UPDATE: Initial reports that the electric vehicle tax credit was killed in the Senate version may have been inaccurate. The text of the amendment contained some obscure language that actually indicates that it was not adopted in the ultimate bill.
Donald Trump’s electoral college win a year ago certainly promised a lot of setbacks to the environmental movement. His administration’s attempts to roll back environmental protections, under-staffing of key agencies enforcing our environmental laws, as well as efforts to prop up dirty energy industries have all taken their toll this year.
However, until the tax bill passed the Senate this week, much of that damage was either relatively limited in scope or thwarted by the courts. But the new tax legislation now passed by both houses of Congress, and still in need of reconciliation and a further vote, could dramatically undercut a number of key environmental measures in ways we haven’t yet seen from this administration.
Originally, there was some hope that Republicans in the U.S. Senate would weaken some of the draconian environmental measures in the original House tax bill. But that was largely dashed by the late Friday night, partisan vote in the U.S. Senate. First, the bill targets clean technology while promoting dirty energy:
- The renewable energy tax credits for wind and solar are severely undercut by an obscure provision in the bill called Base Erosion and Anti-abuse Tax (BEAT), as Greentech Media reports. While analysts are still reviewing the provisions to discern the likely impact, initial assessments are that this bill language could greatly hurt the industry by decreasing the value of the credits.
- Similarly, the reinstatement of the alternative minimum tax for corporations, which was not in the House bill, also hurts the market for renewable tax credits, if not devastates it. By inserting this provision at the very last minute, Senate leaders attempted to offset some of the other tax cuts and projected deficits by ensuring corporations pay a minimum tax. The problem is that it renders many tax credits worthless, as businesses will no longer need them. Particularly hurt are wind energy projects, which rely on the production tax credit, as well as solar projects that rely on the investment tax credit.
- As a dirty cherry on top, the Senate bill opens the Arctic National Wildlife Refuge to oil drilling.
On housing, the tax bill has the potential to devastate affordable housing. Affordable projects often rely on tax credits for financing. As Novogradac & Company writes, the BEAT provision will dampen corporate investors from claiming tax credits like the low-income housing tax credit (LIHTC), new markets tax credit (NMTC), and historic tax credit (HTC), all used to fund affordable and other infill projects. Other changes in the bill promise further dampening of financing for affordable housing.
The only good news for environmental and housing advocates is that there is still a chance to make changes in the bill through the conference committee. And that the provisions here can be rescinded in 2021 with a new congress and president.
California is on track to meet its 2020 climate change goals, to reduce emissions by that year back to 1990 levels. Much of that success is due to the economic recession back in 2008 and significant progress reducing emissions from the electricity sector, due to the growth in renewables.
In 2015, the most recent year for which data are available, the state’s greenhouse gas emissions dropped at less than half the rate of the previous year, according to an August report from the San Francisco-based nonprofit Next 10. Low gas prices and a lack of affordable housing prompted more driving and contributed to a 3.1 percent increase in exhaust from cars, buses, and trucks, the report says. Census data show that more than 635,000 California workers had commutes of 90 minutes or more in 2015, a 40 percent jump from 2010.
The solutions are urgent: we need to reduce driving miles by building all of our new housing (an estimated 180,000 units needed per year) near transit, and we need to electrify our existing vehicle fleet and add in biofuels and hydrogen where appropriate. Otherwise, the state will not be as successful in meeting its much more aggressive climate goals for 2030, with a 40% reduction below 1990 levels called for that year.
Last week I blogged about how electric vehicles (and consumer electronics) run on batteries with cobalt, too-often mined with child labor in the Democratic Republic of Congo. Congo is the world’s biggest producer of cobalt, with more than half of global supplies. And cobalt prices have skyrocketed recently with the growth of EVs.
But reports by Amnesty International point to the human rights risks. The group says that approximately one-fifth of Congo’s cobalt production is mined by hand by “informal miners,” including children, in dangerous conditions. Amnesty recently ranked 29 companies on how well they were tracking their cobalt sources since a January 2016 report spotlighted the issue. Reuters covered the results:
“Apple became the first company to publish the names of its cobalt suppliers … but other electronics brands have made alarmingly little progress,” the statement said.
Most cobalt is produced as a by-product of copper or nickel mining, but artisanal miners in southern Congo exploit deposits near the surface that are rich in cobalt.
The biggest buyer of ore from small-scale miners was Congo Dongfang Mining International, a wholly owned subsidiary of Chinese mineral giant Zhejiang Huayou Cobalt Ltd, Amnesty found in its report last year.
Since then, Huayou Cobalt “has taken a number of steps” in line with international standards but “gaps in information remain”, Amnesty said.
The group was particularly critical of Microsoft, which was among 26 companies that does not disclose their suppliers’ records on this issue, as well as Renault and Daimler among the automakers (BMW had made the most improvements). Microsoft responded to the criticism, arguing that it’s doing more than the report indicates to clean up and disclose its supply chain.
