MUNI FSS Contemporary Trends Martin Jirusek, PhD. Chinese Activities in Northern America: A source of concern? - Increase of Chinese investments in CAN in previous decade - Chinese investments worth of USD 15 bn. in 2010 in Alberta alone - CNOOC Ltd. takeover of Nexen (2/2013 - USD 15,1 bn.) and OptiCanada (11/2011 - USD 2,1 bn.) - Sinopec takeover of ConocoPhillips' shares in Syncrude (prominent company extracting oil from oil sands) - USD 4,6 bn. - 13 investment projects worth more than USD 1 bn. since 2007 in the US and CAN (1/4 in CAN) - in the US - joint-ventures, in CAN - takeovers of whole companies MUNI FSS Selected Chinese Investments in the US Company Target Value (billion USD) Ownership % CNOOC Unocal 18,5 100 CNOOC Chesapeake Energy (2010) 2 33,33 CNOOC Chesapeake Energy (2011) 1,32 33,33 Sinopec Devon Energy 2,4 33,33 MUNI Chinese Activities in Northern America: A source of concern? - Chinese investments do not stand out among other investments common in the industry - big lOCs invest around USD 20 bn. annually into exploration and production - Not an issue until an exclusive relation with the source (supplier) is set - Oil extracted through Chinese NOCs still flows mainly to the US market - Chinese NOCs more prone to ship oil to the world market for greater revenues - Most important receivers of Chinese FDI in oil and gas sectors are in Central Asia and Africa - Still, Chinese activities are being closely observed - Chinese (CNOOC) bid to take over the UNOCAL comp, was rejected (2005) - the Nexen takeover (2013) was reviewed by US authorities 4 MUNI FSS The UNOCAL case (2005) - CNOOC offered USD 18,5 bn. for the UNOCAL comp.; Chevron offered USD16,5 bn. - UNOCAL as an important possessor of oilfields in N America and Asia - The biggest case of FDI in the US history until then - First Chinese bid to take over big US OC - Public and political resistance (republicans) - National security issue? - CNOOC stressed its purely economic interest MUNI FSS The UNOCAL case (2005) - Resistance backed by Republicans „...to protect American national security by ensuring that vital U.S. energy assets are never sold to the Chinese government." (Joe Barton, TX rep.) - Opponents used the Exon - Florio amendment (1988) enabling administration to review and rejects foreign investments threatening national security - Framed as a threat to national security with regard to shrinking world oil reserves and rising consumers The UNOCAL case (2005) - UNOCAL was later taken over by Chevron for less than offered CNOOC - Milestone in CHN - US mutual relationships - competitors in terms of securing energy supplies - New international energy order? - Energy rich vs. energy deficient states? - Pretext for Trump's trade war with China? 7 MUNI FSS Major Chinese energy investments in Canada since 2009 Investment target Value in USD Investor Teck Resources 1,5 bn. China Investment Corp. AOSC 1,9 bn. PetroChina Syncrude 4,65 bn. Sinopec Penn West Energy 1,25 bn. China Investment Corp. EnCana PetroChina Opti 2,1 bn. CNOOC Nexen Regional Greenhouse Gas Initiative Climate Policy - Current Trends Changes to the climate policy under Donlad Trump Apparent reverse of the trend set by previous administration(s) 'Trickle-down' effect on governmental bodies (incl. EPA) -support for greater use and extraction of hydrovcarbons (e.g. Keystone XL) -Obama's Clean Power Plan (- 32% carbon emissions from PPs by 2030) repealed - Affordable Clean Energy rule much weaker -announced Paris Agreement withdrawal -Controversial picks for DoE and EPA (Rick Perry, Scott Pruitt, Andrew Wheeler) Decrease of carbon emissions thanks to changes in power generation (gas+RES vs. coal) - market beats the government's policies (incl. the 'revival' of coal) States and cities have been spearheading the policy-related activities; no comprehensive federal policy State-level GHG reduction goals and carbon markets -100+ cities and counties commited to 100% clean energy Current RGGI States In Process of Joining the RGGI Market MUNI FSS Climate Policy - Current Trends - 2 cap-and-trade systems - Regional greenhouse Gas Initiative (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont) - electricity generation - Western Climate Initiative (California, Quebec, Nova Scotia) - all fossil fuels-generated