Investors are Fleeing Fossil Fuels in Droves

When Bill McKibben and 350.org spear-headed a campaign to divest from fossil fuels and go 100 percent renewables as part of a multi-pronged strategy to confront ramping harms from global climate change in 2012, the big push-back was “divestment doesn’t work, it’s just feel-good, someone else will just buy the stocks when prices drop.”

The Green Mouse That Roared

As if where individuals, banks, investment firms and governments put their money doesn’t matter. As if monetary policy at all levels isn’t an enabler of energy and climate policy. As if the world were awash in an infinite flood of money. As if capital just magically grows on trees.

The detractors clearly didn’t get it. They’d already lost the argument. But the ultimate realization would take years to materialize.

The divestment movement wasn’t so much about the short-term, day to day, flux of money on the financial markets. It was instead aimed at triggering a long term mega-trend. The movement did this by shining a light on the intrinsic immorality of fossil fuel burning. By changing the terms of the environmental debate to include such objects as financial risk and stranded assets. By meeting investors on their own intellectual turf on a daily basis. And by revealing to them the very serious and real risk of loss they were exposed to by pumping money into an energy source that produces widespread, ramping and systemic harm.

A long game that is presently gaining some very significant traction. For it appears that Bill McKibben and the various proponents of the divestment movement have managed to outflank the fossil fuel industry on what was, hitherto, intellectual and financial ground under their unquestioned control. They became, all of us involved became, the green mouse that roared.

(The divestment movement helped to shine a light on the various glaring financial risks involved in continued fossil fuel burning. A primary issue being that due to damage caused by climate change, losses to the whole financial system would eventually greatly outweigh gains. At which point, sunk fossil fuel assets would become stranded due to investor flight. Image source: Carbon Tracker.)

From EcoWatch:

We used text analytics software to sift through 42,000 news articles about climate change between 2011 and 2015 and map the influence of the radical flank. In this analysis, we found that the divestment campaign expanded rapidly as a topic in worldwide media. In the process, it disrupted what had become a polarized debate and reframed the conflict by redrawing moral lines around acceptable behavior.

Our evidence suggests this shift enabled previously marginal policy ideas such as a carbon tax and carbon budget to gain greater traction in the debate. It also helped translate McKibben’s radical position into new issues like “stranded assets” and “unburnable carbon,” the idea that existing fossil fuel resources should remain in the ground.

Although these latter concepts are still radical in implication, they adopt the language of financial analysis and appeared in business journals like The EconomistFortune and Bloomberg, which makes them more legitimate within business circles.

Thus, the battle cry of divestment became a call for prudent attention to financial risk. By being addressed in these financial publications, the carriers of the message shifted from grassroots activists to investorsinsurance companies and even the Governor of the Bank of England.

Mass Divestment Underway as Climate Change Impacts Worsen

Today the world is starting to wake up, bleary eyed and hung over from tar sands smog, to the reality that climate change is poised to eat everyone’s lunch. The U.S. has been hammered by not one, not two, but three $100 billion dollar plus hurricanes. All of those storms were made worse by climate change and one — Harvey — was found to be three times more likely due to the heat trapping gasses fossil fuel based industry has collectively pumped into the world’s atmosphere. With the Thomas Fire threatening to burn down Santa Barbara in December, California is reeling from its worst fire season on record. And glaciers from Greenland to Antarctica are teetering at the brink — ready to inundate the world’s cities at rates far faster than previously expected with only just a bit more added fossil fuel trapped heat.

(How investments in fossil fuel based industry generate carbon emissions. Image source: Carbon Tracker.)

That’s with global temperatures at only 1.1 to 1.2 C above 1880s averages. Keep burning fossil fuels and we’ll hit 3 to 7 C or more by 2100. And folks already feeling the pain of lost financial stability, lost homes, or forced displacement are starting to cry uncle.

Some of the investors holding the fossil fuel industry’s purse strings appear to have had enough. AXA Equitable CEO Thomas Buberl this week stated: “A 4 C world is not insurable.” The major financial and insurance firm has pledged to invest 10.6 billion in environmentally friendly projects and to move 4 billion in funds out of fossil fuels by 2020.

But AXA isn’t the only one by far. Other banks, firms, and share holders are realizing in droves that investing in that 4 C world by throwing more money at fossil fuels isn’t worth a darn either. The World Bank just announced it will stop investing in upstream oil and gas projects by 2019. This after resisting appeals to divest for years. The 23 large regional investors of the International Development Finance Club, who hold 4 trillion in assets, have agreed to align their procurement with the goals of the Paris Climate Summit. Dutch ING bank has announced that it won’t fund any utility that relies on coal for more than 5 percent of its energy.

Meanwhile, an umbrella group managing 26.3 trillion dollars in assets is directly targeting the world’s top 100 carbon emitters. The group — called Climate Action 100 — comprises 225 pension funds and other investors. And it aims to get the world’s worst carbon emitters to curb their greenhouse gas pollution and to disclose their climate change related risks to share holders. Oil, gas, coal, cement, mining and major transportation players are all in Climate Action 100’s sights.

(Renewables possess superior economics in a number of key facets. 1. They have a positive learning curve — the more you build the less they cost. 2. They reduce healthcare costs to society and increase productivity. 3. They reduce ramping systemic harms from climate change by replacing fossil fuel burning. Image source: Union of Concerned Scientists.)

The shareholders from Climate Action 100 have effectively drawn a line in the sand. If these top emitters fail to act to reduce their carbon pollution, then the investors from the group will move their money elsewhere. Effectively, this action is directly from the divestment playbook. But it is now one that lives entirely in the realm of global finance. In other words, divestment is no longer just an environmentalist thing. Global finance, to a rising degree, is being infused with rational environmental thought to the point that it owns it.

