Energy Transition Digest: 13-19 May 2024

1. Dutch Coalition Slows Down on Climate

The new Dutch parliamentary coalition published a draft coalition agreement with key policy priorities of the new government.

In a nutshell. Concerning climate policy, just transition gets priority. The government will stick to the country's existing European commitments but will not add any further restrictions on a national level. Although the level of ambition is lower vs. that of the previous government, PVV's (winning party) most radical election promises, like withdrawing from the Paris Agreement or canceling the Dutch Climate Act, have luckily died in the process of forming the coalition.

Key policy changes in energy transition:

• Energy: wind power will be developed mostly offshore instead of onshore; four new nuclear reactors are planned; the Groningen gas field will remain shut, but gas production in the North Sea will be scaled up.
• Support for residents and SMEs in energy-efficient renovations of buildings.
• A requirement to replace gas boilers with heat pumps for owner-occupied homes and the announced increased CO2 tax will be canceled.
• Resolving grid congestion will be prioritized, with the government taking the leading role, including in prioritizing connection requests.
• The climate adaptation approach will be updated with special attention to impact assessment, freshwater management, and flood protection.

2. US Bans Uranium Fuel Import from Russia

US President Joe Biden signed the law prohibiting the import of low-enriched uranium produced by Russia or a Russian entity into the US.

So what? Despite sanctioning a wide range of companies after the Russian invasion of Ukraine, the US has so far avoided the nuclear power sector, as uranium fuel imports from Russia covered ~25% of the US domestic demand. With efforts to develop a domestic supply chain and find alternative sources abroad, the US is taking the next step in reducing dependence on Russian fuel.

Details:

• The law will kick in 90 days from signing and terminate in 2040, it will also unlock $2.7bn of support for domestic production of uranium fuel.
• Up until 2028, the U.S. Department of Energy (DOE) could waive the ban if it expects a disruption in the operation of a US nuclear power plant.
• In parallel, a new bill was introduced to put sanctions on Rosatom, Russia's state-owned nuclear energy corporation.

3. US Raises Tariffs on Chinese Clean Tech Goods

The US President announced an increase in import tariffs on a range of goods originating from China, including EVs, batteries, and solar cells.

So what? The measure is intended to support EV manufacturing jobs and the development of clean industries in the US (election is coming ??). However, the US imports few Chinese EVs, and China's dominance in clean tech supply chains could mean that tariffs will drive up the costs and harm the competitiveness of American manufacturing. China will respond for sure – let's watch.

Details:

• Tariffs will impact $18bn worth of goods (4% of imports from China to US).
• This year, tariffs will increase from 25% to 100% on EVs, from 7.5% to 25% on Li-ion EV batteries, from 25% to 50% on PV cells, and from 0 to 25% on some critical minerals. Changes will also.
• In 2025 and 2026, more tariffs will be introduced on semiconductors, batteries not used in EVs, graphite, and permanent magnets.

4. UAE Offers New Visa for Sustainability Talent

The UAE cabinet approved a "blue visa" – a new type of residency for people working on environmental protection, air quality, and sustainable technologies.

So what? As the UAE positions itself as a sustainability champion, it also aims to attract expats to work in this domain and scale new industries. The new visa regime is designed to attract and retain international talent.

Details:

• The blue visa will grant a 10-year residency to people who have made “exceptional contributions towards protecting the nation's environment" and those working on air quality and sustainable technology.
• It will not require sponsorship from an employer, which is seen as key benefit.

5. Mammoth Will Suck Carbon Out of the Air

Climeworks launched "Mammoth" – a direct air capture plant with the capacity of 36,000 tons CO2 per annum that is claimed to be the largest in the world.

So what? Direct air capture is seen as one of the technologies that could help achieve net zero. Its current costs are incredibly high (up to $1,000/ton or even $1,300 per ton of CO2 captured), and several companies, such as Climeworks, are working to bring these down through scale. And the degree to which the costs can be brought down is debated.

Details:

• The plant is located in Iceland and runs on geothermal power.
• The company plans to achieve 1 million tons of carbon removal capacity by 2030 and further scale to 1 billion tons by 2050.
• Climeworks is already working on a number of megaton-scale CO2 removal projects in the US, including those receiving US government support.