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I caught up with Brett Christophers, the professor who argued in The New York Times that the Inflation Reduction Act is a gift to a secretive group of financial firms.
To the extent that they’re aware of it, American progressives are generally pretty happy with President Joe Biden’s flagship climate law, the Inflation Reduction Act.
The I.R.A. is slated to cut U.S. greenhouse-gas pollution up to 40% below its all-time high. It’s the centerpiece of Biden’s unprecedented experiment to revive industrial policy with a climate-friendly bent.
But what if it will have a tragic and unforeseen consequence? Earlier this week, Brett Christophers, a geography professor at Uppsala University in Sweden, argued in The New York Times that the I.R.A.’s green subsidies will backfire. The law will “accelerate the growing private ownership of U.S. infrastructure,” he warned, “dismantling” FDR’s legacy and leading to a “wholesale transformation of the national landscape of infrastructure ownership.”
Christophers is particularly worried that the law will enable a group of companies called “alternative asset managers,” who are the subject of his new book, Our Lives in Their Portfolios. These secretive firms own hundreds of billions of dollars’ worth of highways, tunnels, water systems, and power plants worldwide, and Christophers argues that they wield a huge amount of control over our daily lives.
I am sympathetic to his argument — the creeping privatization of America’s roads, tunnels, and water systems is a big problem — but I am far less sure than he is that the I.R.A. will affect that trend. The climate law’s subsidies will mostly go to the energy and industrial sectors, and those parts of the economy are already overwhelmingly privately owned. For the first time ever, the I.R.A. includes “direct pay” subsidies that will allow governments and nonprofits to receive federal money when they build renewables.
I called Christophers to discuss his concerns about the I.R.A, why it might accelerate asset managers’ power, and what a better option might look like. Our conversation has been edited for length and clarity.
So I was trying to make three arguments — and they span not just the book that’s just come out, but another book I’ve been working on about the political economy of the energy transition.
The first thing I was trying to get across in the piece is an argument about the growing influence of a particular set of financial institutions — asset-management institutions.
These are crucially not necessarily the types of asset managers that everyone talks about. Typically, the conversation is all about the BlackRocks, the Vanguards, the State Streets, which are the big holders of large proportions of basically every company that exists. Most of the funds that those big entities manage are passive index funds, which invest in proportion to the scale that companies represent within particular market indices. So if Exxon represents 1% of an index, then 1% of the fund is invested in Exxon, and so on. That's where most of the attention is focused.
What my book’s about is a completely different corner of the asset-management world, which are the active asset managers who increasingly own real assets. The ones I focus on in the book own housing of all shapes and sizes, and then everything that comes under the umbrella of infrastructure — transportation infrastructure, hospitals and schools, municipal water systems, and then all types of energy infrastructure. BlackRock dabbles in this, but the really big players are companies like Brookfield, Macquarie, and Blackstone.
My argument is that, actually, these are the guys that are much more consequential for people’s everyday lives. They determine what sort of condition these infrastructures are in — how much we pay in terms of water rates, or tenants pay in rents, or so on. These are the guys we should be focusing more on, but they’ve been kind of ignored.
Some of them are public, some are private. But even if they’re public, finding out much about what they’re doing is very difficult because all the investments occur through private funds domiciled in the Caymans or Delaware or Luxembourg. It’s a very, very secretive business.
So part of what I’m trying to do is literally just make people aware that these guys are out there and that energy is an important part of what they’re doing. [The asset manager] Brookfield, for example, probably has the fastest growing renewable portfolio in the world right now.
The second argument is that the approach that the world has right now to climate change — which is to put the energy transition in the private sector’s hands, albeit with subsidy and government-support mechanisms — is not working and will not work.
There’s various ways of substantiating that it’s not working. The International Energy Agency says that we need to go from $300 billion of clean-energy investment to $1.3 trillion straight away, and keep it there for the next decade. And it’s increasing now, but only in $50 billion a year chunks, rather than what we need.
And that’s because at root, renewable energy — the ownership and operation of renewable-energy-generating facilities — is actually just not a great business in terms of profitability. Their revenues and profits are very volatile because of the volatility of electricity prices. And if you talk to not only renewable developers, but also the people that finance new solar and wind facilities — the banks that put up the $300 million to buy the turbines — then you hear that the volatility of [electricity] pricing exerts a very kind of chilling effect on investment.
So when everyone obsesses about the fact that renewables are now cheaper than conventional generation, they’re looking at the wrong metric. Price is not what we should be looking at, profit is. And these businesses are just not very profitable.
So then the third argument is that of all the private-sector actors, asset managers are the very worst to rely on. They are particularly inappropriate owners of essential infrastructure that society relies on.
To cut a long story short, a basic reason is that the investment that Macquarie and Brookfield undertake is through investment vehicles that have a fixed-term life.
