Tag Archives: climate
Carbon’s Unburnable Truth
21/03/13 The coal industry has made a feeble attempt to pop the concept of the carbon bubble and its investment consequences. The Australian Coal Association commissioned Alan Oxley to examine The Climate Institute and Carbon Tracker’s recent research into Australia’s Unburnable Carbon. Oxley attacked the carbon bubble concept in the AFR yesterday. If you accept the science of climate change, the carbon bubble concept is based on a simple unburnable truth. There is a limited budget for the heat trapping greenhouse gases we can put in the atmosphere to avoid global warming goals. Our research, and that of the International Energy Agency amongst others, examines the budget in terms of the goal that Australia, China and the US amongst over 190 other countries have agreed upon, of avoiding global warming of two degrees. This research is not the realm of radicals or “extremists” as the Minerals Council of Australia would have it. Two years ago the now CEO of Anglo American Mark Cutifani said “… the global carbon budget makes simple logical sense.” Investors like Warren Buffett and Jeremy Grantham have embraced the concept and begun applying it. Just last week investors representing $22.5 trillion held an historic summit in Hong Kong focused on their role in avoiding the economic costs of dangerous climate change and launched a new global low carbon investment register. Central to Oxley’s arguments is that national governments are unable or incapable of organising to avoid two degree warming and that investors should stick to their knitting and avoid public interest goals not supported by policy. In Oxley’s report he makes the old short-termist argument that the job of business is to maximise profits within current policy. This ignores the very real interest that investors such as superannuation and insurance funds should have, and are beginning to take, in the consequence of their investments. These funds are both legally obliged to manage funds for long term outcomes and invest in a range of asset classes that will take, and arguably are already taking, climate hits. They are awaking to the fact that their old ways of investing actually add to the risks they are now attempting to manage. Limiting average global warming to two degrees above pre-industrial levels is an extremely challenging task especially as there is already almost one degree warming with 1.4 degrees locked in by lag effects. There are however a number of social, political and technological scenarios where effective action to avoid two degrees warming will be taken. We don’t pretend to predict the exact course, but the International Monetary Fund and the World Bank – hardly a bunch of left-wing greenie extremists – are warning of the economic consequences if we don’t. Global leaders at the G8 concluded its meeting two days ago with a communique restating their commitment to this goal noting “climate change is one of the foremost challenges for our future economic growth and wellbeing.” The history of financial bubbles, such as the dot.com and sub-prime mortgage bubbles, is based on the assumption of never ending demand. History has shown those assumptions to be high risk indeed. All bubbles are theories until they crash. This bubble rests on very solid foundations of basic carbon physics and budgets. Contrary to Oxley’s claim yesterday, nowhere does the IEA say there is “little risk” of stranded assets for the coal industry. The IEA report does say that, for its two degree scenario, “more than two thirds of current proven fossil-fuel reserves are not commercialised unless carbon capture and storage is widely deployed.” The prospects of that are not good at the moment – the prospects of a bubble are therefore real, exposing as bizarre the report’s claims that a mining company’s reserves of fossil fuels are disconnected to its valuation by the market. It should be noted that The Climate Institute can hardly by labelled as ignoring the importance of carbon capture and storage. We have repeatedly called on industry and government to speed up the technology’s deployment, and have been public on why Australia and the world should pursue it. The ACA on the other hand appears in retreat, turning its billion dollar Coal21 fund, previously focused on low emissions technology into a vast slush fund now also able to “promote the use of coal.” Finally, our analysis challenges current valuation methods but does not, as Oxley’s report falsely asserts, call for full divestment. Our call is for far greater consideration and disclosure of carbon and climate risks from investors, as well as greater investment in low carbon solutions. In that we are joining and being joined by a swelling rank of NGOs investors and regulators. Denying the concept of the carbon budget is like denying climate science. That is carbon’s unburnable truth. This article was originally published in The Australian Financial Review (online). Republished with permission of the author. John Connor is CEO of The Climate Institute. Read more: http://www.businesss…h#ixzz2WrSQmCwt Continue reading
Explainer: China Carbon Trading Schemes Kick Off
By Erwin Jackson on 18 June 2013 The first of the seven planned Chinese pilot emission trading schemes, in Shenzhen, is to be launched today. While China has been indirectly pricing carbon for years, this scheme will be its first mandatory carbon market. Second largest emissions trading scheme in the world Pilot emission trading schemes are planned to start this year in Beijing, Chongqing, Guangdong, Hubei, Shanghai, Shenzhen and Tianjin. These pilots are expected to cover around 700 million tonnes of CO2-e by 2014, which is a fraction of China’s total emissions, yet are still very significant. By comparison, Australia’s carbon price covers around 380 million tonnes, California’s 165 million tonnes and Europe’s 2.1 billion tonnes. (See Table 2 for comparison with Australia.) China plans to implement a national scheme around 2016 based on the lessons learned from the pilot schemes. China is implementing a range of policies to address climate change, energy security and air pollution. If projections are accurate, these policies (see list of efforts on page 2) since 2005 will deliver a reduction in emissions of 4.5 billion tonnes of CO2 in 2020. This would be the largest single absolute reduction for any country in the history of action on climate change, and would equivalent of closing 1,000 500MW coal-fired power stations for a year. Note also that China’s unabated appetite for coal is overstated. China has been the world’s largest investor in coal over the last decade but the nation’s energy use is undergoing significant change. In 2011 coal plant investment was less than half of what it was in 2005. Inefficient coal generation have been progressive closed and last year coal consumption grew only 2.5 per cent compared to nearly 12 per cent in 2011. Renewable energy accounted for over 19 per cent of generation in 2012 and combined with nuclear, accounted for over 90 per cent of all electricity generation growth last year. Spotlight on Shenzhen Shenzhen is one of the China’s Special Economic Zones, located next to Hong Kong. It is home to around 11 million permanent residents. The region is seeking too to build an advanced carbon finance centre. In 2011, its GDP was around $178 billion and per capita incomes were around $17,000. Total emissions are estimated to be around 83 million tonnes in 2010 (compared to around 570 million in Australia). Rules will differ between the pilot schemes to allow China to experiment with different emission trading scheme designs (see table 1). Shenzhen has committed to reduce the emissions intensity of its economy by 21 per cent below 2010 levels by 2015. Like the schemes in other major economics, Shenzhen’s market has an absolute emission limit. This is around 32 million tonnes. This distinguishes it and other schemes from New Zealand’s emission market or the Coalition’s Emission Reduction Fund, which do not have a regulated cap on emissions. The scheme will cover all companies with emissions over 20,000 tonnes of CO2-e and around 40 per cent of total emissions. It covers 26 sectors, including electricity and natural gas, water supply and industrial manufacturing. Initially emission permits will be allocated to companies for free but this will be progressively reduced through time and income from the carbon price to be used to support the development of new carbon reduction technologies and projects. Companies that pollute more than they are allowed will have to buy credits from those that reduce emissions below their targets. Companies will be charged three times the market price for each tonne of CO2 they emit over their cap if they fail to deliver enough credits. It is unclear at this point whether carbon prices for traded units will be public in the short-term. Reasons for action Chinese officials have cited numerous reasons for their climate action, including an effort to build energy security, reduce air pollution, foster new industries and contribute to global emission reductions. China’s significant investment in clean energy, for instance, has helped the emerging economy leapt ahead of countries like the United States in its ranking among the G20 nations in its ability to compete in a global low carbon economy. This year China ranked 3rd, up from 7th last year. If China had not increased its clean energy investments, it would be in 8th place. Renewable energy in particular has had exponential growth. From having virtually no industry in 2005, China now has the largest installed capacity of wind power in the world and is the world’s largest producer of solar modules. China is now the world’s largest investor in renewable energy with around $65 billion invested in 2012. Between 2009 and 2011, China invested more money in renewable energy than it did in coal fired generation. Is it enough? Despite China’s recent efforts under current energy projections, emissions and coal use will keep growing until at least 2020. This is not inconsistent with a world seeking to avoid a 2°C increase in global temperature as long as an emissions peak by around this time. Erwin Jackson is Deputy CEO of The Climate Institute Continue reading
Obama’s Climate Change Policy ‘Coming Soon’
June 17, 2013 President Obama has reportedly told Democratic Party donors at closed-door fundraisers that he will unveil a new climate change plan in July, with separate actions that could potentially address the Keystone XL oil sands pipeline project and the EPA’s emissions guidelines for new and existing power plants. The White House is still working out the policy proposal, The Hill reports. The EPA in April postponed rules to regulate greenhouse gas emissions from new power plants — proposed more than a year ago — after the power industry objected. The EPA has also been working on guidelines to curb emissions at existing power plants, which will be proposed in the next 18 months, and may be part of the new climate change policy, Bloomberg reports. Green groups and some Democrats have been pushing the Obama administration to set clear limits on coal-fired plants, but the White House and the EPA have not given a timeline for launching such action, The Hill says. Pipeline proponents have warned against combining approval for the pipeline with new climate change guidelines, while environmental activists oppose a climate change policy that allows the pipeline to go ahead while proposing separate emissions curbing guidelines. President Obama has warned he will take executive action if Congress does not pass the climate change law, but the prospects of a Congressional consensus appear remote, The Hill says. In March, manufacturers said they were “very freaked out” by reports of new climate change standards . Earlier this month, some 22 US investment firms with about $240 billion in assets under management signed the Climate Declaration , calling upon federal policymakers to address climate change as an economic opportunity. These financial firms join more than 150 other US businesses, including General Motors , Intel and Nike , and more than 100 ski areas in backing the Ceres-led initiative that asks lawmakers to draft legislation and regulatory initiatives to reduce carbon emissions and incentivize renewable energy development. Continue reading
