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China's new coal pledge; plus six ESG stocks up 1,000% since last Earth Day

By David Callaway, Callaway Climate Insights

The first part of the Earth Day leaders summit held by President Joe Biden on Thursday transpired with lots of speeches, a predictable technical difficulty, and a series of pledges, each one more unlikely than the one before. Highlights:

— Biden came through with a promise to reduce U.S. emissions by more than half (52%) by 2030 and said he could do it with one hand tied behind his back, i.e. without Congress.

— Japan said it would increase its cuts to 46% by 2030, from 26%.

— Canada increased its emissions reduction vow to 40% – 45%, up from 30%, by 2030.

— South Korea said it would eliminate public financing for overseas coal projects.

— China said it would start reducing coal consumption by 2026, moving that date up from 2030.

— Brazil’s Jair Bolsonaro said he would eliminate deforestation by 2030.

By far the biggest news of the day was Xi Jinping’s promise to begin phasing down coal consumption in China’s next five-year plan, which starts in 2026. The current plan calls for fossil fuel consumption to peak in 2030, and then gradually decline to net zero by 2060.

“We will strictly limit the increase in coal consumption over the 14th Five-Year period and phase it down in the 15th Five-Year period,” Xi said, speaking after Biden in what was the first meeting of the two leaders (virtually) since Biden was elected.

Of all the promises, China’s may be the most achievable.

Biden faces steep opposition in Congress to parts of his infrastructure plan, and is unlikely to come close to meeting his goals without legislative help. Canada has so far only achieved a 1% reduction in emissions, and is counting on a carbon tax to help it meet the rest of its goals. Brazil’s promise was, well, a promise.

But for China to make Xi’s pledge stick, it will need to start now. Coal consumption is expected to soar this year and scores of more plants are still to come on line, both in China and in other countries in its Belt and Road Initiative. The world’s largest greenhouse gas emitter can move the needle if it wants. So when Xi says something like this, heads turn.

The Climate Action Tracker said in a statement this morning the U.S. pledge alone could move the world 10% to 15% closer to its Paris Agreement goals of limiting global temperature increases to 1.5°C. above pre-industrial levels. No major blueprint for the Biden plan was announced, though that is expected in coming days.

As the leaders spoke, oil prices rose. They are up 20% year-to-date, a fair indication that at least some investors are still waiting to see some action behind the words.

More insights below. . . .

Callaway Climate Insights Indexes

. . . . Since Earth Day in 2020,  six stocks in the Callaway Climate Insights Climate Index have risen by more than 1,000%, reflecting both the early stage development for many climate companies as well as the volatility of the clean-tech sector. The top three performers were Blink Charging (BLNK), up  more than 1,900%; Sunworks (SUNW), up more than 2,300%; and MicroVision (MVIS), up more than 5,300% from Earth Day just one year ago. . . .

ZEUS: The inevitable rise of the anti-climate investing strategy

. . . . If Mr. Potter from ‘It’s a Wonderful Life’ were alive today, he’d be shorting ESG stocks, arguing that they are the result of “a few starry-eyed dreamers … filling their heads with impossible ideas.” In his ZEUS column this weekDavid Callaway previews the rise of the anti-ESG funds, which focus on companies still dedicated to profit over purpose. Despite the success of the ESG theme, it’s inevitable some funds will take advantage of the messy metrics and regulations around them to create products that stand apart. But the universe of companies not looking at global warming is shrinking rapidly. . . .

Read the full ZEUS column

Thursday’s subscriber insights: A peek at our best offerings

. . . . History-obsessed Europe moves slow and steady when it comes to new laws and regulations, but this week’s climate moves by the European Union signaled a new era in the world’s regional leader on action against global warming. Read more here. . . .

. . . . Treasury Secretary Janet Yellen warned investors this week that her “whole-of-economy” approach to climate mitigation won’t work without billions in private funding for new renewable technologies. Read more here. . . .

. . . . Only two months after the Texas ice storms and gas power failures led to the deaths of more than 100 people, the state’s lawmakers are pushing legislation to boost the cost burden of renewable energy producers and, um, freeze them out of taking board positions on the state’s energy regulator. Read more here. . . .

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