Over-reliance on gas delays G7 transition to net-zero power

Three years ago, G7, a group of major industrialized countries that includes Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, committed to decarbonizing their power systems by 2035. It was a historic and hopeful moment, in which the group demonstrated global leadership, and made a first step toward what needs to become an OECD-wide commitment, according to the recommendation made by the International Energy Agency in its 2050 Net Zero Emission Scenario, setting the world on a pathway to keep global warming below 1.5 degrees.

As we approach the 2024 G7 summit, the ability of G7 countries to deliver on their power systems decarbonization commitment, not least to address the still-lingering fossil fuel price and cost-of-living crisis, but also to retain their global energy transition leadership, is put under scrutiny. So far, the G7 countries’ actual progress toward this critical goal is a mixed picture of good, bad, and ugly, as new analysis shows.

via G7 Power Systems Scorecard, May 2024, E3G

Most G7 countries are making steps on policy and regulatory adjustments that will facilitate a managed transition.

Grid modernization and deployment is, for example, finally starting to receive the attention it deserves. Some countries, such as the U.S., are also starting to address the issue of long-duration energy storage, which is crucial for a renewables-based power sector.

Coal is firmly on its way out in all G7 countries, except Japan, which is lagging behind its peers. This is where the challenges begin, as things like Japan’s unhealthy relationship with coal risk undermining credibility of the whole group as world leaders on energy transition.

Despite these efforts, all G7 countries are delaying critical decisions to implement transition pathways delivering a resilient, affordable and secure fossil-free power system where renewables – mostly wind and solar – play the dominant role. A tracker by campaign groups shows that other European countries have already engaged firmly in that direction.

Progress made so far is neither uniform, nor sufficient.

Further gaps vary by country, but overall, more action is needed on energy efficiency, non-thermal flexibility solutions, and restructuring power markets to facilitate higher renewable electricity and storage uptake. The EU’s recently adopted power market reform provides a solid framework for changes in this direction, at least for the EU-based G7 countries, but it remains to be seen how the EU’s new rules are going to be implemented on the national level.

Overall: Progress made so far is neither uniform, nor sufficient. For one, translation of the G7-wide target into a legislated national commitment is lacking in most G7 countries, in Europe and beyond. Moreover, the chance of G7 countries reaching their 2035 target is at risk, along with their global image as leaders on the energy transition, due to the lack of a clear, time-bound and economically-sound national power sector decarbonization roadmaps. Whether 100 percent or overwhelmingly renewables-based by 2035, today’s power systems will need to undergo an unprecedented structural change to get there.

For this change to take off, clear vision on how to decarbonize the ‘last mile’ while providing for a secure, affordable and reliable clean electricity supply, is crucial. Regrettably, today’s G7 long-term vision is betting on one thing: Gas-fired back-up generation. While there are nascent attempts to address the development of long-term storage, grids, flexibility and other balancing solutions, the key focus in most G7 countries is on planning for a massive increase in gas capacity.

Whether 100 percent or overwhelmingly renewables-based by 2035, today’s power systems will need to undergo an unprecedented structural change to get there.

All G7 countries but France have new gas power plants in planning or construction, with the growth shares the biggest in three European countries: Italy’s planning to boost its gas power fleet by 12 percent, the U.K. by 23.5 percent, and Germany by a whopping 28 percent. The US, which consumes one quarter of global gas-in-power demand, has the largest project pipeline in absolute terms – 37.8GW, the fourth largest pipeline in the world.

This gas infrastructure build-out contradicts the real-economy trend: In all European G7 countries gas demand has been dropping at least since the 2021-2022 energy crisis, driven particularly by the power sector decarbonization. Japan’s gas demand peaked in 2007, and Canada’s in 1996 (see IEA gas consumption data). Even G7 governments’ own future energy demand projections show further drop in gas demand by 2030, by one-fifth to one-third of today’s levels in all European G7 countries and Japan, and at least by 6-10 percent in Canada and the U.S.

Maria Pastukhova | Programme Lead – Global Energy Transition, E3G

Most G7 countries argue that this new gas power fleet will be used at a much lower capacity factor as a back-up generation source to balance variable renewables. Some, for example Germany, incentivize new gas power capacity build-out under the label of ‘hydrogen readiness’, assuming that these facilities will run on low-carbon hydrogen starting in 2035. Others, for example Japan or the U.S., are betting on abating gas power generation with carbon capture and storage technologies in the long-term.

Keeping gas power infrastructure in an increasingly renewables-based, decentralized power system using technology that may or may not work in time is a very risky gamble to take given the time left.

G7 countries have got no more than a decade left to act on their commitment to reach net-zero emissions power systems. We have readily-available solutions to deliver the major bulk of the progress needed: Grids, renewables, battery, and other short and mid-duration storage, as well as efficiency improvements. These technologies need to be drastically scaled now, along with additional solutions we will need by 2035, such as long-duration energy storage, digitalization, and educating skilled workers to build and operate those new power systems.

While available and sustainable, these solutions must be deployed now to deliver in time for 2035. Going forward, G7 can’t afford to lose any more time focusing on gas-in-power, which is on the way out anyway and won’t bring the needed structural transformation of the power system.



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Why investors should be wary of New Year ‘head fakes’ for this hot asset class

The first trading day of the New Year looks set to challenge the Santa Rally theory, with Dow futures down over 200 points as bond yields surge. An Apple downgrade may not have helped investor confidence.

This week will bring the minutes of the Federal Reserve’s last meeting and important December jobs data.

“Data that comes in too hot will kill the idea of rate cuts starting as soon as March, and data that comes in too cold will kill the idea of a soft landing. It means Goldilocks must return from her Christmas trip to Aruba and appear this week,” says Michael Kramer, founder of Mott Capital Management.

Read: A stock investor’s guide to the first trading days of 2024

Onto our call of the day from MacroTourist blogger Kevin Muir, who sees a rally in small-cap stocks as one big theme for the coming year, though investors should beware of getting in too soon.

In a post, Muir draws on a 2021 observation from Raoul Paul, co-founder and CEO of Real Vision financial media platform, who posted on Twitter now X, at the time about the perils of piling into “head fakes” or new ideas in January.

Paul noted how hedge funds and asset managers start the new year with a clean investment slate, but then two weeks later start moving into so-called consensus Wall Street year-ahead trades. And once the rest of the investment world gets in, the trend reverses or corrects, and those managers get back to flat or have to start over.

Muir says given the Fed’s pivot away from monetary tightening at the end of 2023, small-caps will end up as stock leaders this year. A bull on that asset class, he flagged his readers to buy in early November and December.

After a tough year, the Russell 2000
RUT
rallied late in 2023 as it became clearer that Fed interest rate increases, particularly hard on smaller companies, were drawing to a close.

As per this Russell 2000 chart, Muir says he did get the timing right on that bullish call:

However, Muir says he’s concerned that the rally was mainly from “hedge fund covering,” and not a solid signal that the bear market for those stocks has ended.