emissions - +1 (de facto) defunct - Midwestern Regional Greenhouse Gas Reduction Accord (Minnesota, Wisconsin, Illinois, Iowa, Michigan, Kansas, Manitoba + observers) - However, C02 reductions mainly in efficiency and clean policies in power generation, not the C&T mechanism or other polluting sectors - Effect of coal-gas swap - Both systems need to be stricter (excess capacity of allowances) - Regional initiatives (transportation - TCI - New England and neighbours, etc.) MUNI Climate Policy - Current Trends - Two cape and trade systems - Regional Greenhouse Gas Initiative - Western Climate Initiative U.S. State Carbon Pricing Policies • RGGI CAP AND TRADE • RGGI CAP AND TRADE (PENDING) • BASELINE AND CREDIT • CAP AND TRADE I UNITED STATES OF AMERICA 11 - + C ART» Climate Policy - Current Trends Great polarization on the issue of (man-made) climate changes Party-dependent attitudes - (Reps. Vs. Dems.) Trump's administration has repealed a lot of previous policies withdrawal from the Paris agreement Clean Power Plan - critized by Trump's administration for harming the industry - repealed and replaced by ACE softened vehicle efficiency standards (light, medium and also heavy-duty) relaxed restrictions on methane (O&G producers to regulate themselves!) Trump did so using executive orders - binding for federal bodies Many states decided to pursue even stricter goals that had been prescribed even before - incl e.g. Pipelines Ironically, thanks to the administrative's reserved attitude towards the issue, it became much more debated 12 MUNI FSS Climate Policy - Current Trends Climate policies are now very much state-based rather than government-induced, states lead the way Climate Alliance - bipartisan (!) group of the most progressive states commited to GHG reduction, following the Paris Agreement regardles the federal government's stance California, Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Puerto Rico, Rhode Island, Vermont, Virginia, Washington Massive GHG reduction targets 75%+ compared to 1990 by 2045-2050 (or even net zero), up to 100 % RPS by 2045 Economy-wise would be 3rd country in the world 24 states (3/4 of the population) still subscribe to the Paris climate goals Regional cap and trade systems Climate policy □ Current changes sometimes contradictory to environmentally favourable approach (crisis of NPPs, cheap gas, relatively cheap coal, ...) □ BUT... increase of deconcentrated RES □ Climate policy is more efficient on state level - „Petri dish" of new policies □ Voluntary initiatives (e.g. Energy Star) □ Started as a federal light-saving policy □ Emerged into a federal certification program of efficiency measures □ ICT, home appliances, buildings, industry □ Applied internationally (CAN, JPN, SUI, TAI); EU (expired 2018) □ Certification for products subscribing to Energy Star measures, intended also for US market 14 □ Cut of federal funding? ENERGY STAR Energy efficiency resource standards by state arranged by approximate annual electric savings target (2014 - 2020) Energy Efficiency Often overlooked 'source' of electricity Potentially, among the largest energy sources/pools - Growing focus on 'weatherization' (insulation, shading, etc.) - E.g. Pacific NW - growing population X declining electricity consumption since 2011 (thanks to efficiency and savings) - said to be 2nd biggest source of electricity in the region 1.5-1.99 1-1.49 No EERS EERS/RES - Standards for meeting energy needs by specific share of efficiency measures 15 MUNI FSS The Green New Deal 16 Dems.-sponsored policy comprehensive proposal package addressing the issue of climate change and sustainability No full-fledged act, no concrete policy, rather a set of ambitious goals Net-zero GHG emission scheme Infrastructural investments RES Smart grids Building upgrades Curbing agricultural emissions Highly divisive issue (GOP vs. Dems) - criticized fore being ' socialist', expensive, unrealistic and wasteful, Resolution rejected in 3/2019 Remains as a policy driver for like-minded politicians and a 'punching bag' for opponents MUNI FSS Total U.S. Greenhouse Gas Emissions by Economic Sector in 2017 Agriculture Industry 22% Electricity 28% Alternative fuels - Seemingly high number - US as the leading world producer of ethanol - Local and state projects to