Tag: gas

Memo to Labour: Calling fossil fuels “transition fuels” doesn’t make the carbon go away

The New Zealand Labour Party announced their climate change policy on 24 August; the Sunday before last Sunday.

At first glance, it sounds refreshingly like a policy that takes anthropogenic global warming seriously. From the announcement:

A Labour Government will put in place a comprehensive climate change strategy focusing on both mitigation and adaptation, establish an independent Climate Commission and implement carbon budgeting, says Labour Climate Change spokesperson Moana Mackey.

“This is about future-proofing our economy. Making the transition to a low-carbon clean technology economy is not a ‘nice to have’ as the current Government would have us believe. It is a transition we must make and the sooner we begin, the easier that transition will be.”

How did the media respond? Well they ignored it. I haven’t seen any reporting of Labour’s climate change policy in the Herald, or Stuff/Fairfax, or Radio NZ or TV1 or TV3. I only stumbled onto it via Scoop a week after the release.

Like the 2011 election, the issue of climate change has been notable for it’s absence (the snake swallowing the elephant in the room).

However, some climate change focused NGOs responded positively to Labour’s policy. Simon Terry at the Sustainability Council said a carbon budget was the single most important reform. Generation Zero and the Iwi Leaders Group and forest owners welcomed the policy. The mainstream media of course also ignored these NGO views.

However, before I get into the detail of Labour’s climate change policy (a topic for another post), it’s important to ask “are the dots connected with Labour’s energy policy?” Unfortunately, the dots are not connected and the energy policy is 180 degrees contrary to the concept of a carbon budget.

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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.

Nick Smith: another fossil fuel fail

MP Nick Smith in a NZ Herald opinion piece this week uses the fracking debate to advance the cause of fossil fuel mining. He claims that fracking is important in the development of geothermal energy and then moves seamlessly to the notion that we are desperately in need of unconventional natural gas in order to save us from falling back on coal, which we will otherwise “inevitably burn”. In defending fracking he manages to nicely couple the fossil fuel natural gas with a renewable energy source, geothermal.

It’s not my purpose to argue here about fracking as a technology. What is dismaying about Smith’s article is the complacency with which he advances the cause of natural gas. Writing enthusiastically of the huge unconventional shale gas resources in the US, he claims gas emits one-third the greenhouse gas emissions of coal. I know its emissions are lower, but it was news to me that they were as low as that. I could find no source to substantiate that figure. A little over half is the best figure I have been able to locate, and there are big questions about methane leakage in the fracking process. However let that pass. The real issue is the unrestrained pursuit of unconventional fossil fuels, which as James Hansen has reminded us often enough will mean game over for the climate.

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Brownlee’s energy strategy: dig and burn

The newly released Draft NZ Energy Strategy (PDF, web) is a winding back of the clock from the substantial statement released under the previous government only three years ago. When announcing early in his term as Minister that a new strategy was required Gerry Brownlee complained of the old one:

“You need only read the foreword of the NZES. “Sustainability” and “sustainable” are mentioned thirteen times, “greenhouse gas” is mentioned four times, and “climate change” is mentioned three times. That is all very good, but security of supply rates only one mention. Affordability is not touched on at all. Nor is economic growth.”

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