Calculating climate risk

Presented by Williams

With help from Ben Lefebvre

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Quick fix

— Climate change poses a significant threat to the financial system, the Biden administration declared today, outlining a roadmap for protecting the U.S. economy.

— Democrats are vowing climate provisions won’t get cut from their reconciliation bill as the party trims the package to meet a lower topline.

— The Biden administration is sending many of its heavy hitters to Scotland for COP26, signaling that it’s ready for an all-of-government approach to climate change.

HAPPY FRIDAY! I’m your host, Matthew Choi. Congrats to Drew Veysey of Georgetown University for knowing Sarvepalli Radhakrishnan was president of India when Indira Gandhi first became prime minister. For today’s trivia: Where is Sun Yat-sen buried? Send your tips and trivia answers to [email protected]. Find me on Twitter @matthewchoi2018.

Driving the day

WATCH THE MONEY: The Biden administration is declaring climate change a threat to the stability of the financial system today, paving the way for potential regulation to protect the economy and the assets of everyday Americans, Pro’s Lorraine Woeller reports. The administration is releasing a roadmap on how to safeguard the financial system from climate risks, and the Financial Stability Oversight Council is scheduled to release a climate report on Monday.

The roadmap includes using government purchasing power as a path to mitigating long-term climate risks, and the administration’s fiscal year 2023 budget will factor in the federal government’s climate risk exposure. Climate risk will also become a part of agencies’ budgets and financial reports.

“The term ‘systemic risk’ carries a lot of weight,” White House climate adviser Gina McCarthy told reporters. “Its inclusion in this road map reflects our belief that many financial models and investment portfolios still rely on outdated assumptions of climatic stability.”

The private and public sectors alike are increasingly aware of the threats climate change can have on their bottom lines. The Labor Department proposed a new rule that would allow financial planners to consider more environmental and sustainability risks for retirement funds, and several of the largest banks signed onto a voluntary framework on climate risk. Read more from Lorraine, who has been following government and corporate ESG efforts.

On the Hill

CLIMATE TO THE CORE: House Speaker Nancy Pelosi has a message for climate hawks warily watching negotiations on the reconciliation bill: “We will have what we need in terms of the climate provisions.” Speaking at a San Francisco event Thursday, Pelosi said climate was “central” to the package, and there’s general uniformity among Democrats in the Senate that climate is a non-negotiable target in the bill that also covers health care and social services, ME alum and POLITICO Congress Minutes author Anthony Adragna reports.

The wildcard, of course, is Sen. Joe Manchin, who has called on his colleagues to not get carried away on climate at the expense of energy and economic security. Democrats are considering tweaking the Clean Electricity Performance Programto lay a path for natural gas and coal generation to be included as Manchin requested, so long as they have carbon capture technology to mitigate emissions.

Senate Progressives are standing firm that climate must be a central pillar of the bill, repeating the refrain “no climate, no deal,” particularly as Democrats hope for a deliverable to present to the global community at COP26 (more on that later). What’s less clear is whether that means climate provisions will be fully funded and included at the expense of other items, or if the bill will still cast a wide net but with truncated timelines.

House progressives made their case in a letter to Pelosi on Wednesday: “If given a choice between legislating narrowly or broadly, we strongly encourage you to choose the latter, and make robust investments over a shorter window,” adding that doing so would have immediate benefits for more people.

And House Natural Resources Chair Raúl Grijalva wrote to President Joe Biden this week urging the inclusion of his committee’s reconciliation text in the final bill, saying pollution mitigation and restoration are equally important to addressing climate change as switching to clean energy.

WINTER IS COMING: EIA released a report Wednesday warning of higher heating costs this winter compared to last year as global fuel prices balloon and weather forecasts show colder temperatures. It’s causing Republicans to reiterate concerns they have with the Biden administration’s energy policy, particularly regarding its approach to fossil fuels.

Republicans on the House Energy and Commerce Committee wrote to Energy Secretary Jennifer Granholm on Thursday pressing for details on how the administration would alleviate higher prices going into the winter. Some of their questions mirrored GOP attack points on the administration, casting it as hostile to fossil fuels and putting U.S. energy independence at risk. They also reflect the concerns of U.S. oil and gas producers after the administration made overtures to OPEC+ to increase output to relieve rising fuel prices while also embracing policies the industry viewed as hurting domestic producers, such as a pause on new federal oil and gas leases earlier this year. Read their letter here.

In response to the letter, a DOE spokesperson emailed ME: “The US is monitoring global energy market supply and will take a whole of government approach to determine if and when actions are needed to protect American consumers. You can’t turn the economy, or specifically oil rigs, back on overnight. This situation underscores that we must diversify our energy and fuel sources, and we must invest in and deploy clean energy solutions at home, and around the world.”

And a host of Republican state attorneys general wrote to the Senate Energy and Environment committees pushing back against plans for methane fees on oil and gas operations, saying they could exacerbate fuel prices going into a high-demand winter season. “We support reasonable and lawful measures to reduce methane emissions. But a de facto tax administered through an onerous administrative regime is not that. We urge you to reject any methane tax and save American energy consumers from ever more painful price increases,” they write in a letter led by West Virginia Attorney General Patrick Morrisey.

Around the Agencies

THE GLASGOW CLUB: The Biden administration is going all out in its delegation to the U.N.’s climate conference in Glasgow, Scotland, next month. Biden himself plans to pop in for the first two days after wrapping up the G20 meeting in Rome.

