Good morning from Geneva, and happy New Year.
Generative AI and geopolitics will continue to be big business stories in 2024. Let me add a third item to the “3G” trinity: the green transition.
2023 ended with a major global agreement. The UN climate summit in Dubai “snatched a remarkable victory from the jaws of defeat,” as Iberdrola chairman Ignacio Galan put it in a commentary piece for Fortune yesterday. Its final consensus was that the world needs to transition away from fossil fuels, triple renewable energy capacity, and double energy efficiency by 2030.
That pathway starts in 2024—and it won’t be easy.
Political opposition and regulatory hurdles in the U.S. and elsewhere remain high for renewable energy. The latter—specifically, the lack of regulatory approval—is one major reason why Galan’s Iberdrola announced yesterday that it’s walking away from one of the largest renewable energy deals ever in the U.S., the $8.3 billion takeover of PNM Resources. The other reason is the increased financing cost for renewable projects, which led to a crisis in the wind sector in 2023.
Corporations are set for fresh regulatory jolts in 2024. The SEC is expected to release its final corporate climate disclosures this spring after two years of delay due to corporate and political lobbying. Observers are waiting to see if the agency will require reporting of so-called “Scope 3” emissions, or those that occur along a company’s value chain. If it does, the U.S.’s largest companies will force millions of SMEs to reduce CO2 emissions. If the SEC omits Scope 3 emissions, the pressure on smaller suppliers won’t be as intense.
In Europe, large companies, including U.S. ones with major operations there, will have to start collecting climate data to comply with the EU Corporate Sustainability Reporting Directive this year. It will be one source of growth for the Big Four accounting firms. (CEO Daily readers polled in May 2023 weren’t yet aware or prepared for the new regulation.)
The U.S. Inflation Reduction Act gave the U.S. momentum in attracting green investments in 2023. If President Joe Biden wins re-election, IRA-like industrial policy that favors green manufacturing and energy is almost certain to endure. But if a Republican wins—whether it’s Donald Trump, Nikki Haley, or Ron DeSantis—the U.S.’s green energy transition will revert to square one, giving Europe an opportunity to reclaim the green investment advantage. Trump and Haley orchestrated the U.S. withdrawal from the Paris Climate Accord, and DeSantis signed Florida’s anti-ESG legislation. All of them have similar plans for the White House if (re-)elected.
Of all the sectors going green, the automobile industry stands out most as facing a potential turning point in 2024. In 2023, global EV sales continued to grow. But going into the new year, appetite in the U.S. and Europe for EVs is tapering off. One consequence is that just yesterday China’s BYD overtook Tesla as the world’s top seller of EVs. Another may be that traditional car companies temper their own EV transition goals.
More news below.
Peter Vanham
peter.vanham@fortune.com
@petervanham
