Articles in Category: Environment

emissions

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Activist investors and environmentalists make strange bedfellows, but both are like the hordes at the citadel gates of the oil majors.

In the US, activist investor Engine No. 1 forced at least two and possibly three directors onto the board of Exxon Mobil. In doing so, it aims to force a change in direction for the world’s largest oil company away from oil and gas and toward a lower-carbon future.

What is remarkable is Engine No. 1 drove through the imposition of new directors despite holding a mere 0.02% stake (or $54 million) in the company. It won the backing of state pension funds, like that of New York state, and asset managers such as BlackRock, Vanguard and State Street, the Financial Times reported.

Investor action was driven by chronic underperformance. That’s not just at Exxon but across the oil and gas sector, the post reports. It should be seen as the market’s growing demand for the oil business to address the challenges of the future and reposition itself for a world in which the markets demand issues seen as existential threats, like carbon emissions, are addressed in a meaningful way.

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Brussels must feel a little like the Dutch boy with his finger in the dike when it comes to emissions.

No sooner do you create a solution to one problem – costing carbon dioxide emissions – than you create another – putting your domestic industries at a global disadvantage.

The Financial Times reported on calls by European industrial groups for the EU to introduce a carbon border tax. Rapidly rising prices for CO2 allowances raise the cost for the most-polluting industries far above any other region.

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EU’s Emissions Trading System aims to encourage reduction in emissions

emissions

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According to the Financial Times, carbon prices in the EU’s flagship Emissions Trading System (ETS), a cornerstone of the bloc’s ambitious new target to slash emissions 55% by 2030, are within touching distance of €50 a metric ton. That’s more than double their pre-pandemic level.

The ETS is intended to encourage investment in technologies that reduce carbon emissions by placing a financial burden on producers who simply maintain their existing level of emissions. The EU grants allowances to polluters and allows them to trade them in order to allow a commercial price to develop – if you like letting the market decide what the balance is between paying to pollute and investing more to avoid the cost and pollute less.

The problem appears to be that anticipation among traders and commercial buyers is supplies will tighten as the available allowances will shrink over time.

The result? Rising prices for those allowances left, piling pressure on the most polluting firms.

Competition fears

Rises this year have prompted Tata Steel to place a €12 ($14.40) per metric ton surcharge on its European steel. The fear is further increases will make European producers increasingly less competitive against imports from countries with no such taxation system.

The post reports estimates made by steel producers that the EU carbon price is now costing them approximately $95 ($114) per metric ton of steel produced. (The production of one ton, on average, emits two tons of CO2 the post suggests.

That equates to almost 10% of the current steel price near €1,000 ($1,200) a metric ton.

Producers go on to suggest the estimated annual hit to the EU steel sector from having to buy carbon allowances from the market could hit €3 billion this year. Steel producers would have to pay to buy shortfalls in their allowances from the open market.

Pressure builds

The EU was due to unveil proposals for a carbon adjustment border tax in June. However, its implementation is not likely before 2023, at the earliest. Now, pressure is building to move up implementation to later this year.

The proposed border tax mechanism is initially set to target limited goods. Those include steel, cement, power generation and some chemicals. The mechanism will target goods imported from non-EU countries that do not have equivalent carbon pricing or emissions targets.

Ultimately, though, it could be extended to any carbon-intensive product. That includes other metals, like aluminum, zinc and ferro alloys (like FeMn and FeCr).

Distorted market

Letting the market decide the cost of polluting has merit. Price discovery in that way is likely to be more efficient than government-mandated prices.

However, the problem is the EU controls the provision of the allowances, making it a rigged market. It’s not an intentionally rigged market but one distorted by decisions made in Brussels on the size and allocation of allowances.

Steel suppliers selling into Europe and buyers from outside the bloc of components containing a significant steel content will therefore see the EU become less attractive in the run-up to the middle of the decade.

That is, unless or until similar carbon pricing policies are adopted elsewhere.

There is often a price to pay for being in the vanguard.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Before the weekend, let’s take a look at the week that was and the metals storylines here on MetalMiner, including an aluminum smelter labor deal, copper prices, environmental policy developments and more:

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Week of April 19-23 (aluminum labor deal, copper prices and more)

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This morning in metals news: a $2 million project seeks to develop ways to more cost-effectively produce lightweight automotive sheet metals; meanwhile, U.S. Steel joined the global nonprofit ResponsibleSteel™; and the copper price has picked back up over the last week.

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‘Clean Sheet Project’ aims to improve production of recyclable automotive sheet metals

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A $2 million project at the University of Michigan dubbed the Clean Sheet Project is looking to improve processes behind the production of recyclable, lightweight automotive sheet metals.

