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  • Forever blowing carbon bubbles?

    9:38 pm on April 29, 2013 | 0 Permalink | Comment
    Tags: carbon bubble, Climate change

    Guest blogger Amber Parsons (@amber_parsons) explains why carbon bubbles and stranded assets will soon be part of any sustainability professional’s everyday vocabulary.

    An explicit new report published by the UK think tank Carbon Tracker and the London School of Economics describes the trillion dollar gamble that is currently being played out on the global financial markets.

    According to the report, almost all investors and regulators seem to be ignoring the clear inconsistency between the accepted science of climate change and the behaviour of the top 200 global oil and gas and mining companies, on which the report focuses.

    The report concludes that 60-80% of the coal, oil and gas reserves of these 200 publicly listed companies are ‘unburnable’ if the planet is to remain within the globally agreed ‘safe’ level of 450 ppm of CO2 in the atmosphere. In essence, these reserves are ‘stranded assets’ whose questionable value could have enormous implications for the robustness of pension funds and the wellbeing of the companies and people that invest in them. In fact, the Unburnable Carbon map illustrates why fossil fuels can be considered the new subprime.

    Click to enlarge

    In addition, these same 200 companies have invested up to $674bn in the last year in sourcing and developing more reserves and new forms of extraction. The analysis indicates that if this level of capital expenditure (CAPEX) continues at the same rate over the next decade this would result in over $6.74trillion in wasted capital developing reserves that are likely to be unburnable.

    “Are there more fossil fuels listed on the world stock market than we can afford to burn?” asks James Leaton, director of Carbon Tracker, quoted in Greenbiz – “the answer is yes”.

    The 2008 financial crisis revealed the short-termism endemic in financial markets – this existing investment perspective is very bad news for pension funds. The likely reduction in value of shares and investments in the stranded assets of coal, oil and gas industries has prompted Professor Lord Stern to raise the alarm for investors:

    “[Smart investors] can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision.”
    Professor Lord Stern in Carbon Tracker

    To avoid the intensity of economic ruin caused by the rupture of the subprime bubble it would be prudent for all investments portfolios to be assessed for their carbon bubble ‘risk potential’ – redefining risk, dealing with uncertainty and strategising accordingly. This would allow businesses to make investment decisions based on the usable assets held by the fossil fuel industries, rather than the share prices on which these companies currently base their value.

    Deflating this carbon bubble gradually through collaboration between investors, financial regulators, analysts and finance ministers could help avert the most devastating economic scenarios.

     

  • Australia's new Carbon Tax

    9:01 am on July 23, 2012 | 0 Permalink | Comment
    Tags: Australia, , carbon tax, clean energy, Climate change, market mechanism

    Q: What does One Stone have in common with a Melbourne cemetery, Arnold Schwartzegger and a bakery chain called Brumby’s?
    A: The answer is to do with carbon emissions. And we’re on Arnie’s side.

    On July 1st Australia’s Carbon Tax came into effect. That means the country’s 500 biggest polluters must now pay a price for their emissions—initially set at (AUD)$23 a tonne, and increasing gradually until 2015, when it will convert into a trading scheme based on market prices. Most affected are energy generators and mining companies like Macquarie Generation, Woodside Petroleum and Rio Tinto.

    Touted as a key part of the Gillard Labor government’s drive for a clean energy future, the carbon ‘tax’ has paralyzed political debate in Australia over the past year. It has spawned vehement new parties like the No Climate Tax Climate Sceptics Party (NCTCS),
    while Liberal National Party Opposition leader Tony Abbott has pledged “in blood” to dismantle it as soon as he wins the next election—amplifying uncertainty for business and investors.

    At least part of the blame for this hostility to the carbon tax lies with the Gillard minority government, which has done an appalling job at explaining both the rationale behind the tax and why it changed its mind.

    But huge credit goes to the Australian Greens for staying on-message and leveraging their support of Gillard’s government to put climate change on the national agenda. There’s no doubt that pricing carbon is a vital first step to building a clean energy economy for Australia.

    So three weeks in, what has been the effect of a price on carbon? A survey by the Australian Industry Group claims 42 per cent of manufacturing, services and construction businesses will increase their prices due to the carbon tax. Virgin Australia, which has already added a surcharge to its domestic and international air fares to cover Australian and European carbon pricing regimes, expects the overall cost to reach $45-50 million.

    But for most companies, it’s too early to say: it could take 6-9 months before they know their actual costs.