The Amnesty report shows the value of public pressure on this issue. While a global governance framework to ensure a stable and just supply of battery materials will likely be needed, it’s encouraging to know that old fashioned public pressure can help bring progress, too.
Last week I blogged about the potential environmental and governance harms from clean technology mineral extraction. But what about one specific technology, the lithium ion batteries powering the burgeoning electric vehicle market?
Alex Tilley and David Manley of Natural Resource Governance Institute (NRGI) discussed the potential boom in lithium mining in specific parts of the globe:
[I]dentified lithium resources are concentrated in salt flats in Argentina, Bolivia and Chile. If the world shifts to lithium-ion batteries to power vehicles and electricity consumption, South America will become a globally strategic region for energy. And if governed well, this industry could be transformative for these countries’ economies.
Fortunately many of these lithium-rich countries have decent standards and processes for mineral extraction, although we’ll need to be vigilant to monitor impacts.
The story is more concerning though for cobalt, also an important metal for EV batteries. Cobalt is a byproduct of copper and nickel mining, and a typical EV contains about 33 pounds of cobalt. Until recently, there were often surplus cobalt supplies, as it was used mostly for steel production. But its ability to conduct electricity so efficiently has made it critical for rechargeable batteries like in EVs and therefore more in demand.
The problem is the location of the supply. Thomas Wilson in Bloomberg News tackled cobalt mining in a recent piece, noting that the relatively rare metal is found mostly in the Democratic Republic of Congo, “a country in the African tropics where there has never been a peaceful transition of power and child labor is still used in parts of the mining industry”:
The country formerly known as Zaire — which hosted boxers Muhammad Ali and George Foreman for their 1974 heavyweight title bout dubbed the “Rumble in the Jungle” — supplies 63 percent of the world’s cobalt. Congo’s market share may jump to 73 percent by 2025 as producers like Glencore Plc expand mines, according to Wood Mackenzie Ltd. By 2030, global demand could be 47 times more than it was last year, Bloomberg New Energy Finance estimates.
With demand growing, mining companies including Glencore, Eurasian Natural Resources Corp. and China Molybdenum Co. are pouring more money into Congo. With cobalt prices rising, that government is looking for ways to increase its control of the supply as well as the profits. It’s also creating supply disruptions, as in a recent incident in which the government blocked copper and cobalt exports by the China-Congo joint-venture Sicomines in a dispute over local refining.
Worse, the cobalt mining may entail significant human rights violations. Amnesty International alleges that some “informal” mines may rely on child labor.
Corporations are responding to some of the public pressure around situations like in Congo to address the human rights and environmental implications of the battery supply chain. Apple and Samsung in particular were forced to more fully vet their suppliers. But these companies don’t always know where their cobalt comes from. Ultimately, more than half of the world’s supply of refined cobalt in rechargeable batteries comes from China, which in turn gets 90 percent of its cobalt from Congo.
Without more public pressure and international guidelines and cooperation, we lack guarantees that resource-rich countries will meet decent environmental and governance standards. Not only will residents of these areas be at risk, the supplies for electric vehicles may be held hostage to unstable, corrupt regimes. We’ve been down that road before with oil, and we should avoid repeating it in the coming age of electric vehicles.
It’s a recurring knock on clean technologies like solar PV and wind turbines. Critics like to argue that the metals and mineral extraction to make them entail exactly the kind of pollution – and sometimes political conflicts – that clean tech advocates hope to displace in the current fossil fuel supply chain.
We should be clear that we’re starting from a terrible baseline: the geopolitical negatives and pollution from the current regime of oil extraction, coal mining, and natural gas infrastructure dwarfs the likely risks and environmental footprint of producing most clean technology like solar PV and wind turbines.
But at the same time, it’s an area of legitimate concern and one that probably should be addressed at this relatively early stage in clean tech deployment, when advocates of better governance and pollution controls have potentially more leverage over the source countries and states.
Alex Tilley and David Manley of Natural Resource Governance Institute (NRGI) explore the environmental and political footprint of the clean tech supply chain in a recent blog post and accompanying report. The researchers based their analysis on a World Bank report on various clean technologies and the minerals and metals needed to manufacture them, down to country-level data for the various commodities. They then ran the data against the 2017 Resource Governance Index (RGI) scoring:
[We] found that across the different minerals, on average 42 percent of reserves are in countries with “good” or “satisfactory” resource governance, 37 percent are in countries with “weak” scores (China accounts for 14 percent of this total) and a further 7 percent are in countries that score “poor.” Almost none of the reserves are in countries that are “failing” in their resource governance.
The outlook also presents some serious risks. A high average proportion of minerals reserves is found in countries with “weak” or “poor” governance and for some of the individual minerals, this proportion is much higher.