Mindy Lubber, President and CEO of Ceres notes in an interview to Motherboard:

“These investors are the largest owners of companies and they see climate change as a serious threat to their investments and the global economy. They believe it is imperative these companies move away from high-carbon emitting activities. Such companies [top 100 emitters] are unlikely to have economic success [if they don’t adjust to the reality of climate change].

Strong Renewable Energy Economics Mean Investors are No Longer Captive to Dirty Energy

This push for divestment from fossil fuels and holding fossil fuel industry accountable by many of the world’s wealthiest banks and firms comes as renewable energy is making major gains. Solar and wind energy are now less expensive than coal or even gas in many markets. The price of electrical vehicles is falling even as these non-emitting forms of transportation are becoming more capable than traditional ICE vehicles. And the price of related battery storage is also plummeting. So it’s not as if there is no viable alternative to dirty and dangerous fossil fuels. In fact, the alternatives are much more attractive on their own merits. Investors have options at hand to confront climate change. So do the rest of us. And that whole divestment thing that was nonsensically poo-pooed by naysayers — it’s becoming as ubiquitous as oxygen.

CREDITS:

Hat tip to Bill McKibben

Hat tip to EcoWatch

Hat tip to Miles H

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Sweden Aims to be Carbon Neutral by 2045; Largest Pension Fund Ditches Climate Bad Actors

In a stunning victory for clean energy and climate progress, Sweden this week overwhelmingly passed a law that fully commits the country to carbon neutrality by 2045. Meanwhile, Sweden’s largest pension fund has divested from corporations it identifies as violators of the Paris Climate Accord. As a wise person recently said (see featured comment below) — this is “what real climate leadership looks like.”

Beating a Fast Path to Net Zero Emissions

Sweden’s most recent climate law, which flew through the Parliament by a 254 to 41 margin, aims to have the country producing net zero carbon emissions in less than three decades. This new measure moves the date for Sweden’s carbon neutrality forward by 5 years from 2050 to 2045.

Already a climate leader, Sweden presently gets about 85 percent of its electricity from hydropower, wind and nuclear energy. Across all sectors of its economy, Sweden has achieved the goal of 50 percent renewable energy fully 8 years ahead of schedule. The new measure doubles down on this already-powerful trend by further trimming carbon-based electrical generation while shifting larger focus to carbon emissions cuts from the transportation sector.

(Swedish electrical generation is dominated by hydro, nuclear, and wind power. Sweden aims to remove fossil fuels from electrical power generation while shifting transportation to EVs and biofuels by 2045. Image source: Electricity Production in Sweden.)

In order to achieve carbon neutrality, Sweden is pushing hard for rapid electrical vehicle adoption, switching remaining liquid fuels to biofuels, and to completely phase out its ever-dwindling margin of fossil fuel power generation. The result of these policies would be a country that primarily runs on renewable and nuclear power generation and that uses EVs and other alternative fuel vehicles for motorized transportation. Ultimately, Sweden aims to cut its presently low carbon emissions by a further 85 percent all while planting trees and developing carbon sinks to offset the rest by 2045.

Divesting From Climate Bad Actors

In a related move, Sweden’s largest pension fund, which manages the pensions of 3.5 million Swedish citizens, decided to divest money from various climate bad actors. The fund, AP 7, announced last week that it would pull investments from six corporations that it identified as being engaged in various violations of the Paris Climate Summit. These companies included: ExxonMobil, Westar, Southern Corp, and Entergy for fighting against climate legislation in the United States, Gazprom for oil exploration in the vulnerable Arctic, and TransCanada for building pipelines across North America despite widespread local opposition and obvious long-term climate impacts.

(AP 7’s divestment from climate bad actors is a major win for climate action advocacy groups like 350.org which nobly aim to leverage mass social, political and protest action to help spur a transition to 100 percent renewable energy in an effort to prevent serious global harm from climate change. Image source: 350.org.)

These moves were praised by climate action advocacy group 350.org’s Jamie Henn, Strategic Communications Director for the global grassroots climate movement, who stated:

“Sweden divesting its largest pension from Exxon proves you can’t claim to support climate action while funding and perpetuating climate change. Exxon knew about climate change half a century ago, and continues to sow doubt and bankroll climate deniers. With its core business model dependent on exploiting people and planet for profit, Exxon is in direct violation of the Paris agreement.”

Responsible Climate Action by Sweden

Sweden’s latest moves cast light on various agencies who have done so much to slow the pace of a much-needed response to climate change and a related energy transition while putting serious legislative muscle behind carbon emissions reductions. It’s a major win for the divestment and climate action movements — further calling into doubt the viability of a number of businesses who’ve predicated their future profitability on wholesale global harm. Sweden, by both moving forward its date for carbon neutrality and by moving large pension funds away from direct capital support of the fossil fuel industry continues to set an example for all by vividly underlining how decisively the rest of the world needs to act to catch up.

Links:

Sweden Commits to Becoming Carbon Neutral by 2045 With New Law

Sweden’s Largest Pension Divests From Paris Accord Violators Including ExxonMobil and TransCanada

Electricity Production in Sweden

350.org (Please Support)

Featured Comment:

With Mass Vehicle Electrification on the Horizon, New Oil Development hits a 70 Year Low

“One thing is certain: Whenever the oil crash comes, it will be only the beginning. Every year that follows will bring more electric cars to the road, and less demand for oil. Someone will be left holding the barrel.”Bloomberg

*****

As the global climate situation worsens, the rickety and destructive old energy sources that caused the problem in the first place continue to look less and less secure. Meanwhile, the new energy sources that will help to address what is now a very serious crisis continue to gain strength.