One reason, he notes was that the stocks blasting higher at the end of 2023 were the most heavily shorted — he offers the Goldman Sach’s most-shorted index chart here:

MacroTourist

The chart is evidence of how hedge funds that got caught out when the Fed surprisingly guided toward interest rate cuts at the December meeting. Within a few hours of the Fed announcement, the Most-Short index had rallied 15%. But along with that, the ARKK Innovation ETF
ARKK
also shot higher, a red flag for Muir.

That short index is tightly correlated to ARKK and the Russell 2000 small-cap index, he said.

So says it’s possible the small-cap push was “just a hedge fund short-covering rally that will sag back down now that the buying has flamed out.” And based on Raoul Paul’s theory, it makes sense that hedge funds and other investors may be piling into the asset class.

Muir says he stands by his view that small-caps are cheap and deserving of gains. “However, if this small-cap rally is for real, then it can’t be led by crap. We can’t have the GS Rolling Most-Short leading the charge. We need quality small-cap stocks to rally,” he said.

So the correlation between broader small-cap indexes and the most-shorted index (also tightly correlated with ARKK) will have to break down.

“As a proxy for this index, and a hedge against my small-cap long position, I am shorting ARKK. So far, the short covering drove all these smaller capitalized stocks higher, but my bet is that an actual small-cap bull market will see much better differentiation, and that new small-cap leadership will emerge (and it won’t be ARKK),” he says.

The markets

U.S. stock index futures
ES00,
-0.67%

YM00,
-0.26%

NQ00,
-1.19%

are falling sharply as Treasury yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
climb. Gold
GC00,
+0.32%

is up, and oil
CL.1,
+0.14%

is up 2% after Iran sent warships to the Red Sea after the U.S. Navy sank some Houthi militia-backed boats. The Hang Seng
HK:HSI
fell 1.5% after weak China factory activity.

Key asset performance

Last

5d

1m

YTD

1y

S&P 500

4,769.83

0.32%

3.81%

24.23%

24.23%

Nasdaq Composite

15,011.35

0.12%

4.94%

43.42%

43.42%

10 year Treasury

3.933

3.28

-24.22

5.23

18.77

Gold

2,082.50

0.87%

1.67%

0.52%

13.79%

Oil

72.78

-0.97%

-0.70%

2.03%

-9.60%

Data: MarketWatch. Treasury yields change expressed in basis points.

The buzz

U.S. nonfarm payroll data for December is due Friday, with the Institute for Supply Management’s manufacturing report and minutes of the Dec. 12-13 Fed meeting both on Wednesday. Construction spending is due at 10 a.m. on Tuesday.

Read: Health of U.S. labor market looms large on markets’ radar this coming week

Apple
AAPL,
-2.97%

is down 2% in premarket after Barclays’ analysts cut the iPhone maker to underweight from equal weight, on signs of weak iPhone 15 and other hardware sales.

Voyager Therapeutics stock
VYGR,
+29.74%

is up 32% after the biotech announced a licensing deal with Novartis unit Novartis Pharma
NOVN,
+0.99%
.

Joyy
YY,
-14.65%

is off 11% after Baidu
BIDU,
-3.40%

cancelled a $3.6 billion offer for the Singapore-based live-streaming platform.

Bitcoin
BTCUSD,
+4.23%

is at $45,447, a high not seen since April 2022, on ETF approval hopes.

Tesla
TSLA,
-0.55%

said it delivered 484,507 EVs in the fourth quarter, producing 494,989. Deliveries grew 83% to 1.81 million for 2023 as a whole. Tesla shares are slipping. Meanwhile, China’s BYD
002594,
-2.73%

sold 3.02 million electric vehicles in 2023, eclipsing Tesla a second-straight year.

Japan’s western coast was hit by several heavy earthquakes on New Year’s Day, leaving at least 30 people dead and more quakes could come. A collision between a Japan coast guard plane and a Japan Airlines flight that caught fire on the runway on Tuesday resulted in the deaths of five people.

Best of the web

This year, resolve to pack a ‘go bag’ to be ready for the next disaster: Here’s what to put in it

Why Suze Orman never goes out to dinner

Topless massages, cage fights and private flights: CEO mishaps of 2023

The chart

More on small-cap caution from Chris Kimble at See It Market. He points out that investors may be getting greedy as some big resistance levels approach for the Russell 2000:


See It Market

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Ticker

Security name

TSLA,
-0.55%
Tesla

MARA,
+7.47%
Marathon Digital Holdings

NIO,
-5.79%
Nio

NVDA,
-3.27%
Nvidia

GME,
-1.14%
GameStop

AAPL,
-2.97%
Apple

AMC,
AMC Entertainment

COIN,
-2.62%
Coinbase GLobal

MULN,
-4.69%
Mullen Automotive

RIOT,
+5.69%
Riot Platforms

Random reads

New Year’s Eve in a Japanese cat bar.

Woman sues Hershey for $5 million over a faceless Reeses pumpkin.

Viral Burger King worker buys first home after crowdsourcing.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

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Making water the engine for climate action

Much progress has been made on water security over recent decades, yet for the first time in human history, our collective actions have pushed the global water cycle out of balance. Water is life: it is essential for health, food, energy, socioeconomic development, nature and livable cities. It is hardly surprising that the climate and biodiversity crises are also a water crisis, where one reinforces the other. Already, a staggering four billion people suffer from water scarcity  for at least one month a year and two billion people lack access to safely-managed drinking water. By 2030, global water demand will exceed availability by 40 percent. By 2050, climate-driven water scarcity could impact the economic growth of some regions by up to 6 percent of their Gross Domestic Product per year.

Meike van Ginneken, Water Envoy of the Kingdom of the Netherlands

Right now, the world’s first Global Stocktake is assessing the progress being made toward the goals of the Paris Agreement and global leaders are convening at COP28 in Dubai to agree on a way forward. We have a critical opportunity to catalyze global ambition and recognize that water is how climate change manifests itself. While wealthier, more resilient nations may be able to manage the devastating impacts of climate change, these same challenges are disastrous for lesser developed, more vulnerable communities.

Rainfall, the source of all freshwater, is becoming more erratic. Changes in precipitation, evaporation and soil moisture are creating severe food insecurity. Droughts trap farmers in poverty, as the majority of cultivated land is rain-fed. Extreme drought reduces growth in developing countries by about 0.85 percentage points. Melting glaciers, sea-level rise and saltwater intrusion jeopardize freshwater supplies. Floods destroy infrastructure, damage homes and disrupt livelihoods. The 2022 Pakistan floods affected 33 million people and more than 1,730 lost their lives, while 2023 saw devastating floods in Libya among other places.  

Now more than ever, it is urgent that we work together to make water the engine of climate action. Already, many countries are investing in technology and climate-resilient water infrastructure. Yet, we need more than technology and engineering to adapt to a changing climate. To advance global water action, we must radically change the way we understand, value and manage water with an emphasis on two necessary measures.

First, we need to make water availability central to our economic planning and decision-making. We need to rethink where and how we grow our food, where we build our cities, and where we plan our industries. We cannot continue to grow thirsty crops in drylands or drain wetlands and cut down forests to raise our cattle. In a changing climate, water availability needs to guide where we undertake economic activity.

In a changing climate, water availability needs to guide where we undertake economic activity.  