For example, 90 percent of the reserves of chromium, a mineral used in wind turbines, are in Kazakhstan and South Africa, two countries with “weak” RGI scores. Almost two-thirds of reserves of manganese, used in both wind turbines and lithium-ion batteries, are in countries that score “weak” or “poor” in the index—32 percent in South Africa, 23 percent in Ukraine, 7 percent in China, 4 percent in Gabon and 2 percent in Ghana.
The problems that could ensue from resource extraction in these “weaker” countries include worsening corruption, over-reliance on a single extractive industry, more political conflicts over resources, and local pollution of forests, rivers, and coastlines. For project developers, these impacts could result in delays and project cancellations.
The authors cite some potential solutions from a Nature article for the international community to consider:
Because avoiding disruption is so crucial for the progress of clean technologies, the group of experts writing in Nature propose a global governance approach to avert potential bottlenecks. They call for the international community to set targets for mineral production; map resources; monitor impacts; research and invest in new extractive technologies; and carry out exploration in new frontiers, from sea beds to deep in the earth’s crust. Additionally, they propose an early warning system, using data analysis to trigger alarms for impending supply, governance and environmental concerns.
The upside for the residents of these countries, if the extraction processes are sound with respect to governance and environmental impacts, is rising standards of living and potential growth of a more diversified, open and tolerant economy. The downside though is unfortunately all too possible, unless the international community and clean tech industry mobilize for coordinated policy action.
The news that Republicans are targeting the $7,500 federal tax credit for electric vehicles has stirred up automakers, who are relying on the incentives to boost demand for their EV investments. The incentive was created in 2008 through a bipartisan deal, with environmentalists teaming with national security-types concerned about U.S. dependence on foreign oil. The credit is available for the first 200,000 qualifying vehicles by each automaker. While no automaker has reached that cap, Tesla should do soon, once the Model 3 is widely available.
But how motivated is the auto industry to fight for it? Tesla certainly has the most incentive, given their all-electric line of vehicles. But so far they are mum publicly. The other automakers are mixed on electric vehicle deployment. General Motors and Nissan have gone all-in on EVs, but they still make their money on big gas cars.
And perhaps more importantly, the industry as a whole would presumably benefit from the huge corporate tax cuts proposed in the plan. They therefore may be unwilling to pick a strong fight over this one provision for just one part of their business, given how much they could benefit from the plan overall.
E&E news reports [paywalled] on the industry position:
“Eliminating the fuel-cell and EV credits will hamper progress towards getting these very clean and energy-efficient vehicles on the road,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, the powerful trade group for domestic automakers.
Yet she also said the EV tax credit had not previously been a focus of lobbying as Republicans drafted their proposal. Member companies of both the car alliance and the Association for Global Automakers — the trade group for the U.S. operations of international automakers — are meeting this week to sketch out a position and strategy.
That lack of sustained interest in fighting for the tax credit is troubling. For example, the article reports that Ford Motor Co. redirected inquiries on this subject to the Alliance of Automobile Manufacturers, “a tactic most automakers assume when there’s disagreement within the industry about strategy.”
Until we see more all-electric automakers like Tesla, EV backers may have a tough road ahead relying on the auto industry for full-throated support for supportive policies. In the meantime, the tax plan still has a long way to go to becoming law, with many changes likely to occur. So we’ll have to stay tuned.
California’s 2030 climate goals will be a big step forward for the state. We’re already making good progress achieving our 2020 goals (to return to 1990 levels of carbon emissions), with the state likely to hit that goal a bit early thanks to the global recession and the plummeting price of renewables. But the 2030 goals require an additional 5% reduction per year in emissions for the 2020s, to reduce our levels 40% below 1990 emissions. That’s a tall order.
Electric utilities will be a big part of the solution, but not just because of their efforts to decarbonize the electricity supply. They’re also needed to expand the kinds of things that can run on electricity instead of petroleum or natural gas.
SCE used an analysis from the consulting firm E3 that found the cheapest of three pathways to meeting the state’s 2030 emissions goals entails electrifying 24 percent of light-duty vehicles and 15 percent of medium-duty vehicles, in addition to reaching an 80 percent carbon-free electricity target. It also would require 30 percent of residential and commercial water and space heaters to run on electricity rather than gas.
This pathway seems achievable at a reasonable cost, given the advances in battery technologies on the vehicle side. Still, we will need to keep the federal tax credit in place or find a viable substitute to keep demand for EVs strong in the short run.
On the furnace and water heating side, we’ll need some new, cheaper products to wean buildings off of natural gas and onto clean electricity. But the good news is that achieving the 80% carbon-free electricity goal by 2030 may not be so daunting, given that we may be on track for 60% renewables by 2030 anyway, plus all the large hydropower that doesn’t count under the renewables mandate.
