Tag Archives: carbon dioxide

Fossil-Free in 2026

Norrland (in Sweden) abounds in hydropower. Power that is cheap and—crucially—green, along with bargain land and proximity to iron ore, is sparking an improbable industrial revolution, based on hydrogen, “green” steel and batteries. SSAB, a steelmaker, is poised to deliver its first consignment of “eco-steel” from a hydrogen-fuelled pilot plant in Lulea, a northern city. 

Traditionally, to make steel, iron ore must be melted at high temperatures and reduced from iron oxide to iron, a process that typically involves burning fossil fuels, releasing huge amounts of carbon dioxide. Replacing them with hydrogen eliminates more than 98% of the carbon dioxide normally released. The hydrogen is made by electrolysing water, using electricity produced by hydro-power. This approach involves almost no carbon-dioxide emissions at all…..

Northern Sweden’s steelmaking leaps are being emulated elsewhere in Europe, in response to similar environmental pressures which will only increase if, as looks very likely, Germany’s Greens enter government after the election in September 2021. Europe produces a still significant 16% of the world’s steel. Big producers in Germany and Poland, where the industry is mostly coal-based and very dirty, are nervy. Even neighbouring Norway is in danger of losing out. It too has the gift of rich renewable-energy resources, but underinvestment means there may soon not be enough of this green electricity to meet the demands of both households and industry.

Excerpts from Green steel: Plentiful renewable energy is opening up a new industrial frontier, Economist, May 15, 2021

Can We Change Path? Saving Forests and Cutting Carbon

No ecosystem is more important in mitigating the effects of climate change than tropical rainforest. And South-East Asia is home to the world’s third-biggest patch of it, behind the Amazon and Congo basins. Even though humans release carbon from these forests through logging, clear-felling for agriculture and other disruptions, some are so vast and fecund that the growth of the plants within them absorbs even more from the atmosphere. The Congo basin, for instance, locks up 600m tonnes of carbon a year more than it releases, according to the World Resources Institute (WRI), an international NGO that is equivalent to about a third of emissions from all American transport.

In contrast, such is the extent of clearing for plantations in South-East Asia’s rainforests, which run from Myanmar to Indonesia, that over the past 20 years they have turned from a growing carbon sink to a significant source of emissions—nearly 500m tonnes a year. Indonesia and Malaysia, home to the biggest expanses of pristine forest, have lost more than a third of it this century. Cambodia, Laos and Myanmar, relative newcomers to deforestation, are making up for lost time.

The Global Forest Watch, which uses satellite data to track tree cover, loss of virgin forest in Indonesia and Malaysia has slowed for the fourth year in row—a contrast with other parts of the world…The Leaf Coalition, backed by America, Britain and Norway, along with such corporate giants as Amazon, Airbnb, and Unilever, aims to create an international marketplace in which carbon credits can be sold for deforestation avoided. An initial $1bn has been pledged to reward countries for protecting forests. South-East Asia could be a big beneficiary,

Admittedly, curbing deforestation has been a cherished but elusive goal of climate campaigners for ages. A big un initiative to that end, called REDD+, was launched a decade ago, with Indonesia notably due for help. It never achieved its potential. Projects for conservation must jump through many hoops before approval. The risk is often that a patch of forest here may be preserved at the expense of another patch there. Projects are hard to monitor. The price set for carbon under the scheme, $5 a tonne, has been too low to overcome these hurdles.

The Leaf Initiative would double the price of carbon, making conservation more attractive. Whereas buyers of carbon credits under REDD+ pocketed profits from a rise in carbon prices, windfalls will now go to the country that sold the credits. Standards of monitoring are much improved. Crucially, the scheme will involve bigger units of land than previous efforts, the so-called jurisdictional approach. That reduces the risk of deforestation simply being displaced from a protected patch to an unprotected one.

Excerpts from Banyan: There is hope for South-East Asia’s beleaguered tropical forests, Economist, May 1, 2021

Dumping Carbon in the Seabed

Oil companies have for decades made money by extracting carbon from the ground. Now they are trying to make money putting it back. Energy giants such as Exxon Mobil and Royal Dutch Shell are pushing carbon capture and storage (CCS)—where carbon is gathered and buried underground—as part of a drive to reduce both their own and their customers’ emissions. Executives say the service could become a new source of income when the industry is grappling with how to adapt to a lower-carbon economy.

Oil companies have long captured carbon from their operations, albeit mostly to produce more oil. Now they want to retool that skill as a service they can sell to heavy-polluting industries like cement and steel, burying their carbon in the ground indefinitely for a fee, rather than releasing it into the atmosphere. Yet critics question the environmental benefits and high cost of such projects.

