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On Musk’s latest move, Arctic shipping, and China’s natural disasters
Current conditions: Heavy rains triggered a deadly landslide in Nepal that swept away 60 people • More than a million residents are still without power in and around Houston • It will be about 80 degrees Fahrenheit in Berlin on Sunday for the Euro 2024 final, where England will take on Spain.
The Biden administration announced yesterday that the Energy Department will pour $1.7 billion into helping U.S. automakers convert shuttered or struggling manufacturing facilities into EV factories. The money will go to factories in eight states (including swing states Michigan and Pennsylvania) and recipients include Stellantis, Volvo, GM, and Harley-Davidson. Most of the funding comes from the Inflation Reduction Act and it could create nearly 3,000 new jobs and save 15,000 union positions at risk of elimination, the Energy Department said. “Agencies across the federal government are rushing to award the rest of their climate cash before the end of Biden’s first term,” The Washington Post reported.
DOE
Tesla is delaying the much-anticipated unveiling of its robotaxi by about two months until the prototype design can be improved and finalized, Bloombergreported. The initial date for the autonomous taxi to make its first public appearance was August 8 but it’s looking more like October now. Tesla shares fell about 8% on the news, bringing an end to an 11-day streak of gains.
There’s a convenient theory that climate change will make Arctic shipping routes more accessible as sea ice melts. But new research published in the journal Communications Earth & Environment suggests the opposite is true. The authors found that between 2007 and 2021, the ice-free shipping seasons in the Northwest Passage – which runs through northern Canada and connects the Atlantic and Pacific Oceans – actually shortened significantly because warmer temperatures are causing some of the thickest, oldest Arctic sea ice to flow south into the passage’s “choke points,” posing a high risk to ships. “The variability of shipping season and, in particular, the shortening of the season will impact not only international shipping but also resupply and the cost of food in many Arctic communities, which require a prompt policy response,” the authors wrote.
Broken sea ice in Baffin Bay, in the Northwest Passage. Alison Cook
Natural disasters have caused $13 billion in direct economic losses in China just in the first six months of 2024, according to the Chinese government. That’s up from about $5 billion in losses in the same period last year. The disasters run the gamut from floods to drought to heavy snow to landslides, plus a 7.1 magnitude earthquake. The country’s weather bureau warned recently that climate change could raise maximum temperatures across the country by 5 degrees Fahrenheit in the next 30 years. Rainfall is also increasing. Earlier this month China evacuated a quarter of a million people from the eastern provinces as torrential rain caused flooding. The extreme weather is threatening production of food crops including rice, wheat, soybeans, and corn.
Oil giant Marathon must pay a $64.5 million fine for violating the Clean Air Act at its oil and gas operations in North Dakota as part of a settlement with the Environmental Protection Agency, the Justice Department announced. The company also has to invest $177 million in cleaning up those operations, which could result in the equivalent of 2.3 million tons of reduced pollution over the next five years. The EPA accused Marathon of violating the Clean Air Act at 90 facilities in the state, resulting in huge amounts of methane emissions, as well as illegal pollution linked to respiratory disease. The case is “the largest of 12 similar efforts by the Biden administration to target emissions from the oil and gas industry,” according toThe Associated Press.
“We want to give future generations as much glaciological knowledge as possible in case they need it.” –Douglas MacAyeal, a professor of geophysical sciences with the University of Chicago, who is part of a group of scientists calling for more research into whether glacial geoengineering could help prevent catastrophic ice melt caused by climate change.
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And for his energy czar, Doug Burgum.
When Trump enters the Oval Office again in January, there are some climate change-related programs he could roll back or revise immediately, some that could take years to dismantle, and some that may well be beyond his reach. And then there’s carbon capture and storage.