support electromobility (California) - Electromobility and higher efficiency in transportation (issue of single-occupancy vehicles -almost Vi of all vehicles in big cities) 22,109 Alternative Fueling Stations in the United States - City emissions - mainly transportation-related - Target of local policies (e.g. WA aims to exchange 50% of state fleet for EVs) 18 Alternative fuels Light-Duty AFV, HEV, and Diesel Model Offerings, by Fuel Type T3 V CD ■a o E 3 250 200 150 100 50 Hal :■■ ■ it llläilliš- 1991 Last updated. January 2019 Printed on: August 1 1995 1999 ""Nil iHll i s =: b ■ 11111! i II 2003 2007 2011 2015 E85 CNG (Dedicated and Bi-Fuel) Diesel Electric Vehicle* Hybrid Propane (Dedicated and Bi-Fuel) Hydrogen Methanol (M85) Alternative fuels - Alternative fuels/sources of mobility still rather marginal - FlexFuel as the most viable solution - Alternative fuels keep failing to offset rise of fuel sells globally - Biodiesel has lower EROEI than gasoline - Brasil as the top producer/consumer of biofuels - aims at exports to US - Clearly no will to repeal high import taxes on biofuels - that would be a support for foreign farmers at the expense of domestic production - politically unacceptable 20 MUNI FSS Electromobility • Regression of policies on the federal level under the Trump's administration • Federal incentives for EVs and PHEVs are being repealed • Car efficiency measures are being softened even beyond what manufacturers demanded • States lead the way in implementing incentives for alternative fuels, efficiency and saving measures • http://www.ncsl.org/research/enerqy/state-electric-vehicle-incentives-state-chart.aspx • VW settlement money partly invested into EV infrastructure • Environmental Mitigation Trust • Vehicle buyback 21 Climate Opinion Maps of US - Is global warming actually happening? - Is global warming caused by human activities? - Should C02 be regulated? - https://climatecommunication.yale.edu/visualizations-data/ycom-us-2018/?est=governor&type=value&geo=state 22 MUNI FSS GOVERNMENT ACTION TOWARD GLOBAL WARMING I GREAT DEAL/A LOT MODERATE AMOUNT ■ UTTLE/NOTHING U.S GOVERNMENT SHOULD DO- LLS GOVERNMENT IS DOING... SOURCE StanforcfABC News^FF poll ^NEWS PROPOSALS TO REDUCE GLOBAL WARMING | FAVOR ■ OPPOSE o%- RAISE TAXES ON ELECTRICITY RAISE TAXES ON GASOLINE TAX BREAKS TO TAX BREAKS FOR TAX BREAKS FOR BUILD NUCLEAR SMOKESTACK RENEWABLE ENERGY PLANTS SCRUBBERS SOURCE: StanforoVABC NemslRFF poll 23 GLOBAL WARMING AND THE UNITED STATES U.S. GOVERNMENT SHOULD DO A GLOBAL WARMING ISA "VERY" SERIOUS PROBLEM GREAT DEAL/A LOT FOR U.S. ALL 61% 51% DEMOCRATS 84 78 REPUBLICANS 32 25 INDEPENDENTS 63 48 LIBERALS 85 77 MODERATES 63 50 CONSERVATIVES 42 36 VERY LIBERAL 88 77 VERY CONSERVATIVE 33 27 AGE 18-39 70 61 50+ 54 44 COLLEGE GRADUATES 65 56 POST-GRADUATES 71 66 NON-COLLEGE GRADUATES 59 50 WHITES 53 46 NON WHITES 75 62 BLACKS 81 71 HISPANICS 75 60 EVANGELICAL WHITE PROTESTANTS 40 32 NON-EVANGELICAL WHITE PROTESTANTS 53 46 WHITE CATHOLICS 59 46 NO RELIGION 72 66 SOURCE: Stanford/ABC News/RFF poll 5 NEWS TRUMP AND GLOBAL WARMING 0%, TRUMPS HANDLING OF GLOBAL WARMING TRUMP'S DECISION TO WITHDRAW FROM THE PARIS CLIMATE ACCORD APPROVE DISAPPROVE SOURCE Stanford/ABC NewyRFF poll OPPOSE ^NEWS party-based divisions Liberal/conservative Non-significant corelation to education Slight race-based correlation 59% think environment should be prioritised over energy production MUNI FSS Different to Europe? Not so Much... Latin America, Africa More Concerned about Climate Change Compared with Other Regions Regional medians C 'Uniate change is a very serious problem Climate change is harming people noiv Very concerned that climate change will harm me personally 24 54% GLOBAL MEDIAN li 51% GLOBAL MEDIAN 40% GLOBAL MEDIAN Note: Russia and Ukraine not included in Europe median. Asia-Pacific median includes China. Source: Spring 2015 Global Attitudes survey. Q32. Q41 & Q42. PEW RESEARCH CENTER MUNI FSS Most Democrats with more science knowledge believe climate change is due to human activity, but there is no difference by science knowledge among GOP % of Republicans or Democrats who say the Earth is warming due to human activity Republican Among those who have_science knowledge Democrat Among those who have_science knowledge Low Medium High