Plummeting Oil Discoveries, Investments

A report out from the International Energy Agency this week showed that new oil discoveries had fallen to 2.4 billion barrels — less than 1/3 of the 15 year average. Meanwhile, the volume of conventional resources sanctioned for development fell to 4.7 billion barrels or the lowest level seen since the 1940s.

(Global oil discoveries and sanctioned developments hit historic lows during 2016. A structural trend due to new energy market factors that is likely to continue through at least the end of 2017. Image source: International Energy Agency.)

Sanctioned development is a direct measure of investment in new oil extraction infrastructure while new discoveries are a key factor in maintaining or expanding present oil supply rates of around 85 million barrels per day globally (total liquid fuels including biofuels are now 92 million barrels per day). If investments are falling along with new discoveries, at some point daily production rates will start to lag.

A combination of low oil prices, strong opposition to new oil projects, divestment of fossil fuel market capital, concern over climate change, loss of good faith in the oil industry, and rapidly falling renewable energy prices have all weighed heavily on oil exploration and new project investment. Intense efforts to extract unconventional oil (shale oil and tar sands) in the U.S. and Canada also depressed the broader global markets. IEA sees this trend continuing through at least 2017. A potential for price increases may emerge post-2017 due to supply tightening despite a feeble expected demand growth of 1.2 million barrels per day over the next five years. Given such weak expected increases in demand, most of any supply tightening would tend to come as flagging new project investments fail to make up the gap in falling well production rates.

Oil Major Predicts Electric Future

But over the same 5-year timeframe another factor pushing down global oil demand is expected to begin to emerge. Electric vehicle purchases, which now make up about 1 percent of the global market, are expected to dramatically expand in the coming years. A fact that even oil major Total acknowledges.

(Bloomberg New Energy Finance projects rapid adoption trend for electric vehicles. However, once this kind of market momentum starts, it can tend to snowball very rapidly. Potentially even more rapidly than this trend graph suggests.)

According to a recent report from Gas2:

At the Bloomberg New Energy Finance conference in New York on April 25, Joel Couse, chief economist for Total, predicted that sales of electric cars will surge from about 1% globally in today’s new car market to up to 30% of the market by 2030. If that happens, he says, demand for petroleum based fuels “will flatten out, maybe even decline.”

Coming from an oil major, this is a big admission. And one that jibes with past reports made by Bloomberg showing electric vehicles dramatically eating into global oil demand by the 2020s. Since Bloomberg’s 2016 report, new revelations have continued to emerge showing EV market strength. Battery prices are falling by 20 percent per year — which just keeps making both EVs and related battery storage more accessible. Meanwhile, EVs continue to develop in ways that surpass their conventional counterparts. Michael Liebreich, who founded Bloomberg New Energy Finance, expects that by “2020 there will be over 120 different models of EV across the spectrum. These are great cars. They will make the internal combustion equivalent look old fashioned.”

Potential to Decimate Oil Demand in Just One Decade

More than 50 percent of global oil demand comes from gasoline use. Another 15 percent of that demand comes from distillate use which includes diesel — which is also a motor vehicle based fuel. Start replacing significant portions of the global vehicle fleet with EVs and that demand is going to fall.

(Total oil demand is significantly vulnerable to fluctuations in gasoline and distillate products demand — both of which are heavily impacted by electric vehicle and solar energy adoption rates. Image source: Quora.)

This is arguably already a marginal feature of the oil market with EVs making up 1 percent of global vehicle sales and with solar now acting to directly replace diesel based electric generation. But the ground swell we are beginning to see in the energy markets appears to be the start of transformational trend.

Cities and countries are banning (or planning to ban) petrol-based vehicles. Automakers like Volkswagon, GM, Nissan, BMW, Audi, Ford, and Toyota are dedicating increasing portions of their vehicle fleets to electrics even as all-electric manufacturers like Tesla are growing more dominant. And fast charging stations that are capable of 5-10 minute charge times are on the horizon. Given the emerging confluence of affordability, capability and desirability — it appears that a big, S-curve-like, EV adoption bump is coming on fast. If and when such an event occurs, a crash in oil production rates is likely to follow soon after.

Links:

International Energy Agency

Total Predicts Electric Cars Will Decrease Oil Demand

Bloomberg New Energy Finance

How Goliath Might Fall

The 5-10 Minute EV Charging Stations are Coming

Quora

Hat tip to Steve Piper

“A Harbinger of the End of the Fossil Fuel Era” — Coal Production, Exports Plummet as Peabody Energy Declares Bankruptcy

“Peabody Energy’s steep decline toward bankruptcy is a harbinger of the end of the fossil fuel era … Peabody is crashing because the company was unwilling to change with the times, — they doubled down on the dirtiest of all fossil fuels, and investors backed their bet, as the world shifted toward renewable energy. They have consistently put profit over people, and now their profits have plummeted. Our world has no place for companies like Peabody.” — Jenny Marienau, U.S. Divestment Campaign Manager of the environmental group 350.org, in a recent statement.

****

Jenny Marienau of the climate disaster prevention group 350.org is certainly right about one thing. A healthy world. A world full of life and of prospects for all people, all living things. A world that avoids the worst impacts of a terrible climate disruption on the road to a hothouse mass extinction. In this, far more hopeful, world there is no place for companies like Peabody Energy. Companies whose profit-making and related accumulation of a corrupting political power and influence is entirely dependent on locking in an ever-worsening global crisis.

STRIP_MINING_ON_INDIAN_BURIAL_GROUNDS_BY_PEABODY_COAL_CO_-_NARA_-_544109

(Peabody became infamous for its destructive strip mining efforts that transformed beautiful and treasured lands into toxic, lifeless moonscapes. Here, a Peabody crane scoops coal out of the Nara strip mine which was also the location of a sacred Native American burial ground. Continued fossil fuel burning will ultimately have a similar beauty and life-denuding effect on the whole of the global environment. Image source: Commons.)