Yeah. When they buy these infrastructure assets, the only thing they’re thinking about is how they can sell them quickly, so that they can return the capital to the pension fund that gave them the money to invest in the first place. Because of the way the industry works, they’re disincentivized to carry out long-term capital expenditure — there’s inherent short-termism.
I was trying to compress all these things into the piece, which I obviously failed to do, but to the extent that it gets people talking about these problems, then I feel like I’ve succeeded.
That’s a good question. My basic answer is that the word “‘accelerate” is a very important one. As you’re no doubt aware, specifically in the energy realm, in energy-generating facilities, it’s not like privatization is a new thing there, right?
This has been going on for a long time. I guess it comes back to a strong belief I have, which is that the ongoing and accelerated privatization of these types of assets is generally not a good thing.
I would say two things to that. The first is that, we’ve obviously been at an important conjuncture in the U.S. for the last couple years, where the existing [renewable and EV] credits were being wound down. At the same time, there were proposals for a Green New Deal on the national level. So it felt like there was a possibility — arguably even the last possibility — of a different political economy of energy. So in a way, the IRA hammered the nail in the coffin of a substantially different future.
Second, in many other countries, energy has been more publicly owned than it is in the U.S. And the experience of other sectors and other parts of the world shows that the more you concentrate ownership in the hands of private entities, the more that those players increase their capacity to dictate the terms of what’s going on in the sector. They can influence — if not decide — the way that markets are constructed in the sector. You only have to look at the work of the legal scholar Shelly Welton, who has shown how regional wholesale power markets in the U.S. are still dominated by fossil fuels. What we think of as neutral mechanisms of market operation, the algorithms that award capacity and so on, are shaped by particular interests.
I hear that. But I think it’s important to distinguish what I think from another high-profile criticism of the IRA. I very rarely look at Twitter because I don’t find it healthy, but one thing that I see there all the time is this blanket critique of the derisking of investment. [Derisking is a term for when the government takes on some downside risk from private companies in order to persuade them to make investments in something “good,” like renewables or EVs. -Robinson]
That’s not my position at all. Give me a choice between derisking and not derisking, and from a climate perspective, I would always choose derisking. I would much rather the investment happens and Blackrock makes a killing than the investment doesn’t happen and we get stuck with fossil fuels.
To me, that’s not the choice. I think the blanket critique of derisking is naive in the sense that it either magically assumes we’re going to get state ownership of energy, or that the investment will happen anyway without the derisking. My whole book coming out next year is a critique of that argument, because the investment won’t happen. It absolutely won’t happen if you don’t derisk because of the profit constraints. You absolutely need that derisking.
My argument is that even with all of the support from various tax credits, and even with the historic — and amazing — reduction in [renewable] technology costs over the last 20 years, the private sector is still failing. That’s my argument. That’s why I believe we’re not going to reach where we need to be as long as we stick with this capital-centric model. But if you assume that we’re stuck with a private-sector-led model, then absolutely the IRA is a good thing, absolutely it is. You need that subsidization; I don’t disagree with that at all. Does that make sense?
Exactly.
You’ll get that, and I think you’ll get a modest amount of public-sector involvement, but in the big scheme of things I think it’ll be trivial. I think it will still amount to a transition that’s so much slower than we need.
For sure. If it wasn’t for direct pay, it would’ve been a nonstarter. I totally believe that.
I think that’s fair. I guess I would put it a slightly different way. I think I’m comparing it to a counterfactual under which we — by which I mean globally, but also within the U.S. — build renewables at something closer to the rate that is needed. So the IRA amounts, politically, within the U.S. context, to a degree of success, but it’s a degree of success within a framework that is failing.
I totally understand that. I think it comes down to what one’s counterfactual is. If your counterfactual is what was genuinely politically feasible in the U.S. context, then I can totally see that the IRA constitutes a significant success.
If your counterfactual is — and this may sound completely stupid — a situation in which we make really significant, genuine progress on changing what I see as the failing macro approach to the energy transition, then it doesn’t constitute success.
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On the World Bank’s bad record keeping, Trump’s town hall, and sustainable aviation fuel
Current conditions: Parts of southwest France are flooded after heavy rains • Sydney’s Bondi Beach is closed because lumps of toxic tar are washing ashore • A winter storm warning is in effect for parts of Montana.
Nearly 40% of the climate finance funds that have been distributed by the World Bank over the last seven years are unaccounted for due to poor record keeping, according to a new report from Oxfam International. That’s up to $41 billion that is untraceable. “There is no clear public record showing where this money went or how it was used, which makes any assessment of its impacts impossible,” the report said. “It also remains unclear whether these funds were even spent on climate-related initiatives intended to help low- and middle-income countries protect people from the impacts of the climate crisis and invest in clean energy.”