For all the new regulations and funding the Biden administration issued to reduce emissions and advance the clean energy economy over the past four years, it did little to update the regulatory environment for carbon capture and storage. The Treasury Department never clarified how the changes to the 45Q tax credit for carbon capture under the Inflation Reduction Act affect eligibility. The Department of Transportation has not published its proposal for new safety rules for pipelines that transport carbon dioxide. And the Environmental Protection Agency has yet to determine whether it will give Texas permission to regulate its own carbon dioxide storage wells, a scenario that some of the state’s own representatives advise against.
That means, as the BloombergNEF policy associate Derrick Flakoll put it in an analysis published prior to the election, “the next administration and Congress will encounter a blank canvas of carbon capture infrastructure rules they can shape freely.”
Carbon capture is unique among climate technologies because it is, in most cases, a pure cost with no monetizable benefit. That means the policy environment — that great big blank canvas — is essential to determining which projects actually get built and whether the ones that do are actually useful for fighting climate change.
The next administration may or may not decide to take an interest in carbon capture, of course, but there’s reason to expect it will. Doug Burgum, Trump’s pick for the Department of the Interior who will also head up a new National Energy Council, has been a vocal supporter of carbon capture projects in his home state of North Dakota. Although Trump’s team will be looking for subsidies to cut in order to offset the tax breaks he has promised, his deep-pocketed supporters in the oil and gas industry who have made major investments in carbon capture based, in part, on the 45Q tax credit, will not want to see it on the chopping block. And carbon capture typically enjoys bipartisan support in Congress.
Congress first created the carbon capture tax credit in 2008, under the auspices of cleaning up the image of coal plants. Lawmakers updated the credit in 2018, and then again in 2022 with the Inflation Reduction Act, each iteration increasing the credit amount and expanding the types of projects that are eligible. Companies can now get up to $85 for every ton of CO2 captured from an industrial plant and sequestered underground, and $180 for every ton captured directly from the air. Combined with grants and loans in the 2021 Bipartisan Infrastructure Law, the changes have driven a surge in carbon capture and storage projects in the United States. More than 150 projects have been announced since the start of 2022, according to a database maintained by the International Energy Agency, compared to fewer than 100 over the four years prior.
Many of these projects are notably different from what has been proposed and tried in the past. Historically in the U.S., carbon capture has been used on coal-fired power plants, ethanol refineries, and at natural gas processing facilities, and almost all of the captured gas has been pumped into aging oil fields to help push more fuel out of the ground. But the new policy environment spurred at least some proposals in industries with few other options to decarbonize, including cement, hydrogen, and steel production. It also catalyzed projects that suck carbon directly from the air, versus capturing emissions at the source. Most developers now say they plan to sequester captured carbon underground rather than use it to drill for oil.
Only a handful of projects are actually under construction, however, and the prospects for others reaching that point are far from guaranteed. Inflation has eroded the value of the 45Q tax credit, Madelyn Morrison, the government affairs director for the Carbon Capture Coalition, told me. “Coupled with that, project deployment costs have really skyrocketed over the past several years. Some folks have said that equipment costs have gone up upwards of 50%,” she said.
Others aren’t sure whether they’ll even qualify, Flakoll told me. “There is a sort of shadow struggle going on over how permissive the credit is going to be in practice,” he said. For example, the IRA says that power plants have to capture 75% of their baseline emissions to be eligible, but it doesn’t specify how to calculate those baseline emissions. The Treasury solicited input on these questions and others shortly after the IRA passed. Comments raised concerns about how projects that share pipeline infrastructure should track and report their carbon sequestration claims. Environmental groups sought updates to the reporting and verification requirements to prevent taxpayer money from funding false or inflated claims. A 2020 investigation by the inspector general for tax administration found that during the first decade of the program, nearly $900 billion in tax credits were claimed for projects that did not comply with EPA reporting requirements. But the Treasury never followed up its request for comment with a proposed rule.
Permitting for carbon sequestration sites has also lagged. The Environmental Protection Agency has issued final permits for just one carbon sequestration project over the past four years, with a total of two wells. Fifty-five applications are currently under review.
