Tag Archives: climate change and corporations

Taming the Apocalypse Horsemen: Steel Cement Chemicals

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Heavy industry has long seemed irredeemably carbon-intensive. Reducing iron ore to make steel, heating limestone to produce cement and using steam to crack hydrocarbons into their component molecules all require a lot of energy. On top of that, the chemical processes involved give off lots of additional carbon dioxide. Cutting all those emissions, experts believed, was either technically unfeasible or prohibitively expensive.

Both the economics and the technology are at last looking more favorable. Europe is introducing tougher emissions targets, carbon prices are rising and consumers are showing a greater willingness to pay more for greener products. Several European countries have crafted strategies for hydrogen, the most promising replacement for fossil fuels in many industrial processes. Germany is launching the Hydrogen Intermediary Network Company, a global trading hub for hydrogen and hydrogen-derived products. Most important, low-carbon technologies are finally coming of age. The need for many companies to replenish their ageing assets offers a “fast-forward mechanism”, says Per-Anders Enkvist of Material Economics…Decarbonising industry has turned from mission impossible to “mission possible”, says Adair Turner of the Energy Transitions Commission, a think-tank.

In July 2022 the board of Salzgitter, a German steel company, gave the nod to a €723m project called SALCOS that will swap its conventional blast furnaces for direct-reduction plants by 2033 (it will use some natural gas until it can secure enough hydrogen). Other big European steel producers, including ArcelorMittal and Thyssenkrupp, have similar plans.

HeidelbergCement, the world’s fourth-largest manufacturer of the cement has launched half a dozen low-carbon projects in Europe. They include a carbon capture storage (CCS) facility in the Norwegian city of Brevik and the world’s first carbon-neutral cement plant on the Swedish island of Gotland…The chemicals industry faces the biggest challenge. Although powering steam crackers with electricity instead of natural gas is straightforward in principle, it is no cakewalk in practice, given the limited supply of low-carbon electricity. Moreover, the chemicals business breathes hydrocarbons, from which many of its 30,000 or so products are derived. Even so, it is not giving up. BASF, a chemicals colossus, is working with two rivals, SABIC and Linde, to develop an electrically heated steam cracker for its town-sized factory in Ludwigshafen. It wants to make its site in Antwerp net-zero by 2030. 

A few dozen pilot projects—even large ones—do not amount to a green transition. The hard part is scaling them up.  However, the first movers will be able to  set the standards and grabbing a slice of potentially lucrative businesses such as software to control hydrogen- and steelmaking equipment. 

Excerpts from Green-dustrialization, Economist, Sept. 24, 2022

The Curious Case of Larry Fink, BlackRock: He Stays, They Go

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Few private citizens wield more power in America today than Larry Fink, the chief executive of BlackRock in pushing companies to embrace climate-friendly policies, that has made him a lightning rod. The firm he runs manages some $10 trillion for pension funds, endowments, governments, companies and individuals, equal to more than 10% of the world’s gross domestic product in 2020. As steward for millions of investors, BlackRock wields vast shareholder voting power, which it uses either to back managements or to prod them in new directions.

Today, Mr. Fink is telling CEOs that companies must prepare for a scale back of fossil fuels, and that the private sector should work with governments to do so. He warns of the disruption climate change could cause both the economy and financial markets, but sees historic investment opportunity in the energy shift. It’s a point he has made to conferences in Davos, Venice, Riyadh and Glasgow over the past year. Mr. Fink’s power, combined with his advocacy on a hot-button issue, has made him a flashpoint for activists, politicians and unions, both those who think BlackRock isn’t doing enough and others who say it’s doing too much…

U.S. government officials have called on Mr. Fink to help them cope with crises—the pandemic-rattled financial markets in March 2020, and, during the 2008 financial meltdown. “Treasury Secretaries and finance ministers come and go,” said David Rubenstein, the co-founder of the private-equity firm Carlyle Group Inc. “They work for someone else who can fire them tomorrow and have to build what others want them to. When you are the CEO of the biggest asset manager, you don’t have to do that.”

Excerpts from Dawn Lim Follow, Larry Fink Wants to Save the World (and Make Money Doing It), Jan. 6, 2022

Fossil-Free in 2026

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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

Chasing Super-Polluters

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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

Green-Shaming ExxonMobil

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ExxonMobil’s shareholders concerned about greenery are angered by ExxonMobil’s continued carbon-cuddling. Those who care more about greenbacks are irked by its capital indiscipline. Right now, both are pushing in the same direction.

D.E. Shaw, a big hedge fund, is urging ExxonMobil to spend more wisely… More eye-catchingly, Engine No.1, a newish fund with a stake of just 0.02%, is trying to green-shame Mr Woods with a mantra as straightforward as ExxonMobil’s: if the company continues on its current course, and demand shifts quickly to cleaner energy, it risks terminal decline. The fund has launched a proxy battle by proposing four new directors; the current board, it complains, is long on blue-chip corporate credentials but short on energy expertise. Engine No.1’s agitation for a shake-up has won backing from, among others, Calstrs, which manages $283bn on behalf of California’s public-sector workers.

