Climate as a national security threat, dethroning Tesla & the secret to net-zero emissions

The newsletter for people "woke" on carbon and climate

(source: Mike Berners-Lee)

Issue No. 54

Welcome to the latest issue of Carbon Creed - a curated newsletter for people “woke” on carbon and climate. I hope all of you had a restful and safe holiday weekend, despite the national upsurge in covid-19 infections.

My son tested positive for covid last week.

He’s 18 years old, and usually invincible, but this virus has a way of humbling folks. His symptoms were a sore throat and headache, but both have pretty much subsided.

Meanwhile, our family has been under a self-imposed quarantine for the past 8 days. While we have all since tested negative, it does make the whole pandemic experience more acute when someone in your household tests positive. The CNN updates suddenly have relevance. We are very fortunate and thankful that no one has become seriously ill. In fact, with the promise of a vaccine imminent, there’s reason to be hopeful that the worst may soon be behind us.

Unfortunately, climate change cannot be cured with a vaccine. It’s going to take years of commitment and investment by government and industry to decarbonize the economy. Yet, there’s reason to be hopeful, if we can muster the will and courage to make the necessary changes.

If you have an opinion on any other topic covered in this newsletter, please feel free to send me an email at mcleodwl@carboncreed.com. 

Thank you for your viewpoint and the value of your time.

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NOW, LET’S GO DEEP!


GOVERNMENT

Does framing climate as a national security threat downplay the human cost?

John Kerry’s appointment this week as the U.S. climate envoy was also the first time climate was given an official spot on the National Security Council.

The move was symbolic, to some extent, expressing a desire by the Biden administration to treat the “climate crisis as the urgent national security threat that it is,” as Kerry tweeted. Progressive environmentalists are urging President-elect Joe Biden to go even further and declare the issue a national emergency – the same tactic outgoing President Donald Trump used to fund part of his border wall.

Climate activists eager for a stronger stance toward global warming should be careful about how they adopt the language and thinking of national security wonks.

A few years ago, addressing climate change was largely focused on how we produce our energy. It’s now widely acknowledged that the changing climate, and our efforts to arrest it, will affect most facets of human life. It's seeped into all aspects of technocratic policymaking, from cutting transport emissions to helping fossil fuel workers find new careers.

There’s also been a stark recognition within climate circles – helped by the Black Lives Matter movement and First Nations organizers – that climate justice and race justice are inextricably linked. Pollution, extreme heat and sea-level rise often affect minority, indigenous, immigrant and poorer communities first.

Climate change has long been described a “threat multiplier.” The phase was used in 2007 by retired high-ranking U.S. officials in a report for CNA, a federally funded security think tank, to connect climate to national security – possibly the first time the two issues were linked. The first UN Security Council session exploring the connection was held that same year.

Kerry’s own World War Zero emissions-reduction initiative, launched in 2019, is heavy with militaristic imagery. It exhorts supporters to “enlist, engage and mobilize” in the fight against climate change. The idea was to bring people across the political spectrum together under a very broad umbrella of concern about climate change.

It’s inevitable, and necessary, that the security community considers climate change when making decisions. After all, their job is to think long term and strategically about issues like shipping routes and resource scarcity. It’s not clear if the reverse is also true: Is framing climate change as a security issue a useful way to stop the planet from warming?

That way of thinking carries the risk of brushing aside the human casualties of climate change. As environments get unbearably harsher, people will try to move both domestically and across borders to escape heat, drought, rising sea-levels and their resulting conflicts.

It’s happening at the same time that attitudes of many wealthy countries towards asylum seekers have hardened. In a 2019 paper, Kimberley Anh Thomas and Benjamin P. Warner chronicle multiple examples where people who are suffering from some of the worst effects of climate change are perversely cast as threats because of their vulnerability.

Kerry’s own comments about his appointment emphasized the importance of multilateralism – “we all rise together or we all fall together” – and he has proven to be an effective climate diplomat, helping ensure the passage of the Paris Agreement. Many experts who work at the intersection of climate and security stress international cooperation in cutting emissions. They caution against the dangers of geo-engineering, which they worry might be used to change weather patterns to benefit some countries at the expense of others, or to shirk responsibilities to reduce greenhouse gases.