Carbon dioxide pipeline projects have also faced opposition from local governments and landowners. In California, where lawmakers have generally supported the use of carbon capture for achieving state climate goals, and where more than a dozen projects have been announced, the legislature placed a moratorium on CO2 pipeline development until the federal government updates its safety regulations.
The incoming Congress and presidential administration could clear away some of these hurdles. Congress is already expected to get rid of or rewrite many of the IRA’s tax credit programs when it opens the tax code to address other provisions that expire next year. The Carbon Capture Coalition and other proponents are advocating for another increase to the value of the 45Q tax credit to adjust it for inflation. Trump’s Treasury department will have free rein to issue rules that make the credit as cheap and easy as possible to claim. The EPA, under new leadership, could also speed up carbon storage permitting or, perhaps more likely, grant primacy over permitting to the states.
But other Trump administration priorities could end up hurting carbon capture development. The projects with the surest path forward are the ones with the lowest cost of capture and multiple pathways for revenue generation, Rohan Dighe, a research analyst at Wood Mackenzie told me. For example, ethanol plants emit a relatively pure stream of CO2 that’s easy to capture, and doing so enables producers to access low-carbon fuel markets in California and Washington. Carbon capture at a steel plant or power plant is much more difficult, by contrast, as the flue gas contains a mix of pollutants.
On those facilities, the 45Q tax credit is too low to justify the cost, Dighe said, and other sources of revenue such as price premiums for green products are uncertain. “The Trump administration's been pretty clear in terms of wanting to deregulate, broadly speaking,” Dighe said, pointing to plans to axe the EPA’s power plant rules and the Securities and Exchange Commission’s climate disclosure requirements. “So those sorts of drivers for some of these projects moving forward are going to be removed.”
That means projects will depend more on voluntary corporate sustainability initiatives to justify investment. Does Amazon want to build a data center in West Texas? Is it willing to pay a premium for clean electricity from a natural gas plant that captures and stores its carbon?
But the regulatory environment still matters. Flakoll will be watching to see whether lax monitoring and reporting rules for carbon capture, if enacted, will hurt trust and acceptance of carbon capture projects to the point that companies find it difficult to find buyers for their products or insurance companies to underwrite them.
“There will be a more of a policy push for [CCS] to enter the market,” Flakoll said. “But it takes two to tango, and there's a question of how much the private sector will respond to that.”
What he wants them to do is one thing. What they’ll actually do is far less certain.
Donald Trump believes that tariffs have almost magical power to bring prosperity; as he said last month, “To me, the world’s most beautiful word in the dictionary is tariffs. It’s my favorite word.” In case anyone doubted his sincerity, before Thanksgiving he announced his intention to impose 25% tariffs on everything coming from Canada and Mexico, and an additional 10% tariff on all Chinese goods.
This is just the beginning. If the trade war he launched in his first term was haphazard and accomplished very little except costing Americans money, in his second term he plans to go much further. And the effects of these on clean energy and climate change will be anything but straightforward.
The theory behind tariffs is that by raising the price of an imported good, they give a stronger footing in the market; eventually, the domestic producer may no longer need the tariff to be competitive. Imposing a tariff means we’ve decided that a particular industry is important enough that it needs this kind of support — or as some might call it, protection — even if it means higher prices for a while.
The problem with across-the-board tariffs of the kind Trump proposes is that they create higher prices even for goods that are not being produced domestically and probably never will be. If tariffs raise the price of a six-pack of tube socks at Target from $9.99 to $14.99, it won’t mean we’ll start making tube socks in America again. It just means you’ll pay more. The same is often true for domestic industries that use foreign parts in their manufacturing: If no one is producing those parts domestically, their costs will unavoidably rise.