As always with the future, there are plenty of variables and unknowns. But California’s progress to date on clean tech gives us a clear idea of what’s needed — and what the costs may be — to achieve the 2030 goals.
Halloween may be over, but the climate frights this week continue. Here are the scary highlights:
- Electric vehicle incentives in trouble: the Republican tax plan would eliminate the $7500 tax credit for EV purchases, which would likely torpedo sales for all but the luxury EVs in the short term. States might be able to dig deep to make up some of the difference, and the tax credit is set to phase out anyway for automakers over certain sales amounts, but nonetheless this would be a big blow to demand.
- Infill tax credits at risk: the Republican tax plan also targets federal programs that help revitalize infill neighborhoods. It would eliminate key programs like New Markets Tax Credits (NMTC), Historic Preservation Tax Credits (HTC), and the Community Development Block Grant (CDBG) program. As Smart Growth America and their infill group Locus writes in a newsletter today, “community development projects almost invariably rely on federal programs like these to fill a critical financing gap, often making the difference between a go and a no-go decision for a project penciling out.”
- Tesla Model 3 stuck in production “hell”: Tesla’s third-quarter earnings call brought bad news about the Model 3, the $35,000 mass-market EV that is struggling to meet its production targets. The company’s goal of producing 5,000 units a week by the end of 2017 has slid to the first quarter of 2018. The normally upbeat Elon Musk was apparently in a bad mood, per E&E News [paywalled]:
The call’s tone was a swing to the dark side for Musk, who on quarterly earnings calls often minimizes problems and instead trumpets the company’s successes, or announces or at least hints at some bold new initiative.
- Earth passes a carbon milestone: scientists report that the rate of carbon dioxide being released into the atmosphere accelerated at an unprecedented pace last year, reaching levels not seen in 800,000 years. Per E&E news [paywalled]:
Current levels of CO2 correspond to the Pliocene period from 3 million to 5 million years ago, when the climate was 3.5 to 5.5 degrees Fahrenheit warmer, the report found. At that time, the ice sheets of Greenland and West Antarctica were melted. Sea levels were 30-60 feet higher than they are now.
I’d say this is not a good time to invest in ocean-front property. Happy Frightful Friday!
If you care about global adoption of electric vehicles, there is good news out of China. The country is requiring one out of every five vehicles sold by 2025 to be electric. And Chinese residents have bought 300,000 electric vehicles already this year — equal to all the EVs sold in California to date, from 2011 to the present.
But as the New York Times reports, these requirements and market support are in part designed to help China corner the market on producing and manufacturing these vehicles:
Behind the scenes, China is recruiting some of the world’s best electrical engineering talent, even in the United States. China is also home to many smaller companies that make the parts essential to assembling electric cars. All this comes just as electric cars are finally starting to become competitive with gasoline- or diesel-powered cars on performance and cost.
So while the U.S. federal government is trying to roll the clock back on clean technology and pretend we can go back to a fossil fuel world, China is getting ready to eat our lunch on the next generation of vehicles. California in particular has a lot to lose economically, with Silicon Valley emerging as a hub for both electric vehicle innovation and manufacturing, with the Tesla plant just up the road in Fremont.
In the end, it’s good for the environment and the economy if China can make EVs cheap and ubiquitous. But it would be a shame for the U.S. to lose its edge on the jobs and economic growth that goes with that production.
It’s a corporate acquisition that could be the sign of a coming tectonic shift from gas to electricity: the gas station company Royal Dutch Shell just bought NewMotion, one of Europe’s largest electric vehicle charging providers. NewMotion’s specialty is converting parking spots into EV charging stations, with more than 30,000 EV stations in Europe.
As CNN reports:
The acquisition, Shell’s first in this space, shows how Big Oil is being forced to confront the long-term threat posed by electric cars and efforts to phase out gasoline and diesel vehicles.
“This is a way of broadening our offer as we move through the energy transition,” Matthew Tipper, Shell’s vice president of new fuels, told CNNMoney in an interview. “It’s certainly a form of diversification.”
We’ve certainly seen oil companies try to diversify before. Chevron, for example, had a renewable fuels unit that it discontinued a few years ago, as oil prices and profits went up at the time. But this acquisition could be an indicator that these gas companies now see a growing market for EVs that will need to be met with more fueling infrastructure.
I’ve written before about our sore lack of charging stations in places like California. It would be a pretty elegant solution if more gas station companies like Shell started getting into the EV charging business. Station owners don’t make much on fuel sales anyway but on the retail sales in the on-site mini-marts. So attracting EV buyers to charge and buy at these gas stations could make economic sense. And with super-fast chargers on the way, EVs could be an economic lifeline for these gas stations with fueling as fast as gassing up is now.
The transition to low-carbon fuels will disrupt some existing companies but provide opportunities, too, particularly for incumbents like Shell that are willing to take a risk.