Jeff Bezos pledges $10 billion to fight climate change
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"Let me tell you about the very rich. They are different from you and me”, wrote F Scott Fitzgerald, prompting Ernest Hemingway’s reply: “Yes, they have more money.” Jeff Bezos, the founder of Amazon, proved Fitzgerald’s point this week when he used a 127-word Instagram post to announce his plan to give $10 billion to help fight “the devastating impact of climate change”. The commitment to what he has called the Bezos Earth Fund represents about 8% of his estimated net worth, which has risen by about $15 billion since the end of last year.
Details on how Bezos will deploy his billions are still sketchy, but reports have suggested that he is taking a different approach from his previous efforts on climate. Along with many other tech industry leaders, Bezos has in the past sought to use his money to support low-carbon energy businesses to help them reach commercial scale and viability. In his statement, Bezos said his new fund would support “scientists, activists, NGOs”, and talked about making grants rather than investments.
Bill Gates, Bezos’s closest rival at the top of the global rich list, has been taking a lead in trying to use the venture capital model to find climate solutions. In 2015 he launched the Breakthrough Energy Coalition, with backing from others including Marc Benioff, founder of Salesforce, Richard Branson, founder of the Virgin group, and Jack Ma, chairman of Alibaba. The coalition has an investment arm, called Breakthrough Energy Ventures, which is focused on “building the new, cutting-edge companies” that need “patient, risk-tolerant capital so that more transformative clean energy innovations get to market faster”. The fund has the aim of generating a financial return as well as cutting greenhouse gas emissions, and Bezos is one of its backers, along with other wealthy individuals including Michael Bloomberg, the financial information tycoon now running for president.
Breakthrough Energy Ventures has invested in 23 companies, which are pursuing a wide range of promising innovations. This week Lilac Solutions, a California-based mining technology company, announced that it had raised $20 million in funding from a group of investors led by BEV. The company has a technology for extracting lithium from brine that it says is “significantly faster, cheaper, and more scalable than existing technology”, enabling the massive increase in lithium supply that will be needed as sales of electric vehicles grow.
Several of the BEV companies are working on new technologies for energy storage, with the others pursuing ideas ranging from ride-sharing to nuclear fusion. Meanwhile, Gates has separately been chasing a breakthrough with TerraPower, which has a design for an innovative nuclear reactor. He has been looking for US government support to help develop the technology, after a plan to build one of the reactors in China had to be abandoned.
One factor influencing Bezos’s shift from investing to grant-giving may be that venture capital investment in new energy technologies has not had a great record recently. The “cleantech” investment boom of the 2000s ended in a bust, with some high-profile failures including the innovative solar company Solyndra, which was backed by the Obama administration in 2009.
There is now a new wave of VC investment coming into energy and emissions-reducing technologies. The name has changed — people tend to call it “climatetech” these days — but the issues remain much the same: the potential market is huge, but deploying new energy technologies is still enormously challenging. The Interchange podcast had an excellent episode recently discussing whether any lessons had been learned from the failures of a decade ago. Not every company from the previous round of cleantech investment was a failure: one startup that received three rounds of venture capital funding in 2004-06 was Tesla.
Meanwhile, critics have been observing that if Bezos really wants to have an impact on greenhouse gas emissions, he should perhaps start at his own company. Amazon declared its greenhouse gas emissions for the first time last year, and reported an estimate of 44.4 million tonnes of carbon dioxide equivalent for 2018, about the same as the oil group Total emits from its operations.
Bezos is already trying to bring Amazon’s number down: the company has pledged to use only renewable energy by 2030, and to cut its net carbon emissions to zero by 2040. In pursuit of that goal, it has ordered 100,000 all-electric delivery vans from Michigan-based manufacturer Rivian, and taken a stake in the company.
However, a group called Amazon Employees for Climate Justice has argued that the company is still not doing enough. Hundreds of employees last month gave public statements criticising aspects of the company’s strategy and insisting they had a right to speak out. This week the group praised Bezos for his philanthropy, but renewed its attacks on aspects of Amazon’s operations, including its services for the oil and gas industry. As was the case with BP’s ambition to become a “net zero” emissions company, which I discussed last week, pressure from employees seems likely to be a significant factor in corporate decisions on energy and climate.
Flaring in Texas: the case for the defence
The surge in flaring that has accompanied the US unconventional oil boom over the past decade has raised concerns about the industry’s greenhouse gas emissions and waste of resources, particularly as investors are becoming increasingly focused on the environmental, social and governance risks associated with exploration and production companies. Ryan Sitton, one of the Texas Railroad Commissioners who regulate the industry, this week published a defence of its practices, intended to “put the data [on flaring] into context”.
In the past five years, flaring in Texas reached levels last seen in the 1950s. It has dropped back a little from its recent peak, but remains well above its levels of a decade ago. Sitton’s argument is that those numbers need to be looked at in the context of the huge surge in the state’s oil output over that period. He wants people to look not at the total volumes of gas flared, but at flaring per barrel of oil produced.
That metric makes Texas look relatively good compared to some other oil-producing regions. On average, Sitton has calculated, the world flares 0.14 thousand cubic feet of gas for every barrel of oil produced. In Texas right now, oil producers are on average flaring 0.09 thousand cubic feet per barrel, so they are below the global average. The flaring intensity of production is much lower in Saudi Arabia, but it is much higher in other places, including Iran, Iraq and North Dakota.
A less flattering picture is shown by the evolution of flaring intensity in Texas over time, however. It fell sharply from those peaks in the 1950s, but seems to have been on a rising trend since the 1970s.
