Europe may turn to more coal if gas crunch persists
In this newsletter:
1) Europe’s energy crunch is forcing UK factories to shut down
Bloomberg, 15 September 2021
2) You don't say: Green push leaves UK energy supply at the mercy of weather
Bloomberg, 17 September 2021
3) Europe may turn to more coal if gas crunch persists
Yahoo News, 16 September 2021
4) Goldman warns of blackout risk for European industry this winter
Bloomberg, 15 September 2021
5) UN climate summit at risk of failure, UN GenSec warns
GWPF International, 17 September 2021
6) China's useful climate activists criticise Aukus defence deal
The Guardian, 16 September 2021
7) WSJ: Europe’s climate lesson for America
Editorial, The Wall Street Journal, 15 September 2021
8) India rebuffs John Kerry, won't commit to Net Zero
The Hindu, 15 September 2021
9) US Democrats’ job-crushing green agenda is heading toward the ditch
Kimberley A. Strassel, The Wall Street Journal, 17 September 2021
10) And finally: Norway’s new socialist government expected to keep drilling for oil and gas
GWPF Energy, 15 September 2021
Full details:
1) Europe’s energy crunch is forcing UK factories to shut down
Bloomberg, 15 September 2021
Europe’s energy crunch has forced a major fertilizer maker to shut down two U.K. plants, the first sign that a record rally in gas and power prices is threatening to slow the region’s economic recovery.
CF Industries Holdings Inc. said Wednesday it’s halting operations at its Billingham and Ince manufacturing complexes due to high natural gas prices, with no estimate for when production will resume. European gas and power futures tumbled Thursday on signs energy-intensive industries are curbing consumption.
The move comes as Europe is facing an extreme squeeze for energy supplies, with gas and power prices breaking records day after day. The continent is running out of time to refill storage facilities before the start of the winter as flows from top suppliers Russia and Norway remain limited. There’s also a fight for shipments of liquefied natural gas, with Asia buying up cargoes to meet its own demand.
The crisis could have severe economic consequences. Soaring prices are exposing the risk of power outages this winter, according to Goldman Sachs Group Inc. Blackouts would likely send energy prices even higher, compounding concerns about inflation and adding to the rising costs businesses are already shouldering for raw materials.
CF has so far taken the most drastic move of companies operating in the region, but others are warning of the likely blow-back.
High energy prices are creating “inflationary pressure on every other cost” that will end up being passed on to customers, said Pascal Leroy, senior vice-president of core ingredients at Roquette Freres SA, a food processing company based in northern France. And France’s top sugar producer, Tereos, warned of surging natural gas prices raising production cost for the company “tremendously.”
Europe’s energy markets are also just the latest example of the toll that soaring commodity prices are having on the global economy. Tight supplies of everything from aluminum to grains to oil have sparked concerns over a lasting run for inflation. Higher costs for heating homes will bite into consumer wallets at a time when they are also paying more food and many are still struggling from the pandemic’s economic fallout.
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2) You don't say: Green push leaves UK energy supply at the mercy of weather
Bloomberg, 17 September 2021
The U.K.’s wind-power drive has dramatically cut carbon emissions, but it’s also created a vulnerability that’s been brutally exposed.
Calm weather over the past two weeks has cut output from the country’s 11,000 turbines, which account for more than 20% of electricity generation. Coupled with a Europe-wide gas shortage, the crunch has forced some companies to halt operations, which could hold back the economy if they become more widespread.
The disastrous combination is another headache for Prime Minister Boris Johnson at a time the country is already struggling with a shortage of workers that’s disrupted industry and retailers. On top of that, higher energy costs for consumers may damp the spending that’s helped drive the rebound from the pandemic recession.
The crisis could also spark a fresh backlash against renewable energy and net-zero emissions targets. That would make for an unwelcome backdrop as the U.K. prepares to host world leaders at a major climate summit -- COP26 –- in a few weeks.
Britain plans to quadruple offshore wind capacity by 2030 as part of its efforts to be net zero by 2050. But a smooth transition from fossils to greener fuels isn’t guaranteed, and regular capacity crunches could become the norm. Along with worries about higher prices, that will make ambitious climate goals a much harder sell.
“This is going to be a political autumn crisis,” said Dieter Helm, professor of economic policy at Oxford University and energy policy adviser to the government. “It goes together with the delusion that people have that net zero is almost costless. It isn’t.”