In 2021, Shell, Total and Equinor launched a joint venture to store carbon in a rock formation thousands of feet beneath the seabed off the coast of Norway. The state-backed Northern Lights project is set to be the first time companies outside the oil industry will be able to pay to have their carbon gathered and stored. Most carbon-storage projects rely on government funding. Norway is covering about 80% of the $1.6 billion cost of the Northern Lights project, with the rest split equally between Shell, Equinor and Total.

Exxon has said it plans to form a new business unit to commercialize carbon capture and storage, forecasting it could become a $2 trillion market by 2040. Chevron has formed partnerships on storage projects, while BP is codeveloping storage projects in the U.K. and Australia. Oil executives’ sales pitch to carbon-intensive companies: We will provide your energy, then take back the carbon to minimize your footprint. Carbon capture and storage iss becoming a business rather than just a solution. 

The U.S. offers companies a tax credit of as much as $50 a metric ton of carbon captured, while the U.K., Norway and Australia have collectively committed billions of dollars of funding for carbon-capture projects. But There are  concerns about whether storage sites could leak carbon. In Europe, public resistance to land-based storage has led to the use of aquifers and depleted gas fields in the North Sea….In the Norway project, carbon will be transported by ship around the bottom of the country before being pumped offshore via a 68-mile pipeline and then injected into an aquifer under the seabed. BP is working on a similar concept for a project it will operate in northeast England, where carbon will be collected from a gas-power plant and various industrial sites, then stored under the North Sea. “We’ll capture the carbon, we’ll take it offshore, we’ll stuff it underground,” BP Chief Executive Bernard Looney recently said of the project. “Taking the carbon back is what I like to describe it as.”

Excerpts from Sarah McFarlane, Oil Giants Turn to Carbon Storage, Apr. 20, 2021

Chasing Super-Polluters

A constellation of satellites will be flown this decade to try to pinpoint significant releases of climate-changing gases, in particular carbon dioxide and methane. The initiative is being led by an American non-profit organisation called Carbon Mapper.
It will use technology developed by the US space agency over the past decade.
The satellites – 20 or so – will be built and flown by San Francisco’s Planet company.
Planet operates today the largest fleet of Earth-observing spacecraft.

There are already quite a few satellites in the sky that monitor greenhouse gases, but the capability is far from perfect. Most of these spacecraft can sense the likes of methane over very large areas but have poor resolution at the local level, at the scale, say, of a leaking pipeline. And those systems that can capture this detail will lack the wide-area coverage and the timely return to a particular location. The Carbon Mapper project wants to fix this either-or-situation by flying multiple high-resolution (30m) sensors that can deliver a daily view, or better.

They will look for super-emitters – the actors responsible for large releases of greenhouse gases. These would include oil and gas infrastructure, or perhaps poorly managed landfills and large dairy factory facilities.

Often these emitters want to know they have a problem but just don’t have the data to take action. “What we’ve learned is that decision support systems that focus just at the level of nation states, or countries, are necessary but not sufficient. We really need to get down to the scale of individual facilities, and even individual pieces of equipment, if we’re going to have an impact across civil society,” explained Riley Duren, Carbon Mapper’s CEO and a research scientist at the University of Arizona…The aim is to put the satellite data in the hands of everyone, and with the necessary tools also to be able to understand and use that information….

Excerpt from Jonathan Amos Carbon Mapper satellite network to find super-emitters, Reuters, April 16, 2021

How Mining Waste Can Help us Deal with Climate Change

Every year, mining and industrial activity generates billions of tons of slurries, gravel, and other wastes that have a high pH.

These alkaline wastes, which sit either behind fragile dams or heaped in massive piles, present a threat to people and ecosystems. But these wastes could also help the world avert climate disaster. Reacting these wastes with carbon dioxide (CO2) from the air solidifies them and makes them easier to handle.

At the same time, carrying out this type of an operation on a global scale could trap between 310 million to 4 billion tons of CO2 annually, according to recent surveys. That could provide the world with a much needed means of lowering atmospheric CO2.

But there are major hurdles. Governments will need to offer incentives for mineralization on the massive scale needed to make a dent in atmospheric carbon. And engineers will need to figure out how to harness the wastes while preventing the release of heavy metals and radioactivity locked in the material…

If regulators verified mines and other alkaline waste producers as CO2 sequestration sites…incentives would skyrocket, companies could claim tax benefits, and industry might start to tackle climate change on the grand scale that’s necessary.

Excerpt from Robert F. Service, The Carbon Vault, Science, Sept. 4, 2020

Climate Change Unlikely to Kill Amazon Rainforest

The current Earth system models used for climate predictions show that the Amazon rainforest is very sensitive to water stress. Since the air in the future is predicted to get warmer and drier with climate change, translating to increased water stress, this could have large implications not just for the forest’s survival, but also for its storage of CO2. If the forest is not able to survive in its current capacity, climate change could greatly accelerate.