    That hasn’t stopped a handful of businesses taking advantage of the carbon tax—or blaming it for their woes—spawning a lively ‘Misleading Headline of the Day’ discussion on the Australian Sustainability Group’s LinkedIn page.

    Among the most brazen was Brumby’s bakery, whose now-former Managing Director Deane Priest sent out a memo urging franchisees to put up prices and “let the carbon tax take the blame.” Similarly, a staff member at Springvale Botanical Cemetery was had up for announcing the cost of burial had risen by $55 due to the carbon tax. Meanwhile headlines that the aged Munmorah Power Station was forced to close as a result of the carbon price—even though it hasn’t operated since 2010—read like an effect in search of a cause.

    Over 630 complaints and enquiries over cases like these have led the Australian Competition and Consumer Commission (ACCC) to issue several warnings over illegitimate cost pass-through, where retail price rises are wrongly attributed to the tax. To prevent misrepresentations about the impact of carbon tax-related cost increases, the ACCC has launched a Carbon Price Claims Hotline. Companies found to be misleading consumers face legal action and hefty fines.

    With so much media attention on the carbon tax critics and conmen, Businesses for a Clean Economy (B4CE) stands out for speaking up in support of a price on carbon. One Stone is among 398 signatories—including Westpac, AGL and General Electric—who think it’s important the voice of proactive business is heard in the Australian debate.

    Which brings us to Arnie. Thinking big, as ever, Arnold Schwartzenegger is not waiting for national governments to overcome political gridlock and carbon paralysis. As Founding Chair of R20 Regions of Climate Action, a UN-backed NGO launched in 2011, Schwartzenegger is focusing on developing carbon leadership at local and state level. By linking government, finance and green technology partners, R20 is spearheading a bottom-up movement to counter carbon policy gridlock and take meaningful action at the sub-national level.

    That definitely gets our vote.

     

  • Ideas worth listening to: Paul Gilding's sustainability call to arms at TED 2012

    2:00 pm on June 21, 2012 | 0 Permalink | Comment
    Tags: Climate change, , crisis,

     

  • Why Wall Street Protestors Should Demand Carbon Cap and Trade

    10:27 pm on October 18, 2011 | 1 Permalink | Comment
    Tags: , , Climate change, limits of growth


    The Occupy Wall Street movement – is it an indicator of a coming Great Disruption, a la Paul Gilding, or just a visible manifestation of the more optimistic Big Shift espoused by John Hagel III and John Seely Brown in Thomas Friedman’s recent column?

    Gilding says our “growth-obsessed capitalist system is reaching its financial and ecological limits,” while Hagel and Seely Brown propose a Big Shift is happening – when globalization and the IT revolution merge to unleash a huge new global flow of ideas and opportunities.

    Maybe they are both right. So what are the protestors, poised on that thin line between the yin and the yang of it all, hoping not to get arrested, supposed to do?

    Agitate for carbon cap and trade. Yeah, it may seem like a funny thing to ask for when you can’t afford car insurance and a lousy bag of groceries cost $50 bucks.

    However, if we really are globally connected and unavoidably linked together, we need a piece of positive change that’s going to work for everyone from Manhattan to Mongolia.

    That’s where Gernot Wagner comes in. He’s writing a book called “But Will the Planet Notice?” that, among other things, tells the greenies among us that composting and going car-free is all well and good but isn’t worth a dime or a renminbi to Mother Nature.

    Policy change, Wagner is quick to note, is the only thing worth fighting for, and the only way to align the values of old Mama Nature with the self-interest of each and every one of us. Wagner, an environmental economist, details policy changes – on acid rain, and lead in gasoline – that let markets continue to work and solve problems.

    Perhaps that approach can work for both controlling climate change and leading us forward to a sustainable model of growth.

    If carbon has a price, and everyone, capitalist and composter, banker and bungee jumper, has to pay the price as they go about their business, the world becomes a different place. Everything changes, and it all boils down to this: If you pollute carbon, you pay.

    Of course it’s not that simple, is it. People have their grievances, their inequalities, their past injustices. Carbon cap and trade won’t recoup the money Wall Street ‘stole’ and redistribute it to me and the other 98.999%.

    However, it will make us stop blindly using and abusing our planet’s resources in continually chasing endless growth. All parents know kids need us to set limits, or they run amok, like the 9 billion-pound hamster. Setting up global carbon cap and trade seems like a logical first limit, doesn’t it?

     

     

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