Most important, the tone from ExxonMobil’s three biggest institutional shareholders—BlackRock, Vanguard and State Street—has also shifted…In a recent letter to clients, Larry Fink, boss of BlackRock, talked of greener stocks enjoying a “sustainability premium” and dirty ones jeopardising portfolios’ long-term returns. He hinted that his firm—the world’s largest asset manager—might divest from firms that failed to appreciate the “tectonic shift” taking place. Vanguard, too, has called out ExxonMobil for flawed governance…

Excerpt from Schumpeter: The Long Squeeze, Economist, Feb. 6, 2021

The Green Climate Fund and COVID-19

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 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

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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,

Hunting Down Polluters from Space

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When scanning for emissions from a mud volcano in western Turkmenistan in January 2019, a satellite called Claire came across a large plume of methane drifting across the landscape. … The company operating the satellite, GHGSAT passed details via diplomats to officials in Turkmenistan, and after a few months the leaks stopped. This largely unknown incident illustrates two things: that satellites can play an important role in spotting leaks of greenhouse gases and, rather worryingly, that the extent of such leaks is often greatly underestimated. The data from Claire suggested the leak in Turkmenistan had been a big one…142,000 tonnes of methane. This made the Turkmenistani leak far bigger than the 97,000 tonnes of methane discharged over four months by a notorious blowout at a natural-gas storage facility in Aliso Canyon, California, in 2015, which is reckoned to have been the worst natural-gas leak yet recorded in America. There have been other big leaks, too…

The reason for concern is that although methane, the main constituent of natural gas, does not linger in the atmosphere for anywhere near as long as carbon dioxide does, it is a far more potent heat-trapping agent. About a quarter of man-made global warming is thought to be caused by methane. And between a fifth and a third of the methane involved is contributed by the oil and gas industry. Methane can be detected spectroscopically. Like other gases, it absorbs light at characteristic frequencies. With a spectrometer mounted on a satellite it is possible to analyse light reflected from Earth for signs of the gas. As with the satellites that carry them, spectrometers come in many shapes and sizes. Tropomi can also detect the spectral signs of other polluting gases, such as nitrogen dioxide, sulphur dioxide and carbon monoxide.

Other methane-hunting satellites are coming. These include one due for launch in 2022 by Methanesat, an affiliate of the Environmental Defence Fund, an American non-profit organisation. The 350kg satellite will cost $88m to build and put into orbit. It will scan an area of land 200km wide with a resolution of 1km by 1km. According to Methanesat, it will be the most sensitive to emission levels yet, being able to detect methane concentrations as low as two parts-per-billion. Data collected by the satellite will be publicly available.

Excerpts from The Methane Hunters, Economist, Feb. 1 2020

The Fight for the Remnant Trees of Europe

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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 the Mining Industry

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An Australian regulator recently told Peabody Energy Glencore they couldn’t export coal from a new mine to countries that haven’t signed the Paris climate agreement. Two other Australian coal projects were scuttled in 2019, partly out of concern about greenhouse-gas emissions overseas.  Investors, too, are growing inquisitive about miners’ records on their customer emissions—partly out of fear about potential liability. Miners are responding by increasing carbon-impact disclosure, forming alliances with buyers and investing in technology to cut emissions from steel mills and power plants.  BHP  has said its scope 3 emissions—pollution mostly created when customers transport and use the commodities it produces—are almost 40 times greater than those generated at its own operations.

In the oil industry, facing similar pressures, there is friction among large companies over whether to commit to reducing greenhouse-gas emissions from products such as gasoline—in big part because emissions vary hugely depending on the vehicle…

Threats to miners’ business go beyond pushback on new projects. Consumer brands could stop buying commodities they consider too dirty, experts say. Many are already innovating with recycled materials.

In July 2019, BHP pledged to spend $400 million over five years to develop technologies that can reduce emissions both from its operations and its customers’.  “We won’t stop at the mine gate,” BHP Chief Executive Andrew Mackenzie said. …Rio Tinto is also drawing up scenarios for decarbonizing the steel industry. Success could materially affect the value of its core iron-ore business, it said.  Meantime, miners are touting their role in the shift to a low-carbon economy by producing commodities such as copper and nickel for wind turbines and electric vehicles.

Excerpts from Rhiannon Hoyle, Miners’ New Worry: Other People’s Pollution, WSJ, Oct. 9, 2019

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

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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 Unquenchable Thirst for Oil

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Demand for oil is rising and the energy industry, in America and globally, is planning multi-trillion-dollar investments to satisfy it. No firm embodies this strategy better than ExxonMobil, the giant that rivals admire and green activists love to hate. As our briefing explains, it plans to pump 25% more oil and gas in 2025 than in 2017. If the rest of the industry pursues even modest growth, the consequence for the climate could be disastrous.