Columbia Engineering researchers decided to investigate whether this was true, whether these forests are really as sensitive to water stress as what the models have been showing. In a study published in Science Advances, they report their discovery that these models have been largely over-estimating water stress in tropical forests.

The team found that, while models show that increases in air dryness greatly diminish photosynthesis rates in certain regions of the Amazon rainforest, the observational data results show the opposite: in certain very wet regions, the forests instead even increase photosynthesis rates in response to drier air…[In fact] As the trees become stressed, they generate more efficient leaves that can more than compensate for water stress.”…

“So much of the scientific research coming out these days is that with climate change, our current ecosystems might not be able to survive, potentially leading to the acceleration of global warming due to feedbacks,” Gentine added. “It was nice to see that maybe some of our estimates of approaching mortality in the Amazon rainforest may not be quite as dire as we previously thought.”

Excerpts from Some Amazon Rainforest Regions More Resistant to Climate Change than Previously Thought, Columbia Engineering, Nov. 20, 2020

Banning Gasoline Cars: Better than subsidies and taxes

More than a dozen countries say they will prohibit sales of petrol-fueled cars by a certain date. On September 23rd, 2020,  Gavin Newsom, California’s governor, pledged to end sales of non-electric cars by 2035. Such bans may look like window-dressing, and that could yet in some instances prove to be the case. But in the right circumstances, they can be both effective and efficient at cutting carbon.

Fully electric vehicles are not yet a perfect substitute for petrol-consuming alternatives. They are often more expensive, depreciate faster, and have a lower range of travel and more limited supporting infrastructure, like charging stations or properly equipped mechanics. But the number of available electric models is growing, and performance gaps are closing. A recent analysis concludes that in such conditions—when electric vehicles are good but not perfect substitutes for petrol-guzzlers—a ban on the production of petrol-fueled cars is a much less inefficient way to reduce emissions than you might think.

If electric vehicles were in every way as satisfactory as alternatives, it would take little or no policy incentive to flip the market from petrol-powered cars to electric ones. If, on the other hand, electric cars were not a good substitute at all, the cost of pushing consumers towards battery-powered vehicles would not be worth the savings from reduced emissions. Somewhere in between those extremes, both electric and petrol-powered cars may continue to be produced in the absence of any emissions-reducing policy even though it would be preferable, given the costs of climate change, for the market to flip entirely from the old technology to the new. Ideally, the authors reckon, this inefficiency would be rectified by a carbon tax, which would induce a complete transition to electric vehicles. If a tax were politically impossible to implement, though, a production ban would achieve the same end only slightly less efficiently—at a loss of about 3% of the annual social cost of petrol-vehicle emissions, or about $19bn over 70 years… A shove may work as well as a nudge. 

Excerpts from Outright bans can sometimes be a good way to fight climate change, Economist, Oct. 3, 2020

The Green Climate Fund and COVID-19

 The Green Climate Fund has promised developing nations it will ramp up efforts to help them tackle climate challenges as they strive to recover from the coronavirus pandemic, approving $879 million in backing for 15 new projects around the world…The Green Climate Fund (GCF) was set up under U.N. climate talks in 2010 to help developing nations tackle global warming, and started allocating money in 2015….

Small island states have criticised the pace and size of GCF assistance…Fiji’s U.N. Ambassador Satyendra Prasad said COVID-19 risked worsening the already high debt burden of small island nations, as tourism dived…The GCF  approved in August 2020 three new projects for island nations, including strengthening buildings to withstand hurricanes in Antigua and Barbuda, and installing solar power systems on farmland on Fiji’s Ovalau island.

It also gave the green light to payments rewarding reductions in deforestation in Colombia and Indonesia between 2014 and 2016. But more than 80 green groups opposed such funding. They said deforestation had since spiked and countries should not be rewarded for “paper reductions” in carbon emissions calculated from favourable baselines…. [T]he fund should take a hard look at whether the forest emission reductions it is paying for would be permanent.  It should also ensure the funding protects and benefits forest communities and indigenous people…

Other new projects included one for zero-deforestation cocoa production in Ivory Coast, providing rural villages in Senegal and Afghanistan with solar mini-grids, and conserving biodiversity on Indian Ocean islands.  The fund said initiatives like these would create jobs and support a green recovery from the coronavirus crisis.

Excerpts from Climate fund for poor nations vows to drive green COVID recovery, Reuters, Aug. 22, 2020

Wasted Energy: Methane Leakage in Permian Basin


The methane over the Permian Basin emitted by oil companies’ gas venting and flaring is double previous estimates, and represents a leakage rate about 60% higher than the national average from oil and gas fields, according to the research, which was publishe in the journal Science Advances. Methane is the primary component of natural gas. It also is a powerful driver of climate change that is 34 times more potent than carbon dioxide at warming the atmosphere over the span of a century. Eliminating methane pollution is essential to preventing the globe from warming more than 2 degrees Celsius (3.6 degrees Fahrenheit)—the primary target of the Paris climate accord, scientists say.