In their book “The Secure and the Dispossessed”, Ben Hayes and Nick Buxton ask, “who are the winners and losers of the new ‘climate security’ strategies – or, put another way, what is being secured, for whom, from whom, and at what cost?”

The bipartisan appeal of viewing climate change as a security challenge shouldn’t distract from Hayes and Buxton’s question, or we risk building a future that’s militarized as much as it is decarbonized.

[This post was adapted from the original written by Kate Mackenzie, author of the Stranded Assets column for Bloomberg Green.]


CLEAN TECH

11 electric vehicle companies trying to dethrone Tesla

(source: WSJ)

The race is on to become the next Tesla Inc. Tens of billions are riding on the outcome. 

Investors from Wall Street to the Motor City are betting that a field of electric-car startups can emulate the rise of Elon Musk, who sits at the wheel of a company that is on track to sell 500,000 battery-powered vehicles this year and turn its first-ever annual profit. His Tesla—scheduled to join the S&P 500 next month—is now more valuable than Toyota, Volkswagen, General Motors and Ford combined.

It won’t be a smooth journey either for investors—which include the world’s largest money manager and the second-largest U.S. private- equity firm—or these industry upstarts, which face numerous obstacles. Most haven’t yet successfully built or sold a car. Those that have, struggled to do so profitably. Some are still hiring a workforce or fighting accusations of fraud. One recently posted a loss of $1.6 billion.

Their fate hinges on a number of unanswered questions. Are consumers ready to buy a pricey electric vehicle other than a Tesla? Or is it a safer bet to sell workaday vans and trucks to companies? Is it smarter to build your own cars in your own factory? Or should you rely on outside contractors to produce them? Does it make more sense to focus on China, home to the world’s largest electric-car market, or stay closer to home? How much pressure will they face from old giants like GM, which said this week it would spend $27 billion through 2025 on the development of electric and driverless vehicles?

At stake is the future of transportation—and who gets to define it. There will be winners. And losers. There will be fortunes won. And lost. Let’s check out a few of the contenders:

(image: Rivian Automotive)

Rivian Automotive LLC, Irvine, Calif.

YEAR FOUNDED: 2009
OWNERSHIP: private
CAPITAL RAISED: $5.35 billion in five funding rounds in the past two years
VALUATION: unknown 
NOTABLE BACKERS: Ford, Amazon.com Inc., BlackRock Inc.

Lucid Motors Inc., Newark, Calif.

YEAR FOUNDED: 2007
OWNERSHIP: Private
CAPITAL RAISED: more than $1 billion 
VALUATION: Unknown
NOTABLE BACKERS: Public Investment Fund of Saudi Arabia

Lordstown Motors Corp. , Lordstown, Ohio

YEAR FOUNDED: 2019
OWNERSHIP: public
MARKET VALUATION: $4.2 billion (as of November 19)
NOTABLE BACKERS: Workhorse Group Inc., Fidelity Investments, GM

(image: Nikola Corp)

Nikola Corp. , Phoenix

YEAR FOUNDED: 2015
OWNERSHIP:
 public
MARKET VALUATION: $10.1 billion (as of November 19)
NOTABLE BACKERS: German auto supplier Robert Bosch GmbH, heavy machinery giant CNH Industrial NV, hedge-fund investor Jeffrey Ubben

Fisker Inc., Los Angeles

YEAR FOUNDED: 2016
OWNERSHIP: public
MARKET VALUATION: $4.7 billion (as of November 19)
NOTABLE BACKERS:Apollo Global Management Inc., Magna International Inc., Louis Bacon

Canoo Inc., Torrance, Calif.