Coal’s Moral and Economic Bankruptcy

Today that company, representing the largest coal interest in the Western World, declared bankruptcy. An optimistic announcement that comes amidst a swift sea change and a precipitous contraction in the global coal industry. One that, if world-wide public, private, protest action, and individual efforts to reduce carbon emissions on the back of 200 nations reaching a landmark global climate agreement in Paris continue in force, may well be a beginning of an end to the fossil fuel energy era.

With each passing day, that start of an end becomes more and more visible in what appears to be an ongoing global coal industry collapse and retrenchment. In three of the world’s largest coal producing and consuming regions — India, China, and the US — production, imports and exports are down. In the US, coal production has fallen by more than 50 percent since 2008. Meanwhile US coal exports plummeted by 23 percent in 2015 alone. In China, coal consumption is reported to have dropped during both 2014 and 2015. This drop comes as this world’s largest current greenhouse gas emitter has announced an expanding array of bans on coal burning for its highest polluting power plants and a cessation of coal plant construction in 15 of its provinces. In India, one region that coal backers had looked to for expanding consumption, coal imports are also down.

The broadening contraction in coal has forced bankruptcies not just for Peabody, but for other major American coal players like Arch Coal and Alpha Natural Resources. A devastating wave for a climatologically destructive industry that appears less and less likely to survive in any form resembling its former might.

The Supertrend That’s Driving Coal’s Downfall — Mass Protest, Divestment, The Rise of Renewables, Policy Push to Prevent Climate Change, and The Switch To Gas

It’s all a part of an emerging supertrend that is being reinforced along many fronts. The first of which involves a broad global protest action against new coal plant construction and wider fossil fuel based energy itself. Led by key groups like 350.org, Greenpeace, and the Sierra Club, these critical actions have targeted construction sites, pipelines, railways and mines. In addition, a comprehensive divestment campaign spear-headed by 350.org has targeted capital flows to the fossil fuel special interests. In this campaign, investing firms and institutions are faced with a call to moral action. A call to shift resources away from the fossil fuel-based companies that profit by locking in the ever-worsening impacts of climate change. In most cases, coal divestment is seen as the low-hanging fruit in these efforts. The coal companies produce the highest level of fossil fuel based carbon pollution per ton of fuel burned, are among the biggest threats to clean air and clean water, and are the most financially at risk entities among the fossil fuel based polluters.

Such campaigns against coal would be toothless without readily available alternative energy sources. And during recent years, clean substitutes for coal like solar and wind energy have become more and more accessible. Market prices for both resources have plummeted to the point where either can now compete directly with coal in most major markets. A fact that was brought into stark contrast this year when the cost of a newly constructed Indian solar power station fell below the cost of a newly constructed Indian coal plant fueled by imports. Solar energy in particular has been surging by leaps and bounds with India alone planning 100 gigawatts of new solar powered generation in just six years — a level of construction that will inevitably take a big bite out of what appears to be the last remaining major energy market where coal could potentially expand. In effect, what we are seeing is coal being crowded out by far more benevolent and increasingly competitive wind and solar based energy systems.

US Coal Production Eports Down

(US coal production has plummeted since 2008 in the face of rising renewables, increased use of gas, and falling overseas demand. Global trends seem to indicate that the US coal market is a microcosm of the larger shift in the international energy trade — one that has been driven by a broad-based effort to reduce carbon emissions and impacts related to a human-forced warming of the world. Image source: Clean Technica. Data source: US EIA.)

In many nations, drives to increase the rate of renewable energy adoption have been put at logger-heads with the special-interest funded bodies supporting polluting legacy fossil fuel generation. In the US, republicans have become infamous for their pro-coal, drill-baby, drill, anti-renewables, climate change denial political stance. But despite a well-funded effort by fossil fuel industry to lock in carbon pollution and climate disruption by stacking the political deck, policies aimed at confronting climate change have continued to advance. The Paris Climate Summit, though the object of much criticism, produced the strongest global climate treaty yet. And the broader effort to reduce greenhouse gas emissions has now been reinforced by a growing number of cities, states, and nations who now realize that continuing the current massive carbon emission is a hazard to their ongoing existence. Coastal cities and nations facing worsening sea level rise, states in expanding drought zones, regions stricken by water insecurity and increased crop damage, cities, states and nations dependent on healthy oceans for tourism and seafood, regions confronting waves of persons displaced from drought-stricken nations, and cities, states, and nations in the path of increasingly severe weather have all both quietly and loudly fought back — pushing the necessary cuts in hothouse gas emissions forward. These key stakeholders — who basically represent all of the rest of the non-fossil fuel interest world — are starting to realize that the carbon industry, though excessively influential, is not all-powerful. And they are starting to more effectively wield their own, far more just, influence in an attempt to reduce the climate harm that is now setting in.

Within the fossil fuel ranks there is also division. Even among the fossil fuel players there appears to be an acceptance that coal is on its way out. Messaging coming from the fossil fuel industry appears to have shifted to support of the still very harmful natural gas and for a new global fracking campaign. In essence, what we observe is that the oil and gas interests, including the new fracking interests, have basically maneuvered in a way that effectively throws coal under the climate change response bus. Coal is tougher to greenwash than natural gas and the spearhead campaign against coal as the worst of the worst among carbon polluters has proven undeflectable. This has been especially true in the UK where even conservatives are aiming to shut down coal plants (while continuing their harmful efforts in support of fracking and aimed at suppressing rates of renewable energy adoption).