Second, we must restore and protect natural freshwater stocks, our buffers against extreme climate events. Natural freshwater storage is how we save water for dry periods and freshwater storage capacity is how we store rainwater to mitigate floods. 99 percent of freshwater storage is in nature. We need to halt the decline of groundwater, wetlands and floodplains. But our challenge is not only about surface and groundwater bodies, or blue water. We also need to preserve and restore our green water stocks, or the water that remains in the soil after rainfall. To reduce the decline of blue water and preserve green water, we need to implement water-friendly crop-management practices and incorporate key stakeholders, such as farmers, into the decision-making process.

Addressing the urgency of the global water crisis goes beyond the water sector. It requires transformative changes at every level of society. National climate plans such as Nationally Determined Contributions (NDCs) and National Adaptation Plans are key instruments to make water an organizing principle to spatial, economic and investment planning. Much like the Netherlands did earlier this year when the Dutch parliament adopted a policy that makes water and soil guiding principles in all our spatial planning decisions. Right now, about 90 percent of all countries’ NDCs prioritize action on water for adaptation. NDCs and National Adaptation Plans are drivers of integrated planning and have the potential to unlock vast investments, yet including targets for water is only a first step.

To drive global action, the Netherlands and the Republic of Tajikistan co-hosted the United Nations 2023 Water Conference, bringing the world together for a bold Water Action Agenda to accelerate change across sectors and deliver on the water actions in the 2030 Agenda for Sustainable Development and the Paris Agreement. To elevate the agenda’s emphasis on accelerating implementation and improved impact, the Netherlands is contributing an additional €5 million to the NDC Partnership to support countries to mitigate the impacts of climate change, reduce water-related climate vulnerability and increase public and private investments targeting water-nexus opportunities. As a global coalition of over 200 countries and international institutions, the NDC Partnership is uniquely positioned to support countries to enhance the integration of water in formulating, updating, financing and implementing countries’ NDCs.

One example showcasing the importance of incorporating water management into national planning comes from former NDC Partnership co-chair and climate leader, Jamaica. Jamaica’s National Water Commission (NWC), one of the largest electricity consumers in the country, mobilized technical assistance to develop an integrated energy efficiency and renewables program to reduce its energy intensity, building up the resilience of the network, while helping reduce the country’s greenhouse gas emissions. With additional support from the Netherlands, the International Renewable Energy Agency (IRENA) and the United Nations Development Programme (UNDP), together with Global Water Partnership (GWP)-Caribbean, the government of Jamaica will ensure the National Water Commission is well equipped for the future. Implementation of climate commitments and the requisite financing to do so are key to ensuring targets like these are met.

Water has the power to connect. The Netherlands is reaching out to the world.

Water has the power to connect. The Netherlands is reaching out to the world. We are committed to providing political leadership and deploying our know-how for a more water-secure world. As we look towards the outcomes of the Global Stocktake and COP28, it is essential that we make water the engine of climate action. 



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The state of the planet in 10 numbers

This article is part of the Road to COP special report, presented by SQM.

The COP28 climate summit comes at a critical moment for the planet. 

A summer that toppled heat records left a trail of disasters around the globe. The world may be just six years away from breaching the Paris Agreement’s temperature target of 1.5 degrees Celsius, setting the stage for much worse calamities to come. And governments are cutting their greenhouse gas pollution far too slowly to head off the problem — and haven’t coughed up the billions of dollars they promised to help poorer countries cope with the damage.

This year’s summit, which starts on Nov. 30 in Dubai, will conclude the first assessment of what countries have achieved since signing the Paris accord in 2015. 

The forgone conclusion: They’ve made some progress. But not enough. The real question is what they do in response.

To help understand the stakes, here’s a snapshot of the state of the planet — and global climate efforts — in 10 numbers. 

1.3 degrees Celsius

Global warming since the preindustrial era  

Human-caused greenhouse gas emissions have been driving global temperatures skyward since the 19th century, when the industrial revolution and the mass burning of fossil fuels began to affect the Earth’s climate. The world has already warmed by about 1.3 degrees Celsius, or 2.3 degrees Fahrenheit, and most of that warming has occurred since the 1970s. In the last 50 years, research suggests, global temperatures have risen at their fastest rate in at least 2,000 years.  

This past October concluded the Earth’s hottest 12-month span on record, a recent analysis found. And 2023 is virtually certain to be the hottest calendar year ever observed. It’s continuing a string of recent record-breakers — the world’s five hottest years on record have all occurred since 2015. 

Allowing warming to pass 2 degrees Celsius would tip the world into catastrophic changes, scientists have warned, including life-threatening heat extremes, worsening storms and wildfires, crop failures, accelerating sea level rise and existential threats to some coastal communities and small island nations. Eight years ago in Paris, nearly every nation on Earth agreed to strive to keep temperatures well below that threshold, and under a more ambitious 1.5-degree threshold if at all possible. 

But with just fractions of a degree to go, that target is swiftly approaching — and many experts say it’s already all but out of reach.

$4.3 trillion  

Global economic losses from climate disasters since 1970  

Climate-related disasters are worsening as temperatures rise. Heat waves are intensifying, tropical cyclones are strengthening, floods and droughts are growing more severe and wildfires are blazing bigger. Record-setting events struck all over the planet this year, a harbinger of new extremes to come. Scientists say such events will only accelerate as the world warms. 

Nearly 12,000 weather, climate and water-related disasters struck worldwide over the last five decades, the World Meteorological Organization reports. They’ve caused trillions of dollars in damage, and they’ve killed more than 2 million people.  

Ninety percent of these deaths have occurred in developing countries. Compared with wealthier nations, these countries have historically contributed little to the greenhouse gas emissions driving global warming – yet they disproportionately suffer the impacts of climate change.  

4.4 millimeters  

Annual rate of sea level rise

Global sea levels are rapidly rising as the ice sheets melt and the oceans warm and expand. Scientists estimate that they’re now rising by about 4.4 millimeters, or about 0.17 inches, each year – and that rate is accelerating, increasing by about 1 millimeter every decade.

Those sound like small numbers. They’re not.  

The world’s ice sheets and glaciers are losing a whopping 1.2 trillion tons of ice each year. Those losses are also speeding up, accelerating by at least 57 percent since the 1990s. Future sea level rise mainly depends on future ice melt, which depends on future greenhouse gas emissions. With extreme warming, global sea levels will likely rise as much as 3 feet by the end of this century, enough to swamp many coastal communities, threaten freshwater supplies and submerge some small island nations.  

Some places are more vulnerable than others. 

“Low-lying islands in the Pacific are on the frontlines of the fight against sea level rise,” said NASA sea level expert Benjamin Hamlington. “In the U.S., the Southeast and Gulf Coasts are experiencing some of the highest rates of sea level rise in the world and have very high future projections of sea level.”  

But in the long run, he added, “almost every coastline around the world is going to experience sea level rise and will feel impacts.”

Less than 6 years

When the world could breach the 1.5-degree threshold

The world is swiftly running out of time to meet its most ambitious international climate target: keeping global warming below 1.5 degrees Celsius. Humans can emit only another 250 billion metric tons of carbon dioxide and maintain at least even odds of meeting that goal, scientists say. 

That pollution threshold could arrive in as little as six years.