The U.S. delegation will also include climate envoy John Kerry, national climate adviser Gina McCarthy, Secretary of State Tony Blinken; EPA Administrator Michael Regan, Interior Secretary Deb Haaland, Granholm, Transportation Secretary Pete Buttigieg, Treasury Secretary Janet Yellen, Agriculture Secretary Tom Vilsack, USAID Administrator Samantha Power, National Oceanic and Atmospheric Administration Administrator Rick Spinrad, White House Office of Science and Technology Policy Director Eric Lander and National Economic Council Director Brian Deese.

That’s a hefty roster and intentionally so — the White House wants to demonstrate that it’s taking an all-of-government approach to addressing climate change and that it’s serious about the issue. This year’s COP will be an opportunity for the administration to convince the world that the U.S. can lead on climate after four years of withdrawal under President Donald Trump. Having such an expansive cohort will certainly help with the optics — especially if Congress can’t get major climate legislation past the finish line in time for the summit. Zack Colman has more for Pros.

Meanwhile, Kerry told the AP that Glasgow probably won’t be where the world solves all its climate problems although he claimed not to be lowering expectations ahead of the summit. While Kerry lauded the U.S., Europe and Japan for moving the needle on climate, he acknowledged there’s a ways to go in bringing other high polluters on board. He didn’t name China specifically, but the world’s largest carbon emitter has been a major target for Kerry in his earth-circling effort to enhance emissions commitments. “By the time Glasgow’s over, we’re going to know who is doing their fair share, and who isn’t,” he said.

The US climate envoy also compared a possible failure by Congress to pass significant climate legislation to President Donald Trump pulling out of the Paris climate agreement although he expressed optimism that the federal legislature would come through.

Related: “U.N. chief slams shipping and aviation for lackluster climate efforts,” via POLITICO Europe’s Mari Eccles, Hanne Cokelaere and Karl Mathiesen.

THE CLIMATE POPE: Just before showing up in Scotland, Biden plans to attend the G20 summit from Oct. 30-31 in Rome, with a quick stopover at the Vatican to meet Pope Francis. It’ll be the first time America’s second Catholic president meets the Pope as president, and they plan to touch on tackling climate change along with a host of other issues. The Pope has been outspoken on climate issues, signing onto an unprecedented statement last month with the Ecumenical Patriarch of Constantinople and the Archbishop of Canterbury demanding action to stop climate change.

SAUDIS IN TOWN: The Biden administration continues to talk with Saudi Arabia about energy prices, one of the pointiest inflationary thorns in the administration’s side. Saudi Foreign Minister Faisal bin Farhan Al Saud in a statement before his meeting Thursday with Blinken said the two would “talk about regional security and how we can work together on that, but also ... climate change, energy, recovery from COVID-19.” State Department spokesperson Ned Price told reporters before the meeting the administration is “constantly engaged in diplomacy with OPEC member states and having these discussions expressing our concerns with current energy prices.”

A big part of that convo is sure to be OPEC’s reluctance so far to increase oil production even as gasoline prices in the U.S. continue to rise. Political opponents keep hammering the administration to do something about prices and supply chain issues - FOX News painted Biden as a Grinch stealing Christmas - even as market analysts paint a global economic picture too complicated for any one government to control when it comes to recent price increases. Only two things would will really bring fuel prices down in the short term, Janus Henderson Investors Research Analyst Noah Barrett told ME: OPEC increasing production or another COVID variant incapacitating the economy and crashing fuel demand.

“OPEC still is sitting on a meaningful amount of barrels that are being curtailed,” Barrett said. “From an OPEC standpoint, I’m not sure what their trigger is, if it’s $85 dollar oil, $90 dollar oil. I would think it’s some point if there were that higher oil price actually leading to demand destruction, that may be a catalyst for them to want to accelerate the return of those curtailed volumes back into the market.”

Kerry plans to visit Saudi Arabia as well as Mexico before COP26.

Advocacy

GREENS SEEING RED: A coalition of environmental and Indigenous rights groups will continue demonstrating in front of the White House this morning before taking their message to the Capitol. The groups, which includes the Indigenous Environmental Network, Oil Change International, Gulf Coast Center for Law & Policy and others, have been meeting outside the White House since Monday demanding the Biden administration stop the Line 3 pipeline — which earlier this month began transporting oil— and in general take more unilateral action to wind down U.S. production of fossil fuels.

Thursday’s event culminated in a group of protesters occupying the Interior Department headquarters, a move that the department said resulted in one security official being sent to the hospital. Despite the groups’ complaints, the Biden administration has made some major announcements in the past week. Interior Secretary Deb Haaland on Wednesday announced a major increase in the department’s plans for establishing offshore wind power leases, while Biden himself moved last week to establish the larger borders around Bears Ears and other national monuments that the Trump administration had rolled back. But there was a strong sense of dissatisfaction with the pace of change otherwise.

The Grid

— “Prince William: Let’s focus on saving Earth, not exploring space for new planet to live on,” via The Washington Post.

— “As Western Oil Giants Cut Production, State-Owned Companies Step Up,” via The New York Times.

— “Germany to slash renewable power fee to ease burden of higher energy bills,” via Reuters.

— “LyondellBasell companies agree to pay $3.4M fine after feds allege illegal air pollution,” via The Houston Chronicle.

— “U.S., Texas reach settlement with DuPont, PMNA over alleged environmental violations,” via Reuters.

— “IEA: Increasing global climate ambitions projected to price out Canadian oil,” via POLITICO.

THAT’S ALL FOR ME!