Tag Archives: climate
Climate Change: Let’s Bury The CO2 Problem
We can’t stop fossil fuels being burned: but we can easily act now to capture and store carbon with CCS technology Myles Allen The Guardian , Wednesday 5 June 2013 22.05 BST The carbon capture unit at Longannet power station, Scottish Power’s test project that will see CO2 emissions extracted from the coal-fired power plant. Photograph: Murdo Macleod How often have you read that we have a once-in-a-generation opportunity to solve the problem of climate change – shortly followed by frustration and disappointment? People might expect me, as a climate scientist, to be disappointed by the failure of the attempt by the MP Tim Yeo to set an ambitious decarbonisation target in Tuesday’s debate on the energy bill. But I’m not. Not because I don’t think it is possible, or even desirable: get climate policy right, and I believe we will have largely decarbonised the UK power sector by 2030. And the UK, having led the world into this era of venting fossil carbon into the atmosphere, clearly has a duty to lead the world out of it. But ambitious targets backed by micromanagement of energy supply and demand are leading nowhere. What other country is going to attend a seminar on the UK energy bill and think, “Great idea, let’s do that”? They won’t even be able to read the powerpoint slides. The time is right to move forward on climate policy. This may seem a strange claim to environmentalists: the pace of warming is reported to have slowed , and projections are being revised downwards. At the same time, evidence continues to emerge that the world will only stop warming when we stop dumping carbon dioxide in the atmosphere altogether. The conditions for an effective global deal could hardly look worse. But the very fact that so many have come to believe, rightly or wrongly, that the climate response is at the low end of the range of uncertainty provides us with an opportunity. Rather than targets for arbitrary years, we should aim for a policy explicitly linked to rising temperatures. If George Osborne really believes global warming has stopped, he would have no reason to object. Ideas like this have been floated before, but too often they amount to kicking the can down the road. There is no point in “wait and see” if – after another decade or two of research into solar and nuclear power, or a modest carbon tax – we find ourselves in exactly the same position as now: fossil fuels dominating global energy supplies and far cheaper than any alternative, only with another couple of hundred billion tonnes of fossil carbon dumped, irreversibly, into the atmosphere. The problem requires a different approach. We started out before the industrial revolution with roughly 4 trillion tonnes of fossil carbon underground. We have dumped about half a trillion tonnes into the atmosphere, and have up to a trillion more tonnes to go before we commit ourselves either to warming substantially greater than two degrees or some form of geoengineering. Given the extraordinary profits that can be made from the extraction and use of fossil fuels, no conceivable carbon tax or cap-and-trade regime is going to prevent a substantial fraction of those 2½ trillion “excess” tonnes from being burned somewhere, someday. Nor should it: what right have we today to prevent the citizens of India of the 2080s from touching their coal? So the only thing that really matters for long-term climate is that we deploy the technology – carbon capture and sequestration (CCS) – to bury carbon dioxide at the same rate we dig up fossil carbon before we release too much. Shell , in its latest scenarios, predicts that conventional measures will have only a modest impact on global emissions until about 2040, at which point rising concern about climate change will trigger a crash CCS programme, mopping up over 50% of extracted carbon in only a couple of decades. For the taxpayers and consumers of the 2040s – bearing the full cost, and risks, of such rapid deployment – this is the worst possible outcome. It is revealing that Shell’s scenario-builders envisage large-scale deployment of CCS only when it is made mandatory. Two of just a handful of demonstration CCS projects in Europe were recently cancelled, in part because of the collapse of the carbon price. But once you realise that CCS will be needed in the end, it would be far safer, simpler and fairer to mandate gradual deployment, so we can spread the cost over a couple of generations and provide time to evaluate and monitor the storage options. Anyone who extracts or imports fossil fuels should be required to sequester a steadily increasing fraction of their carbon. The maths could not be simpler: we need to increase the fraction of carbon we sequester by, on average, 1% for every 10bn tonnes of carbon dumped in the atmosphere. This is one regulation, affecting a handful of major companies. The policy can adapt to rising temperatures by adjusting the rate. So start at 1% per 10 billion tonnes and plan to adjust the rate when, say, temperatures reach 1.5 degrees above preindustrial. Crucially, this is not asking the impossible of future politicians. If the evolving evidence suggests we need to treble the rate of CCS deployment sometime around 2030, that would be feasible. Adjusting regulations on a single industry is something politicians find easy: as we found with the fuel tax escalator in the UK or the European emission trading scheme , when times get tough, supporting an energy tax or carbon price is not. Mandatory sequestration is transparent, fair, easy to monitor, and above all clearly addresses the problem. If we introduce it, it would be simple to request that our European and broader trading partners to do the same. Having solved the long-term climate problem, we might well need a complex energy bill to ensure security of supply in the 2030s, particularly given the uncertain cost of all that mandatory sequestration. That might well involve subsidies to renewables to ensure we don’t become over-dependent on Russian gas. But it would be what it says on the tin: an energy bill. Climate change would have nothing to do with it. Continue reading
WWF Uses Money, Instead of Environment, as Reason to Invest In Renewables