That’s the bottom line from at least two recent studies, one published in June and one in October. Humans are pouring about 40 billion tons of carbon dioxide into the atmosphere each year, with each ton eating into the margin of error.  

The size of that carbon buffer is smaller than previous estimates have suggested, indicating that time is running out even faster than expected.  

“While our research shows it is still physically possible for the world to remain below 1.5C, it’s difficult to see how that will stay the case for long,” said Robin Lamboll, a scientist at Imperial College London and lead author of the most recent study. “Unfortunately, net-zero dates for this target are rapidly approaching, without any sign that we are meeting them.”

43 percent 

How much greenhouse gas emissions must fall by 2030 to hit the temperature target

The world would have to undergo a stark transformation during this decade to have any hope of meeting the Paris Agreement’s ambitious 1.5-degree cap. 

In a nutshell, global greenhouse gas emissions have to fall 43 percent by 2030, and 60 percent by 2035, before reaching net-zero by mid-century, according to a U.N. report published in September on the progress the world has made since signing the Paris Agreement. That would give the world a 50 percent chance of limiting global warming to 1.5 degrees. 

But based on the climate pledges that countries have made to date, greenhouse gas emissions are likely to fall by just 2 percent this decade, according to a U.N. assessment published this month

Governments are “taking baby steps to avert the climate crisis,” U.N. climate chief Simon Stiell said in a statement this month. “This means COP28 must be a clear turning point.” 

$1 trillion a year 

Climate funding needs of developing countries

In many ways, U.N. climate summits are all about finance. Cutting industries’ carbon pollution, protecting communities from extreme weather, rebuilding after climate disasters — it all costs money. And developing countries, in particular, don’t have enough of it. 

As financing needs grow, pressure is mounting on richer nations such as the U.S. that have produced the bulk of planet-warming emissions to help developing countries cut their own pollution and adapt to a warmer world. They also face growing calls to pay for the destruction wrought by climate change, known as loss and damage in U.N.-speak. 

But the flow of money from rich to poor countries has slowed. In October, a pledging conference to replenish the U.N.’s Green Climate Fund raised only $9.3 billion, even less than the $10 billion that countries had promised last time. An overdue promise by developed countries to deliver $100 billion a year by 2020 to help developing countries reduce emissions and adapt to rising temperatures was “likely” met last year, the Organization for Economic Cooperation and Development said this month, while warning that adaptation finance had fallen by 14 percent in 2021. 

As a result, the gap between what developing countries need and how much money is flowing in their direction is growing. The OECD report said developing countries will need around $1 trillion a year for climate investments by 2025, “rising to roughly $2.4 trillion each year between 2026 and 2030.”

$7 trillion 

Worldwide fossil fuel subsidies in 2022

In stark contrast to the trickle of climate finance, fossil fuel subsidies have surged in recent years. In 2022, total spending on subsidies for oil, natural gas and coal reached a record $7 trillion, the International Monetary Fund said in August. That’s $2 trillion more than in 2020. 

Explicit subsidies — direct government support to reduce energy prices — more than doubled since 2020, to $1.3 trillion. But the majority of subsidies are implicit, representing the fact that governments don’t require fossil fuel companies to pay for the health and environmental damage that their products inflict on society. 

At the same time, countries continue pumping public and private money into fossil fuel production. This month, a U.N. report found that governments plan to produce more than twice the amount of fossil fuels in 2030 than would be consistent with the 1.5-degree target. 

66,000 square kilometers

Gross deforestation worldwide in 2022

At the COP26 climate summit two years ago in Glasgow, Scotland, nations committed to halting global deforestation by 2030. A total of 145 countries have signed the Glasgow Forest Declaration, representing more than 90 percent of global forest cover. 

Yet global action is still falling short of that target. The annual Forest Declaration Assessment, produced by a collection of research and civil society organizations, estimated that the world lost 66,000 square kilometers of forest last year, or about 25,000 square miles — a swath of territory slightly larger than West Virginia or Lithuania. Most of that loss came from tropical forests. 

Halting deforestation is a critical component of global climate action. The U.N.’s Intergovernmental Panel on Climate Change warns that collective contributions from agriculture, forestry and land use compose as much as 21 percent of global human-caused carbon emissions. Deforestation releases large volumes of carbon dioxide back into the atmosphere, and recent research suggests that carbon losses from tropical forests may have doubled since the early 2000s.  

Almost 1 billion tons

The annual carbon dioxide removal gap 

Given the world’s slow pace in reducing greenhouse gas pollution, scientists say a second approach is essential for slowing the Earth’s warming — removing carbon dioxide from the atmosphere.

The technology for doing this is largely untested at scale, and won’t be cheap.  

A landmark report on carbon dioxide removals led by the University of Oxford earlier this year found that keeping warming to 2 degrees Celsius or less would require countries to collectively remove an additional 0.96 billion tons of CO2-equivalent a year by 2030.

About 2 billion tons are now removed every year, but that is largely achieved through the natural absorption capacity of forests. 

Removing even more carbon will require countries to massively scale up carbon removal technologies, given the limited capacity of forests to absorb more carbon dioxide. 

Carbon removal technologies are in the spotlight at COP28, though some countries and companies want to use them to meet net-zero while continuing to burn fossil fuels. Scientists have been clear that carbon removal cannot be a substitute for steep emissions cuts. 

1,000 gigawatts 

Annual growth in renewable power capacity needed to keep 1.5 degrees in reach  

The shift from fossil fuels to renewables is underway, but the transition is still far too slow to meet the Paris Agreement targets. 

To keep 1.5 degrees within reach, the International Renewable Energy Agency estimates that the world needs to add 1,000 gigawatts in renewable energy capacity every year through 2030. By comparison, the United States’ entire utility-scale electricity-generation capacity was about 1,160 gigawatts last year, according to the Department of Energy.

Last year, countries added about 300 gigawatts, according to the agency’s latest World Energy Transitions Outlook published in June. 

That shortfall has prompted the EU and the climate summit’s host nation, the United Arab Emirates, to campaign for nations to sign up to a target to triple the world’s renewable capacity by 2030 at COP28, a goal also supported by the U.S. and China.

“The transition to clean energy is happening worldwide and it’s unstoppable,” International Energy Agency boss Fatih Birol said last month. “It’s not a question of ‘if’, it’s just a matter of ‘how soon’ – and the sooner the better for all of us.”

This article is part of the Road to COP special report, presented by SQM. The article is produced with full editorial independence by POLITICO reporters and editors. Learn more about editorial content presented by outside advertisers.



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Energy crisis: Who has the priciest electricity and gas in Europe?

The pre-tax prices of electricity and natural gas soared after Russia’s full-scale invasion of Ukraine, but they’re now on the decline. Although slightly higher than the second half of 2022, the final prices for customers, including taxes, reached their peak in the first half of 2023.

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Electricity and gas costs, which experienced a sharp increase after the Russian invasion of Ukraine, are now steadying in Europe, after peaking in the first half of 2023.

While pre-tax prices are decreasing, some countries have already frozen the support measures they offered households, resulting in higher consumer prices. 

The EU appears to be more ready for winter this year now that it has largely replaced Russian energy, but it’s worth noting that there’s disparity between electricity and natural gas prices among individual countries both within and outside the bloc.