The U.S. imported over $3 trillion worth of goods in 2023, and $426 billion from China alone, so Trump’s proposed tariffs would represent hundreds of billions of dollars of increased costs. That’s before we account for the inevitable retaliatory tariffs, which is what we saw in Trump’s first term: He imposed tariffs on China, which responded by choking off its imports of American agricultural goods. In the end, the revenue collected from Trump’s tariffs went almost entirely to bailing out farmers whose export income disappeared.
The past almost-four years under Joe Biden have seen a series of back-and-forth moves in which new tariffs were announced, other tariffs were increased, exemptions were removed and reinstated. For instance, this May Biden increased the tariff on Chinese electric vehicles to over 100% while adding tariffs on certain EV batteries. But some of the provisions didn’t take effect right away, and only certain products were affected, so the net economic impact was minimal. And there’s been nothing like an across-the-board tariff.
It’s reasonable to criticize Biden’s tariff policies related to climate. But his administration was trying to navigate a dilemma, serving two goals at once: reducing emissions and promoting the development of domestic clean energy technology. Those goals are not always in alignment, at least in the short run, which we can see in the conflict within the solar industry. Companies that sell and install solar equipment benefit from cheap Chinese imports and therefore oppose tariffs, while domestic manufacturers want the tariffs to continue so they can be more competitive. The administration has attempted to accommodate both interests with a combination of subsidies to manufacturers and tariffs on certain kinds of imports — with exemptions peppered here and there. It’s been a difficult balancing act.
Then there are electric vehicles. The world’s largest EV manufacturer is Chinese company BYD, but if you haven’t seen any of their cars on the road, it’s because existing tariffs make it virtually impossible to import Chinese EVs to the United States. That will continue to be the case under Trump, and it would have been the case if Kamala Harris had been elected.
On one hand, it’s important for America to have the strongest possible green industries to insulate us from future supply shocks and create as many jobs-of-the-future as possible. On the other hand, that isn’t necessarily the fastest route to emissions reductions. In a world where we’ve eliminated all tariffs on EVs, the U.S. market would be flooded with inexpensive, high-quality Chinese EVs. That would dramatically accelerate adoption, which would be good for the climate.
But that would also deal a crushing blow to the American car industry, which is why neither party will allow it. What may happen, though, is that Chinese car companies may build factories in Mexico, or even here in the U.S., just as many European and Japanese companies have, so that their cars wouldn’t be subject to tariffs. That will take time.
Of course, whatever happens will depend on Trump following through with his tariff promise. We’ve seen before how he declares victory even when he only does part of what he promised, which could happen here. Once he begins implementing his tariffs, his administration will be immediately besieged by a thousand industries demanding exemptions, carve-outs, and delays in the tariffs that affect them. Many will have powerful advocates — members of Congress, big donors, and large groups of constituents — behind them. It’s easy to imagine how “across-the-board” tariffs could, in practice, turn into Swiss cheese.
There’s no way to know yet which parts of the energy transition will be in the cheese, and which parts will be in the holes. The manufacturers can say that helping them will stick it to China; the installers may not get as friendly an audience with Trump and his team. And the EV tariffs certainly aren’t going anywhere.
There’s a great deal of uncertainty, but one thing is clear: This is a fight that will continue for the entirety of Trump’s term, and beyond.
Give the people what they want — big, family-friendly EVs.
The star of this year’s Los Angeles Auto Show was the Hyundai Ioniq 9, a rounded-off colossus of an EV that puts Hyundai’s signature EV styling on a three-row SUV cavernous enough to carry seven.
I was reminded of two years ago, when Hyundai stole the L.A. show with a different EV: The reveal of Ioniq 6, its “streamliner” aerodynamic sedan that looked like nothing else on the market. By comparison, Ioniq 9 is a little more banal. It’s a crucial vehicle that will occupy the large end of Hyundai's excellent and growing lineup of electric cars, and one that may sell in impressive numbers to large families that want to go electric. Even with all the sleek touches, though, it’s not quite interesting. But it is big, and at this moment in electric vehicles, big is what’s in.