The World Bank is the largest multilateral provider of climate finance, and has a goal of directing 45% of its total financing toward climate projects by 2025. The report noted that climate finance will be a key issue at the upcoming COP29, where countries will put forward a new global climate finance goal. “The lack of traceable spending could undermine trust in global climate finance efforts at this critical juncture,” Oxfam said.
During a town hall event hosted by Univision last night, Republican presidential candidate Donald Trump was asked by a veteran construction worker – who had seen first-hand “the devastating impacts of climate change” – if he still believed global warming was a “hoax.” In his response, Trump claimed to be an environmentalist, saying he’d won “many awards over the years” for the way he’d constructed his buildings, “the way I used the water, the sand, the mixing of the sand.” But, he said, “we can’t destroy our country” for the sake of saving the climate. He said the U.S. is competing against China, which “doesn’t spend anything on climate change.” According to the International Energy Agency, last year China alone accounted for one-third of the world’s clean energy investments.
Needless to say, Trump didn’t really answer the question about whether he thought climate change was real, but he did cast doubt on sea level rise and claimed “the real global warming we have to worry about is nuclear.”
I’ll just take this opportunity to remind you that Heatmap’s Jeva Lange put together an exhaustive fact-check on Trump’s climate and weather claims going back to 2001.
The Supreme Court yesterday allowed the Environmental Protection Agency to move forward with its rule restricting climate pollution from power plants, meaning that one of the Biden administration’s key climate policies can stay in place. For now. The high court’s decision will allow the EPA to defend the rule in a lower court over the next 10 months. Whether the Biden administration’s new attempt at regulating climate pollution will survive depends on the outcome of next month’s election. The Trump campaign has said that it will overturn the EPA’s new climate rules. Should Harris win, the rule will still have to survive the lower court challenge. That case is scheduled to be heard in front of the D.C. Circuit Court of Appeals this term.
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The Department of Energy yesterday announced its first two loans for sustainable aviation fuel. The roughly $3 billion in funding will go to two companies:
“As the aviation sector aims to meet its decarbonization goals, SAF will become increasingly vital,” the DOE said in a statement. “SAF is the only viable near-term option to decarbonize the airline industry.”
A Canadian court’s ruling on a climate lawsuit today could influence similar cases in Canada and other countries. Seven young people are suing the Ontario government over its emissions targets, which they say are inadequate and violate their human rights. If the case heads to Canada’s Supreme Court, and the plaintiffs win, that would “dramatically open the door to new litigation,” constitutional law expert Emmett Macfarlane toldReuters. “That would be explosive. It would have immediate ramifications for all governments.”
The University of California, San Diego, is the first major public university to require all its undergraduate students to complete a climate change course.
They may not survive a full challenge, though.
The Supreme Court allowed the Environmental Protection Agency to move forward with its rule restricting climate pollution from power plants on Wednesday, meaning that one of the Biden administration’s key climate policies can stay in place. For now.
The high court’s decision will allow the EPA to defend the rule in a lower court over the next 10 months. A group of power utilities, trade groups, and Republican-governed states are suing to block the greenhouse gas rule, arguing that it oversteps the EPA’s authority under the Clean Air Act.
The EPA’s new rules, which were finalized in April, would be the government’s first successful effort to regulate climate pollution from the power sector. The electricity industry is the second most-polluting sector in the American economy.
The Obama administration previously tried to regulate greenhouse gas pollution from the power sector. The Supreme Court blocked those rules from taking effect in 2016, before striking them down completely in 2022.
This time, the agency has written the rules within a framework laid out by the Supreme Court’s conservative majority in that ruling. In that now landmark case, the court ruled that the EPA could restrict greenhouse gas pollution from power plants only by requiring new technology, such as carbon capture equipment, to be installed at the plant itself. The agency couldn’t require utilities to stop burning fossil fuels and build more renewables.
In the near term, whether the Biden administration’s new attempt at regulating climate pollution will survive depends on the outcome of next month’s election. The Trump campaign has said that it will overturn the EPA’s new climate rules. During his first term, Donald Trump rolled back more than 100 environmental and climate protections.
Should Harris win, the rule will still have to survive the lower court challenge. That case is scheduled to be heard in front of the D.C. Circuit Court of Appeals this term.
“The high court made the right call,” Meredith Hankins, a senior attorney at the Natural Resources Defense Council, said in a statement. “Given its rulings in recent years undercutting environmental protections, the refusal of the majority on the Supreme Court to block this vital rule is a victory for common sense.”
Not all the news from the Supreme Court on Wednesday was good for climate advocates, though.
In the same decision that let the new rules stand, the high court’s conservative justices signaled that they might block the rules next year.