Which countries have the highest and lowest prices in Europe, and by how much have electricity and natural gas prices increased since Russia’s full-scale invasion of Ukraine started in February 2022?

In the first half of 2023, average household electricity prices including all taxes in the EU rose from €25.3 per 100 kWh to €28.9 per 100 kWh, compared with the same period in 2022. 

Average natural gas prices also climbed from €8.6 per 100 kWh to €11.9 per 100 kWh in the same period. These are the highest prices recorded by Eurostat, the EU’s official statistical office.

Looking at the percentage changes year-over-year, the electricity prices in the EU increased by 14.5% in the first half of 2023, and gas prices rose by 37.9%. These figures are lower than the second half of 2022, when the percentage changes year-over-year reached their peak.

The figures suggest that electricity and gas prices are stabilising in the EU, according to Eurostat, even though the final consumer prices with taxes are slightly higher than in the second half of 2022: Pre-tax prices on electricity and natural gas are decreasing, yet countries are partly withdrawing their energy price support measures, explaining the increase.

In the first half of 2023, electricity prices including taxes for household consumers in the European Economic Area (EEA) ranged from €11.4 per 100 kWh in Bulgaria to €47.5 per 100 kWh in the Netherlands.

The Netherlands was followed by Belgium (€43.5), Romania (€42) and Germany (€41.3).

Electricity prices were higher in nine EU Member States than the EU average. 

As France has the highest share of nuclear in its electricity mix (68.9% in 2021) in the EU, its electricity prices were significantly below the EU average, with €23.2 per 100 kWh in the first half of 2023.

This was not the case for Belgium, where the share of nuclear in its electricity production was 50.6%. Belgium came in second on the most expensive electricity price list.

EU candidate countries had the cheapest electricity

When the EU’s candidate countries are also included, Turkey recorded the cheapest electricity prices with €8.4 per 100 kWh. The six countries at the bottom were all EU candidates, with prices fluctuating little between them.

The average household gas prices in the first half of 2023 were lowest in Hungary (€3.4 per 100 kWh), Croatia (€4.1) and Slovakia (€5.7), and highest in the Netherlands (€24.8), Sweden (€21.9), and Denmark (€16.6).

The EU average was €11.9. Gas prices were higher in eight EU member states than the EU average, suggesting households in these countries paid substantially more.

Gas prices were lowest in Turkey (€2.5) when EU candidate countries are included. Contrary to electricity prices, the candidates didn’t have the cheapest gas prices, as shown by the likes of North Macedonia (€10.4) and Bosnia and Herzegovina (€5.9).

In the first half of 2023, the Netherlands had the most expensive electricity and gas prices in the EU.

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Electricity and gas prices rose in almost all EU countries

Household electricity prices increased in 22 EU countries in the first half of 2023 compared with the first half of 2022, according to the Eurostat data, and gas prices climbed in 20 out of the 24 EU members.

Why did Dutch electricity prices skyrocket by almost 1000%?

The Netherlands recorded the largest increase year-over-year in electricity prices by a country mile, at 953%. According to Eurostat, this extraordinary rise is related to several factors: not only were tax relief measures from 2022 discontinued in 2023, but at the same time, household electricity taxes doubled. 

However, the government is due to incorporate a price cap which will lower prices at all levels quite significantly in 2023.

The Netherlands was followed by Lithuania (88%), Romania (77%) and Latvia (74%).

On the flipside, electricity prices fell in five EU member states, with Spain recording a significant decrease of 41%, followed by Denmark at 16%.

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Gas prices climbed more than 100% in some countries

Natural gas prices rose substantially in several countries across Europe, climbing more than 100% per cent in Latvia, Romania and Austria. They were followed by the Netherlands (100%), Turkey (92%) and Ireland (73%).

EU countries Italy, Estonia and Croatia saw decreases less than 1%. North Macedonia, an EU candidate, showed the largest fall overall by 14%. All these changes are based on national currencies.

EU energy imports from Russia dramatically fell

Eurostat has recorded a dramatic shift in the amount of energy the EU has imported from Russia since it launched its war against Ukraine. A huge growth in renewables, as well as gas from Norway and the US, has helped to make up for the dramatic drop in Russian energy.

The most striking change can be seen in natural gas. 

EU natural gas imports from Russia made up almost 50% of the total before the war. This decreased significantly in 2022, down to 12% in October.

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It remains to be seen whether the recent outbreak of the Israel Hamas war will have a similar, lasting effect on European energy supplies and prices.

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Poland turns toward bets on offshore wind

The development of offshore wind farms in Poland has never before taken place on such a large scale. The PGE Group is the biggest investor in offshore wind farms in the Polish part of the Baltic Sea in terms of wind turbine capacity. As part of its offshore program, the PGE Group is currently implementing three offshore wind farm projects.

Two of them are the offshore wind power plants Baltica 2 and Baltica 3, which comprise the Baltica Offshore Wind Farm with a total capacity of 2.5GW. PGE is implementing this project together with the Danish partner Ørsted. Both phases of the Baltica offshore wind farm have location decisions, environmental decisions, and grid connection agreements with the operator, and have been granted the right to a Contract for Difference (CfD).

As part of its offshore program, the PGE Group is currently implementing three offshore wind farm projects.

Last April, PGE and Ørsted took a major step in the Baltica 2 project. They signed the first of the contracts for the supply of wind turbines. Subsequently, they also signed a contract for the supply of offshore substations in June. Baltica 2 is expected to start producing green energy in 2027, while the entire Baltica Offshore Wind Farm will be completed within this decade.

Independently of the Baltica Offshore Wind Farm, the PGE Group is developing a third project, Baltica 1. Commissioning is scheduled after 2030 and its capacity will be approximately 0.9GW. The project already has a location permit and a connection agreement. In May 2022, wind measurement studies for this project started, followed by environmental studies in autumn 2022. The energy produced by all three farms will supply nearly 5.5 million households in Poland.  This means that more than a third of all Polish households will be provided with energy from wind power.

Baltica 2 is expected to start producing green energy in 2027, while the entire Baltica Offshore Wind Farm will be completed within this decade.

At the same time, the PGE Group has received final decisions on new permits for the construction of artificial islands for five new areas to be developed in the Baltic Sea, which will enable the construction of further offshore wind power plants in the future. The total capacity potential from the new areas provides PGE with more than 3.9GW. Considering the projects currently under development (Baltica 2, Baltica 3 and Baltica 1) with a total capacity of approximately 3.4GW, PGE Capital Group’s offshore wind portfolio may increase to over 7.3GW by 2040.

Offshore wind — a new chapter for the Polish economy

A long-term vision for the development of the Polish offshore wind sector, based on the carefully assessed potential of this technology, will support the development of the energy sector in Poland. The benefits of offshore wind development in Poland should be considered in several aspects — first and foremost, due to their total capacity, offshore wind farms will become a very important new source of clean, green energy for Poland in just a few years.