Preventing Ever-Worsening Harm — Why The Fossil Fuel Era Must End as Soon as Possible

With today’s Peabody bankruptcy declaration, and in light of these observed trends, it’s becoming more and more apparent that the global energy game has changed and that the political and economic power of coal is fading. A positive shift to be certain. One that will help to reduce global carbon emissions. But we should remember that the current human greenhouse gas emission is now ten times faster than during the last hothouse mass extinction event 55 million years ago. And the only way to greatly reduce that terrible spewing of heat trapping gasses is to not only completely cut out the coal emission, but to also remove the major atmospheric carbon contributions coming from a massive burning of both oil and gas. To this point, we should work as hard as we can to help make Jenny’s prediction above a reality. For we desperately need the end of the fossil fuel era to happen soon.

Links:

A Harbinger of the End of the Fossil Fuel Era (Please Support 350.org)

The Western World’s Largest Coal Company Declares Bankruptcy

US Coal Production Continues Plunge

China Expands Coal Ban

Sans a Swift Switch to Renewables, Dangerous Climate Change May Be Imminent

COP 21

Greenpeace

The Sierra Club — Beyond Coal

350.org — Divestment

US Energy Information Administration

Peabody Strip Mining on Indian Burial Grounds

Hat Tip to Colorado Bob

 

 

The Carbon Bubble is Bursting

I admit it. I felt sorry for those poor, duped oil, gas and coal company investors back during the early part of 2015. Many of these guys, fed a constant stream of bad information from the financial news sources, at the time were still enraptured by the notion that fossil fuel stocks were then cheap and that the situation was nothing more than some kind of golden buying opportunity.

Now, six months later, 41 US oil and gas companies have gone bankrupt, powerful major oil companies like Exxon and BP are in the range of 20-40 percent losses in stock price year-on-year, most gas companies have seen even more severe losses, and most coal companies have been reduced to junk stock status (see Arch Coal declares bankruptcy). TransCanada, the parent company of the canceled Keystone XL Pipeline, is challenging United States sovereignty with its 15 billion dollar lawsuit. But it’s questionable if the company will even exist long enough to see the results of its NAFTA-based legal challenge.

Arch Coal stock price

(Arch Coal, one of the largest coal companies in the US, filed for bankruptcy today. The company’s stock price has plunged from 300 dollars per share in 2011 to 58 cents per share today. A total loss to investors of 99.88 percent. The dirtiest burning fossil fuel — coal energy faces headwinds from increasing competition by renewable energy, stronger national policies aimed at reducing carbon emissions, as well as a strong push for fossil fuel divestment by environmentalists and those who have increasing concerns about the impact of human-forced climate change. Image source: CNN Money.)

It’s as if All of Fossil Fuels Were Solyndra

It’s like the curse of Solyndra has been revisited on the entire fossil fuel industry. But while the renewable energy industry is undergoing its biggest boom ever, the fossil fuel industry’s own bad investments, bad performance, bad decisions, and overall bad impacts on pretty much everything from the increasingly wrecked global climate, to the Deepwater Horizon blowout, to Oklahoma fracking earthquakes, to the debacle that is the Porter Ranch gas leak, are sinking it even faster than its carbon emissions are melting the Arctic sea ice.

Back during 2013 and 2014 we warned that continued investment in oil, gas and coal companies was a really bad idea — one that probably represented the worst malinvestment in the history of finance. A carbon bubble that was worse even than the bad real estate investments that led up to the financial collapse of 2008. Trillions-upon-trillions of dollars encouraged by more than 500 billion dollars worth of subsidy support globally from the world’s governments each year. And to what end? Producing fuels which, contrary to wind and solar, increase in price the more you use them even as they wreck the very natural wealth that is the basis for healthy economic systems the world over.

And now the markets are being driven to the brink by just such a terrible malinvestment. Now major fossil fuel supporters are crying crocodile tears to their friends in Congress — asking them to shore up these big, polluting, malinvesting fossil fuel special interests. In other other words — the fossil fuel industry has now gone panhandling to the US government for a bailout after a risky and speculative oil and gas production binge. The fruits of drill-baby-drill thinking resulting in both economic and environmental collapse.

The Cheap Energy Age and Saudi Arabia’s Use of the Cheap Oil Lever

How did this all happen? Well, much talk-talk has appropriately centered around the topic of Saudia Arabia. But, as with many issues covered in the news today, the current conversation over Saudi’s move to turn on the oil taps lacks the full and appropriate context. It’s probably true that Saudi Arabia opened up the spigots in an effort to tamp down competition from US fracking interests and from other high-price but high volume competitors overseas. An issue that short-sighted conservatives and Wall Street vs Main-Street blow-hards like Trump have used to drum up much misplaced rage.

BLOG-Trump-Probably-Hates-This-News-About-Wind-Energy-0722-2015

(Fossil fuel cheerleaders like Donald Trump seem both outraged and perplexed by the fall in fossil fuel fortunes even as wind, solar and electric vehicles make new gains. Image source: Donald Trump Probably Hates This Wind Energy News.)

But the story often not told is the one where wind energy, solar energy, and efficiencies have now become an increasingly competitive player in the energy sector. If one considers jobs growth alone, a single US renewable energy sector — solar — added 35,000 jobs during 2015 growing to more than 208,000. By comparison, the entire US oil and gas extraction industry composed just 199,000 jobs at the start of 2015 and by its end had contracted by 14,000 to 185,000. This point is worth reconsidering for a few moments — just one renewable energy industry now supports more US jobs than the entirety of all the oil and gas extraction interests combined.

What’s going on in the US is part of a growing global trend. In many regions now, wind and solar are competitive with natural gas and coal as well as with diesel electric generation. In total, more than 106 gigawatts of new renewable energy capacity from wind and solar alone was likely installed globally over the course of 2015 (see wind capacity forecast here and solar capacity forecast here). Since over 3 million barrels of oil go to diesel electricity generation around the world, this new generation directly competes with that source. In addition, natural gas, which is fungible with oil in many markets, is also being increasingly crowded out by cheap renewables. With coal also under price pressure, the world was flooded with a glut — not only of oil, but of cheap energy sources of all kinds.

