Energy Transition Digest: 6-26 January 2025

1. Make America [Exit Paris Agreement] Again

Donald Trump was sworn in as the 47th President of the United States.

So what? His views on energy and climate policy are very different from those of his predecessor. While it will not immediately stop the energy transition in the US, the speed of the transition may slow down due to changes in regulation and reallocation of government spending. Besides, global climate diplomacy has lost a powerful actor, at least for the next four years.

Details. During his first days in office, Donald Trump changed many things. He:

• Withdrew the US from the Paris Agreement;

• Suspended offshore wind leasing and permitting;
• Eliminated "EV mandates", i.e., pollution restrictions and fuel economy standards;
• Eased restrictions for oil, gas, and mineral development in Alaska;
• Lifted the ban on the sale of drilling rights in Federal waters;
• Resumed review process for LNG export projects;
• Announced massive investments in AI infrastructure likely to support gas & nuclear power.

While these measures might still take years to implement, it's clear that the US is changing course on its energy policy.

2. Global Warming is Too Close for Comfort

World Meteorological Organization reported 2024 to be the hottest year on record, with warming at 1.55°C above pre-industrial level.

So what? 1.5°C is the ambitious target of the Paris Agreement (2°C is the baseline target), and it's clear we have failed to achieve it. What's worse, we are not even close to the desired emissions reduction trajectory.

There will be no further details to this piece of information. Just let it sink in.

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3. What the Future Holds

It's the beginning of the year, and everyone pulls out their crystal ball to make "What to expect in 2025" predictions.

So what? It's a temperature check for the energy sector, so let's look at a few interesting ones:

• Bloomberg Green thinks solar installations will slow down because of grid constraints, climate tech startups will redomicile away from the US, arctic regions will play a more important role, and deep-sea mining will gain momentum (+11 other forecasts).
• ??Redefining Energy podcast makes a bold prediction: a fall of a regime in either Russia or Iran and subsequent reopening will unleash a massive demand for energy that can't be met within tight supply chains, and it will be a massive catalyst for energy innovation (+5 more).
• Rystad Energy expects that the CCUS market will grow thanks to policy support, while US shale oil producers will hold back expansion plans despite the Trump administration policies, and the hydrogen sector will go into a downturn (+9 more).
• ...and everyone, EVERYONE, talks about the rise of AI and nuclear power.

4. UAE Enacts Emissions Reporting Legislation

Major GHG emitters in the UAE must now report their Scope 1 and 2 emissions – the legislation requiring this came into force on December 28, 2024.

So what? UAE is the first country in the Middle East to introduce such legislation. Moreover, it opens the way for the eventual introduction of a compliance market and integration with other national and international systems (see below).

Details:

• All companies with GHG emissions higher than 500 kt CO2-equivalent per year must implement a monitoring, reporting, and verification (MRV) system.
• Small print: the law introduces "The National Register for Carbon Credits," which may be used for carbon trading and to demonstrate compliance with carbon border taxes (!).
• Some people are concerned that introducing MRV requirements might lead to some degree of carbon leakage when companies relocate their production to other GCC countries.

5. EU Omnibus Legislation Under Fire

European Commission is about to introduce an 'Omnibus Legislation' to change several laws at once, particularly the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the EU Taxonomy Regulation.

So what? While the omnibus aims to simplify the complex set of sustainability regulations passed recently, EU businesses have already started to comply with the existing regulation, and changing the implementation rules mid-way creates uncertainty and unnecessary administrative load.

Details:

• "Omnibus simplification package" will be published on 26 February 2025.
• The process allows the EU legislative bodies (the European Parliament and Council of the EU) to introduce amendments, potentially scaling back requirements set previously.
• The initiative has already caused a significant backlash among businesses and NGOs.

Other News Headlines:

• International Energy Agency (IEA) published "The Path to a New Era For Nuclear Energy."
• Masdar (Abu Dhabi Future Energy Company) and EWEC will develop a 5.2 GW solar PV plant with 19 GWh battery storage to provide 1 GW of uninterrupted load.
• aramco and Ma'aden will form a JV to explore and mine transition metals, notably lithium.
• Energy (boosted by AI) overtakes transport in climate tech investments amid overall decline.