According to a release from the Michigan Engineer News Center, the project is a “key effort as major car manufacturers look to lightweight light-duty trucks and shift away from internal combustion engines toward electric cars which require more lightweight components to increase vehicle range.”

The research will initially focus on steel and aluminum, the report states, but could eventually expand to other materials.

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Earth Day concept

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Today is Earth Day, whatever that means for you. For once, though, the politicians are not adding to greenhouse gas emissions by flying around the world first class or, worse, in private jets to talk shop.

Rather, they are gathering virtually.

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Earth Day news

According to The New York Times, they will hear President Joe Biden commit the United States to cutting CO2 emissions nearly in half by the end of the decade.

It’s a target that would require Americans to transform the way they drive, heat their homes and manufacture goods, the post reports.

Although the time frame is longer, the new goal nearly doubles the pledge that the Obama administration made to cut emissions by 26-28% below 2005 levels by 2025. It also builds on the UK’s ambitious plans announced earlier this week.

Nathan Hultman, director of the Center for Global Sustainability at the University of Maryland, described the 50% goal as attainable. However, it will require “pretty significant action across all sectors of the American economy.”

Autos and energy generation are tipped as two of the major industries to feel the impact of the new target, if supported by new legislation.

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Unfortunately for all those who passionately support efforts by people like David Attenborough to force the world to confront climate change – regardless of where you stand on the issue on what is admittedly quite a wide platform – recent reports suggest we are now in the land of political signaling in environmental policy rather than earnest endeavor.

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UK makes major environmental policy shift (on paper, at least)

environmental policy

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As The Spectator reported yesterday, British Prime Minister Boris Johnson and Business Secretary Kwasi Kwarteng announced that the government would enshrine in law the target of cutting the UK’s carbon emissions by 78% by 2035.

That’s 15 years earlier than originally planned.

Why today make Britain a world leader in tackling climate change? Largely, because it is a nice commitment to be announcing in the run-up to the COP26 climate summit in Glasgow this year.

Ardent supporters of environmental issues, of course, welcome the news. However, it would require a lot of big lifestyle changes in terms of diet, transport and housing for the general public. Furthermore, left to government, it will cost both the state and individuals a lot of money.

Environmental policy in the US

Across the Atlantic, the Biden administration is in danger of going down the same road.

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electric vehicle charging

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This morning in metals news: General Motors debuted its 2023 Cadillac LYRIQ electric vehicle; the House Judiciary Committee advanced a bill that seeks to open OPEC up to lawsuits for price collusion; and Texas is set to add a significant amount of utility-scale solar power.

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GM unveils Cadillac LYRIQ EV

General Motors previously announced plans to offer 30 new electric vehicle models by 2025.

This week, the automaker debuted its 2023 Cadillac LYRIQ electric vehicle.

“At launch, LYRIQ will be available with premier technologies and stirring performance capabilities enabled by the vehicle’s dedicated electric architecture,” GM said.

The vehciel features a 12-module, 100 kilowatt-hour battery pack and a rear-wheel-drive Ultium Platform deliver a Cadillac estimated 340 horsepower and 440 Nm of torque — and a Cadillac-estimated over 300 miles of range with a full charge.”

House panel takes aim at OPEC

The House Judiciary Committee this week passed a bill that seeks to open oil-producing alliance OPEC up to lawsuits for price collusion.

“The Organization of Petroleum Exporting Countries, or OPEC, is an international cartel whose members deliberately collude to limit crude oil production as a means of fixing prices, unfairly driving up the price of crude oil to satisfy the greed of oil producers,” US Rep. Jerrold Nadler (D-NY) said in a release. “Such behavior, if done by private companies, would be illegal per se under U.S. antitrust law.”

As a result, the committee moved to advance the No Oil Producing and Exporting Cartels (NOPEC) Act of 2021. The committee passed it via voice vote Tuesday, Reuters reported.

The bill seeks to empower the Justice Department to pursue antitrust enforcement actions against OPEC members.

Texas to add utility-scale solar power

A significant amount of solar power is going to come online over the next two years in Texas, the Energy Information Administration said.

Texas’ added 2.5 GW of solar capacity last year. That marked the beginning of a “solar boom” in the state, the EIA said.

The EIA forecast the state will add 4.6 GW of solar capacity in 2021. Furthermore, it forecast an additional 5.4 GW in 2022. The additions would bring total installed solar capacity in Texas to 14.9 GW, the EIA reported.