Perhaps even more of a threat to the fossil fuel industry was a growing shift within the auto industry toward renewable and high fuel efficiency vehicles. This shift was driven in large part by major countries and influential regions like the US, EU, and China providing ever-higher fuel efficiency standards for their vehicle fleets. The tip of the spear to this effort, of course, is in the growing expansion of electrical vehicle access. And despite ever-lower oil prices around the world, electric vehicle sales continue along at a rather substantial rate of growth — jumping from 320,000 total global EV sales during 2014 to 447,000 total EV sales during 2015. Marking the first time a major oil glut has not dramatically reduced the rate of electric vehicle sales growth.

In this global context of both fossil fuel glut and ramping renewable energy adoption, it was impossible for Saudi Arabia to defend the price of oil without losing much of its market share. And with so many new energy systems coming to the fore, it was all-too-likely that the kingdom would eventually see that market share whittled away entirely. Saudi’s only recourse to defend its markets was to open the pumps and flood the world with cheap crude. But as it did, the move shifted the burden of fossil fuel market erosion back to the highest price, and often dirtiest, producers. In other words — fracking, tar sands and the various marginal mines and fields around the world.

Deepwater Horizon

(Major disasters like the Deepwater Horizon oil spill and the Porter Ranch gas leak have aided in the fall of fossil fuel industry fortunes. But the pervasive and growing concern over human-forced climate change is likely to have an even broader impact. Image source: NOAA.)

So who’s really to blame? In all honesty, those currently seeking the bailout by Congress deserve at least as much of it as the Saudis. They were the ones who over-invested in oil, gas and coal and who failed to see a world in which even heavily subsidized fossil fuels couldn’t compete on the margins with emerging renewable energy and efficiencies. And they were the same fools who also denied climate change. A generation-spanning crisis that is now about to make the 2015 blow to the fossil fuel industry look like the proverbial tempest in a tea-pot.

COP 21’s Ongoing Influence

To this point, we should also be very clear that human-forced climate change is starting to have a serious impact on global policy-making. The storms, floods, droughts, sea level rise, glacial decline, ocean health decline, and mass displacements of human beings and wildlife related to climate change just keep getting worse and worse. So pressure on policy-makers from all corners for comprehensive actions to reduce the harm caused by human forced climate change is growing quite intense.

It is due to this increasingly urgent call to action that the recent stated COP 21 goals were the strongest yet coming from any climate conference. And though they are not yet enough to provide much hope for avoiding a very dangerous and deadly 2 C warming this Century, the goals, if applied, do shift the world solidly away from the ridiculously catastrophic business as usual fossil fuel burning path.

In total, the conference committed to a 40 percent reduction in global greenhouse gas emissions from 1990 levels by 2030. Further emissions reductions commitments continue on through 2050 at 75 percent. The conference also aimed to increase the renewable energy share of the global energy market to 32 percent by 2030 even as it aimed to reduce total energy consumption by 50 percent by 2050. Adding in even a mild carbon pricing or carbon tax regime and what this means is that the fossil fuel industry is looking at decades of recession and retraction. And since most scientists are now saying that COP21 isn’t enough, that more stringent policy measures will be needed to rapidly reduce carbon emissions, it appears that the harmful practice of burning fossil fuels is being set on a path toward ending this Century.

So once again, as we warned before — the carbon bubble is bursting. The end of the age of fossil fuels is at hand. Fossil fuel investor — beware.

Links:

Arch Coal Declares Bankruptcy

TransCanada Sues US For 15 Billion Dollars

Go Fossil Fuel Free

41 US Oil and Gas Companies Have Gone Bankrupt

CNN Money

The Oklahoma Fracking Earthquakes

The Porter Ranch Gas Leak

Bankrupt Fossil Fuel Industry Seeks Bailout From Congress

59 Gigawatts of New Wind Energy Capacity for 2015

57 Gigawatts of New Solar Energy Capacity for 2015

Electric Vehicles See Major Sales Growth Through 2015

NOAA

COP 21 Success or Failure?

National Solar Jobs Census

Bureau of Labor Statistics — Oil and Gas Extraction Jobs

Hat tip to Greg

Climate Change Changes Everything — Massive Capital Flight From Fossil Fuels Now Under Way

The madness and futility of continued fossil fuel burning is all too readily apparent…

If one were to search for an example of the utterly and inherently life, climate, and economy destroying impacts of fossil fuel burning, they wouldn’t have to look too far. They could look to the rapidly destabilizing glaciers now putting our coastal cities, our island nations in dire peril. They could look to the droughts now ranging the world, forcing officials in Sao Paulo to make water out of mud, lighting understory fires in the Amazon rainforest, and setting off water scarcity crises from the US West Coast, to the Caribbean, to South America and on through broad sections of Asia and Africa. They could look to the nation-destabilizing crises that have already rippled through our world.

The collapse of Syria due to drought, the fractures running through both India and Bangladesh due to sea level rise, the immigration camps Australia has already set up to deal with a rising tide of island migrants — driven from their homes more and more by increasingly extreme weather and the swelling seas (see also Australia’s Immigration Detention Facilities). 158 million persons were displaced by extreme weather over the past 7 years. A flood that has swelled the ranks of refugees inundating the developed countries of the world from Europe to North America to Southeast Asia.