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3) Europe may turn to more coal if gas crunch persists
Yahoo News, 16 September 2021
Despite its ambitious green energy targets, Europe could be forced to burn more coal this winter if natural gas stockpiles are not adequately replenished amid record-high gas prices, an expert on the EU energy market told Russian news agency TASS on Thursday.
Gas prices continue to be pushed up by the risk of insufficient gas storage ahead of the winter heating season, EU energy expert Simonas Vileikis told TASS.
“If inventories are not refilled now and winter turns out cold enough, EU countries may be forced to fire up power plants burning fuels other than gas, including coal, to generate enough electricity,” Vileikis said.
This scenario will hit the EU’s ambitions to reduce greenhouse gas emissions, the expert noted.
Gas prices in Europe have shot up in recent weeks, with the European benchmark, the Dutch Title Transfer Facility (TTF) hub, surging by 250 percent since the beginning of the year, as per Reuters estimates. Gas prices in major economies, including Germany and France, have also spiked, leading to record electricity prices.
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4) Goldman warns of blackout risk for European industry this winter
Bloomberg, 15 September 2021
Cold weather could worsen gas crunch, prompt power cuts. Europe hasn’t had widespread industrial blackouts since the 1970s
Europe’s soaring energy markets are exposing the risk of power blackouts this winter, especially if freezing weather worsens the region’s already exceptionally low natural gas inventories, according to Goldman Sachs Group Inc.
While higher gas prices can trigger supply and demand adjustments to offset the tight market, these are largely already priced in, Goldman analysts including Samantha Dart said in a note. As a result, a colder-than-average winter would mean Europe needing to compete with Asia for supplies of liquefied natural gas, driving prices even higher.
And there’s a “non-negligible risk” that LNG directed to Europe won’t be enough to prevent a depletion of gas inventories by the end of winter, especially if weather is cold in both Europe and Asia, the analysts said.
“Under such an outcome, the only balancing mechanism would be a significant further rally in European gas and power prices reflective of the need to destroy demand, with curtailed power demand in the industrial sector through blackouts,” they said.
This scenario from the bank adds to mounting concerns about an energy crisis in Europe, just as economies recover from the pandemic.
Energy prices are breaking records daily. Gas and coal reserves are well below normal weeks before the heating season begins, while limited gas supplies from Russia, lower North Sea production and competition with Asia for LNG are also stoking the rally. On top of that, a fire shut a key U.K.-France electricity subsea cable Wednesday, worsening Britain’s energy crunch.
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5) UN climate summit at risk of failure, UN GenSec warns
GWPF International, 17 September 2021
As Europe’s Net Zero agenda is causing industrial havoc and energy prices are going through the roof, the UN chief has warned that COP26 is heading for the rocks.
Warnings about a Cop-flop are no news to interested observers who have been following our CP26 coverage in recent months. In fact, It has been evident for years that the huge and growing energy demands by China, India and other emerging nations and the Net Zero agenda are incompatible and insurmountable.
This international deadlock has been inherent from the very start of UN climate summits almost 30 years ago and is not going to be overcome anytime soon.
In any case, Europe's severe energy crisis is a stark warning to the world what happens when collective hysteria and green utopianism cancel reason, threatening the continent with industrial devastation and a winter of discontent and upheaval.
As a result, we can expect COP26 to follow the normal COP ritual, culminating in a lame compromise that will allow Joe Biden and Boris Johnson to claim to have saved the climate summit from near collapse while enabling China and much of Asia and Africa to burn fossil fuels for decades to come.
Glasgow climate summit at risk of failure, U.N. chief warns
UNITED NATIONS, Sept 16 (Reuters) – United Nations chief Antonio Guterres said a critical meeting on climate change later this year in Scotland is at risk of failure due to mistrust between developed and developing countries and a lack of ambitious goals among some emerging economies.
The U.N. COP26 conference in Glasgow aims to wring much more ambitious climate action and the money to go with it from participants around the globe. Scientists said last month that global warming is dangerously close to spiralling out of control.
“I believe that we are at risk of not having a success in COP26,” Guterres told Reuters in an interview at U.N. headquarters in New York on Wednesday. “There is still a level of mistrust, between north and south, developed and developing countries, that needs to be overcome.”