The researchers used satellite data gathered in 2018 and 2019 to measure and model methane escaping from gas fields in the Permian Basin, which stretches across public and private land in west Texas and southeastern New Mexico. The leaking and flaring of methane had a market value of nearly $250 million in April 2020.

Methane pollution is common in shale oil and gas fields such as those in the Permian Basin because energy companies vent and burn off excess natural gas when there are insufficient pipelines and processing equipment to bring the gas to market. About 30% of U.S. oil production occurs in the Permian Basin, and high levels of methane pollution have been recorded there in the past. Industry groups such as the Texas Methane and Flaring Coalition have criticized previous methane emission research. The coalition has repeatedly said (Environmental Defense Fund) EDF’s earlier Permian pollution data were exaggerated and flawed.

The Texas Railroad Commission, which regulates the oil and gas industry in Texas, allows companies to flare and vent their excess gas. The commission didn’t respond to a request for comment.

The use of satellites to measure methane is a different approach than the methods used by federal agencies, including the EPA, which base their estimates on expected leakage rates at oil and gas production equipment on the ground. A “top-down” approach to measuring methane using aircraft or satellite data almost always reveals higher levels of methane emissions than the EPA’s “bottom-up” approach.

Excerpts from Permian Oil Fields Leak Enough Methane for 7 Million Homes, Bloomberg Law, Apr. 22, 2020,

The Privilege of Polluting v. Decarbonization

The Paris climate agreement of 2015 calls for the Earth’s temperature to increase by no more than 2°C over pre-industrial levels, and ideally by as little as 1.5°C. Already, temperatures are 1°C above the pre-industrial, and they continue to climb, driven for the most part by CO2 emissions of 43bn tonnes a year. To stand a good chance of scraping under the 2°C target, let alone the 1.5°C target, just by curtailing greenhouse-gas emissions would require cuts far more stringent than the large emitting nations are currently offering.

Recognising this, the agreement envisages a future in which, as well as hugely reducing the amount of CO2 put into the atmosphere, nations also take a fair bit out. Scenarios looked at by the Intergovernmental Panel on Climate Change (IPCC) last year required between 100bn and 1trn tonnes of CO2 to be removed from the atmosphere by the end of the century if the Paris goals were to be reached; the median value was 730bn tonnes–that is, more than ten years of global emissions…

If you increase the amount of vegetation on the planet, you can suck down a certain amount of the excess CO2 from the atmosphere. Growing forests, or improving farmland, is often a good idea for other reasons, and can certainly store some carbon. But it is not a particularly reliable way of doing so. Forests can be cut back down, or burned—and they might also die off if, overall, mitigation efforts fail to keep the climate cool enough for their liking. …But the biggest problem with using new or restored forests as carbon stores is how big they have to be to make a serious difference. The area covered by new or restored forests in some of the ipcc scenarios was the size of Russia. And even such a heroic effort would only absorb on the order of 200bn tonnes of CO2 ; less than many consider necessary.

The world has about 2,500 coal-fired power stations, and thousands more gas-fired stations, steel plants, cement works and other installations that produce industrial amounts of CO2. Just 19 of them offer some level of Carbon Capture and Storage (CCS), according to the Global Carbon Capture and Storage Institute (GCSI), an advocacy group. All told, roughly 40m tonnes of CO2 are being captured from industrial sources every year—around 0.1% of emissions.

Why so little? There are no fundamental technological hurdles; but the heavy industrial kit needed to do CCS at scale costs a lot. If CO2 emitters had to pay for the privilege of emitting to the tune, say, of $100 a tonne, there would be a lot more interest in the technology, which would bring down its cost. In the absence of such a price, there are very few incentives or penalties to encourage such investment. The greens who lobby for action on the climate do not, for the most part, want to support CCS. They see it as a way for fossil-fuel companies to seem to be part of the solution while staying in business, a prospect they hate. Electricity generators have seen the remarkable drop in the price of wind and solar and invested accordingly.

Equinor, formerly Statoil, a Norwegian oil company, has long pumped CO2 into a spent field in the North Sea, both to prove the technology and to avoid the stiff carbon tax which Norway levies on emissions from the hydrocarbon industry. As a condition on its lease to develop the Gorgon natural-gas field off the coast of Australia, Chevron was required to strip the CO2 out of the gas and store it. The resultant project is, at 4m tonnes a year, bigger than any other not used for EOR. But at the same time, what the Gorgon project stores in a year, the world emits in an hour.

In Europe, the idea has caught on that the costs of operating big CO2 reservoirs like Gorgon’s will need to be shared between many carbon sources. This is prompting a trend towards clusters that could share the storage infrastructure. Equinor, Shell and Total, two more oil companies, are proposing to turn CCS into a service industry in Norway. For a fee they will collect CO2 from its producers and ship it to Bergen before pushing it out through a pipeline to offshore injection points. In September Equinor announced that it had seven potential customers, including Air Liquide, an industrial-gas provider, and ArcelorMittal, a steelmaker.