June 6, 2013 by Linda Hardesty The World Wildlife Fund is asking governments and financial institutions worldwide to increase investment in renewable energy by at least $40 billion over the next 12 months. WWF’s public campaign will run in more than 20 countries, where the environmental group is targeting public finance, pension funds and sovereign wealth funds. By establishing a business case for moving new money into renewable energy , the group hopes to advance its environmental goals. WWF launched its new international campaign under the slogan Seize Your Power , asking supporters to sign a pledge for increased investments in renewable energy and the phasing out of investments in coal, oil and gas. “The energy markets’ driving forces include speculation, institutional inertia, lack of accurate information, perverse incentives but also huge economic and political interests. It’s time to reframe the debate and expose the real costs of fossil fuels and the real opportunity of the renewable energy sector,” said Samantha Smith, Leader of the Global Climate and Energy Initiative of WWF-International, in a statement. Renewable energy project developers often look to institutional investment as a source of capital to reduce the cost of wind and solar projects, but a study in March from the non-profit Climate Policy Initiative found significant barriers to increases in institutional investment. Continue reading
Forestry Is One Irish Asset That Can Only Grow
In a volatile climate it can seem wise to follow the herd, but branching out into something different can pay off PATRICK LAWLESS – 09 JUNE 2013 RIGHT now, many investors are overlooking quality Irish assets – simply because these assets are Irish. They seem to think that, if an asset is Irish, it can only be a route to lose money and should be avoided. For me, that’s never a good enough reason. Where an asset is located is undoubtedly important, it’s nowhere near as important as the income it can produce and the price at which I can buy the asset. During the bubble years, some investors were rightly scared away because they felt the prices of many Irish assets were too high. At the time, I felt the same way. My firm, Appian Asset Management, moved to the sidelines of the Irish property market when property prices had escalated. Our clients missed out as prices continued to go up. But importantly, we did not lose money on Irish property when the market crashed. We advised clients to sell Irish property in 2006. We advised them to sell shares in Irish banks in 2007. But when a market experiences the type of radical change we’ve seen since 2006 and 2007, an investor who’s looking for value should always be prepared to change his or her mind in response. I’ve changed my mind on certain asset classes in Ireland. Irish commercial property – if a highly selective approach is applied – should no longer be considered off limits to investors. We think pockets of value are emerging in this asset class after 10 years of bad value and insufficient upside. The prices of quality office and retail buildings in central locations are now approaching levels that we think will be attractive to long-term investors. Appian recently made its first-ever investment in Irish commercial property. That decision was taken after choosing to avoid this asset class throughout the company’s 10-year history. Let’s not get carried away, however. Irish commercial property should only make up a small part of any diversified investment portfolio. The extent of price falls witnessed in recent years means, in some cases, it can cost less to acquire a building than it would to rebuild it. It means there are now attractive opportunities in this asset class and being highly selective is likely to be rewarded. Aside from Irish bricks and mortar, we’ve also changed our minds on an asset class that I once considered too obscure: Irish forestry. For nearly three years now, we have been studying forestry as a potential alternative asset. We now think forestry satisfies our criteria and will further diversify our investment portfolio without reducing the return we’re aiming for. Forestry has given good long-term returns with low volatility. It’s an asset class that appears to have demonstrated a low correlation with other asset classes – it doesn’t necessarily fall when other asset classes fall, nor does it necessarily rise when other asset classes rise. We’ve also identified it has a strong positive correlation with inflation. One of the things our clients worry most about is minimising the risk of losing money – suffering a permanent destruction of capital – while getting better returns than they can get at the bank. Inflation eats away at low-risk investments, so even if clients think they’re playing it safe by keeping large amounts of their portfolio in cash, over the long term any investment that can’t at least match inflation is going to hurt their buying power. Forestry has performed well in this context. If inflation picks up in the years ahead, it’s a sector that our analysis suggests is capable of continuing to match or beat the general inflation rate. Before we put any money at risk, however, we do a lot of homework. We held discussions with a number of potential forestry investments before we saw value. We believe it’s conservative but that it can deliver what we want it to deliver. As with any asset class, however, forestry has its risks. These include a potential lack of liquidity – forestry by its nature is an illiquid asset – but this risk can be reduced in a large portfolio with a diversified maturity profile of forests. Other risks include those that can be insured against – such as fire, flooding and wind – and those that cannot, such as disease. Another factor to consider is macroeconomic risk. This is limited in the case of forestry, however, as trees continue to grow irrespective of the economic cycle. Forestry managers have the option of reducing the levels at which they harvest stock in times of lower market demand. Since 1994, forestry has delivered an average of 5.65 per cent per annum with volatility below 5 per cent. Commercial forests cover an area of almost 15,000 hectares, and the expected forest maturity dates have a wide range, from relatively recently planted to potentially immediately harvestable crops, with a diverse regional spread. We recently committed 5 per cent of our flagship fund to invest in forestry and see merit in having a limited exposure to it. In a volatile climate like today’s, it can be tempting to follow the conventional wisdom and stay with the herd. However, following the conventional wisdom in the bubble years turned out to be a costly strategy. Ignoring certain investments – just because they relate to Ireland and ignoring the factors that really matter, such as price and expected return – could be a mistake. Patrick Lawless is CEO of Appian Asset Management. The views expressed do not constitute investment advice or investment research Irish Independent Continue reading
