really needed. And, you know, from our perspective, yes, it is about enabling clean energy, but let’s kind of look at that in a little bit of a different light, which is, [00:02:00] it’s actually about enabling the least cost resources, whatever those are, energy resources for reliability and demand growth to actually get to where they need to go. So really a ray of hope in what has been very polarized, this topic of energy and climate, etc.  

Julio Friedmann: Yeah, I have to agree. This was awesome. It was really good news.  

James Lawler: And what is it actually saying? What does the rule actually lay out?  

Julio Friedmann: So what the rule actually says is, first of all, you should do long term planning. This is like the very first, lowest rung on this thing, which was not really allowed. That already opens up a whole lot of opportunities by just saying, since we have long term planning, we think we need to build these transmission lines and therefore we need to figure out how to pay for them. This is in some level, this is kind of kindergarten stuff, but it’s actually really critical and really important. The second thing it says is, if we are going to build these transmission lines, the cost will be shared. And that is [00:03:00] part of the pushback as well. Part of the pushback is saying well, there’s like, you’re going to have to force states to opt-in even if they don’t necessarily want these lines, even if they don’t necessarily get all the benefits. But a point of fact, the pay structure is more subtle and nuanced than that. It still has the largest power buyers, the largest power users are paying the largest share, which is again, a reasonable setup. So I’m, I’m actually pretty enthusiastic about it. You’ve heard me talk about infrastructure over and over again on this show. This is getting kind of that infrastructure in place. Last but not least under any circumstance, we know there’s not only going to be a lot more generation, but there’s going to be a lot more demand, which is why we’re going to have a lot more generation. We’ve been talking about the electricity gauntlet, the lack of ability to have put power to data servers, much less industrial decarbonization or fleet vehicles or industrial heat pumps or steam boilers or all those other sorts of things. We probably need a minimum of 2x probably more likely [00:04:00] 3x to 5x growth in the grid. This just makes it easier to say yes to that need.  

Dina Cappiello: To put it in other contexts, like so, Julio is absolutely right, as usual. We have had a very, very slow, sluggish build out of new power lines, which is a key hurdle that’s been facing the U.S. energy transition. And right now, the volume of clean energy projects waiting to get on the grid is at a record high, largely because we haven’t had this mechanism of like seeing ahead. The fact that they have now implemented this long term planning is one of the most powerful ways, I think, that the federal government has to solve this kind of the gridlock, for lack of a better word, of getting more energy onto the grid, clean energy onto the grid. That’s the problem it’s solving. 

James Lawler: The rule also requires utilities and grid operators to consider new technologies that [00:05:00] might cost more today, but could make grids more efficient and deliver longer term benefits, such as advanced conductors that carry twice as much current as traditional lines. So, really making sure that all of these different options, and I assume the way that this sort of percolates through is that in utilities, RFPs for proposals for new grid projects, they would ask for such things, right?  

Julio Friedmann: Well, yeah. And, and one of the nice things, again, good policy, good energy policy should be technology agnostic. This is technology agnostic, right? It says you can do reconductoring if that’s what works, you can do new nuclear if that’s what works. But the whole idea is look at the set of options and even if they might cost a little bit more today, if you have a good reason to believe that will be important for grid stability or to serve new loads, then you can figure out how to get it done and pay for it. It’s like, it is mostly authorization and that authorization in and of itself is hugely valuable. And we don’t know if reconductoring is going to be the right answer [00:06:00] everywhere, or if nuclear is going to be the right answer, or if renewables or carbon capture or anything else. It also allows balancing authorities to take a larger role in how they think about their own grid operation, a balancing authority like MISO or ERCOT or KISO has to make sure that the grid is reliable and that the loads and the generation are balanced. And if they can’t do the long-term planning, it’s very hard for them to really make that work, so hopefully this will unstick some of the friction that is in the politics of this because more players have more latitude and more options to consider. 

Dina Cappiello: So, I think everybody is seeing the need for this, right? So from the military perspective, it’s needed for national security, right? We need a stable grid. So there was a lot of very different interests come to play. I mean, not all Republicans were for it. The Republican FERC commissioner was against it and objected to it based on federal authority over state authority, state rights. But universally, for something [00:07:00] even in this topic area, hugely bipartisan, because I think no matter what your perspective is, there’s a reason to do this, right? Whether it’s the energy load, whether it’s that, that the grid being outdated has impacted your life because, you know, electricity has gone off, right? So, for all of those reasons, there is a huge national security military hearing this week on the Hill about climate change and that, they’re, they’re worried about it because of the susceptibility of the old grid. So for all of those reasons, it kind of, it herded cats that haven’t been herded in a long time on topics like this. So that, that is a plus, especially going into obviously, it’s currently a presidential political year.  

