Tag: emissions

Carbon budgets begin to bite: unburnable carbon not an asset, HSBC reports

The world’s big oil and gas companies could face cuts in market valuation of up to 60% if the world acts to cut carbon emissions, a report by bankers HSBC warned last week. Business Green summarises the report’s findings:

A new report from the banking giant finds that 17 per cent of Norwegian company Statoil’s reserves would become “unburnable” in a world where oil and gas use falls as countries seek to keep carbon concentrations in the atmosphere to 450 parts per million (ppm), the level the International Energy Agency (IEA) estimates is necessary to deliver a 50 per cent chance of limiting long-term temperature rises to 2°C.

HSBC estimates that as much as 6% of BP’s reserves could be at risk, 5% of Total’s, and 2% of Shell’s. But the biggest risk to oil company values could come from reduced demand for oil and gas leading to a fall in prices. Business Green notes:

…the potential value at risk for leading fossil fuel firms could rise to between 40 per cent and 60 per cent of current market capitalisation. BP’s market capitalisation currently stands at around £90bn, compared to Shell’s £147bn, Statoil’s £53bn and BG Group’s £39bn.

The HSBC report is the first acknowledgement by a mainstream financial institution that fossil fuel companies may be over valued in a world where steep cuts in carbon emissions are (one hopes) inevitable. The idea was first mooted in 2011 by the Carbon Tracker Initiative, whose Unburnable Carbon report estimated that as much as 80% of proven fossil fuel reserves would have to remain in the ground. That idea fuelled 350.org’s latest campaign, as Bill McKibben explained in an influential Rolling Stone article last year:

We have five times as much oil and coal and gas on the books as climate scientists think is safe to burn. We’d have to keep 80 percent of those reserves locked away underground to avoid that fate. Before we knew those numbers, our fate had been likely. Now, barring some massive intervention, it seems certain.

Yes, this coal and gas and oil is still technically in the soil. But it’s already economically aboveground – it’s figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony. It explains why the big fossil-fuel companies have fought so hard to prevent the regulation of carbon dioxide – those reserves are their primary asset, the holding that gives their companies their value.

Stockmarket prices are supposed to factor in — or take into account — all of the assets and risk a company faces, but to date there has been little sign that markets have seriously considered “unburnable carbon” as a liability. The HSBC report may be the first sign of a shift in financial markets, but I suspect it will take clear evidence of concerted global action to cut emissions before markets will run scared of carbon. However, when it happens, the change could be swift. There could be carbon carnage on the trading floors as financial markets ditch fossil fuels for renewables.

There’s a stark lesson there for government and business leadership in Australia and New Zealand — and everywhere else where public money is subsidising the production and use of fossil fuels. Today’s investments in extracting fossil carbon only make sense if you are blind to the climate consequences. Those are now inevitable, and so oil and gas reserves — and especially coal fields — will inevitably become stranded assets, a millstone round the neck of the national and global economy.

Tackling agricultural emissions: the NZ story

In this guest post, Josh Pemberton, an intern at Motu Economic and Public Policy Research, describes the Ag Dialogue exercise Motu ran last year. This interesting and thought-provoking short film exploring what reducing emissions really means for New Zealand’s farming communities was one result.

New Zealand is, in many ways, an unusual country. We pride ourselves on punching above our weight in international relations and sport; but we cherish the fact that we are a small and uncrowded nation, happily occupying our own little corner of the earth. We admire our rugby and Olympic heroes yet our national symbols are relatively innocuous: an upside down fern frond (the upper side of a silver fern is, of course, green) and a flightless, nocturnal bird. It must say something about our mentality that in recent years we treated an unshorn sheep like a national celebrity, and that a shortage of our favourite spread triggered panic-buying and created ongoing headlines.

Something else which is unusual about New Zealand — considering that we’re a developed nation — is that agriculture is responsible for almost half of our greenhouse gas emissions. Agriculture is, of course, vitally important to our economy – providing jobs and crucial export dollars. These two factors together give rise to a tension which can inhibit conversation about the effect of agriculture on the environment. It’s easy to end up with “naïve greenies” and “conservative farmers” (as they may perceive each other to be) talking past one another, and missing an opportunity to make real progress.