“We are on the verge of the abyss and when you are on the verge of the abyss, you need to be very careful about what the next step is. And the next step is COP26 in Glasgow,” he said.
Guterres and Britain’s Prime Minister Boris Johnson will on Monday host a meeting of world leaders on the sidelines of the annual high-level week of the U.N. General Assembly in a bid to build the chances of success at the climate conference, being held from Oct. 31 to Nov. 12.
“My objective and the reason why we are convening a meeting on Monday is exactly to build trust, to allow for everybody to understand that we all need to do more,” Guterres said.
“We need the developed countries to do more, namely in relation to the support to developing countries. And we need some emerging economies to go an extra mile and be more ambitious in the reduction of air emissions,” he said.
Monday’s meeting, which will be both virtual and in-person, will be closed to allow for “frank and open discussions” on how to deliver success in Glasgow, said a senior U.N. official, speaking on condition of anonymity.
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6) China's useful climate activists criticise Aukus defence deal
The Guardian, 16 September 2021
The timing of the new defence deal between the US, UK and Australia has dismayed climate experts, who fear it could have a negative effect on hopes of a deal with China on greenhouse gas emissions ahead of vital UN climate talks.
The Aukus trilateral security partnership has been interpreted as seeking to counterbalance Chinese power in the Asia-Pacific region, and has been likened to a new cold war by China. A Chinese foreign ministry spokesperson warned the three countries to “respect regional people’s aspiration and do more that is conducive to regional peace and stability and development – otherwise they will only end up hurting their own interests”...
Tom Burke, founder of the E3G environmental thinktank, said: “This [Aukus announcement] is bad timing ahead of Cop26, as Glasgow is time-critical and it’s hard to see what was critical about the timing of this announcement. It does not appear to suggest that the prime minister is taking Glasgow very seriously. And it exposes the fact that he has not got much to offer ahead of Glasgow.”
Saleemul Huq, the director of the International Centre for Climate Change and Development in Bangladesh, said the UK and US should not be seeking deals with Australia because its prime minister, Scott Morrison, has refused to take action on emissions.
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7) WSJ: Europe’s climate lesson for America
Editorial, The Wall Street Journal, 15 September 2021
Energy prices are soaring in Europe, and the effects are rippling across the Atlantic. Blame anti-carbon policies of the kind that the Biden Administration wants to impose in the U.S.
Electricity prices in the U.K. this week jumped to a record £354 ($490) per megawatt hour, a 700% increase from the 2010 to 2020 average. Germany’s electricity benchmark has doubled this year. Last month’s 12.3% increase was the largest since 1974 and contributed to the highest inflation reading since 1993. Other economies are experiencing similar spikes.
Europe’s anti-carbon policies have created a fossil-fuel shortage. Governments have heavily subsidized renewables like wind and solar and shut down coal plants to meet their commitments under the Paris climate accord. But wind power this summer has flagged, so countries are scrambling to import more fossil fuels to power their grids.
European natural-gas spot prices have increased five-fold in the last year. Some energy providers are burning cheaper coal, but its prices have tripled. Rising fossil-fuel consumption has caused demand and prices for carbon permits under the Continent’s cap-and-trade scheme to surge, which has pushed electricity prices even higher.
Russia has exploited the chaos by slowing gas deliveries, ostensibly to increase pressure on Germany to finish the Nord Stream 2 pipeline certification. Vladimir Putin last week took a swipe at the “smart alecs” in the European Commission for “market-based” pricing that increased competition in gas, including from U.S. liquefied natural gas imports.
Mr. Putin can throw his weight around in Europe because the rest of the world also needs his gas. Drought has reduced hydropower in Asia, and manufacturers are using more energy to supply the West with more goods. Due to a gas and coal shortage, China has rationed power to its aluminum smelters and aluminum prices this week hit a 13-year high.The U.S. is the world’s largest gas producer, but it isn’t immune from turmoil in energy markets.
Natural gas spot prices in the U.S. have doubled over the past year in part because producers have increased exports to Europe and Asia. Exports are up more than 40% during the first six months this year over last.