The L.A. show is one the major events on the yearly circuit of car shows, where the car companies traditionally reveal new models for the media and show off their whole lineups of vehicles for the public. Given that California is the EV capital of America, carmakers like to talk up their electric models here.
Hyundai’s brand partner, Kia, debuted a GT performance version of its EV9, adding more horsepower and flashy racing touches to a giant family SUV. Jeep reminded everyone of its upcoming forays into full-size and premium electric SUVs in the form of the Recon and the Wagoneer S. VW trumpeted the ID.Buzz, the long-promised electrified take on the classic VW Microbus that has finally gone on sale in America. The VW is the quirkiest of the lot, but it’s a design we’ve known about since 2017, when the concept version was revealed.
Boring isn’t the worst thing in the world. It can be a sign of a maturing industry. At auto shows of old, long before this current EV revolution, car companies would bring exotic, sci-fi concept cars to dial up the intrigue compared to the bread-and-butter, conservatively styled vehicles that actually made them gobs of money. During the early EV years, electrics were the shiny thing to show off at the car show. Now, something of the old dynamic has come to the electric sector.
Acura and Chrysler brought wild concepts to Los Angeles that were meant to signify the direction of their EVs to come. But most of the EVs in production looked far more familiar. Beyond the new hulking models from Hyundai and Kia, much of what’s on offer includes long-standing models, but in EV (Chevy Equinox and Blazer) or plug-in hybrid (Jeep Grand Cherokee and Wrangler) configurations. One of the most “interesting” EVs on the show floor was the Cybertruck, which sat quietly in a barely-staffed display of Tesla vehicles. (Elon Musk reveals his projects at separate Tesla events, a strategy more carmakers have begun to steal as a way to avoid sharing the spotlight at a car show.)
The other reason boring isn’t bad: It’s what the people want. The majority of drivers don’t buy an exotic, fun vehicle. They buy a handsome, spacious car they can afford. That last part, of course, is where the problem kicks in.
We don’t yet know the price of the Ioniq 9, but it’s likely to be in the neighborhood of Kia’s three-row electric, the EV9, which starts in the mid-$50,000s and can rise steeply from there. Stellantis’ forthcoming push into the EV market will start with not only pricey premium Jeep SUVs, but also some fun, though relatively expensive, vehicles like the heralded Ramcharger extended-range EV truck and the Dodge Charger Daytona, an attempt to apply machismo-oozing, alpha-male muscle-car marketing to an electric vehicle.
You can see the rationale. It costs a lot to build a battery big enough to power a big EV, so they’re going to be priced higher. Helpfully for the car brands, Americans have proven they will pay a premium for size and power. That’s not to say we’re entering an era of nothing but bloated EV battleships. Models such as the overpowered electric Dodge Charger and Kia EV9 GT will reveal the appetite for performance EVs. Smaller models like the revived Chevy Bolt and Kia’s EV3, already on sale overseas, are coming to America, tax credit or not.
The question for the legacy car companies is where to go from here. It takes years to bring a vehicle from idea to production, so the models on offer today were conceived in a time when big federal support for EVs was in place to buoy the industry through its transition. Now, though, the automakers have some clear uncertainty about what to say.
Chevy, having revealed new electrics like the Equinox EV elsewhere, did not hold a media conference at the L.A. show. Ford, which is having a hellacious time losing money on its EVs, used its time to talk up combustion vehicles including a new version of the palatial Expedition, one of the oversized gas-guzzlers that defined the first SUV craze of the 1990s.
If it’s true that the death of federal subsidies will send EV sales into a slump, we may see messaging from Detroit and elsewhere that feels decidedly retro, with very profitable combustion front-and-center and the all-electric future suddenly less of a talking point. Whatever happens at the federal level, EVs aren’t going away. But as they become a core part of the car business, they are going to get less exciting.