“In my view, the applicants have shown a strong likelihood of success on the merits as to at least some of their challenges” to the rule, Justice Brett Kavanaugh wrote in a short statement attached to the stay, which was cosigned by Justice Neil Gorsuch.
But because the rules don’t require utilities to start complying until next June, there was no reason to grant an emergency stay, the two justices added.
Justice Clarence Thomas would have gone further and stepped in to block the rules immediately. Justice Samuel Alito, another reliable conservative vote, did not participate in the deliberations.
That suggests that four justices could be ready to block the rules as soon as next year. They would need only one more vote — from Chief Justice John Roberts or Justice Amy Coney Barrett — to stay the protections from taking effect.
The statement didn’t provide any hints to what Roberts or Barrett are thinking.
Has Plug Power pulled the plug on its upstate New York facility?
In 2021, top elected officials in New York state promised that Plug Power, a nascent company in the growing hydrogen industry, would build a large hydrogen fuel production facility in the Buffalo-Rochester area. It was supposed to make the state an industry leader.
Today, the project is looking more like a warning sign about the perils of being a first-mover in the unproven hydrogen business.
It wasn’t supposed to be this way. Plug Power, an American hydrogen and fuel cell producer founded in 1997, believed it would capitalize on rising demand for the liquid fuel when it broke ground at its hydrogen production facility at Genesee County’s Science, Technology and Advanced Manufacturing Park in 2021, a project known colloquially as STAMP. Heavy polluting industries like steel and transportation were chomping at the bit to strike supply deals for hydrogen, a liquid fuel that produces no carbon when burned. And this New York plant would on paper be particularly attractive from a climate perspective: It would be powered by hydroelectric dams at Niagara Falls, offering a potential carbon reduction of an estimated 14,000 tons of CO2 per year. It would also be the largest project of its kind in the Northeast.
Three years later and the project appears to be on ice, according to a phone call recording between New York county officials and a real estate developer that was obtained by Heatmap News.
Construction stopped in January, per the call, as did work Plug Power promised to do on an electrical substation that will also power a neighboring semiconductor manufacturing plant. Now energy-hungry data center developers are bidding to pick up the substation work instead in exchange for a spot at STAMP and access to some of the remaining hydroelectricity, and county officials are looking at buying Plug Power’s electrical equipment.
It is unclear whether the hydrogen production plant will ever be completed.
“They’ve put things on hold and now we’re coming to pick up the pieces,” Chris Suozzi, an executive vice president at the Genessee County Economic Development Authority, told one bidder – PRP Real Estate Management – on a call last month. PRP taped the call and shared it with us after it was first reported by local news nonprofit InvestigativePost. Suozzi also said on the call: “They’re not ready to go. They’re on pause. We don’t know what’s going to happen with them at this point.”
The New York Plug Power plant’s problems should be familiar to anyone in the climate tech startup space but for the unfamiliar, the company’s rapid growth seems to have run headlong into struggles with cash. A year ago Plug Power said in an investor filing there was a “substantial” concern the company may not have “sufficient funds to fund [its] operations through the next 12 months.” So problematic are Plug’s financial woes that they’ve become a political target; after the Energy Department offered a $1.6 billion conditional loan commitment to Plug for building hydrogen production plants, Republicans in Congress called for an inspector general investigation into the move.
But the New York production facility won’t benefit from the potential loan either. We’ve learned from two sources familiar with the matter that the project is not included in its potential loan application currently pending before DOE.
Then there has been the rollout of the Inflation Reduction Act. Even though the project relies on carbon-free hydropower, it may not qualify for the IRA’s hydrogen production tax credit because of proposed requirements for fuel to rely on new renewable energy sources (known as “additionality”). This has been a major sticking point in implementation of the credit, and Plug Power is quoted in InvestigativePost last week linking the work stoppage at the production facility on waiting for the final regulation implementing the credit. This is even as the company uses the yet-to-be finalized credit in its financial analyses for other hydrogen facilities in operation today, like this one in Georgia.
Environmental justice issues have also been a drag on development. The native Tonawanda Seneca Nation is opposed to the entire industrial park because of the resulting impacts on wildlife, noise and the visual landscape. In April, the Fish and Wildlife Service revoked a necessary permit for a wastewater treatment pipeline that would be used by companies at the park.
Earthjustice attorney Alex Page – who is working with the Nation to fight the project – told me the tribe was told last year by the Energy Department that Plug Power had withdrawn the New York site from its loan application. The Nation will continue to fight the project and DOE’s loan financing to Plug Power on the chance that money could be reprogrammed to the industrial park. Page said: “The Nation remains very, very much opposed.”
We sent Plug Power multiple requests for comment as well as Suozzi. A representative for Plug Power declined to answer questions about the project. I got a text from a number listed for Suozzi asking to chat later, but I didn’t hear back before publication.