In the past two years, Motu Research has sought to increase the quality of the conversations that people are having on this topic. Motu set up and ran the Ag Dialogue group, bringing together farmers, scientists, iwi, government representatives and other experts to talk through issues around greenhouse gas emissions. There was no specific output in mind, although the Dialogue did catalyse a significant amount of research by Motu economists. The Dialogue also led Motu to release The New Zealand Farming Story: Tackling Agricultural Emissions, the short film embedded above.

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The Gore synthesis: where we are now, where we are heading, and what we need to do

This is the five minute condensed version of the talk I gave in Gore at the Coal Action Network Aotearoa Summerfest (a somewhat optimistic title, given the chilly and wet weather last weekend).

It’s too late to avoid damaging climate change, because it’s already happening. Weather extremes — floods, droughts, heatwaves, wildfires, and storms — are on the increase, dramatic melting of Arctic sea ice is affecting northern hemisphere weather patterns, and accelerating ice loss in Greenland and Antarctica points towards a rapid increase in sea level. And the climate commitment, the 30 years it will take the planet to get back into energy balance once atmospheric CO2 is stabilised, guarantees that we will see much worse long before we see any benefit from action we take today.

Everything we do now to cut emissions will help us to avoid the very worst impacts — the almost unimaginable stuff that will be happening by the middle of this century — so it’s really worth doing.

To avoid future damage being catastrophic, we need emissions cuts to be made as if this were wartime. The global economy has to be switched from fossil fuel burning to clean energy as fast as possible — as if our very civilisation depended on it, because it does. Every year of delay now is a year more in the 2040s and 2050s of the very worst the climate system will throw at us. Every year of delay will make the job harder.

We need to go beyond stabilising atmospheric CO2 levels, and remove much of carbon emitted since the industrial revolution if we are to avoid losing much of the low lying land to long term sea level rise.

We need to be working now to futureproof New Zealand (and everywhere else) as much as possible. We must not lock our economies into high emissions pathways by investing in fossil fuel extraction or emissions-intensive agriculture. We must put in place policies to deal with sea level rise as it happens, but they will have to focus on managed retreat — at least until atmospheric CO2 is on a downwards trend. We need to focus on developing economic and social resilience, to enable us to recover from the inevitable shocks caused by rapid climate change.

This has to be the reality that our governments confront. Getting them to face up to the full seriousness of climate change is not going to be easy, but it’s going to have to be done.

*****

I often find that preparing a talk crystallises my thinking around an issue, and that was certainly the case here. Reviewing the climate events of the last year, looking forward to the near future, and considering our options as climate change begins to really bite left me feeling rather gloomy — but the energy and enthusiasm of the CANA crowd, committed to preventing lignite mining in Southland and to phasing out coal mining throughout New Zealand, did a lot to put a smile back on my face.

Below the fold is an expanded version of the notes I prepared for my talk, with links to supporting material (as I promised to the audiences in Gore)…

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Messages from a sizzling continent: Salinger on the Aussie heatwave

This op-ed by climate scientist Jim Salinger first appeared in print editions of the New Zealand Herald last Tuesday.

Global warming is not a phenomenon for future generations to deal with: it has arrived. And more frequent heat waves and climate extremes are part of this phenomenon. As I watch from my summer roost in northern New South Wales, the somewhat unprecedented heat is searing the Australian continent making it tinder dry with fires springing up everywhere. These raise some pertinent lessons on climate and risk management for New Zealand.

Firstly let’s look at some figures and ask the question of what are the climate mechanisms behind the heat waves.

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Things we could only have dreamed of – and all that sand

Flying into Doha yesterday for the next round of international climate negotiations, landing in what seems to be a pile of white sand in the middle of nowhere, with high rise buildings sticking out of it. Is this where we’re going to stop climate change?

In a word, no.  Not by a long shot.  These talks, the 18th conference of parties to the UN Framework Convention on Climate Change, signed in 1992, will not stop climate change.

For me, the last few weeks have seen a number of  “things we could only have dreamed of” moments.  Back in 1991 when we were negotiating the UNFCCC, the meetings were peppered with almost daily International Chamber of Commerce press conferences where the likes of climate cranks Fred Singer, Patrick Michaels and Richard Lindzen questioned the science.  Big business and global institutions either ignored the issue – or were working to stop any agreement. Continue reading “Things we could only have dreamed of – and all that sand”