Sitton discusses a few options for curbing flaring, including restricting the exceptions that are routinely granted by the Railroad Commission. Cutting flaring by 200 million cubic feet per day in this way, he suggests, could reduce oil production in Texas by up to 1 million barrels per day, and drive up the price of US crude by $25 a barrel. Given these large costs of tighter regulation, he concludes: “Total gross flaring volumes in Texas will likely continue to increase as oil volumes increase.”
Even if the Railroad Commission does not step in to compel a reduction in flaring, companies may start to move anyway. Some of the most interesting data in Sitton’s report breaks down flaring between companies, in absolute terms and relative to oil production. The biggest flarers in Texas, in volume terms, have been ExxonMobil’s XTO Energy, Diamondback, and Endeavor Energy Resources. In terms of volumes flared per barrel produced, however, it is a different set of smaller companies, including Steward Energy and Primexx Operating Corporation, that top the charts.
There is also a very wide variation between the highest and lowest flaring intensity. Companies that do relatively little flaring, according to the Railroad Commission data, include Devon Energy, Chesapeake Energy, ConocoPhillips’ Burlington Resources, and Royal Dutch Shell. Steward Energy on average has burned off 30 times as much gas per barrel of oil produced as Pioneer Natural Resources, another low-flaring company. This fact has not gone unnoticed by the leadership of Pioneer. Scott Sheffield, its chief executive, said on a call with analysts on Thursday that if companies were not able to cut flaring sufficiently, investors should “end up either not doing business or sell whatever you have in regard to that company.”
The outbreak of the new coronavirus Covid-19 has continued to spread, although another change in methodology in China has made it more difficult to interpret the data. The latest numbers announced by the Chinese authorities on Friday gave little encouragement to hopes that the outbreak is slowing. Iran reported its first case, bringing to 27 the number of countries where the disease has been diagnosed.
While the medical data may be somewhat ambivalent, the economic data have been absolutely clear: the outbreak is causing a sharp slowdown, particularly in China but increasingly in other countries as well. Retail car sales in China in the first half of February were down 92%, and the industry association expects a 5% drop for the year as a whole, providing Covid-19 can be brought under control by April. Sales of copper in China have also been falling, and are also on course to show a decline for the year, depending on how long the outbreak lasts.
Attention is increasingly being focused on the disruption being caused to supply chains in China and around the world. Manufacturing shutdowns and shipping bottlenecks are already causing delays for some oil and gas projects. The history of epidemics suggests that even the most severe outbreaks have only a transitory economic impact, John Kemp of Reuters pointed out. But by exposing the vulnerabilities in extended global supply chains, Covid-19 could have a long-term impact, if it encourages some companies to start sourcing components closer to home.
India plans to stop importing thermal coal from financial year 2023-24. The goal reflects the government’s intent to increase the production of Coal India, the state-owned mining company, by about 50% by that year. It also comes as solar energy is becoming cheaper than coal for power generation in India. Kartikeya Singh of the Center for Strategic and International Studies in Washington wrote that the decision on the future of India’s tax on coal would be important for the country’s energy future. Clyde Russell of Reuters wrote that in India, coal was losing in an “unfair fight” against renewable energy.
The US announced new sanctions against the trading arm of Rosneft, alleging that the company had helped to prop up Nicolás Maduro, the “dictatorial” president of Venezuela. The US state department said in a statement that Rosneft Trading had been “the primary broker of global deals for the sale and transport of Venezuela’s crude oil”.
The US Internal Revenue Service has issued two long-awaited guidance notes on the implementation of the new 45Q tax credit for carbon capture projects. The guidance should mean that planned projects, which had been held up waiting for the IRS, can now go ahead.
Last year 83 new hydrogen refuelling stations went into operation worldwide, bringing the global total to 432.
The active rig count in the Vaca Muerta shale of Argentina has dropped 37% since the end of July. Wood Mackenzie’s Maria Cortez says fuel price regulation and concerns about the direction of government policy under Argentina’s new president, Alberto Fernandez, have put pressure on E&P companies and undermined confidence in the region.
And finally: the energy business has always been full of hopefuls touting their potentially world-changing breakthroughs, and that great tradition continues to this day. This week, the University of Massachusetts Amherst announced that scientists there had developed a technology that could “create electricity from moisture in the air”. The researchers have used a thin film of protein nanowires less than 10 microns thick, which adsorbs water vapor from the atmosphere, establishing the conditions for a current to flow. The power generated is not exactly at commercial scale yet, but nor is it trivially weak. It would take about 17 of the researchers’ nanowire devices to power a mobile phone.
However, the usual caveats about exciting-looking laboratory results are definitely in order here. Science magazine noted that the researchers “aren’t sure exactly how these wires work,” and that could be a drawback in the search for practical applications. Dirk de Beer of the Max Planck Institute for Marine Microbiology told the magazine: “I think a deeper understanding… is needed.”
Quote of the week
“Once we get through the coronavirus demand issues. I’m more optimistic that we’re going to see a much higher price deck over the next five years, and that number will increase substantially as we go out over time.” – Scott Sheffield, chief executive of Pioneer Natural Resources, looked ahead to a future of rising crude prices and strengthening cash flows.
Chart of the week
This comes from Wood Mackenzie’s latest long-term forecasts for global gas markets. After a rush of new liquefied natural gas supplies coming on to world markets in the past five years, the pace of growth is set to slow. After a record year for new export project approvals in 2019, it now looks as though there will be a second LNG supply surge in the second half of the decade.