Energy executives and Biden administration officials in Houston had a simple message for Europe and other regions griping that US climate spending will starve them of investment: Stop complaining and put up the cash to enact measures of your own.
In a standing-room-only luncheon address at the CERAWeek by S&P Global conference, Energy Secretary Jennifer Granholm boasted the newly enacted infrastructure law and Inflation Reduction Act (IRA) have made the US “irresistible” for clean energy investments. The more than $360-billion in support for clean energy and advanced manufacturing — as well as preferences for domestic content — have provoked tensions with allies including the European Union
There’s nothing wrong with “a little friendly competition,” she said. “As we keep saying, have at it. You should do the same thing. You should incentivize the production of clean energy in your country as well.”
Democratic President Joe Biden’s signature climate and infrastructure laws received almost universal praise from the world’s top fossil fuel executives at the conference, as they struck a more confident tone than in years gone by.
A year of energy shortages, volatile prices and recalibrating the global supply chain following Russia’s invasion of Ukraine has underscored the enduring importance of oil and gas, even as the world attempts to transition to cleaner fuels.
The billions of dollars of fiscal incentives baked into the IRA mean the world’s biggest energy and industrial companies now view the US as the most attractive place to build renewable, carbon capture, and hydrogen facilities. That’s a problem for allies in Europe, Canada and elsewhere who are now playing catch-up to attract the capital for large-scale clean-energy projects.
“My speech to European leaders is: Don’t complain, do the same,” said Patrick Pouyanne, CEO of Paris-based TotalEnergies. The IRA is “exactly what we need to do” to accelerate the energy transition. “We say to European governments, since you want us to invest in Europe, you have to put the same incentive schemes as the US, or even more.”
Exxon Mobil CEO Darren Woods said the EU first needs to scrap a “punishing” windfall profits tax on oil companies that will wipe out years of profits from recent investments in its European refineries. As a result, the Texas oil giant has “stepped back and reevaluated” in Europe and is investing more in the US, he said.
EU leaders appear concerned. The war in Ukraine and the withdrawal of Russian gas have supercharged the continent’s push toward clean energy but the long-term strategy could be under threat with companies like Tesla Inc. and Volkswagen AG now prioritizing investment in the US. “Europe’s competitiveness and resilience is in danger,” the EU’s internal market authority said in an initial assessment seen by Bloomberg.
A clean energy arms race would be welcome, said Meghan Nutting, executive vice president of government and regulatory affairs at Sunnova Energy International.
“For years, Europe was asking us to do something to meet the Paris climate agreement requirements, and we finally did, and now they’re worried we’re doing that,” she said on a panel Monday.
It’s not just the sheer size of the IRA that has won the backing of energy leaders, but also its simplicity. Big and small companies alike can access funds, and projects don’t have to wait years to redeem tax credits. Crucially, the legislation comes with few punitive measures that affect the industry’s cash cow, oil and gas.
The IRA is “all carrots, no sticks,” Alex Pourbaix, CEO of Cenovus Energy, said in an interview, picking up a metaphor that’s become ubiquitous at the conference. Pourbaix called on Canada to adopt similar legislation, which he says would accelerate the decarbonization of the country’s oil sands. Australian and Japanese executives also expressed admiration for the IRA.
“If we don’t we’re just going to see that capital flee the country and go to the US,” Pourbaix said.
The full-throated praise for the IRA marked a sharp contrast with recent sniping between oil executives and Biden, who has criticized them for not investing more in production and instead funneling profits into share buybacks.
In Houston, both sides seemed content to accentuate the positive. White House climate adviser John Podesta, a vocal climate hawk, used an appearance at the event to announce new plans to reduce permitting time on major projects, a major concern for energy producers.
Granholm’s rousing address also was well-received, a sharp contrast to her speech last year at the event, when she implored the gathered executives to do more to step up production in the face of energy shortages stemming from Russia’s war with Ukraine.
This time, Granholm stressed that the oil industry can bring its know-how to US investments in clean energy development that will yield worldwide benefits — including lower costs — far beyond American borders.
“We make no apologies for the level of investments that are happening,” Granholm said. “We don’t want to stoke trade wars or anything like that, but we are serious about bringing back supply chains into this country.”