A So-Called Resource that is Instead a Curse

And all this just a brief and incomplete overview that doesn’t include the massive wildfires, the great species displacement and winnowing, the coral reef bleaching, the ocean dead zone expanding, or the amplifying feedback inducing nature of the 1 C warming we’ve experienced since the 1880s. More than 1/4 of the warming experienced over 10,000 years at the end of the last ice age. But this warming all crammed into a mere 135 years. A warming set off by a massive burning of fossil fuels that has continued to ramp higher to this day. A warming that will continue to worsen, setting off an age of Storms leading to a hothouse world that is not at all friendly to life or human habitation — if we do not stop lighting fossil fueled fires.

Mordor-like Tar Sands

(A land of pits, fumes, and poisoned pools as far as the eye can see. Canada, in its mad quest for oil, has turned a pristine boreal forest into a place that is a stunning likeness to Tolkien’s Mordor. Image source: Garth Lenz’s TED Talk.)

If one were to encapsulate all the destruction that we are now beginning to witness due to our mad continued combustion, we might set the scene in Alberta. There a massive tar sands operation continues to unearth some of the most expensive, the most high-carbon fuels in the world. There they break rocks to leech out an oily bitumen. There they burn natural gas to enrich the bitumen with hydrogen before shipping it south to the US for further refinement. It’s an ugly process that has gouged great furrows in the earth, destroyed the great carbon sequestering boreal forests — leaving hundreds of square miles of wasteland and a vast pollution of waters and airs in the wake of its operation. It’s a process that’s aiding in the burning of Arctic permafrost. A process that warms the permafrost to thaw and then turns it into a kind of peat-like fuel for the wildfires that have now become a feature of an annual season of burning in the Arctic. A vast ripping and combustion of the once frozen biomass, adding to the fury of our fossil fuel warmed future.

This year, a massive wildfire encroached upon the tar sands operation itself. The fire raged close enough to one of the major production centers to force it to shut down some of its operations. As a result 220,000 barrels per day of tar sands production was shut in by some of the massive wildfires the operation itself has helped to drive. Just one more ironic twist in the violent history of a resource that has been called The Prize, but that may as well be considered The Curse.

Massive Canadian Wildfire Outbreak June 29

(A massive wildfire outbreak in Canada that temporarily shut down tar sands operations in Alberta. Fossil fuel burning is now so destructive that it sets off climate impacts that threaten its own production. Image source: LANCE MODIS.)

Massive Investor Flight Away From Fossil Fuels

And this year it appears that a number of investors are starting to get it. Get the fact that there’s no future left in burning coal, oil or gas. No future worth living in at least. For investors by the droves are now engaged in removing their assets from fossil fuel based companies.

Some are being pushed out by divestment campaigns run by responsible college students. Students who look to the future and don’t like what they see and so, encourage their schools to scrub carbon emissions from their investment funds. It’s a campaign that has also touched churches — including the great Catholic Church itself — setting off a broadening wave of religious-based divestment. And it’s a campaign that has reached into the sovereign wealth funds of entire nations.

Still more are being shoved along by a death spiral of coal, oil and gas prices. A wholesale disintegration of the paper billions of dollars once claimed on fossil fuel company balance sheets. A disintegration led by plummeting demand for fossil fuel products due to a combined increased efficiency and an ever more rapid adoption of non carbon based energy sources.

Though some are rendered deaf by greed or cynicism, the message is loud and clear. If preserving a just and functional human civilization is the underlying basis for morality, then there’s nothing more amoral than continuing to burn fossil fuels. But not only that, there’s no future in it. For if the use of this kind of energy destroys the very reason for having energy in the first place — living, playing and working in a world in which natural wealth exists at all — then there is no economic justification for continuing its use. As a result of its running counter to both sound morality and rational economics, the future for fossil fuels looks increasingly bleak. For individuals, societies and investors are faced with a choice between stranded fossil fuel assets and a world undergoing a new mass extinction likely worse than the Permian. One of these choices is survivable by human civilizations, and the other one is not.

The falling price of solar

(One factor at play in the massive fossil fuel bloodletting has been a precipitous fall in the cost of its wind and solar energy replacements. For US electricity in 2015 fully 78 percent of new capacity additions have been wind and solar. Image source: Climate Crocks and Bloomberg.)

It is perhaps for these combined reasons and due to the encroachment of ever-more inexpensive and accessible renewable energy sources that has led to a massive flight of capital away from fossil fuel based energy. Arch Coal, for example, has lost 95 percent of its market capitalization in the past year. Other corporations who’ve cast their lot with continued fossil fuel burning have suffered similar, though slightly less dramatic fates. Suncor, one of the chief tar sands extractors, has lost 20 percent of its value, Exxon Mobil 12 percent, Chevron 18 percent, Chesapeake Energy 55 percent, Conoco Phillips 24 percent, Suncoke 36 percent, and Peabody 85 percent. These are industry-wide losses that are in the process of setting off a string of malinvestment-based bankruptcies that would put the ‘tempest in a teapot’ hype surrounding Solyndra to shame. In essence, it’s the epic and compounding failure of drill, baby, drill politics.

Investors told late last year that oil, gas and coal fortunes would rebound have been sorely disappointed. Coal continues its 5 year long string of monthly bankruptcies. Oil and gas companies trail the S&P 500 by 40 percent. And more than 118 billion dollars in new oil projects has now been shelved. Growing ever more sour on what appears to be an escaped-from-reality chorus of fossil fuel cheerleaders, investors have finally had enough and gone in search of greener pastures. In this case, green pastures include a wind farm now being built off Cape Cod. One that will provide renewable energy based electricity to 30,000 homes that previously got their electricity through dirty, expensive and hothouse-amplifying diesel fuel burning.