James Lawler: Yeah. You know, there is a related development. The U.S. Department of Energy on Wednesday, so on the 15th, unveiled a list of 10 potential national interest electric transmission corridors. So these are corridors totaling more than 3500 miles [00:08:00] across, which target specific regions: Northeast, Mid Atlantic, New York and New England, Southwest and Northern Plains. And what this designation allows is the federal government to expedite development of grid expansion and make federal funding available for projects along those corridors, which is pretty interesting. How did these things, how does this kind of designation actually work? Like what is, can anyone shed some light on what this means and what we might see as a result? 

Julio Friedmann: So this is a, an attempt at permitting reform through executive action. Ultimately, permitting reform requires legislative action, which is hard to come by. It’s hard to get that done. So, the agencies do what they do. In this case, what the Department of Energy is saying is, hey, we have found 10 corridors where we could do a lot and a whole bunch of projects that look a bunch the same should be able to come on here in the same way. It is an attempt to declog that backload that Dina was [00:09:00] talking about earlier. And essentially what it says is, hey, if you’re in these corridors, because we’ve already scoped it, because we’ve already worked it, because we understand the land use issues, because there’s certain government holdings, and so forth, we have powers that can fast track aspects of the work. It’s not a full solution, but it says, hey, if you’re in this region, then we can do stuff there. And again, it includes maybe new build up, but also reconductoring, also add-ins, also pre-approval for certain classes of projects. It’s a way to get stuff moving. 

James Lawler: Got it. So shifting gears a little bit. This is a story that first came out in late April. Mining giant BHP made a $39 billion bid for Anglo American. That bid was rejected and I believe if they haven’t already, they’re contemplating making a higher bid for Anglo. Darren, what is this story all about and why are we reporting on it? Why are we talking about it on Climate Now? 

Darren Hau: Yeah, this is an incredibly important story and highly relevant to all the stuff that we just discussed. They, [00:10:00] so, BHP actually did up their bid. They most recently proposed a $43 billion takeover, which was again rejected, and essentially the investors in Anglo American are pressuring their executive team to come up with a plan of their own to see if they can come up with something that is more favorable to the shareholders. But the reason why this is important is because it’s really a story about copper. So wherever we’re talking about the energy transition, whether it’s EVs, you know, wind turbines, data centers, and infrastructure, all of this is going to require a structural increase in the demand of copper. Unfortunately, as we have talked about in this podcast in the past, building new mines is incredibly difficult, and it takes a lot of time, and sometimes mines can take 10 or 20 years before they actually start operating. So, what you see from the big miners, BHP and Anglo American included, is that oftentimes, rather than trying to build new mines, which is incredibly risky from a permitting perspective, from a capital [00:11:00] expenditure perspective, they’re just trying to consolidate. They’re trying to take more of the pie, but they’re not growing the pie, because that’s the easier thing to do. Of course, this is not necessarily great for solving the problems that we have in society. We do have to find a new way to get more of this material, but do it in a way that’s environmentally friendlier. But this is why you’re seeing what you are seeing. So, what’s interesting about this acquisition is that BHP is trying to acquire Anglo primarily for the copper resources. If you take a look at what Anglo American does, well, they used to be much more diversified in a way that was quite unwieldy. Not only did they have mining units, but they also had pineapple canning, beer brewing, hotels. These days, they’re actually all focused on mining, but there are five major businesses. There’s copper and iron ore. Those are the two largest parts, probably responsible for almost 75 percent of the revenues. And then also have coal, platinum, and diamonds. So they actually owned De Beers. Funnily enough, as valuable as diamonds are, that only constitutes about 1 percent of their revenue. What their, you know, what their investors have been [00:12:00] pushing them to do is, hey, divest, get away from some of these areas that are distracting you, see if you can be more focused, and expand in the areas that we have structural demand for. What’s interesting is BHP, part of its acquisition proposal is also pushing Anglo Americans to divest from the things that they don’t care about, and they really want to focus on those copper resources. 

James Lawler: And demand for that, for that copper resource is expected to grow 24 percent over the next decade.  

Darren Hau: Right.  

Julio Friedmann: Yeah, conservatively.  

James Lawler: Yeah. So in 2010, the market was 16 million metric tons. In 2023, the market was 22 million metric tons. So it’s, it’s grown a huge amount.  

