Investing

Lines drawn for epic battle over new climate reporting rules

As politicians jockey for the limelight at the upcoming COP27 United Nations climate summit in Egypt, regulators and corporate lawyers are gearing up for the biggest climate battle of 2023 — Scope 3 emissions.

The technical name for indirect emissions a company gets from its supply chain vendors — which can often be a vast majority of its emissions — Scope 3 reporting threatens to divide the U.S. and Europe at a time when a global energy crisis and increasing environmental disasters are surging.

U.S. companies have been pushing the Securities and Exchange Commission hard to remove Scope 3 from its new climate reporting rules, which could still come out by the end of this year, but likely next. Meanwhile, the International Sustainability Standards Board voted last week to include Scope 3 emissions in its requirements, albeit with lots of exemptions and extensions.

How Gary Gensler and the SEC move on this will be the corporate climate reporting story of the year. It is likely, under all this pressure, that the SEC will include Scope 3 in some very limited format, declaring victory yet giving everybody an out in some way. That would at least align with the ISSB. But some companies aren’t waiting around to find out. Apple $AAPL this week, for example, said it will press its vendors to decarbonize by 2030. General Motors $GM said it will transition entirely to renewable energy by 2035.

At this stage in the war against global warming, a year of litigation is the last thing we need, even though it’s certain to happen either way the SEC rules. In that case, Gensler & Co. could dramatically cement U.S. leadership on climate finance in the second half of President Joe Biden’s term with a bold decision to include Scope 3, whether it is difficult to comply with or not.

More insights below . . . .

Clean-energy stocks rally hinges on Democrats retaining Senate

. . . . A unique and unexpected correlation between clean energy stocks and political betting markets this year is raising the stakes for the Democrats in their battle to retain control of the U.S. Senate in midterm elections in two weeks, at least as far as investors are concerned, writes Mark Hulbert. While conventional wisdom is that the midterms will lead to the usual Capitol Hill gridlock, Hulbert finds an unexplainable tie between that Democratic control and the fortunes of clean energy shares, which have been on a rally in the past few weeks. But in his own explanatory fashion, he shows how the statistics line up to support the green investor case for a Democratic win on Nov. 7. . . .

Read the full column

A selection of this week’s subscriber-only insights

. . . . Amid the stories of horror and fear (nuclear fallout, anyone?) from the Ukraine war comes a bit of good news: The energy crisis sparked by Russia’s invasion is likely to speed up rather than slow down the global transition away from fossil fuels and toward cleaner technologies like wind, solar and electric vehicles, according to the world’s leading energy agency. We look at the evidence. . . .

. . . . Oh, the irony. While Big Oil puts big bucks behind Republican candidates, word comes that consumers in one of the GOP bastions, Texas, have saved $28 billion on their energy bills in the past 12 years because of renewables. And a second irony: A large proportion of renewable energy installations are in red states. Something is screwy. Read more here. . . .

. . . . It’s kinda obvious: The same skill set that enables oil companies to set up offshore oil rigs can be used to build and service offshore wind farms. Now a report by research and consultancy group Wood Mackenzie points to further synergy — that oil companies will need to transform into renewable companies as the energy transition continues. We look at the report. . . .

. . . . Britain has a new prime minister. What will the arrival of Rishi Sunak mean for Britain’s climate efforts, which saw somewhat of a downturn under the more right-wing Liz Truss? Overall the forecast is good; meanwhile, he faces a population that is, in general, supportive of renewables, though battered by the current energy crisis. Read more here. . . .

Editor’s picks: Record growth for renewables and EVs

Small modular reactors could transform old US coal towns

The advent of small modular reactors (SMRs) could be a big win for utilities and communities if the new type of reactor can help reincarnate coal-fired power plants, Siri Hedreen writes in a post for S&P Global Market Intelligence this week. According to the report, the opportunity to bring new energy investment to coal communities arose Oct. 24 at two nuclear energy events hosted by the American Nuclear Society and the Atlantic Council. Hedreen says a recent U.S. Department of Energy study identified over 250 GW of coal units, operating and retired, that could be converted into nuclear power plants. The study, based on NuScale Power Corp.’s SMR design, also estimated each conversion would add about 650 jobs to the host community.  Panelists said building a nuclear power plant in an old coal town has advantages, and the SMRs, with a smaller footprint, could be installed as stand-alone units, powering a single manufacturing facility or in small clusters as a grid-scale power plant.

Apple calls on global supply chain to decarbonize by 2030

Apple is asking its suppliers to step up efforts to stem their greenhouse gas emissions as the tech giant eyes its 2030 value chain decarbonization goals. Apple $AAPL also announced this week some clean energy and climate-related investments and projects. The company said in a statement that it will evaluate the work of its major manufacturing partners to decarbonize their Apple-related operations — including running on 100% renewable electricity — and will track yearly progress. “Apple has been carbon neutral for its global corporate operations since 2020, and is laser-focused on its ambitious goal to become carbon neutral across its entire global supply chain and the life cycle of every product,” according to the statement. Apple also announced investments in renewable energy in Europe, partnerships to support businesses transitioning to clean energy, and new support for projects which it says will “advance natural carbon removal and community-driven climate solutions.”

Digging deep for cleantech

Global material consumption has grown significantly over the past few decades, and almost every building and device contains some amount of metal. In a special report, All the Metals We Mined in 2021: Visualized, Govind Bhutada and Miranda Smith detail all 2.8 billion tonnes of metals mined in 2021 and highlights each metal’s largest end-use, using data from the United States Geological Survey. Click here to see the full report and detailed visualization. They report global production of both iron ore and aluminum has more than tripled relative to the mid-1990s. Other metals, including copper and steel, have also seen significant consumption growth. “Today, economies are not only growing and urbanizing but also adopting mineral-intensive clean energy technologies, pointing towards further increases in metal production and consumption.” In terms of growth, they note, clean energy technology metals stand out. “For example, lithium production has more than doubled since 2016 and is set to ride the boom in EV battery manufacturing. Over the same period, global rare earth production more than doubled, driven by the rising demand for magnets.”

Words to live by . . . .

“How glorious a greeting the sun gives the mountains! To behold this alone is worth the pains of any excursion a thousand times over.” — John Muir

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