Similar projects for filling up the emptied gasfields of the North Sea are seeking government support in the Netherlands, where Rotterdam’s port authority is championing the idea, and in Britain, where the main movers are heavy industries in the north, including Drax.

The European Union has also recently announced financial support for CCS, in the form of a roughly €10bn innovation fund aimed at CC S, renewables and energy storage. The fund’s purpose is not to decarbonise fossil-fuel energy, but rather to focus on CCS development for the difficult-to-decarbonise industries such as steel and cement.

Excerpts from, The Chronic Complexity of Carbon Capture, Economist, Dec. 7, 2019

The Fight for the Remnant Trees of Europe

For 120 years RWE has been one of Europe’s biggest emitters of carbon dioxide. The German utility cleared almost all of Hambacher forest, a once-vast wood in western Germany, to mine lignite, an especially filthy fossil fuel, which it burned to generate electricity. What is left of “Hambi” has become a symbol of the anti-coal movement, occupied by activists camping in 80-odd tree houses.  RWE is under fire even where it does not operate. A Peruvian farmer has sued it in a German court for its contribution to climate change that led to the melting of an Andean glacier, which threatens to flood his home. He lost but is appealing.

Peruvian farmer who sued RWE

But  in September 2019, the EU agreed to a €43bn ($47.5bn) asset swap between RWE and its rival E.ON. It turns E.ON into Europe’s largest power-grid operator by assets and RWE into the world’s second-biggest producer of offshore wind power and Europe’s third-biggest producer of renewable energy. [RWE] has vowed to become carbon neutral by 2040

Of the eu’s 28 members, 18 have pledged to emit no net carbon by 2050. Germany says it will stop using coal by 2038 and stump up €40bn to ease the transition.   RWE is demanding a chunk of the transition pot. It still runs three lignite mines, which directly employ 9,900 people and indirectly support another 20,000 jobs in the Rhine region….  [To complicate matters further], in October 2019 a court ordered a halt to the clearing of its remaining 200 hectares of the forest…RWE says the forest could be left as it is—but at a price. It may cost the company €1.5bn or so to find an alternative to a planned expansion of an open-pit mine at Hambach.

Excerpts from  RWE: After Hambi, Economist, Nov. 23, at 59

Greening Natural Gas: How to Record Gas Leaks with Hand-Held Cameras

Energy companies are producing record volumes of natural gas, thanks in part to the U.S. fracking boom. They have ambitious plans to make the cleaner-burning fuel a big part of the global energy mix for decades to come by sending tankers of liquefied gas around the world.But growing public concern over leaks and intentional releases of gas and its primary component, methane, threaten to derail the dominance of gas in the new energy world order.  Methane is far more potent than carbon dioxide in contributing to climate change. That makes it particularly harmful to the environment when it is discharged into the atmosphere.

In the U.S. alone, the methane that leaks or is released from oil and gas operations annually is equivalent to the greenhouse gas emissions from more than 69 million cars, according to a Wall Street Journal analysis using conversion formulas from the Environmental Protection Agency and emissions estimates for 2015 published last year in the journal Science….The Intergovernmental Panel on Climate Change, a United Nations body, says methane is even more potent than the estimates the EPA uses. By its calculation the annual releases would be equal to those of about 94 million cars, or roughly a third of the nation’s registered vehicles.

About 2.3% of the natural gas produced in the U.S. escapes directly into the atmosphere due in part to leaky equipment or intentional discharges, according to the Science study, which analyzed 2015 emissions. (Some discharges are legally permitted.) At that rate, it would have amounted to about $7.6 million worth of gas lost each day last year.  Another roughly $4.5 million in U.S. gas went up in smoke each day in 2018, World Bank data show, as energy companies burned fuel  (a practice known as flaring) they couldn’t move to market or chose not to ship because the cost of doing so would have exceeded the price the gas would fetch in some regions. Many companies drill primarily for oil and treat the gas released in the process as a byproduct.

Leaking and flaring are a global problem. As gas displaces coal for electricity production in the U.S. and other countries its side effects are drawing more attention, not just from environmental activists but investors fretting about how gas will compete over the long term against renewable energy sources such as wind and solar, which are dropping in price.

President Trump’s administration has moved to relax existing federal requirements for monitoring and fixing leaks. Still, from oil giants to the independent drillers powering the shale boom, companies are scrambling to rein in emissions over concerns from their executives, shareholders and environmentalists that gas waste could undermine the argument for gas as the “bridge fuel” to a cleaner future of renewables.