Low Medium High Note: Beliefs about climate change include those who "lean" toward each response. Those who did not give an answer not shown. Republicans and Democrats include independents and other non-partisans who "lean" toward the parties. Respondents who do not lean to a political party not shown. Source: Survey conducted May 10-June 6,2016. "The Politics of Climate" PEW RESEARCH CENTER U.S. Should Place "More Emphasis " on Each Source of Domestic Energy Production, by Party ID Do you think that as a country, the United States should put more emphasis, Less emphasis or about the same emphasis as it does now on producing domestic energy from each of tire following sources - ? Republicans Independents Democrats % % % Solar power 70 «3 «2 Wind °3 69 81 Natural gas 66 52 49 Oil 60 33 28 Nuclear power 47 34 24 Coal 40 a- 22 March 5-8, 20L;i GALLUP MUNI FSS Partisan Divide on Climate Change in Major Economies Climate Opinion Maps of US - Partisanship - not a US exception Concern about Personal Toll of Climate Change Greatest in Latin America Very concerned that global elinuite ehanye will harm me personally LESS CONCERNED MORE CONCERNED 20 30 40 50 60 70 80» _: : ' l Source: Spring 2015 Global Attitudes survey. Q42. PEW RESEARCH CENTER Australia Climate change will harm me personally Rich countries should do more LIBERAL 1 LABOR GREENS —til!) 72% U67 I Canada ...v i Climate change will harm me personally Rich countries should do more CONSERVATIVE LIBERAL I 45 { 40 _ 49 Germany Climate change will harm me personally Rich countries should do more CDU/CSU SPD GREENS 5iiarWj76 53 178 UK Climate change will harm me personally Rich countries should do more CONSERVATIVE LABOUR 39«HT;49 I 39 54 Note: Dot color s color used by each party: it does not necessarily indicate ideological similarity. Source: Spring 2015 Global Attitudes survey. Q42 & Q44. PEW RESEARCH CENTER Unconventional sources of oil in North America - oil sands (Canada) Canada proved Reserves (1330-2013) billion barrels 200 175 150 125 100 75 SO 25 251^G" 1'M 5 proved Reaefvea 2010 1955 1990 2000 2005 CiiV Saura: U.S. Energy IntarrnScn AdmMBlrtfcart Alberta's crude oil (left) feels and flows like asphalt or molasses. (Courtesy of: Petrobank Resources). Unconventional sources of oil in North America sands (Canada) - 3 main areas (>140 000 km2, 2x Czech Republic): Athabasca (open cast) Cold lake (partly in conventional sources) Peace River (in-situ techniques) - Canada - 3rd biggest proven reserves worldwide >170 BBL Economically recoverable up to 170 Gbbl Ultimately recoverable up to 315 Gbbl Total volume (resources) up to 1,8 trillion bbl (est.) - Cumulative oil sands production to date 9,6 Gbbl - The biggest oil sand resources (along with Venezuela) - The only significant area where oil sands are currently being developed - Around 2/3 of total world reserves are in unconventional sources, mostly sands (heavy oil) Unconventional sources of oil in North America - oil sands (Canada) - Oil sands came online in early 2000s - thanks to the economy of scale and technical advancements - Canadian sources were in decline since 1970s with view of becoming net importer after 2020 - Unconventionals >90% of current Canadian oil reserves - Environmental issues of in-situ techniques, open cast mining, infrastructure, energy intensity, EROEI - http://svs.qsfc.nasa.gov/vis/a010000/a010800/a010838/athabasca-540-MASTER hiqh.mp4 Unconventional sources of oil in North America - oil sands (Canada) - Influx of US (light) crude to CAN refineries - from 24 000 bbd to 100 000 bbd - Decreasing demand for CAN heavy crude, lacking infrastructure (Keystone XL) - Asian markets - issue of infrastructure - Keystone XL: - https://www.youtube.com/watch?v=mflq8whDQDU - http://www.voutube.com/watch?v=qrROqJpNJH0&feature=voutu.be Kexstone XL - Seemingly dead after cancellation by the Obama administration Revived by Trump one of the key points of Trump's energy policy plan ('America First Energy Plan') - Still contested on the level of state regulators - Questionable economy - Investors rather reluctant Refineries at the gulf coast have been switching to lighter crudes anyway as a response to the demand coming from US Keystone XL is not the only game in town - there are other ways how to get the oil to the refineries