Dina Cappiello: According to a Wood Mackenzie report, the share of global copper demand coming from green sectors, including renewables and EVs, is on course to double over the next 10 years, from about 8 percent to about 16%. Consumption rises about 24 percent between 2023 and 2033, [00:13:00] reaching about 32 million tons a year. So, a huge driver of, I think, of deals that we’re talking about is the demand.  

James Lawler: Right.  

Darren Hau: So if you take a look at around 2019, copper costs about $6,000 a ton. We had a huge spike in 2021, early 2022, where it reached above $10,000 a ton. And then with the slowdowns in really manufacturing capacity out of China, I believe, in end of 2022 and 2023, it kind of hovered around $8,000 a ton. What you’re seeing right now is kind of a return to form. We’ve had this exponential increase back up to over $10,000 a ton and people in the commodity space are saying that it has legs to continue to keep running.  

Julio Friedmann: I just want to draw a comparison for your listeners here. $6,000 a ton for copper, that’s great. Copper does all kinds of stuff, but maybe you could pay for $200 a ton of CO2 removal somewhere in there. Try to balance some of that out.  

James Lawler: That’s a great point, Julio. All right, let’s move to our next story, which is that Mauna Loa, in Hawaii [00:14:00] has recorded its biggest year over year jump in CO2, which is not good. 

Julio Friedmann: Yeah. This is something we talk a lot about. We see a lot of progress and it’s really great. And the emissions continue to rise. This is also true. This year was particularly alarming for a couple of reasons. One, it was the biggest jump ever year on year. And in part that was due to a low March the year before, but in part, it seems structural. As hydropower has declined due to climate change, there’s been more coal fired generation . Oil demand continues to grow around the world, even if it’s decreasing in parts of the OECD. And so we are seeing ongoing rise of emissions and one question that comes from this is, are we starting to hit the limits of how much CO2 landscapes can take up, how much CO2 the oceans can take up? We’re still trying to sort that science, but it’s wearing in the alarm bell. You want to answer that question to really understand it because we may be in a position again of structurally [00:15:00] higher CO2 atmospheric concentrations because the other sources of historical environmental drawdown are starting to saturate. 

James Lawler: It’s hard to overstate how alarming that is.  

Darren Hau: Right. And the thing is, like, there’s still science to be done. We don’t know all the answers. But when you see a signal like that, it’s telling you you need to do more. It’s telling you you need to do more and you need to move faster, you need to have higher ambition, you need to make faster and greater strides. The idea that there’s going to be some magic threshold where the whole globe wakes up and decides to take decisive action, like that’s not what’s going on. What is the case is that repeating this kind of story, yeah, public may be fatigued, but the public isn’t making these decisions. Lawmakers are making these decisions. Investors are making these decisions. Operators are making these decisions. And so what we are seeing, the good news stories that we were talking about earlier around transmission lines reflect the fact that people have seen these kinds of things for a very [00:16:00] long time. There is not going to be one magic event that crystallizes action globally. It’s just not going to be that way. But the constancy of the drumbeat actually raises ambitions and leads to more action.  

Dina Cappiello: That’s absolutely right. It’s, it’s the reason why you have these good news, bad news, right? It seems like it’s like, this is terrible, but we have all this acceleration and the clean energy, it’s just not happening fast enough on the clean side, right? And at some point, hopefully we’ll accelerate it to the point where it is catching up and all the news becomes great and good instead of these, these records.  

Julio Friedmann: And the fact is, there’s going to be a point where fossil energy peaks. There’s going to be a point where emissions peak. And we’re going to need to keep that level of focus and ambition for the next 30 years after that too. Like, we don’t declare victory at that point. We still will be emitting 52 billion tons a year. So we’re going to have to do a whole lot more after that point too.  

James Lawler: Yeah. Thanks guys. That’s helpful perspective on that. In a, in a positive story, the U.S. and China [00:17:00] have agreed on climate collaboration in spite of trade tensions. They’ve agreed to intensify their cooperation and replacing coal with clean power.  

Julio Friedmann: So the most important thing globally is that the U.S. And China work together. If the U S and China don’t work together, we are simply not going to achieve climate goals globally, period. Number one and number two emitters. Number one and number two markets. Like, like this has to happen. So the fact that we are continuing to meet, despite other tensions, despite other challenges, is a step forward and it remains positive. The fact that we can find collaboration, whether it’s in the Glasgow accords or the Dubai consensus, or these bilateral agreements between John Podesta and his counterpart, in China, Yu Jimin, like, it is great that we are continuing to do this. And I do believe that kind of dialogue leads to investment projects, demonstrations, and it also helps in the global negotiations when we get together in Azerbaijan in COP 29 and [00:18:00] Brazil in COP 30. The U.S.-China discussions are going to change the color of all of those conversations. 