Methane is invisible to the naked eye, so companies detect leaks with infrared cameras and lasers. That can be a tall task—the gas can seep out of countless places, from wells to pipelines to storage facilities.  As a result, energy companies are increasingly supplementing manual inspections with aerial monitoring to survey large swaths of land checkerboarded with oil and gas infrastructure.  In West Texas, BP has begun monthly flights over its wells by a drone equipped with methane-detection equipment.   The company also is looking to cut back on flaring, which many companies do in the Permian Basin of Texas and New Mexico because they lack access to pipelines to move the product to market….BP is investing in a new gas-gathering and compression system that will allow it to send more gas to customers instead of burning it away…

Kairos,  a company, specializes in identifying larger methane releases by flying small planes about 3,000 feet above the ground. …Kairos has received funding from the Oil and Gas Climate Initiative, an industry organization whose members include Exxon Mobil Corp. and Chevron Corp. The companies in the organization have pledged to collectively cut average methane emissions to less than 0.25% of gas sold by 2025.

One reason companies are stepping up monitoring is that environmental activists are watching, using technology to record leaks as they seek to boost public awareness of methane emissions.  Sharon Wilson, an organizer for the advocacy organization Earthworks, visits the Permian almost every month to monitor leaks from oil and gas sites, using a hand-held infrared camera. She submits the footage as evidence in state regulatory complaints against energy companies and often posts it on YouTube…Earthworks has filed more than 100 complaints in Texas and New Mexico since the beginning of 2018. State regulators issued violations or compelled operators to make repairs or install new equipment in fewer than 10% of the instances as of July, according to estimates by the group.

Excerpts from Rebecca Elliott, The Leaks that Threaten the Clean Image of Natural Gas, WSJ,  Aug. 10, 2019

The Carbon Bubble

Regulators around the globe are researching potential risks to financial stability from a failure to contain climate change or a sudden collapse in the value of fossil-fuel assets.  Institutions such as the Bank of England, the Financial Stability Board and the European Systemic Risk Board are examining how banks, insurers and pension funds would cope if policies designed to reduce carbon-dioxide emissions led to a sharp drop in the share price of oil, gas and coal companies.They are looking at new rules to disclose exposures to both stocks and bonds in such companies, conducting stress tests based on different climate scenarios or even requiring additional capital buffers.

The regulators’ concerns rest on scientific assessments that much of the world’s known fossil-fuel reserves would have to stay underground if governments want to limit global warming to 2 degrees Celsius above preindustrial levels. If they aim to contain average temperature increases to 1.5 degrees, as set out in an international climate deal sealed in Paris in December 2015, the so-called carbon budget would shrink even more.

That…cause selloffs of fossil-fuel companies and broader economic problems caused by energy shortages. In 2015, the Group of 20 major economies asked the FSB to scope out potential vulnerabilities in the financial system linked to climate change.

Not everyone agrees with the regulators’ new focus….Spencer Dale, chief economist of BP PLC and a former executive director for financial stability at the Bank of England says only around 2% to 3% of proven fossil-fuel reserves are actually featured on energy majors’ balance sheets, limiting the danger of a sudden drop in the companies’ value due to climate-change policies. “The idea that somehow that we have a carbon bubble—in the sense that the assets that are currently on oil companies’ balance sheets are overpriced, because they won’t be able to use them—I don’t think makes any economic sense,” he says.

Instead, energy companies should provide more information on how climate change and climate-change policies will affect their businesses and allow investors to make their own assessment, says Mr. Dale. BP and Royal Dutch Shell PLC both backed shareholder resolutions to that effect last year.

Excerpts from  Climate Financial Risks Examined, Wall Street Journal, Apr. 1, 2016

Carbon budget

Demand for Carbon Tax

“You can argue that Big Oil is becoming Big Gas,” says Occo Roelofsen of McKinsey, a consulting firm. Others are going in for renewables. Total of France has a majority stake in SunPower, one of the world’s biggest solar-power firms. Eldar Saetre, the boss of Statoil, Norway’s state-run oil company, says that in 15 years there may be more opportunities outside oil and gas than within.

Plenty of oil firms (Exxon among them) are also calling for governments to enact a “carbon tax” on emitters of greenhouse gases. Their critics argue that this is less altruistic than it appears. For one thing, such a tax would hurt the coal industry especially, thereby boosting the oil firms’ gas businesses. And governments, especially in the developing world, where fossil-fuel demand is still surging, may find such a tax politically impossible anyway; the oilmen are calling for it, opponents say, in the knowledge that such countries will never introduce it….

On November 4th New York’s attorney-general, Eric Schneiderman, subpoenaed documents from Exxon to investigate how much it has known since the 1970s about the effects of fossil fuels on the climate. Exxon is reportedly being investigated under the Martin Act, dating back to 1921, which gives prosecutors wide-ranging powers to investigate securities fraud. Exxon says it has long disclosed information about the risks to its business from climate change, and from action to prevent it, in reports to its shareholders. But the firm’s run-in with the New York justice department may be a portent of what is to come.