This underscores how fossil fuels are a U.S. economic and strategic asset. The Biden Administration’s plan to curtail oil, gas and coal production by regulation would empower adversaries, especially Russia, Iran and China, which are the world’s three largest gas producers after the U.S.Americans are already feeling the pain of rising energy prices. Electricity and utility gas prices were up 5.2% and 21.1%, respectively, over the last 12 months in August. Higher energy costs are bleeding into inflation.
Some analysts predict that gas prices could double this winter if U.S. production doesn’t increase and global demand remains high.Europe is showing the folly of trying to purge CO2 from the economy. No matter how heavily subsidized, renewables can’t replace fossil fuels in a modern economy. Households and businesses get stuck with higher energy bills even as CO2 emissions increase. Europe’s problems are a warning to the U.S., if only Democrats would heed it.
8) India rebuffs John Kerry, won't commit to Net Zero
The Hindu, 15 September 2021
Emissions target not the only priority, govt. tells U.S. climate envoy
The world is watching commitments on climate change made by all “big emitters” said U.S. Special envoy John Kerry on Tuesday. He was making a pitch for India to announce a pledge to reduce emissions to “net zero” (carbon-neutral) by 2050 — to ensure global warming is held at 1.5 degrees Celsius — at the upcoming COP26 summit in the UK in November.
However, the government said it does not consider the “net zero” goal its only priority at present, and Mr. Kerry admitted that he had not received a firm pledge from New Delhi on the issue yet.
Speaking at the end of his visit to Delhi, where he launched the U.S.-India Climate Action and Finance Mobilization Dialogue with Minister of Environment and Climate Change Bhupender Yadav, Mr. Kerry said he had “personally urged the government” to increase India’s commitments to ensure global warming levels are held at 1.5 degrees, instead of the 2 degrees announced at the Paris summit in 2015.
Mr. Kerry said it is important to announce this as a part of India’s “Nationally Determined Contributions” (NDCs) now, as the next decade is critical for the battle against climate change.
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9) US Democrats’ job-crushing green agenda is heading toward the ditch
Kimberley A. Strassel, The Wall Street Journal, 17 September 2021
There’s a simple reason Democrats have never in 20 years rounded up the votes for an economy-crushing climate bill: It’s political suicide. As the reconciliation battle rages, that reality is finally—belatedly—setting in.
House Democrats this week wrapped up committee work on their $3.5 trillion reconciliation bonanza, and most of the hoopla was over taxes and entitlements. But in the background, progressives also grappled with the first signs that their other major priority—a sweeping climate agenda—is veering toward a ditch. It turns out a relevant number of Democrats are reluctant to destroy their states’ energy industries (and millions of jobs), or to saddle consumers with skyrocketing prices and blackouts.
All eyes are, again, on Sen. Joe Manchin. West Virginia’s coal industries (mining and power plants) support some 17% of the state’s economic output, and its utilities are more than 90% reliant on that fuel.
More relevant for the reconciliation fight, Mr. Manchin is chairman of the Senate Energy and Natural Resources Committee, which was tasked in August with handling the crown jewel of progressives’ climate agenda—the Clean Electricity Payment Program.
CEPP is a punitive regime that would require utilities to buy or generate a set additional amount of renewable energy, year on year. Companies that hit the mark get federal payments; companies that don’t face steep fines. Natural gas doesn’t count. About half the states don’t currently have renewable mandates; this would force them into a federal quota program. The rules would also require them to shut down reliable fossil-fuel plants prematurely, killing jobs, raising costs, and provoking the sort of power crises seen in Texas and California.
Democrats managed to summon surprise somehow when Mr. Manchin—of West Virginia—on Sunday lambasted the program, noting that the industry is already moving to cleaner fuels. “It makes no sense to me at all for us to take billions of dollars and pay utilities for what they’re going to do as the market transitions,” he told CNN’s Dana Bash. Ms. Bash tried to suggest Mr. Manchin was in the pocket of Exxon. In reality, he’s listening to labor groups like the United Mine Workers, who are opposed to CEPP, noting it will destroy the very blue-collar, union jobs Democrats claim to care about.
But Mr. Manchin is hardly alone. Seven House Democrats from Texas—a center of fossil-fuel production—on Monday sent a letter to Speaker Nancy Pelosi objecting to provisions “targeting the U.S. oil, natural gas, and refining industries.” They noted that oil and natural gas companies support “11 million domestic jobs” and also took aim at the CEPP, specifically its exclusion of natural gas.
