The Inflation Reduction Act—or the “Manufacturing Renaissance Act”—turns one this week. Over the past year, we’ve seen an uptick in investment in an already growing clean energy industry in the United States.
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The Manufacturing Renaissance Act turns one
The Inflation Reduction Act—or the “Manufacturing Renaissance Act”—turns one this week. Over the past year, we’ve seen an uptick in investment in an already growing clean energy industry in the United States. Climate Power, an environmental organization, says the IRA has helped create 170,606 new jobs in 44 states, 272 new clean energy projects, and $278 billion in new investments nationwide.
But carbon capture questions remain
Alongside wind, energy, batteries, and EVs, money is also flowing to more speculative tech. Occidental Petroleum subsidiary 1PointFive (sigh, I know) is likely to be a major beneficiary of Biden Administration grants for carbon removal, with a focus on Direct Air Capture in Texas and the Gulf South. Occidental Petroleum CEO Vicky Hollub has been forthright about why she wants to capture carbon, saying: “We believe that our direct capture technology is going to be the technology that helps to preserve our (oil and gas) industry over time…this gives our industry a license to continue to operate for the next 60, 70, 80 years.” However, it’s not clear whether Oxy’s carbon capture claims add up. To date, Oxy has mainly captured carbon to pump more oil and the company has a long history of benefiting from government largesse while continuing to hurt communities and workers.
PE’s PJM problems
A new report from the Institute for Energy Economics and Financial Analysis (IEEFA), to be released on Tuesday, August 22nd, will examine the rising financial risks facing private equity-owned fossil fuel plants in the PJM Interconnection, the largest power market in the United States. These risks include falling capacity prices, fines for non-performance during last winter's Christmas freeze, and pending market reforms. Together, these risks are ushering in a new, riskier era for PE in PJM, and bad news for gas-fired power plants.
Don’t mention ESG
"ESG" is once again under the microscope. S&P Global has discontinued assigning numerical ESG scores in credit ratings, McDonald’s has subtly erased some ESG references from its website, and Norway's $1.4 trillion wealth fund now supports the European Commission's push to overhaul ESG ratings. The motivations for these changes differ—corporate cowardice is different from preventing greenwashing—but there’s a consistent desire to move away from an often empty buzzword. For example, financial professionals also increasingly dislike the "ESG" label but remain committed to its core principles. A new Bloomberg survey shows that, although the term "ESG" may be falling out of favor, the strategies surrounding environmental, social, and governance considerations are more integral than ever. Many of those surveyed anticipate phasing out the term "ESG" in client conversations due to mounting criticism, especially from some US policymakers, but sticking to core principles in their investments.
Zurich exit points to an unsure future
Voluntary climate alliances are “political and bureaucratic,” according to Mario Greco, the CEO of Zurich Insurance Group AG, and probably won’t help prevent dangerous climate change. Greco, whose company recently left the Net Zero Insurance Alliance, says he expects firms to forgo these groups in favor of championing their unique sustainability commitments. Zurich's official justification for the exit is to protect shareholders from litigation. However, Zurich is doing pretty well this year after significantly raising rates, something industry insiders say might attract more regulatory attention if they remained in an alliance. In the past, the company has also been a major investor in fossil fuels, investing $900 million in the industry in 2019.
Ceres, ERM, and Persefoni: A new report revealsU.S. insurers held $536 billion in fossil-fuel related assets in 2019, with just 16 companies owning half of the fossil fuel investments in the entire industry.
Aug 17: Ahead of the Africa Climate Summit, join African experts and activists for a briefing on energy policies and leadership, adverse community impacts of fossil fuel expansion, African energy access issues and stranded assets from short-term investment. Click here for the media advisory.
Aug 17: The Labor Network for Sustainability will host a webinar where major climate groups will join UAW members to show the climate movement's solidarity with the union in their upcoming contract negotiations with the Big Three automakers and support the call for a just transition for auto workers in the shift to EVs. Click here to learn more and to register.
August 23-25: Global Research Alliance on Sustainable Finance and Investment 2023 Annual Conference. Register here.
August 24-26: The Federal Reserve Bank of Kansas City 2023 Economic Policy Symposium “Structural Shifts in the Global Economy” in Jackson Hole, Wyoming.
September 17-24: Climate Group Climate Week NYC. View list of events here.