“Offshore wind energy will make a significant contribution to Poland’s energy mix. The three projects currently under construction by the PGE Group, with a total capacity of almost 3.5GW, will generate electricity for almost 5.5 million households. All the investments planned for the Baltic Sea are crucial for strengthening Poland’s energy security. Regarding the Polish economy, in particular the economy of the entire Pomerania region, the construction of offshore wind farms will provide a strong development stimulus. This is not only about businesses closely related to wind energy, such as companies supplying components for offshore wind power plants. Jobs will also be created by businesses willing to join the development of this new sector and take advantage of the opportunities it brings,” said Wojciech Dąbrowski, president of the management board of PGE Polska Grupa Energetyczna S.A.

All the investments planned for the Baltic Sea are crucial for strengthening Poland’s energy security.

The construction of offshore wind farms will ensure Poland’s energy security

The development of offshore wind is also crucial to Poland’s energy security and independence. Thanks to the production of energy from renewable sources, there is no need to import fossil fuels from abroad or rely on dwindling domestic coal resources.

This means that Poland will not be dependent on external fuel suppliers or various international developments. The ability to generate electricity independently contributes to strengthening the country’s energy sovereignty.

Energy, environmental and social benefits

Poland has ambitions and capabilities to become one of the leaders in offshore wind energy development in the Baltic Sea and even in Europe. We have plenty of resources for the development of offshore wind farms because of our favorable geographical location and natural conditions — strong, stable winds and the relatively shallow considerable area of the Baltic Sea, located in the exclusive economic zone. The Baltic Sea has some of the best wind conditions not only in Europe but also in the world, which are comparable to those in the North Sea.

Offshore wind energy is a key element of sustainable development. For Poland, green wind energy means savings, security and energy independence at the same time. Electricity from renewable sources is less expensive than that generated from fossil fuels. By choosing green energy, consumers can save on their electricity bills while at the same time supporting the development of a green energy sector. As a zero-emission energy source, it contributes to achieving climate policy goals and minimizing negative environmental impact. It is a huge step towards reducing greenhouse gas emissions. The creation of an infrastructure for the construction of alternative energy sources with wind farms will ensure the diversification of energy sources.



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EPA Gonna Punch That Climate Emergency Right In The Snoot!

The Biden administration rolled out yet another piece of its climate plan today, as the Environmental Protection Agency proposed new regulations to limit the greenhouse gases emitted by electric power plants fueled by coal and methane (so-called “natural” gas). As the New York Times puts it in an admirably simple and accurate sentence,

The nation’s 3,400 coal- and gas-fired power plants currently generate about 25 percent of greenhouse gases produced by the United States, pollution that is dangerously heating the planet.

Instead of mandating any particular technology, the rules set caps on rates of carbon dioxide pollution that plants can release, leaving it up to energy producers to find ways to meet the goal of eliminating CO2 emissions by 2040. If industry can find ways to capture all CO2 from smokestacks — technology that doesn’t exist yet — then great. But it’s more likely that utilities would have to switch to green energy, or for gas plants, to burning green hydrogen (the kind produced without fossil fuels), which emits no carbon.

And while the EPA doesn’t say it, we’re happy to: The faster the US and the world adopt solar and wind electricity, the cheaper that electricity will be per megawatt hour. According to an Oxford University study published in September, a rapid transition away from fossil fuels to wind and solar could save the world $12 trillion by 2050, which would help offset other costs of the transition like grid upgrades and developing reliable storage/backup/distribution of clean energy. Going slow, on the other hand, will cost more and result in greater climate caused damage.


The EPA press release says the regulations will

avoid up to 617 million metric tons of total carbon dioxide (CO2) through 2042, which is equivalent to reducing the annual emissions of 137 million passenger vehicles, roughly half the cars in the United States. Through 2042, EPA estimates the net climate and health benefits of the standards on new gas and existing coal-fired power plants are up to $85 billion.

The EPA emphasizes the public health benefits of not burning all that stuff, which doesn’t just contribute to global warming but releases nasties like particulates, sulfur dioxide, and nitrogen oxides into the air Americans breathe, especially in communities nearest to power plants, which tend to be home to poor and minority people because America. In addition to helping to keep the planet more habitable for large mammals like gazelles and the NCAA Final Four champion men’s and women’s teams, the proposed standards would mean huge health gains. In 2030 alone, the EPA says, cleaner air resulting from the new standards would prevent

• approximately 1,300 premature deaths;

• more than 800 hospital and emergency room visits;

• more than 300,000 cases of asthma attacks;

• 38,000 school absence days; [and]

• 66,000 lost workdays.

Under the new rules, virtually all coal and methane gas plants would be required to either reduce or capture 90 percent of their carbon emissions by 2038, or shut down. Currently, roughly a quarter of American coal plants are already scheduled to be retired by 2029, per the US Energy Information Agency.

Needless to say, industry groups and Republican state officials are at this very moment working on the first drafts of legal challenges to the policy, written as is traditional with the congealed blood of seals and dolphins killed by oil spills. The Times reports that West Virginia Attorney General Patrick Morrisey (R) is already declaring the EPA plan DOA in the courts, whining that “It is not going to be upheld, and it just seems designed to scare more coal-fired power plants into retirement — the goal of the Biden administration.” Stupid not-wanting-climate-catastrophe Biden!

Sen. Joe Manchin (“D”-West Virginia), whose family fortune is built on selling some of the filthiest coal available — a mining waste slurry called “gob” coal that’s particularly carbon intensive — also threatened today that he will oppose any new Biden appointees to the EPA unless the plan is dropped. Manchin griped that the administration is

“determined to advance its radical climate agenda and has made it clear they are hellbent on doing everything in their power to regulate coal- and gas-fueled power plants out of existence, no matter the cost to energy security and reliability.”

Also, fuck the future, the man has money at stake, and he hasn’t spent a career lining his own nest with filthy feathers from crows with black lung disease just to watch it all go away because people in the tropical regions think they “deserve” to live.

So yeah, kids, this is going to be a fight between the wealthy bastards who want to keep pumping the atmosphere full of planet-heating pollutants, and the first president ever whose administration is actually taking the action needed to get close to meeting the US’s commitments to decarbonization by midcentury, which all nations need to do in order to hold warming to non-catastrophic levels.

Previously:

When you combine the anticipated greenhouse gas reductions from the EPA’s recent vehicle emissions standards, its methane reduction standards, and the power plant emissions standards announced today, the Times reports, the total emissions that would be eliminated would be around 15 billion tons of CO2 by 2055, or

roughly the amount of pollution generated by the entire United States economy over three years. Several analyses have projected that the Inflation Reduction Act will cut emissions by at least another billion tons by 2030.

That could put the nation on track to meet Mr. Biden’s pledge that the United States would cut its greenhouse gases in half by 2030 and stop adding carbon dioxide to the atmosphere altogether by 2050, although analysts point out that more policies will need to be enacted to reach the latter target.

And that, children, puts the world within what I’ll call realistic hoping distance of actually meeting the Paris Climate Agreement goal of limiting warming since the start of the industrial age to 1.5 degrees C (2.7 degrees Fahrenheit). It would require all countries doing the same as or better than the Biden plan is close to accomplishing, so yeah, that’s freaking difficult. But doable, genuinely doable, according to the climate boffins. The Times again:

“Each of these several regulations from the E.P.A. are contributing to the whole picture that is necessary to steer this ocean liner away from the worst climate disaster,” said Dallas Burtraw, an economist with Resources for the Future, a nonpartisan research organization that focuses on energy and environmental policy.

