Equilibrium/Sustainability — Tesla transplants to Texas to trot out trucks

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Today is Friday. Welcome to Equilibrium, a newsletter that tracks the growing global battle over the future of sustainability. Subscribe here: thehill.com/newsletter-signup

Tesla will be transplanting its headquarters from California to Austin, Texas, where it will be building a new manufacturing plant, a move away from Silicon Valley that The New York Times described as a “blow to California.”

The company’s CEO, Elon MuskElon Reeve MuskElon Musk announces Telsa headquarters to move to Texas Why electric F-150s will not help the climate Russian film crew beats Tom Cruise in race to shoot first movie in space MORE, made the announcement at a shareholder meeting on Thursday, fulfilling a threat he issued about a year ago after pandemic lockdowns forced Tesla to pause production at its Fremont, Calif., plant, according to the Times. 

While Tesla plans to keep the Fremont facility, Musk said that “there’s a limit to how big you can scale in the Bay Area,” the Times reported. The Texas factory, minutes from downtown Austin and near an airport, will be manufacturing Tesla’s Cybertruck,  which the company hopes will rival Ford’s electric F-150 line, a second Times piece said. 

Today we’ll take a look at another rivalry: the fierce competition among countries scrambling to procure a limited — and very expensive — natural gas supply. Then we’ll follow that global energy crunch to China, where it’s causing leaders to rethink their potential climate agreements and recommit to coal.

For Equilibrium, we are Saul Elbein and Sharon Udasin. Please send tips or comments to Saul at selbein@thehill.com or Sharon at sudasin@thehill.com. Follow us on Twitter: @saul_elbein and @sharonudasin

Let’s get to it.

Europeans braces for cold winter as natural gas prices surge 

European countries are bracing for a cold winter amid surging natural gas prices. 

News of the anticipation comes as customers in Europe, Asia and Latin America are competing for a limited supply of the resource 

Prices escalated to new records in Europe and Asia this week while natural gas supplies plummeted to “alarmingly low” levels around the world, The Wall Street Journal reported. 

Demand for the resource has risen as economies recover from pandemic-related shutdowns, but that “squeeze has caught traders, shipowners and energy executives off guard,” according to the Journal. 

Aren’t price hikes normal? Yes and no. Energy companies pay wholesale prices to purchase gas and electricity, and these prices that can go up or down depending on supply and demand, according to a Reuters explainer piece.  

Price jumps in the winter are typically due to higher demand for heating and people turning on the lights earlier in the evening. But in the current situation, Reuters said “prices have sky-rocketed.” 

That’s been driven by uncharacteristically strong demand for natural gas in China and Latin America while Russia is tightening its supplies, the Journal reported. And as a result, European economies are especially suffering. 

What’s going on with Russia? Natural gas flow from Russia to Europe has been the subject of intense debate in recent months, as the country’s state-owned Gazprom has been slow to increase gas shipments there, another Journal piece said. Russian President Vladimir PutinVladimir Vladimirovich PutinMicrosoft report finds Russia dominant force behind cyberattacks in past year Global energy crunch spurs inflation and scares green lobby The Hill’s Morning Report – Presented by Facebook – Senate nears surprise deal on short-term debt ceiling hike MORE has apparently been “flexing his geopolitical muscles by signaling that he could help tamp down a growing crisis in Europe,” according to the Journal. 

“We can reach another record of deliveries of our energy resources to Europe, including gas” this year, Putin said, as reported by the Journal.

The New York Times described the situation for the Russian leader as “schadenfreude over Western European nations that he sees as unprepared.” 

What have been some immediate effects? Shippers are now diverting gas tankers to the highest bidder, while high energy prices have led manufacturers to slow production, and China and Europe are firing up far dirtier coal and oil plants, according to the Journal.

“The system has gone haywire,” Øystein Kalleklev, chief executive of Flex LNG Ltd., told the Journal.

THE ONLY END IN SIGHT: A MILD WINTER, OR A SHIFT IN RUSSIAN POLICY

Has this affected the U.S.? Although the U.S. is now the world’s largest producer of natural gas, it competes in the same global market as everyone else. As a result, the “bidding war” across the Atlantic and Pacific has driven up prices to their highest in the past decade, a reality that has set “the stage for an expensive heating season,” according to the Journal. 

About 61 million American households depend on natural gas to heat their homes, energy economist Mark Wolfe wrote in an opinion piece for CNN. Lower-income families will likely be the ones to struggle the most, being forced to make a choice among heat, food and medication, Wolfe said. 

Approximately 29 percent of Americans had to decrease or forego basic household expenses to pay an energy bill in the last year, Wolfe wrote, citing U.S. Census Bureau data

“And that was before natural gas prices started to rise,” Wolfe added. 

Are there any practical solutions? The Journal, citing energy traders, identified two factors that “could take the heat out of European prices,” neither of which Europe has much control over: A lengthy spell of mild weather that would reduce demand, or an increase in gas flow from Russia. 

Some analysts expect prices to remain elevated next year, although Russia has said that the certification of its Nord Stream 2 gas pipeline to Germany — which is awaiting authorization from a German regulator — could help hold down the rising prices, according to Reuters.

It may all come down to Putin. White House national security adviser Jake SullivanJake SullivanDefense & National Security — Troops secretly train with Taiwan as tensions with China continue CIA launches new center focused on China Biden, Xi to hold virtual summit by end of this year MORE told the Times on Thursday that Russia has a history of employing energy “as a political weapon.”

“Whether that’s what’s happening here now is something I’ll leave to others,” he added.

Energy shortage pushes China back to coal 

The United States and European Union are pushing the Chinese government to commit to more aggressive emission cuts, a move the Chinese have been hesitant to do, according to The New York Times. 

In fact, the Chinese are going in the opposite direction — They’re ordering their main coal mining provinces in Shanxi and Inner Mongolia to kick up production, as Reuters reported.

Why aren’t they cutting emissions? First, let’s be clear that no one involved in this debate has made meaningful cuts in emissions.

But in terms of commitments, the E.U. has committed to reach net zero by 2050, with around 55 percent cuts below 2005 levels by 2030. That’s roughly in line with what Biden and the Democrats are pushing for in the U.S., according to a White House fact sheet.

So far, China won’t match them: China’s Xi Jinping, by contrast, has said that Chinese emissions will not peak until 2030 and will not reach net zero until 2060.

That’s far too late, according to U.S. climate envoy John KerryJohn KerryGlobal energy crunch spurs inflation and scares green lobby Turkey becomes last G-20 country to ratify Paris climate agreement Overnight Defense & National Security — US attempts to mend ties with France MORE. “We hope China will join us in this effort to have serious enough reductions,” he said, according to Reuters.

That’s hard for the Chinese to do, in light of rolling blackouts that have sparked a rural backlash against China’s proposed…

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