Equilibrium/Sustainability — Industrial hub lockdown risks global supplies

Today is Tuesday. Welcome to Equilibrium, a newsletter that tracks the growing global battle over the future of sustainability. Subscribe here: digital-release.thehill.com/newsletter-signup.     

Several of China’s key industrial hubs are now under lockdown, threatening to jostle global supply chains amid a new nationwide coronavirus outbreak, The Washington Post reported. 

China, one of the world’s only countries with a “zero-COVID” strategy, is currently battling one of its worst-ever coronavirus outbreaks, with a surge of cases in at least 19 provinces, according to the Post. The country’s National Health Commission reported 2,125 new locally transmitted cases on Monday.   

In Shenzhen — home to Chinese tech firms like Huawei, electric carmaker BYD and Tencent — more than 17 million residents received orders to stay home on Monday, the Post reported. Apple supplier Foxconn, as well as two circuit board suppliers for Apple and Intel, suspended operations in Shenzhen, according to the Post. 

Today we’ll look at how Europe is scrambling to secure energy provisions while confronting climate challenges. Then we’ll look at the sudden collapse of a key Biden administration appointment to the Federal Reserve.    

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.  

 

Europe faces climate conundrum

Despite pledges from EU countries to ramp up clean energy production, the widespread shift away from Russian oil could also cause a surge in greenhouse gas emissions, according to German broadcaster DW.  

Four of the world’s largest fossil fuel companies have made promises to pull out of Russia, while Germany — Russia’s biggest customer — halted the Nord Stream 2 pipeline that would have brought it more Russian gas.

The U.S. has sanctioned Russian energy, the U.K. said it would stop buying Russian oil and the EU declared it would slash imports by 80 percent this year and end its reliance on Russian fuels entirely by 2027, DW reported. 

A coal ‘comeback?’ As Europe speeds up its transition to clean energy, escalating gas prices and concerns that Russian President Vladimir Putin could stop gas exports altogether threaten what DW described as “a comeback of coal, a dirtier fuel that leaders had promised to dump.” 

First words: “There’s an opportunity to catalyze this to drive forward the clean energy transition very rapidly,” Hannah Daly, a lecturer in sustainable energy at University College Cork in Ireland, told DW.  

“But there’s also dangerous signals that policies will work in the opposite direction,” she added.  

A climate conundrum: Within two weeks of Putin’s invasion of Ukraine, the EU announced plans to ramp up installations of wind turbines, solar panels and heat pumps. Germany alone also committed 200 billion euros ($220 billion) to decarbonize its electricity supply by 2035, according to DW. 

But Germany has also pushed to import more fossil fuels. The country promised to build two liquefied natural gas (LNG) terminals as part of a continent-wide effort to replace Russian gas with fossil fuels from other countries, DW reported. . 

A ‘bidding war’ with China: As the EU seeks out alternative gas supplies, the bloc also risks getting into what The Wall Street Journal described as a “bidding war” with China.  

What are the E.U.’s options? The EU is aiming to reduce its current gas import rate of about 155 billion cubic meters to about 55 billion cubic meters next year, according to the Journal. 

While the bloc can source about 10 billion cubic meters more gas through existing pipelines from Norway, Algeria and Azerbaijan, it will also need to purchase five times this quantity as LNG, the Journal reported. 

So what’s the problem? The gas simply may not be available — or may force Europe into an expensive rivalry with another powerful contender.  

In the first two months of 2022, Europe was able to import large quantities of LNG on the spot market, according to the Journal. A spot market is one in which commodities are exchanged for immediate delivery — as opposed to long-term contracts. 

Although China’s spot volumes fell from 40-50 percent of its LNG imports to 10-20 percent during those months, Europe may soon face formidable competition from Beijing, the Journal reported.    

 

OTHER PARTS OF EUROPE ALSO FACE CLIMATE CONSEQUENCES

All Arctic Council members aside from Russia — Denmark, Finland, Iceland, Norway and Sweden, as well as the U.S. and Canada — have agreed to boycott future meetings, pausing proceedings on climate issues like Arctic oil drilling, E&E News reported. 

But by making this decision, the Council members are also stalling work on many environmental issues and concerns related to climate change, as rising temperatures continue to threaten a warming Arctic, according to E&E. 

What are some of these projects? As reported by E&E, some such initiatives include: 

• The Arctic Wildland Fire Ecology Mapping and Monitoring Project, which maps out areas burned by wildfires and their impacts on Arctic ecosystems
• The Circumpolar Wildland Fire Project, which works to coordinate wildfire response among Arctic communities  

“How exactly the pause will impact cooperation, participation, information sharing, understanding, and working together in the medium-long term is yet to be determined,” Devlin Fernandes of the Gwich’in Council International, which runs both projects, told E&E. 

And then, of course, there’s Ukraine: Svitlana Krakovska, a top Ukrainian climate scientist, has described the ongoing conflict as a “fossil fuel war,” British site iNews reported.

Kakovska, who leads the Ukrainian delegation to the Intergovernmental Panel on Climate Change, has stayed in Kyiv despite Russia’s assault on the city.

She said her work on climate science will help secure a better future for Ukraine and she plans to participate in talks later this month ahead of the release of an international climate report, according to iNews.

Last words: “We still exist and resist, and we are thinking about our future,” Krakovska told iNews. “And we understand that we will need to rebuild our country, we want to rebuild it on a climate-resilient pathway.” 