Then there are Democrats who worry the program will harm states that have already moved away from fossil fuels, or hurt markets. “We don’t need blunt penalties that are impossible for energy producers to avoid,” Arizona Rep. Tom O’Halleran told the Journal this week. The bottom line: Energy remains central to functioning state economies, and enough Democrats continue to understand the political folly of crushing jobs and consumers with ruinous mandates.
These criticisms have sent Democratic leaders scrambling for fig-leaf compromises. Minnesota Sen. Tina Smith has floated including carbon-capture in CEPP, thereby allowing utilities like those in West Virginia to skate from penalties. Others are suggesting CEPP might be scrapped in favor of a carbon tax. The problem? Progressives long ago came out against carbon taxes as too obviously hurting the poor. Progressives prefer hiding their price hikes in complicated programs like CEPP, which force utilities to do their energy dirty work.
Green groups are already in a lather. The White House and progressives had demanded the reconciliation bill strip fossil-fuel industries of longstanding tax provisions that allow them to recover costs. Yet in response to blowback from Democrats in oil-and-gas states like Texas, Ohio and Pennsylvania, the House Ways and Means Committee reconciliation draft this week didn’t include those repeals. The omission sent the green lobby around the bend. Ways and Means Chairman Richard Neal’s “failure to tackle billions of dollars in direct subsidies to the fossil fuel industry is an egregious dereliction of duty,” railed Food & Water Watch policy director Mitch Jones. “No handouts for fossil fuels can be allowed. Not one dollar will be tolerated.”
Speaker Pelosi has so far managed to keep Congressional progressives from joining in this throw down, no doubt counseling that some compromise will be required. But how much will they tolerate? The Bernie Sanders wing of the Democratic Party is already apoplectic that Mr. Manchin and Arizona Sen. Kyrsten Sinema say they won’t support $3.5 trillion. If Democrats from energy states hold strong, a final reconciliation bill may consist primarily of the renewable-energy tax credits that have been the mainstay of Democratic energy policy for decades. Here’s to betting that won’t wash with progressives who have made climate central to their congressional existence.
Give the green coalition credit for staving off political reality as long as it did, pretending a climate agenda would sail through Washington. It may still pass, but not before a bruising internal Democratic fight.
10) And finally: Norway’s new socialist government expected to keep drilling for oil and gas
GWPF Energy, 15 September 2021
Billed as another ‘climate change election’ by green campaigners and the media’s usual eco-warriors, Norway’s new socialist government is almost certain to keep drilling for more oil and gas – indefinitely.
According to the cabal of eco-journalists in the Norwegian and British media the ‘climate issue’ dominated the election campaign. The IPCC report was supposed to give a huge boost to the greens who called for curbs on oil and gas drilling.
Instead, Norway’s new socialist government is expected to ignore all calls for an end to fossil fuels, uphold existing oil and gas policies which aim at maximising the full economic gains from the sector that has made Norway one of the wealthiest nations on earth. Let’s face it: No one is going to choke the life out of the Golden goose.
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Norway to hold firm on oil, gas, energy transition under new government
Victory by the Labor Party at parliamentary polls confirms Norway’s broad intention to make the most of its oil and gas resources despite environmental and legal challenges mounting against the sector across Europe.
With Conservative Prime Minister Erna Solberg conceding defeat, the stage is set for a switch back to a center-left administration led by the Labor Party, which headed the previous government to Solberg’s, up to 2013.
Tax changes designed to answer criticism that the regime is too supportive of oil and gas exploration, proposed by the authorities ahead of the election, appear likely to gain parliamentary approval without provoking industry ire.
The Green Party looks likely to have advanced on the one seat it held previously and could yet play a role in a coalition government, but its goal of abolishing the oil and gas sector in Norway by 2035 looks far-fetched.
While support for the Greens and environmental discussion have risen up the agenda, “Labor are more or less a guarantee for no dramatic change,” Teodor Sveen-Nilsen, research analyst at Spare Bank 1 Markets, told S&P Global Platts.
S&P Global Platts Analytics senior analyst Sami Yahya said the results “provide the Labor Party with a wider array of options of how to form the next government,” with potential partners the Center and Socialist Left parties both supporting exploration and extraction, albeit the latter wants a more aggressive approach on climate change.
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The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.
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