It’s the kind of choice investors and the rest of us need to be making if we’re going to avoid the worst of this climate change nightmare we’ve already set in play. And we’d better get a move on. For as commenter Mblanc from the UK recently noted in response to a previous post:

I’ve got a really bad feeling about this. That feeling has been building up over the last few months. Every time I see an anomaly map these days, I can’t help feeling that we in the UK are right in the firing line of Greenland ice melt, and the firing might have already started.

It’s starting. Climate change changes everything — makes our world, our nations and our homes less secure, more vulnerable in the path of oncoming and ever more violent weather. But, if Hansen and other scientists have it right, we can still avoid the worst impacts if we don’t listen to the fossil fuel cheerleaders and keep making all the wrong choices. Thankfully, it appears investors may have wised up a bit. Let’s hope that trend continues.

Links:

Warning From Scientists — Halt Fossil Fuel Burning or Age of Storms, Rapid Sea Level Rise is on the Way

They Make Water out of Mud in Sao Paulo These Days

Syria Conflict Linked to Drought Made Worse by Climate Change

Australia Facing Climate Migrants

Extreme Weather Displaced 158 Million People During the Last 7 Years

Garth Lenz’s TED Talk

LANCE MODIS

Divest From Fossil Fuels

Catholic Church Leads Divestment Effort

Norway’s Sovereign Wealth Fund to Divest From Fossil Fuels

CNN Markets

Cape Wind Moves Forward

Markets are About to Deal With Climate — Get Ready for Ugly

Mike Carney Gets Set for Carbon Stranded Assets Intervention

Hat Tip to Mblanc

Hat Tip to ClimateHawk1

Is The IEA Advising Investors to Dump Fossil Fuel Stocks?

An eyebrow-raising report in The Irish Times today raised the possibility that one of the world’s foremost energy policy bodies may be suggesting that investors dump fossil fuel stocks. From The Irish Times:

About two-thirds of all proven reserves of oil, gas and coal will have to be left undeveloped if the world is to achieve the goal of limiting global warming at two degrees Celsius, according to the chief economist at the International Energy Agency.

Addressing participants in the latest round of UN climate talks in Bonn, Fatih Birol said this should be an “eye-opener” for pension funds with significant investments in the energy sector – particularly in coal – as well as for ratings agencies.

He predicted coal would be hardest hit in the “unburnable carbon” scenario, followed by oil and gas. “We cannot afford to burn all the fossil fuels we have. If we did that, it [average global surface temperature] would go higher than four degrees.

Fatih Birol is echoing concerns coming from the vast body of climate science that if all the fossil fuels are burned, Earth may well be rendered uninhabitable for human beings. And since less than 1/3 of current fossil fuel stocks can be used and still maintain an economically viable human civilization, that makes 2/3 of those stocks practically unusable. As such, oil, gas, and coal stocks are likely at least over-valued by 2/3 and serious write-down in company stock prices will be inevitable at some point in the near future.

Environmental organizations have seized on this overvaluation and begun to urge investors to transition away from fossil fuel stocks and begin supporting companies that invest in alternative energy. To wit, 350.org has spear-headed such efforts with a broad-based campaign targeting universities, municipalities and even state governments. This divestment campaign has already met with major successes with hundreds of efforts emerging across the US. You can learn more about these efforts here.

For such efforts to reach the international stage would be a major milestone. Fatih Birol’s statements and efforts are, therefore, worth wholehearted support. Preservation of a climate amenable to human civilization should be held as paramount. And current IEA statements appear pursuant to that goal.

 

350.org Leads Wave of Fossil Fuel Divestment

Image

In a Rolling Stone interview this past summer, Bill McKibben, head of 350.org and related tar sands protests, called for investors to dump holdings in oil, gas, and coal companies as a means to fight climate change. McKibben’s call for this divestment mirrors similar action during the latter 20th century against South Africa’s Apartheid government via its state issued bonds and corporate backers.

Now, divestment of fossil fuel company stocks is again being spear-headed by major universities, cities, religious groups, and individuals. In total, over 210 university campuses now host divestment groups — and the number continues to grow. Even major cities have pitched in with the mayor of Seattle ordering the city trust to dump fossil fuel company holdings.

Spurring this large and growing divestment movement are two numbers: 565 gigatons and 2,795 gigatons. 565 gigatons represents the amount of carbon we can dump into our atmosphere without pushing human caused global warming above the catastrophic level of 2 degrees Celsius. 2,795 gigatons is the total amount of carbon that would end up in the atmosphere if fossil fuel companies managed to sell all the oil, coal, and natural gas on their books. Carbon pollution they are doing their best to foist upon a world increasingly damaged by an angry climate.

Making matters worse is the fact that fossil fuel companies are increasing the amount of carbon we pump into the atmosphere at a break-neck rate. Last year alone, 34 gigatons were dumped into Earth’s already riled climate. At the current rate of emission, enough carbon will be emitted to pre-set a 2 degree increase by 2029. But since emission rates continue to increase, that date will likely be closer to 2025. And since the world’s policy-makers are failing to act, divestment activists are attempting to pull the rug out from under fossil fuel industries by denying them public funds via the world’s investment markets.

Now anyone — an individual, an investment firm, any institution or municipality with a trust or an endowment — can take part in the campaign to reclaim a healthy climate by pulling investment funds out of fossil fuel industries. And, so far, the response has been massive — far more rapid than the response to Apartheid. Let’s hope that these direct actions on the part of responsible individuals begins to roll back the tide of increasing fossil fuel exploitation and carbon emission. For my part, I hope you express your right to divest as well.

Links:

http://gofossilfree.org/

http://www.thenation.com/blog/172411/why-divestment-changing-climate-movement#

http://www.nytimes.com/2012/12/05/business/energy-environment/to-fight-climate-change-college-students-take-aim-at-the-endowment-portfolio.html?pagewanted=all&_r=0

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