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Social network Facebook recently announced an agreement with a Mumbai-based clean energy firm CleanMax for a 32 MW wind power project in India’s southern province of Karnataka.

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Facebook to purchase energy from Indian wind power project

wind power and solar power installations generation

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CleanMax will own and manage the plant. Meanwhile, Facebook will purchase the power produced.

Indian financial paper Mint quoted Urvi Parekh, head of renewable energy at Facebook, as saying the partnership will enable new solar and wind power to be generated in the near future. As such, it would contribute to the decarbonization of the Indian electrical grid.

Incidentally, nearly 50% of the project capacity has already been commissioned and is generating power.

This is not the first such project in Asia involving Facebook.

In October 2020, the social media giant signed a Power Purchase Agreement with a Singaporean energy company, Sunseap Group. The deal would see it utilize solar panels on the rooftops of 1,200 public housing blocks and 49 government buildings.

In turn, Facebook will receive Renewable Energy Credits (REC) produced by the project once it’s done next year. Facebook will buy up to 100 MW of power at a previously agreed upon price.

Last week, Facebook CEO Mark Zuckerberg announced his company’s global operations are now wholly supported by renewable energy and that Facebook had reached net-zero emissions. Furthermore, Facebook said it had reduced its greenhouse gas emissions by 94% over the last three years.

Facebook’s journey started back in 2011 with a wind project in Iowa.

Big Tech going green

Facebook and other data-center-reliant tech companies use up as much as 1% of the world’s total energy, according to the International Energy Agency.

It’s not just Facebook. Big Tech companies like Apple, Microsoft and Google have set net-zero emissions targets for their global operations.

Last July, Apple unveiled a plan to become carbon neutral for its supply chain and products by 2030.

That means even Apple’s manufacturers in India will be moving to 100% renewable energy. In addition, the company’s partners have 8 GW of planned clean energy set to come online by 2030.

Last week, Apple also announced that its US $4.7 billion green bond spend helped generate 1.2 gigawatts of renewable energy. In February 2016 the company issued its first US $1.5 billion Green Bond. It followed it up with another round of $1 billion in June 2017.

In November 2019, the company issued its third set of Green Bonds and its first in Europe. The bonds came in at 1 billion euros each (totaling nearly US $2.2 billion). In fact, Apple’s global corporate operations are already carbon neutral.

“Apple is dedicated to protecting the planet we all share with solutions that are supporting the communities where we work,” said Lisa Jackson, Apple’s vice president of environment, policy and social initiatives. “We all have a responsibility to do everything we can to fight against the impacts of climate change, and our $4.7 billion investment of the proceeds from our Green Bond sales is an important driver in our efforts. Ultimately, clean power is good business.”

While turning green themselves, these companies are also hastening the transformation of entire electricity systems in many parts of the world.

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This morning in metals news: Century Aluminum and the United Steelworkers union reached a five-year labor agreement at the Hawesville smelter; meanwhile, Ford reported its Q1 sales results in Europe; and, lastly, miner Anglo American said it will now source 100% renewable energy at its South American operations.

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Century Aluminum reaches labor deal with USW for Hawesville smelter

Aluminum production

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Century Aluminum announced it had reached an agreement with the United Steelworkers union at its Hawesville smelter.

The company said it had reached a five-year deal with United Steelworkers Local 9423.

The new contract will run through April 1, 2026. Furthermore, the company said it will add about 60 news jobs at the smelter.

“These productive negotiations between the two parties is a great example of how we work together with the USW to provide the best opportunities for our employees and to put Hawesville in a position to succeed in a highly competitive aluminum market,” said Gunnar Gudlaugsson, Century’s executive vice president of global operations, and Dayan Neves, Hawesville’s plant manager.

Ford of Europe releases Q1 sales figures

Ford of Europe reported its Q1 sales rose by 7.7% from Q1 2020. Furthermore, March sales surged by 70.6% from March 2020.

The UK, Germany and Italy took the top three spots in Q1 in terms of Ford sales.

Anglo American touts renewable South American operations

Following through on previous commitments, Anglo American said it has made the transition to 100% renewable energy at its South American operations.

“Having already secured renewable energy to meet all its power requirements for its iron ore and nickel operations in Brazil from 2022, and for its copper operations in Chile from 2021, Anglo American has now signed an agreement with Engie Energía Perú to provide 100% renewable energy for the Quellaveco copper operation in Peru that is expected to begin production in 2022,” the miner said in a release.

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Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including coverage of steel prices, US electricity consumption and much more:

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Week of April 12-16 (steel prices, electricity consumption and more)

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