Another worry for oil executives is pressure from investors spooked by the financial risks of climate change. Policymakers, such as Mark Carney, governor of the Bank of England, talk about the possibility of many oilfields turning into “stranded assets”, or “unburnable carbon”, if governments get serious about climate-change action. Anthony Hobley of Carbon Tracker, a climate-advisory firm, says that if the Paris pledges are taken at all seriously, the oil and gas industry may become “ex-growth”. Oil executives dispute that. But shareholders, if motivated, could force the industry to shrink just by limiting the funds they provide for new oil discoveries.

Curiously, the present situation may provide a foretaste of this—though cyclically, because of falling oil prices, rather than structurally, because of rising temperatures. Faced with a world awash in crude, oil majors are abandoning high-cost reserves in the Arctic, Canada, North Sea and Gulf of Mexico. One oil executive ruefully calls it a “practice run” for the day in the distant future when fears of global warming, or the emergence of cheap, clean alternative technologies, mean that demand for fossil fuels starts to wane.

Excerpt from Oil Companies and Climate Change: Nodding Donkeys, Economist, Nov. 14, 2015, at 61

The Risk of Unburnable Carbon

Several  reports suggest that markets are overlooking the risk of “unburnable carbon”. The share prices of oil, gas and coal companies depend in part on their reserves. The more fossil fuels a firm has underground, the more valuable its shares. But what if some of those reserves can never be dug up and burned?

If governments were determined to implement their climate policies, a lot of that carbon would have to be left in the ground, says Carbon Tracker, a non-profit organisation, and the Grantham Research Institute on Climate Change, part of the London School of Economics. Their analysis starts by estimating the amount of carbon dioxide that could be put into the atmosphere if global temperatures are not to rise by more than 2°C, the most that climate scientists deem prudent. The maximum, says the report, is about 1,000 gigatons (GTCO2) between now and 2050. The report calls this the world’s “carbon budget”.

Existing fossil-fuel reserves already contain far more carbon than that. According to the International Energy Agency (IEA), in its “World Energy Outlook”, total proven international reserves contain 2,860GTCO2—almost three times the carbon budget. The report refers to the excess as “unburnable carbon”.

Most of the reserves are owned by governments or state energy firms; they could be left in the ground by public-policy choice (ie, if governments took the 2°C target seriously). But the reserves of listed oil companies are different. These are assets developed using money raised from investors who expect a return. Proven reserves of listed firms contain 762GTCO2—most of what can prudently be burned before 2050. Listed potential reserves have 1,541GTCO2 embedded in them.

So companies and governments already have far more oil, gas and coal than they need (again, assuming temperatures are not to rise by more than 2°C). Logically, the response to this would be for governments to leave their reserves untouched and for companies to run theirs slowly down, returning more of what they earn to shareholders. Neither of these things is happening. State-owned companies are taking an increasing share of total energy output. And in 2012, says Carbon Tracker, the 200 largest listed oil, gas and coal companies spent five times as much—$674 billion—on developing new reserves as they did returning money to shareholders ($126 billion). ExxonMobil alone plans to spend $37 billion a year on exploration in each of the next three years.

Such behaviour, on the face of it, makes no sense. One possible explanation is that companies are betting that government climate policies will fail; they will be able to burn all their reserves, including new ones, after all. This implies that global temperatures would either soar past the 2°C mark, or be restrained by a technological fix, such as carbon capture and storage, or geo-engineering.Recent events make such a bet seem rational. On April 16th the European Parliament voted against attempts to shore up Europe’s emissions trading system against collapse. The system is the EU’s flagship environmental policy and the world’s largest carbon market.  Putting it at risk suggests that Europeans have lost their will to endure short-term pain for long-term environmental gain. Nor is this the only such sign. Several cash-strapped EU countries are cutting subsidies for renewable energy. And governments around the world have failed to make progress towards a new global climate-change treaty. Betting against tough climate policies seems almost prudent.

The markets are [also] mispricing risk by valuing companies as if all their reserves will be burned. Investors treat reserves as an indicator of future revenues. They therefore require companies to replace reserves depleted by production, even though this runs foul of emission-reduction policies. Fossil-fuel firms live and die by a measure called the reserve replacement ratio, which must remain above 100%. Companies see their shares marked down if the ratio falls, even when they pull the plug on dodgy, expensive projects. This happened to Shell, for example, when it suspended drilling in the Arctic in February….

At the moment neither public policies nor markets reflect the risks of a warmer world.

Energy Firms and Climate Change: Unburnable Fuel, Economist, May 4, 2013, at 68

Top Five Worst Polluters in Gas Flaring

An international coalition led by the World Bank is calling for state-backed and private oil producers to reduce “gas flaring” by an additional 30 percent over the next five years, saying that doing so would be equivalent to taking 60 million cars off of the roads.  Analysts widely characterised the goal as both ambitious and significant, though it follows on an apparent levelling out in flaring reductions in recent years.

