Equilibrium/ Sustainability — Presented by NextEra Energy — Climate change threatens California’s wine country

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California’s Napa Valley is home to some of the country’s most expensive farmland, at as much as $1 million per acre, but wildfires and empty reservoirs are destroying the grapes, property and equipment at the core of the region’s wine industry, Christopher Flavelle reported for The New York Times.

One winemaker, Dario Sattui, told the Times that insurers would no longer cover his winery, which burned down in September. Without that insurance, his winery will need to go bare during this year’s fire season. Another winemaker, Cyril Chappellet, said he still has insurance, but that it costs five times as much as it did last year.

Climate change, Flavelle reported, “is spelling calamity” for Napa Valley, where the vineyards that made the valley famous are “now surrounded by burned-out landscapes, dwindling water supplies and increasingly nervous winemakers.”

Today, climate intrudes into the previously nonpolitical. Today, we travel to Germany, where the recent floods have put climate politics front and center. And in the world of nuclear proliferation, one of the greatest threats to global sustainability, the Biden administration weighs whether sanctioning Iran’s oil sales to China can get the country to reconsider a nuclear deal.

For Equilibrium, we are Saul Elbein and Sharon Udasin. Please send tips or comments to Saul at selbein@digital-release.thehill.com or Sharon at sudasin@digital-release.thehill.com. Follow us on Twitter: @saul_elbein and @sharonudasin. 

Let’s get to it.

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In Germany, the floods have put climate at the center of national politics

After historic floods smashed through Germany and Belgium — what Bloomberg Green called the worst since the Middle Ages — federal officials, local authorities and residents are picking up the pieces and trying to figure out how to keep it from happening again.

The timing couldn’t be more auspicious: a climate-linked disaster in the industrial heartland of a European Union that just last week launched an ambitious plan for climate action. Member states of that union are now being forced to reckon with questions of climate risk and response at the center of national discourse.

What happened? Heavy rains pummeled northern Germany, Belgium and the Netherlands last week — overflowing rivers, toppling buildings and causing mass evacuations, as we reported Friday. More than 180 people were killed in the floods, Caroline Vakil reported for The Hill.

Many survivors are angry after 30,000 people were left without power, heat or drinking water, Philip Oltermann reported for The Guardian. With about a thousand people hospitalized from floods they say arrived before warnings did — despite government claims otherwise — Germans are now trying to figure out what went wrong, Bojan Pancevski reported for The Wall Street Journal. And that debate is spilling out of disaster response circles and into the country’s upcoming federal election.

“Expect new crises”: In last week’s disaster, Germans identified three principal points of failure, which are relevant to flood-prone regions everywhere. 

1. Control was fragmented: The German government received reports from the national weather service that heavy rain would drive floods, and said it passed that information on to local officials, Geir Moulson reported for The Associated Press. 
2. Communications broke down: But those governments became overwhelmed by the speed and scale of the flooding, which one mayor described to the AP as “an explosion” of water that knocked out infrastructure needed to warn residents. Much of the national system of warning sirens failed an emergency test in 2020.
3. More precise predictions needed: Local authorities complained that they had not been notified of possible dam or levee breaches until shortly beforehand. But even “half an hour before, it is often not possible to say what place will be hit with what quantity” of water, the head of national defense said, according to the AP.

With the devastation from the floods still raw, German officials across the political spectrum called for further, faster reduction in emissions to help stem climate change. As such extreme weather events continue, Armin Laschet stressed the urgency to “move more quickly down the path towards carbon neutrality,” Guy Chazan reported for the Financial Times.

A CHANGE IN POLITICAL CLIMATE

Two parties fight for power: With Merkel retiring in September, the recent flood crisis has become a referendum on German climate policy more generally, Chazan wrote, giving Green candidates “a whole new way to mobilize voters,” but also strengthening the position of established parties such as the Christian Democratic Union of Germany.

The Greens, who have been growing into a mainstream political force since the devastating heatwaves of 2018, were already favorites to succeed Merkel’s Christian Democratic Union before the disaster. Now, experts told Chazan, the disaster helps to restore her sheen, especially since the leader of the Greens is facing plagiarism allegations.

But the German Greens are being pushed — for the first time in their history — from those further on the environmental left, by the “scientists and activists” of Klimaliste, or “climate list,” Erika Solomon reported last week for the Financial Times. “Politicians want to follow the old strategy: negotiate, negotiate,” Doris Vollner, a physicist running for a seat on the Klimaliste slate, told a gathering, according to the Times. “But you can’t negotiate with nature.”

Takeaway: One striking thing about this controversy, from the vantage point of the U.S., is that most of the German political mainstream now agrees on the need to rapidly cut emissions —  a position that has moved sharply toward the mainstream in this country as well. 

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Potential sanctions on Iranian oil would aim to ‘choke off’ Tehran’s sales to China

The U.S. is considering tighter sanctions on Iranian oil sales to China if talks on Tehran’s nuclear program continue to falter, according to The Wall Street Journal.

Negotiators have been working with international partners since April to resurrect the 2015 deal that placed restrictions on Iran’s nuclear program, Benoit Faucon and Ian Talley reported for the Journal. But after making little progress, the U.S. is exploring options that might encourage Iran to stay at the table — or endure consequences, officials told the Journal.

