Transition Finance Weekly - November 21, 2024
Oil CEO for Energy Sec, NYC Clean Investing Leadership, Fire Insurance Regs
1. Fracking Exec for Energy Secretary Is a Walking Conflict of Interest
Expect “a machete rather than a scalpel” as the incoming Trump Administration goes after the IRA.
Donald Trump nominated Chris Wright, CEO of oil fracking company Liberty Energy, to lead the Department of Energy.
Wright’s on record saying “there is no climate crisis, and we’re not in the middle of an energy transition either.” Last year he testified to a House committee that rising global temperatures are not a problem.
Wright is a close friend of Harold Hamm, a Trump energy advisor who gave his campaign more than $5 million. They worked together to lead a climate-denier industry group, the Domestic Energy Producers Alliance, that pushes back against larger fossil fuel groups taking a rational approach to climate change.
Hamm is pushing to kill the IRA’s $7,500 electric vehicle tax credit in any new tax bill, and Wright would help. This wouldn’t kill the EV industry outright, but it would be a blow to competition, likely giving Tesla a leg up over legacy automakers that currently have lower market share.
2. NYC Comptroller Wins Climate Disclosures from JPMorgan Chase, and NYCERS Joins Net Zero Alliance
Lander takes action to “reinforce our commitment to sustainable investments that protect our retirees’ futures.”
New York City Comptroller Brad Lander, who oversees the city’s massive pension funds, used NYC’s power as a shareholder to negotiate agreements with JPMorgan Chase and other big banks earlier this year to begin disclosing their clean energy ratios. Now we’re seeing the data start to flow: last week, JPMorgan reported a $1.29 clean-energy-to-fossil-fuel ratio. RBC and Citi have agreed to disclose, too.
According to JPMorgan, the company will finance $2.5 trillion in sustainable development by 2030, with $1 trillion earmarked for climate solutions. But JPMorgan still finances $430 billion in fossil fuel projects around the world, including many that harm frontline and indigenous communities. And it’s gone back on promises before: it promised not to fund a coal project, then underwrote its operators anyway.
Also last week, Lander brought NYCERS, New York City’s largest pension system, into the UN-convened Net Zero Asset Owner Alliance (NZAOA). NYCERS has already adopted a 2040 net zero goal with an implementation plan to match. In NZOAO, NYCERS joins 89 big investors like CalPERS and the David Rockefeller Fund that have publicly committed to align with Paris Agreement goals.
3. The Fed Is Slowing Climate Progress in Central Banking
When the U.S. waters down global climate reporting rules, it drags the whole world backwards.
The U.S. Federal Reserve is refusing to endorse the Basel Committee framework that would require lenders to disclose climate risks. Fed Chair Jerome Powell has called it a “big mistake” to expect bank regulators “to lead the fight on climate change.”
The Basel Committee has already watered down the proposal significantly to accommodate U.S. concerns, and are pushing to finalize efforts in the first half of 2025 despite the uncertainty.
Meanwhile, in the rest of the world, financial regulators are doubling down. The European Central Bank has promised to fine lenders unless they address climate risk, and central banks in China and India are requiring disclosure, too.
4. California Tries to Address the Wildfire Insurance Crisis
Lara moves to finalize regulations to help stabilize the state’s insurance market, but industry watchers worry the new policy falls short on affordability and risk reduction.
With premiums spiking, policies hard to get, and property insurers pulling out of the state, California Insurance Commissioner Ricardo Lara has released a regulatory proposal that would restructure the wildfire risk balance.
Under the proposal, insurers can incorporate catastrophe models into ratemaking decisions for the first time, if they commit to increasing their policy offerings in wildfire-prone areas. While the policy change may lead to increased coverage availability, consumer groups worry that without stronger requirements, there is no guarantee that policy availability will increase to promised areas — and none that policies, even if offered, will be affordable to homeowners.
A positive detail: qualified catastrophe modeling must take investments in risk reduction into account, acknowledging the progress the state has made in pressing property owners and communities to make improvements that reduce the risk of fire damage. Also part of the conversation: the development of a first-of-a-kind public risk model, which will be an important tool to evaluate proposed rates and ensure ratemaking fairness.
Moira Birss, Climate and Community Institute fellow and lead author of a comprehensive risk framework proposal: “These measures could (emphasis on may!) lead to more insurance availability, they are no guarantee of availability, let alone of affordability…. ”
5. Congestion Pricing Returns in New York, with a Toll Reduction
The program the governor paused in June will start in January, and emissions and traffic reductions will follow immediately.
New York Gov. Kathy Hochul has ended her six-month “pause” of the nation’s first congestion pricing program, enacted into law in 2019, to reduce pollution, congestion, and vehicle miles traveled (VMT) in New York City. All the revenue will go toward capital improvements and expansion of the MTA, North America’s largest transit system.
Typical drivers entering the Manhattan congestion zone will pay $9 a day (a 40% reduction from earlier plans), with a lower overnight rate and some exemptions and credits. Tolls are expected to reach the original $15 by 2030, to support billions of dollars in transit financing.
Reducing driving is key to fighting climate change, and like carbon pricing and other market mechanisms, New York’s toll will keep drivers from entering America’s most congested urban zone. Similar programs elsewhere have outperformed expectations: Stockholm’s cut carbon emissions by up to 3% and reduced urban pollution by up to 15%. London’s cut nitrogen oxides by 35% and particulates by 15%.
Danny Pearlstein of Riders Alliance, which sued Hochul over her “pause”: “[W]e are not breathing easy until the first tolls are collected, right? We've seen a lot of false starts, and we’ve seen some false promises.”