James Lawler: Yeah, that’s a great detail.  

Julio Friedmann: In the face of this progress with U.S.-China discussions, almost the day after that set of meetings, President Biden announced a whole bunch of tariffs on EVs from China, and a big increase. It went from 25 percent tariff to a hundred percent tariff, trying to keep the U.S. EV industry alive, trying to push back against Chinese dumping and stuff, but talk about mixed signals like this is the kind of world we’re living in where there’s friendly competition and not so friendly competition and collaboration and deep suspicion, like all of these things are living together at the same time. Seeing these two stories so closely together was jarring. 

Darren Hau: Yeah, I would say there’s kind of a near term impact and the long term impact. The near term impact is really minimal because China doesn’t really sell a lot of vehicles in the U.S., so this is a little bit more for [00:19:00] political show than anything else in the near term. Now, there are implications in the medium and long term. Chinese companies have been really aiming to push, well, they’ve been really aiming to set up factories in Mexico, for instance, because they do want to sell them to the U.S. Why is that, given all the geopolitical tensions? Well, having spoken with some folks that have been on kind of both sides of the story, you know, working at American automakers and understand how things work in China, there is structural overcapacity in China, and of course, this is, you know, the thing that Europe and the U.S. are very concerned about, that China has been subsidizing its domestic industries, there’s an oversupply, they try to send it into other countries, which, you know, is dumping. And, Chinese companies are very competitive in their domestic markets. It’s difficult to make money because of all of the competition and given the oversupply, they would like to have other markets to supply to. I think the question is, what is the right approach for us as a country to make sure that we can build a domestic manufacturing capacity for these [00:20:00] new energy technologies? I certainly don’t have the full answer, but one might suppose that, you know, this, this has echoes of what happened in the eighties when Japan, which was albeit an allied, friendlier country, started exporting much better vehicles than our domestic automakers. And, you know, back then there were also questions of tariffs there are tariffs that are currently imposed. And the way that Japanese automakers got around it was they did set up domestic manufacturing supply. Today, about a third of American automakers actually work for Japanese automakers, and they have factories in the U.S. So I think the question is, you know, it’s not exactly the same, again, China is a geopolitical competitor, if not an antagonist to the United States, but if our goal is to build the know-how and the capacity to build these new energy technologies in the U.S., one might wonder, maybe we should be trying to set up more of these factories along with Chinese expertise in the United States?  

James Lawler: Yeah, agreed. I mean, that’s a great point, Darren. Final story [00:21:00] today, Climeworks, the direct air capture company, has opened Mammoth, which is now the world’s largest direct air capture plant.  

Julio Friedmann: This is the first part of the 36,000 ton plant. So they’ve commissioned something that was twice as big as the existing plant. Orca, which does 4,000 tons a year, it’s twice as big. It’s also a new design. So it has lower capital costs, better energy efficiency. So they’ve learned between their first and their second iteration. So I consider this to be like the difference between say a mammoth and a mastodon, like they’re pretty similar kinds of beasts, but they’re a little different, right. And one’s a little bigger and one’s a little better. And so, I’m really glad to see this. It’s important to know that the other four units are going to be coming on very soon, so they’ll get the 36,000 tons. It’s important to know as well that all that volume has already been sold. Part of the reason why they were able to build this is because they have sustained offtake agreements for all of that volume. So there’s buyers already for 36,000 tons a year for [00:22:00] a number of years. And you need that kind of financing to make it work. I wished I could have been there. I love going to those things.  

Dina Cappiello: Because you’re a geek Julio, but we love you for it.  

Julio Friedmann: Right back at you.  

Dina Cappiello: Exactly, exactly. So, just to put like, step back a bit, right? Love the mastodon analogy, but to step, step back a bit and talk about a little bit, what we’re talking about with, with the record on Mauna Loa. We know that we have to speed up renewable energy. We also know that we’re gonna have to capture some carbon and basically every projection talks about that. So, this is a critical technology and the fact that it is of this scale, I think, is an amazing test case for products that are needed around the world to take carbon out of the atmosphere. We need to get to net zero, right.  

Julio Friedmann: Well, and this is the “net” in net zero. We’re going to plant trees, we’re going to do BECCS, we’re going to do mineralization, we’re going to do soils, but we’re going to do direct air capture too. And even let’s say, the aviation [00:23:00] sector, we have really good sustainable aviation fuel. Really good sustainable aviation fuel will still have some footprint and we have to zero that out too.  

James Lawler: Absolutely. Well, I think we’ve covered our list of stories for the week. Darren, Julio, Dina, bexthanks guys so much for joining us and thanks for listening.