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Raskin withdraws candidacy

The withdrawal of key Biden administration appointee Sarah Bloom Raskin from the Federal Reserve’s top law enforcement role could hamstring efforts to mitigate the growing financial risks posed by climate change — and by fossil fuels themselves.  

The failure of Raskin’s candidacy — a certainty once Sen. Joe Manchin (D-W.Va.) announced his opposition and no Republican crossed the aisle — will widen the gulf between U.S. and European approaches to the financial regulation of fossil fuel firms, which has been a major goal of the American oil and gas industry.   

First words: “They won’t have me,” Sen. Lisa Murkowski (R-Alaska) told E&E News on Tuesday, when asked if she could replace Manchin as the White House’s necessary swing vote. 

“Not this Republican, and I’d be hard-pressed to offer up anyone else. I think she is a flawed nominee,” Murkowski added. 

Why not? The Republicans opposed to Raskin launched a flurry of objections to her candidacy — most recently about her position on the board of Reserve Trust, a Colorado financial services company. While Raskin was serving in this role, Reserve Trust gained access to the Fed’s payment system, our colleague Sylvan Lane reported. 

Raskin is a former member of the Fed’s Board of Governors, and a move from government to corporate lobbying or regulatory compliance is a common one for members of both parties.  

But Sen. Pat Toomey, ranking Republican on the powerful Senate Banking Committee, cited concerns over Raskin’s use of “the revolving door” to explain why he and his colleagues boycotted a February committee vote over her nomination, Lane reported in mid-February. 

“Alone disqualifying”: Despite asking for more information on Raskin’s time with Reserve Trust, Toomey was clear that the answer didn’t really matter. He called the nominee’s views on the role of financial regulators in addressing risks from climate change to be  “alone disqualifying.” 

 

ANATOMY OF THE CONSERVATIVE OPPOSITION TO RASKIN

In a contentious confirmation hearing on Feb. 3, Toomey and other Republican members argued — as many Republicans have — that Raskin would use her position to steer funding away from fossil fuels and toward green energy, as we reported.

Has she? In previous positions, and in her confirmation hearing, Raskin has argued that she doesn’t want to penalize fossil fuels, but to make sure that, for example, banks have enough reserves on hand in the case of a climate crisis. This way, financial institutions could prevent a crash stemming from either climate change or a loss of faith in fossil fuels from spreading through the markets, as we have reported.  

If such policies were put into place, then banks that Fed auditors identify as particularly vulnerable to regulatory risk might have to keep more money on hand in case those assets went bust. 

Such risky sectors might include real estate in flood or wildfire-prone areas, or fossil fuel resources like coal plants. 

The bottom line: Since these institutions wouldn’t be able to loan out that reserve money at interest — because they would need to keep it on hand — such capital requirements could make lending to fossil fuels more expensive, and therefore discourage such loans. 

Manchin doesn’t want that: With the war in Ukraine driving up international oil and gas prices, the senator called inflation and rising energy prices “the most pressing issues facing the American people” in a Monday statement.  

“[Raskin’s] previous public statements have failed to satisfactorily address my concerns about the critical importance of financing an all-of-the-above energy policy to meet our nation’s critical energy needs,” Manchin said. 

Behind the lines: The West Virginia senator is a top recipient of fossil fuel donations, taking in more than $400,000 in donations in late 2021, as he fought fellow Democrats’ attempts to decarbonize the electricity sector, E&E reported. 

What now? The crucial seat stays open — a serious blow to regulation in general, American University financial stability expert Hilary Allen told E&E. 

Last words: It would be “a huge loss in terms of financial regulatory policy generally to have this powerful position empty,” Allen said.

Trade-off Tuesday 

Uneasy compromises for the era of climate change. 

Tree planting programs can hurt ‘in the name of doing good’ 

• Planting trees where they don’t naturally occur — like on marsh or grasslands, as oil giant TotalEnergies intends to do across 40,000 hectares of Congo savanna — risks doing “harm in the name of doing good,” Bethanie Walder of the Society for Ecological Restoration told The New York Times. Such planting programs pull down carbon in an environmental trade-off — jeopardizing local biodiversity and absorbing heat that “grasslands … would have reflected,” according to the Times. 

Maryland Senate passes climate bill, without policy to curb fossil fuel reliance 

• The Maryland Senate voted on Monday night to pass what The Baltimore Sun described as “a sweeping climate change bill that would accelerate state greenhouse gas reduction goals,” but would also abandon an aggressive proposal for reducing fossil fuel reliance. While the bill would aim to make the state carbon neutral by 2045 and would require big buildings to reduce their energy footprints by 2035, it would not prohibit fossil fuel-based heating systems in new buildings as previously proposed, the Sun reported.   

Local opposition threatens huge Rivian electric truck factory east of Atlanta  

• An enormous $5 billion Georgia electric truck plant that automaker Rivian intends to install near Atlanta is running into a barrage of local opposition on issues from water quality to land rights — highlighting the complications faced by the nationwide build-out in clean energy, The New York Times reported. “It’s always going to be a case-by-case question of whether the trade-off is viable, and sometimes NIMBYism is going to win out,” Michael Burger of Columbia University told the Times. 

 

Please visit The Hill’s sustainability section online for the web version of this newsletter and more stories. We’ll see you on Wednesday.