First, a nuclear deal refresher: The Joint Comprehensive Plan of Action (JCPOA) required Iran to dismantle much of its nuclear program and open its facilities to inspections, in exchange for billions of dollars in sanctions relief, a Council of Foreign Relations backgrounder explained.

Former President Trump withdrew from the deal in 2018, claiming that it failed to curb weapons development. Iran began ignoring JCPOA restrictions a year later, and the U.S. has since placed sanctions that have devastated Iran’s economy, as the BBC reported in 2019. 

Current talks reached a stalemate when Iranian President-elect Ebrahim Raisi demanded a comprehensive removal of U.S. sanctions, according to the Journal. The years of back-and-forth call into question just how much longer the fight over nuclear prowess will remain sustainable to any of the powers involved — and if fossil fuels are used as an incentive to come to the table, how much longer that incentive will remain relevant.

Why target oil sales to China? With “not much left to sanction in Iran’s economy,” the U.S. is eyeing Tehran’s oil deals with China as “the prize” — meaning that sanctions could serve to “choke off” Iranian sales to its main client — the Journal reported. Since President Biden’s election, Iran’s crude oil exports have surged, reaching up to 1.5 million barrels a day, three times more than the low point when Trump reimposed sanctions, the Journal reported.

The sanctions would target the shipping networks that export about a million barrels a day to China, the Journal reported. 

But instead of forcing the issue with “sticks,” the administration might try to get the Iranians back to the table with “carrots,” Morgan Bazilian, director of the Payne Institute for Public Policy at the Colorado School of Mines, told Equilibrium. 

“The domestic pressure on Biden to be tougher on Iran is a political tool for the Republicans,” said Bazilian, a former World Bank energy specialist, noting that it was good that the U.S. was trying to revive the nuclear deal, as it had been the party to leave the table.

Is Biden considering other options? Yes. The administration knows such sanctions could backfire — and drive Iran to accelerate its nuclear program. So in lieu of sanctions, Biden is considering a diplomatic campaign to persuade Iran’s customers like China and India to cut imports, the Journal reported.

WHERE GEOPOLITICAL RISK HITS CLIMATE RISK

A rocky triangle: The fraught U.S.-China relations are worrying progressive groups, which recently warned that Biden’s “antagonist approach” to China is putting the future of the planet in jeopardy, Alexander Ward reported for Politico.

In this “new Cold War,” tensions are mounting. In March, China and Iran signed a deal that included plans for the Chinese government to invest in Iran and buy oil from the Islamic Republic, furthering straining ties with the U.S., Arsalan Shahla reported for Bloomberg.

Meanwhile, the White House — and U.S. allies — blamed China on Monday for a cyberattack that struck tens of thousands of computers worldwide, NPR reported.

In this context, the Chinese seem less than receptive to a potential Biden push. China’s Foreign Minister Wang Yi told his Iranian counterpart Mohammad Javad Zarif on Saturday that China would partner with Iran to oppose unilateralism and intimidating behavior, according to the Tehran Times, which functions as the voice of the Islamic Revolution. 

Chinese Foreign Ministry spokesman Zhao Lijian demanded that the U.S. “lift its illegal unilateral sanctions against Iran and third parties,” another Tehran Times report said.

And yet, oil sanctions might have minimal effect: Bazilian, the Payne Institute director, told Equilibrium that even if the U.S. decides to sanction Iranian oil sales to China, American influence on that trade “might be fairly limited in practice.”

“Additionally,” Bazilian added, “the appetite of China for Iranian oil may be wavering depending on price and other arrangements.”

ROUND-UP

Money Monday

American E.V. startup boom brings $20 billion to Saudi investors

• The kingdom of Saudi Arabia could make nearly $20 billion in profits on a $2.9 billion investment in Lucid Motor Inc., a California-based electric vehicle (EV) manufacturer that is set to list publicly Friday, Eliot Brown reported for The Wall Street Journal.
• The Saudi Public Investment Fund will own more than 60 percent of the company, which is expected to have a market capitalization of about $36 billion, according to the Journal.
• The 2018 Saudi investment occurred as Lucid struggled for survival. But Saudi Crown Prince Mohammed bin Salman pushed the Public Investment Fund to pour money into startups as part of the country’s efforts to steer its economy away from oil, Brown reported.

In the EU, $2 trillion disappeared from ESG funds

• It wasn’t a heist, or a loss of interest in environmental, social and governance (ESG) directed funds. Instead, it was in 2018 that Europe passed the Sustainable Finance Disclosure Regulation, an “anti-greenwashing” rule requiring firms to disclose their ESG features, Bloomberg Green reported in March.
• Hence, that $2 trillion contraction, as the Sustainable Finance Disclosure Regulation “has effectively reset the bar as to what can be called sustainable investment,” showing how big the divide had been between claimed and actual sustainability, the chair of the Global Sustainable Investment Alliance, Simon O’Connor, told Bloomberg Green on Sunday.
• It’s exactly this sort of confusion that has made many U.S. investors push the Securities and Exchange Commission to require similarly rigorous disclosures. 

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