Also I just remembered that we were going to do some kind of Wonkette Book Club on Kim Stanley Robinson’s 2020 climate novel The Ministry for the Future (Wonkette-gets-a-cut link), so I guess I’d better actually make a plan and write it up for tomorrow, damn my eyes.

Let’s choose hope. But back it up with action.

OPEN THREAD.

[EPA / NYT / Oxford University / AP / NBC News / Photo: American Wind Energy Association, used by permission]

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The EU greenwashed fossil gas. Today, we are suing.

Last July, EU policymakers decided to greenwash fossil gas. Today, the WWF European Policy Office, Client Earth, BUND and Transport & Environment are taking them to the European Court of Justice.

We are doing it to reassert a basic truth: all fossil fuels are dangerous for the planet. Only last summer, European cities baked under fierce heatwaves, rivers across our continent ran dry, and whole swathes of France, Spain, and Portugal were burned by unprecedented wildfires. In the midst of this devastation, the EU approved a new chapter of its supposed green investment guidebook — the EU Taxonomy — which stated that fossil gas-fired electricity is ‘green’. In fact, fossil gas is a fossil fuel that can cause plumes of methane that harm the climate just as badly as coal.

However, under the guise of climate action, the gas Taxonomy could divert tens of billions of euros from green projects into the very fossil fuels which are causing those heatwaves, droughts, and wildfires. This is while scientific experts at the International Energy Agency and the United Nations continue to stress that we must halt any expansion of fossil fuels and invest exclusively in developing clean energy sources. Even the EU’s own experts have said we must use much less gas by 2030. The gas Taxonomy is not just at odds with the science: it also flies in the face of market dynamics. Renewable investments across the world reached $500 billion last year, which shows that there is already a massive, readily available alternative to gas-fired power.

For all these reasons, having previously filed a request for the Commission to review the gas Taxonomy, we are filing a case at the CJEU today. We will argue that the gas Taxonomy, and the Commission’s refusal to review it, clash with the European Climate Law, the precautionary principle, and the Taxonomy Regulation — the law on which the Taxonomy is built. It also undermines the EU’s obligations under the Paris Agreement. We expect a judgment within the next two years.

Fossil gas at the heart of two European crises

Europe faces two interlocking crises: an inflation crisis and a climate crisis. Fossil gas is at the heart of both. Had we decided to invest with more determination in renewables and energy efficiency even just 10 years ago, our continent would not have been so dependent on energy imports. We would not have faced such great spikes in energy and food prices, which disproportionately hurt our poorest citizens. We would be closer to meeting our Paris Agreement goals.

Instead,  largely due to decades of industry pressure — the gas lobby spends up to €78 million a year in Brussels alone — our continent has remained extremely dependent on destructive fossil fuels. That dependency must end. It is high time to direct billions of euros into installing more renewables more quickly, with a focus on secure, cheap wind and solar power. It is time to expand the technologies to back them up, such as building insulation, energy storage, and strong grids. And above all, it is time to stop the lie that putting money into any fossil fuel will help the green transition. That is the purpose of our legal case.

Policymakers and financial institutions beware

EU policymakers are increasingly inserting references to the EU Taxonomy into other policies. If our case is successful, and the Taxonomy’s gas criteria are overturned, any legislation tying gas financing to the Taxonomy would become inapplicable.

Policymakers beware: the Taxonomy is on shaky ground, and you should not use it to justify new gas investments. Fossil fuel companies that get hooked on green funding will face a rude awakening if our legal case cuts that support off. They may even incur steep losses if they have made investments based on EU policies only to find that gas has been struck out of them.

Fossil fuel companies that get hooked on green funding will face a rude awakening if our legal case cuts that support off.

Financial institutions also face real reputational, financial and legal risks from the gas Taxonomy. Fossil gas is excluded from the global green bond market. Leading institutions such as the European Investment Bank or the Dutch pension federation have openly criticized the Taxonomy’s greenwashing. What is more, taxonomies in several other countries exclude fossil gas-fired power, so the European one lags behind. Any financial institution that uses the EU Taxonomy to justify investing in fossil gas assets therefore risks direct, robust and repeated attacks on its reputation.

The inexorable public policy shift towards energy efficiency and renewables, and the plummeting price of wind and solar power, have made fossil gas-fired power uncompetitive. Investments in more fossil gas, even if encouraged by the EU Taxonomy, would quickly result in stranded assets and could even cause billion-euro losses. Financial institutions must guard against these risks by stopping their support for gas expansion now.

Finally, if our case is successful, financial institutions could find they have purchased or sold products mislabeled as ‘green’. They must be careful to verify the legal consequences of such an event, particularly for its impact on any climate claims they have made.

Our message to the EU

Policymakers and financial institutions should note that the Taxonomy faces four further court cases: one from the governments of Austria and Luxembourg, one from Greenpeace, one from the Trinational Association for Nuclear Protection (ATPN) and another from MEP René Repasi. The EU’s greenwashing is now being discredited from all sides – amongst scientists, in financial markets, and soon, we expect, by the judiciary.

Our message to the EU is simple: do not help fossil lobbyists to block our continent’s move to clean, cheap and secure energy. If you do, we will meet you head-on.

Victor Hugo once said that nobody can stop an idea whose time has come. Today, despite much fossil fuel lobbying, denial and delay, it is the turn of the green transition. Our message to the EU is simple: do not help fossil lobbyists to block our continent’s move to clean, cheap and secure energy. If you do, we will meet you head-on.

See you in court.



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Ukraine’s Richest Billionaire On Upending Putin’s Expectations, One Year Into Russia’s War

Rinat Akhmetov’s steel plants and electricity substations have been damaged by the attacks–and hundreds of his employees have been killed. But he’s determined to stay in Ukraine and support his country.

By Kerry A. Dolan


Nearly a year ago, Ukraine’s richest person, Rinat Akhmetov, pledged to do everything he could to help his country fight back against the war launched by Russia on February 24, 2022, promising to spare no expense. Since then, attacks by Russian soldiers have not only led to an estimated 100,000 dead or injured in Ukraine, but also have laid waste to some of Akhmetov’s holdings in the country. Russian forces destroyed key plants owned by his mining and steel firm Metinvest and ravaged substations of his power generation firm DTEK. Worse still, 517 of his employees are among the dead and another 1,000 are injured.

Yet Akhmetov, the son of a coal miner who grew up in Donetsk, remains committed to repair the damage, win the war and force Russia to make reparations. Metinvest, he tells Forbes by email, is still operating, but in a diminished capacity. He says he’s continuing to pay his 150,000 employees and that his group, SCM, paid $2 billion in taxes in 2022. (He’s also got a superyacht on order that’s being built at a reported price tag of $500 million.) In addition, through his foundation, his companies and the Donetsk-based professional soccer team he owns, Akhmetov says he’s given $150 million in goods and services, including infrastructure repair and energy supplies. His companies have also produced nearly 200,000 bullet-proof vests and armored shelters for the Ukrainian army.