YEAR FOUNDED: 2018
OWNERSHIP: private but expected to go public through a reverse merger known as a SPAC by the end of the year
VALUATION: $2.4 billion (valuation estimate at the time reverse merger was announced)
NOTABLE BACKERS: Daniel Hennessy, BlackRock, AFV Partners

(image: Nio, Inc)

NIO, Inc., Shanghai

YEAR FOUNDED: 2014
OWNERSHIP: Public
MARKET VALUATION: $66 billion (as of November 19)
NOTABLE BACKERS: Chinese mobile gaming behemoth Tencent Holdings Ltd. , Scottish hedge fund (and major Tesla investor) Baillie Gifford & Co., Chinese state investors

Li Auto, Inc., Beijing

YEAR FOUNDED: 2015
OWNERSHIP: public
MARKET VALUATION: $30.7 billion (as of November 19)
NOTABLE BACKERS: Chinese e-commerce heavyweight Meituan Dianping, TikTok creator ByteDance Ltd., BlackRock

XPeng, Inc., Guangzhou, China

YEAR FOUNDED: 2015
OWNERSHIP: public
MARKET VALUATION: $35.3 billion (as of November 19)
MAJOR BACKERS: Chinese e-commerce giant Alibaba Group HoldingLtd. , Chinese phone company Xiaomi Corp. , Qatar Investment Authority

(image: Faraday & Future, Inc)

Faraday & Future, Inc., Los Angeles 

YEAR FOUNDED: 2014
OWNERSHIP: private
VALUATION: unknown
MAJOR BACKERS: Birch Lake Holdings LP, ATW Partners

(image: Arrival, Ltd)

Arrival Ltd., London

YEAR FOUNDED: 2015
OWNERSHIP: private but expected to go public through a reverse merger known as a SPAC by end of the year
VALUATION: $5.4 billion (valuation estimate at the time reverse merger was announced)
MAJOR BACKERS: Hyundai Motor Co., Kia Motors Corp. , BlackRock, United Parcel Service Inc. 

[This post was adapted from the original written by Ben Foldy in the Wall Street Journal].


CORPORATE CITIZENS

(source: Edie)

Net-Zero pledges won’t work just from the top-down

Company after company has announced plans to cut their greenhouse gas emissions to net-zero by 2050. Occidental Petroleum Corp., Toronto-Dominion Bank, Eskom Holdings SOC Ltd. and Equinor ASA are among those that have made such a pledge in just the past month.

The problem is that, pledge or not, most companies won’t reach that target unless there is total commitment from all levels of management, not just the top.

Ninety-three of the 161 companies on the Climate Action 100+ list of the world’s most significant emitters have proclaimed that climate-change performance is a factor in setting their executive compensation, based on a BloombergNEF analysis of Transition Pathways Initiative data. However, that also means 42% of them have not.

Tying a CEO’s income to such goals can be quite the incentive to go green. But the majority of the companies, 126 of the 161, have simply nominated a board member to oversee climate-change policy. It turns out that to be successful, an aspiring net-zero company needs more.

“Net-zero target typically needs to be overseen at the executive level,” said Kyle Harrison, a New York-based analyst at BNEF. But “setting a net-zero target requires input from many departments, including operations, investor relations, compliance and accounting.”

Companies are increasingly finding that net-zero pronouncements often require fundamental adjustments in the ways that they operate, which is not something easily done from the top-down only.

In many cases, industries have to almost wholly remake themselves. Utilities are exploring carbon-capture technologies to reduce emissions from their fossil-generation power plants, while technology companies are creating digital products to help their customers decarbonize, in turn reducing their own hard-to-abate Scope 3 emissions. This will lead to cross-sector cooperation and decarbonization opportunities.

Mercedes-Benz, for example, can sell its electric vehicles to help companies like Unilever achieve their 100% electric-fleet goals, while Microsoft Corp. can offer its software to customers that can then use it to develop supply chains that are less carbon-intensive.

The companies also will need a supportive regulatory environment to meet their targets. In the past month, countries including China, Japan, South Korea and Canada have put forward legislation to reach net-zero targets.

[This post was adapted from the original written by Tim Quinson a Senior Executive Editor with Bloomberg.]


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