Energy executives and Biden administration officials in Houston had a simple message for Europe and other regions complaining that U.S. climate spending will deprive them of investment: Stop complaining and get the cash to enact your measures.
At a standing-room-only luncheon at the CERAWeek by S&P Global conference, Energy Secretary Jennifer Granholm boasted that the recently enacted infrastructure law and the Inflation Reduction Act have made the United States ” irresistible” for clean energy investments. More than $360 billion in support for clean energy and advanced manufacturing, as well as preferences for domestic content, have led to tensions with allies, including the European Union.
There’s nothing wrong with “a little friendly competition,” he said. “As we keep saying, have at it. You should do the same. You should also encourage clean energy production in your country.”
Democratic President Joe Biden’s climate and infrastructure laws drew near-universal praise from the world’s top fossil fuel executives at the conference, striking a more confident tone than in years past.
A year of energy shortages, volatile prices and a recalibration of the global supply chain following Russia’s invasion of Ukraine has underscored the enduring importance of oil and gas, even as the world tries to transition to cleaner fuels.
The billions of dollars in tax incentives built into the IRA mean the world’s biggest industrial and energy companies now see the US as the most attractive place to build renewable, carbon capture and hydrogen facilities . That’s a problem for allies in Europe, Canada and elsewhere who are now playing catch-up to attract capital for large-scale clean energy projects.
“My message to European leaders is: don’t complain, do the same,” said Patrick Pouyanne, chief executive of Paris-based TotalEnergies SE. The IRA is “exactly what we need to do” to accelerate the energy transition. “We say to European governments that because you want us to invest in Europe, you have to put in the same incentive plans as the US, or even more.”
Exxon Mobil Corp. Chief Executive Darren Woods said the EU must first eliminate a “punitive” tax on oil company windfalls that will wipe out years of profits from recent investments in its European refineries . As a result, the Texas oil giant has “stepped back and reassessed” in Europe and is investing more in the US, he said.
EU leaders seem concerned. The war in Ukraine and the withdrawal of Russian gas have increased the continent’s push for clean energy, but the long-term strategy could be under threat with companies such as Tesla Inc. and Volkswagen AG that now prioritize investment in the US. “Europe’s competitiveness and resilience are at risk,” the EU’s internal market authority said in an initial assessment seen by Bloomberg.
A clean energy arms race would be welcome, said Meghan Nutting, executive vice president of governance and regulatory affairs at Sunnova Energy International Inc.
“For years, Europe has been asking us to do something to meet the requirements of the Paris climate agreement, and we finally did, and now they’re worried that we’re going to do it,” he told a panel Monday.
The potential downside of a clean energy arms race, however, is that individual nations investing in similar technologies can “create a totally fractured world,” diminishing cost reductions and diluting any truly global response to climate change, he said. said Joseph Majkut, director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies.
It is not just the size of the IRA that has won the support of energy leaders, but also its simplicity. Both large and small businesses can access funds, and projects don’t have to wait years to redeem tax credits. Crucially, the legislation includes few punitive measures affecting the industry’s cash cow, oil and gas.
The IRA is “all carrots, no sticks,” Alex Pourbaix, CEO of Cenovus Energy, said in an interview, picking up on a metaphor that has become ubiquitous at the conference. Pourbaix called on Canada to adopt similar legislation, which he says would accelerate the decarbonization of the country’s tar sands. Australian and Japanese executives also expressed admiration for the IRA.
“If we don’t, we’re going to see this capital flee the country and go to the United States,” Pourbaix said.
The full-throated praise for the IRA marked a stark contrast to recent French spats between oil executives and Biden, who has criticized them for not investing more in production and instead funneling profits into share buybacks .
In Houston, both sides seemed happy to emphasize the positive. White House climate adviser John Podesta, a vocal climate hawk, used an appearance at the event to announce new plans to reduce permit time on major projects, a major concern for energy producers.
Granholm’s impassioned speech was also well received, a stark contrast to his speech last year at the event, when he implored the assembled executives to do more to increase production in the face of renewable energy shortages of Russia’s war with Ukraine.
This time, Granholm emphasized that the oil industry can bring its knowledge to American investments in clean energy development that will bring benefits around the world, including lower costs, far beyond American borders.
“We make no apologies for the level of investments that are happening,” Granholm said. “We don’t want to start trade wars or anything like that, but we are serious about getting supply chains back to this country.”