Since a major new push began in 2005, the World Bank-led Global Gas Flaring Reduction (GGFR)* partnership estimates that, through 2011, its actions have brought down gas flaring by 20 percent, eliminating around 274 million tonnes of carbon dioxide emissions.  But according to the GGFR – a coalition of 20 major oil companies and 19 countries..both the economic and environmental impacts of gas flaring require far greater reductions.  “A 30 percent cut in five years is a realistic goal,” Rachel Kyte, the World Bank’s vice-president for sustainable development, said…

Oil producers resort to flaring when gas, a by-product of oil, is brought up to the surface but cannot easily be repurposed for consumers. Instead, producers simply burn off the product, the value of which the World Bank, based here in Washington, puts at some 50 billion dollars a year.  The total amount of gas estimated to have been flared last year, about five trillion cubic feet, is said to equal the amount of natural gas used in the United States over a full year.

Environmentalists have long called for the outright banning of the practice, though flaring does in fact release far lower levels of greenhouse gases than simply allowing the gas to evaporate. However, the process does not deal with one notorious pollutant, nitrogen oxide, and still releases significant carbon dioxide, and thus significant greenhouse gas-related worries remain.

Alternative uses for this gas range from producing power, refining it for use in local markets, or even putting it back into the ground. But analysts say the economic benefits for companies in doing so are low.  Nonetheless, the World Bank reports slow but steady success in reductions, particularly since 2005. According to data released Mexico has cut its flaring by two-thirds and Azerbaijan by half in just two years, while Kuwait gotten its flaring down to just one percent of previous levels.  In addition, Qatar and Congo have been singled out for using the gas to make electricity.

Significant improvements have also been seen in many of the world’s worst flaring offenders. “Huge investments” by GGFR partners have reportedly helped Nigeria to reduce its flaring by nearly a quarter through 2011, while Russia, the most significant culprit in this regard, has reduced flaring by around 40 percent, though those figures rose last year.  Still, the World Bank warned that both of these countries, particularly Russia, in addition to Mexico, Iraq and Kazakhstan, need to make significant improvements.

Missing from this list, however, is one of the most significant outliers in the global push against gas flaring: the United States, which has increased its gas flaring by more than three times since 2007, more than any other country.  The U.S. is currently in the midst of a sea-changing boom in natural gas production, thanks almost entirely to new technologies (so-called hydraulic fracturing or “fracking”) that have allowed for the exploitation of previously off-limits gas deposits in shale and other geological formations.

Against the promising country-by-country numbers, total global gas flaring actually increased last year by around two billion cubic metres, which World Bank analysts have put down to output from Russia and, specifically, the U.S. state of North Dakota.  “The small increase underlines the importance for countries and companies to sustain and even accelerate efforts to reduce flaring of gas associated with oil production,” Bent Svensson, manager of the GGFR partnership, said when the 2011 figures became available in July. “It is a warning sign that major gains over the past few years could be lost if oil-producing countries and companies don’t step up their efforts.”

The U.S. is now the fifth-largest flarer, behind Russia, Nigeria, Iran and Iraq. While part of this is due to the multifold increase in production in recent years, it also appears to be due to a lag in implementing the necessary infrastructure.  “Due to insufficient natural gas pipeline capacity and processing facilities … over 35% of North Dakota’s natural gas production … has been flared or otherwise not marketed,” the U.S. government reported in late 2011. “The percentage of flared gas in North Dakota is considerably higher than the national average; in 2009, less than 1% of natural gas produced in the United States was vented or flared.”…But based on new EPA rules, “the U.S. is going to have 100 percent no-flaring by 2015, which will be pretty good in terms of the rest of the world,” Kyle Ash, a Washington-based legislative analyst with Greenpeace, an advocacy group, told IPS.

Excerpts, By Carey L. Biron, U.S. Outlier in New Push to Reduce Gas Flaring,Inter Press Service,Oct. 24, 2012

*The GGFR partners include: Algeria (Sonatrach), Angola (Sonangol), Azerbaijan, Cameroon (SNH), Ecuador (PetroEcuador), Equatorial Guinea, European Bank for Reconstruction and Development (EBRD), France, Gabon, Indonesia, Iraq, Kazakhstan, Khanty-Mansijsysk (Russia), Mexico (SENER), Nigeria, Norway, Qatar, the United States (DOE) and Uzbekistan; BP, Chevron, ConocoPhillips, ENI, ExxonMobil, Marathon Oil, Maersk Oil & Gas, Pemex, Qatar Petroleum, Shell, Statoil, TOTAL; European Union, the World Bank Group; Associated partner: Wärtsilä.