The 56-year-old billionaire, whose fortune dropped from an estimated $14 billion before the war to a current $4.3 billion, responded to questions from Forbes earlier this week from an undisclosed location in Ukraine. His answers, provided to Forbes Ukraine, a licensed edition of Forbes, are below.

How is the war going? Do you see an end to it and what would “victory” for Ukraine be at this point?

RINAT AKHMETOV: The war is going the way Putin has never expected. He did not expect that Ukraine could withstand. But Ukraine has held out, liberated half of the territory occupied by his criminal troops and is heading towards victory. He did not expect that the Western world would stand united: yet the West is united as never before in supporting Ukraine. It has been providing economic and military assistance and imposing unprecedented sanctions. He did not expect that Ukraine could survive the winter without electricity and heating.

Our people have not only restored the energy grid and survived, but also showed Putin that we will never stop fighting for our freedom. He thought that Ukrainians would shower him with flowers, but we have met Russian soldiers with guns defending every inch of our homeland.

A victory for me means to restore the territorial integrity of Ukraine within the borders of 1991, which includes Donbas and the Crimea. It means that we punish the aggressor state for its crimes against humanity, get reparations from Russia, and implement a new Marshall Plan for Ukraine as a member of EU and NATO.

How are you operating your businesses during this time?

The way business operates has not changed, the circumstances have changed significantly. The management and supervisory boards of our businesses work 24/7, addressing the most challenging problems of wartime: from repair work and energy supplies to production of hundreds of thousands of bulletproof vests and armored shelters for the Ukrainian army. Our companies operate under severe conditions, providing employment and paying salaries, ensuring financial stability, paying taxes, and meeting their commitments to investors. In 2022, SCM companies paid over US$2 billion in taxes.

How would you describe the state of your companies? One estimate is that Metinvest, your steel company, is operating at 30%-50% of its capacity. Is that accurate?

The state of SCM companies is the same as the state of Ukraine’s economy. It is dire. Part of Metinvest’s assets (Azovstal, Ilyich Steel and several other plants) have been severely damaged or temporarily occupied. The assets of our energy holding DTEK are exposed to constant shelling and Russian drone attacks.

At the moment, Metinvest operates at 30%-50% of its capacity because of the constant shelling and as a result of the occupation of the Black Sea area, including the ports. We continue to extract gas, coal and iron ore, generate electricity, produce steel and invest in the future. One of the latest events: the purchase of licenses for the development of a gas field in the Poltava region for a record US$26 million that was paid to the national budget. The licenses were purchased at a transparent auction by DTEK, an energy company that plans to invest over US$20 million in this particular field.

Are you able to pay your employees? How many do you have? Can you estimate how many have left Ukraine? And how many have died?

SCM Group employs about 150,000 people now. They all receive full pay. More than 13,000 have been conscripted to the army, territorial defense forces and National Guard of Ukraine. The most tragic thing is that the war has claimed the lives of 517 of our employees and has wounded another 1,000. We work unfailingly to provide financial aid and any other assistance to our injured employees and the bereaved families.

You decided to shut down your media operations and TV channels. Can you talk about why you did that?

Ukraine has enacted a law on ‘oligarchs’ I disagree with. I have repeatedly stated: I have never been and will not be an oligarch. Not to be categorized as an ‘oligarch’ under this law, I fully complied with the legislation and thus was forced to shut down the media holding, a sectoral leader with a twenty-year history, a talented team of 4,000 employees, and US$1.5 billion in investments. It would have been impossible to sell it in this situation.

You have directed resources from your foundation to help the people of Ukraine. How much have you directed and where has the help been most needed and most effective?

We are doing everything we can to help our military to hold the line, and civilians to survive. One year into the war, SCM businesses, my foundation and FC Shakhtar [the professional soccer team in Donetsk] have donated US$150 million in aid to help Ukraine and Ukrainians. Our assistance includes body armor, vehicles, equipment and fortifications for the Ukrainian Defence Forces, medicines and other humanitarian aid for civilians, and efforts to keep critical infrastructure up and running. Today, each of our businesses has its own front held by our brave employees.

For example, Metinvest has used in-house resources to develop and produce more than 100 armored shelters for Ukrainian combatants on the front lines. They can withstand hits from artillery shells. Also, we have started producing armored steel. Today, every tenth bulletproof vest in Ukraine is made of Metinvest steel. Overall, we have produced and handed over to the Ukrainian military about 170,000 bulletproof vests for free.

Moreover, I took the decision to allocate an additional US$25 million to help the military service members who defended Mariupol. This project is called the Heart of Azovstal and has already been launched. We will help Mariupol defenders and the families of the missing and killed soldiers, as well as the families of prisoners of war.

Have you been able to start rebuilding at all?

We continue to restore our facilities after Russian missile strikes every day, I mean our energy facilities in the first place. All Ukrainian power companies restore damaged and destroyed facilities, helping the country to get through the winter. We are preparing for the large-scale reconstruction of our assets in Mariupol and are involved in the Mariupol Reborn project, a concept to rebuild the city.

To do this, we need to restore full control over the entire Ukrainian territory and receive reparations from the Russian Federation, which is what our legal team is busy with now. In addition to the application that I have filed with the European Court of Human Rights, SCM’s assets affected by Russia’s aggression against Ukraine have filed more than 60 claims with the ECHR. Our demands are clear: recognise that the actions of Russia violate the European Convention on Human Rights; and make Russia pay fair compensation. We are confident that we are right and we hope that the Court will make fair judgements in favor of Ukrainian applicants.

We have only begun to file claims against the Russian Federation. The ECHR [European Court of Human Rights] is the first institution where we seek justice, and we are going to file claims with other organizations. Russia must be held accountable for everything it has done since 2014 in the breakaway Luhansk and Donetsk regions, as well as for the actions of the terrorists controlled by Russia. We’re going to make updates on our additional legal actions against the Russian Federation soon. Russia must pay in full for the war it has unleashed, the factories it has destroyed and the infrastructure it has damaged.

We are calling on all Ukrainian allies, including G7 countries, to engage with us to develop an effective international system that will enable us to seek reparations from Russia, including at the expense of its state-owned assets, as well as companies controlled fully or partly by the Russian government. This system must operate to the benefit of Ukraine and all those affected by the war in Ukraine, both civilians and businesses. We will do everything we can to ensure that Russia is held fully accountable to all Ukrainians, including financially.”

What would you like the American people to know about the current state of the war, and what that has meant for business in Ukraine?

The American people are well aware of this terrible and unjust war unleashed by Putin against Ukraine. The American people know what the fight for freedom is. The American people are helping Ukraine win this war. After all, this war is much more than Putin’s attempt to take over Ukraine. This is a war against freedom and human dignity, against democracy and the free world, against the world order and security. We defend both ourselves and you. The U.S. President Biden’s leadership and his visit to Kyiv is historic, and bipartisan support for Ukraine is unprecedented. I am grateful to the American people and their leaders for their tremendous help.

How are you spending your days now?

I am staying in Ukraine just like many other Ukrainian people. I have not left Ukraine for a day. I have the same feelings as all Ukrainians. I wake up and go to bed, thinking only of victory of Ukraine, and I do everything I can to bring it closer: from my morning conference calls to my daily meetings.

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