To date politicians, particularly in America, have been reluctant to legislate for bold restrictions on carbon. That is in part thanks to ExxonMobil’s attempts to obstruct efforts to mitigate climate change. …ExxonMobil’s policies on climate change remain marred by inconsistencies. In October the company said it was giving $1m, spread over two years, to a group advocating a carbon tax. ExxonMobil maintains that a carbon tax is a transparent and fair way to limit emissions. But the sum is less than a tenth of its federal lobbying spending in 2018. Moreover, the carbon tax it favours would include protection for oil companies from climate lawsuits.

The firm is also working to reduce leaks of methane, a powerful greenhouse gas, from its wells, pipelines and refineries. However the American Petroleum Institute  (API) has been a main force urging Mr Trump’s administration to ease regulations on methane emissions. The API’s other efforts include lobbying against incentives for electric cars.  ExxonMobil is not alone in trying to sway the climate debate in its direction either. Shell, Total and BP are all members of the API. Marathon Petroleum, a refiner, reportedly campaigned to ease Barack Obama’s fuel-economy standards. BP spent $13m to help block a proposal for a carbon tax in Washington state in November. The Western States Petroleum Association, whose membership includes ExxonMobil and Shell, also lobbied to defeat that tax.

While oil companies plan to grow, trends in cleaner energy are moving in the wrong direction. Investments in renewables fell as a share of the total in 2017 for the first time in three years, as spending on oil and gas climbed. In 2018 carbon emissions in America grew by 3.4% as economic activity picked up, even as coal fell out of favour. Mr Woods maintains that any change to the energy supply will be gradual. “I don’t think people can readily understand just how large the energy system is, and the size of that energy system will take time to evolve,” he argues… Out at sea, ExxonMobil is working to increase production. By next year an underwater web of pipes will connect wells on the seabed to a vast vessel. From there the oil will be transferred to smaller tankers, then to the vast infrastructure that can refine and transport it until it reaches consumers in the form of fertiliser, plastic bottles, polyester or, most likely, petrol. From beneath the ocean floor to your car’s tank, for about the price of a gallon of milk.

Excerpts from  Crude Awakening, Economist,  Feb. 9, 2019; Bigger Oil, Economist,  Feb. 9, 2019

Making a Fortune from Climate Change

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Eleven years ago Dharsono Hartono, a former JPMorgan Chase & Co. banker, spotted what he thought was a new way to make a fortune: climate change.The plan was to snap up rainforest in Borneo, preserve it from logging and sell carbon credits to big polluting companies in the developed world. The earth’s temperature was rising, and this was a way to profit by confronting the problem.  Investors around the world have poured money into assets like once-frozen farmland in Canada and groundwater basins in California, betting that warming temperatures will raise their value.  Another bet has been on what some investors hope will be the most profitable outcome of a warming climate: government regulation of carbon emissions. Those who correctly anticipate future government responses to climate change are likely to reap profits.

Mr. Hartono went in big. His company’s rain forest, a humid and swampy expanse home to orangutans and clouded leopards, is twice the size of New York City and has one of the largest carbon stores of any such project in the world.  Mr. Hartono has sold just 20% of his credits to environmentally conscious corporations voluntarily buying credits, and has lost around $20 million, burning through $5 million to $10 million a year in recent years. Other investors in Indonesia and Latin America who made similar bets, including one backed by Australian bank Macquarie Group , failed to sell credits and abandoned their rain-forest projects…

Only after actor Harrison Ford visited the project to shoot a documentary on climate change, and raised the issue with Indonesia’s forestry minister, did final approval come for most of the concession in October 2013. For an initial payment of around $3 million to the Indonesian government, Mr. Hartono’s company gained the rights to the forestland for 60 years.  By then, however, some environmentalists were questioning private carbon-selling projects like Mr. Hartono’s. They argued that buying up and preserving rain forest to sell credits wouldn’t decrease net deforestation, since palm-oil barons would simply work around the few protected plots in the forest.  U.S. legislation that would have put a price on carbon failed during the Obama administration. The European Union’s carbon market doesn’t include tropical forests amid worry that low-cost credits generated there would make it affordable to pollute…

The Paris climate accords are expected to lead to an international carbon market after 2020, where countries that exceed emissions targets can purchase offset credits from countries that reduce emissions beyond their targets, potentially opening up new opportunities for Mr. Hartono.

Excerpts fom One Man’s Money Draining Bet on Climate Change, WSJ, Dec. 27, 2018

Who to Blame for Climate Change? the Carbon Majors

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 Whether the damage caused by extreme weather events can be linked to human emissions of greenhouse gases is one of the hottest topics in climate science. And that debate leads directly to another: if this link can be established, who bears the responsibility?  Both of these questions are at the center of an inquiry by the Philippine Commission on Human Rights, whose latest hearings took place in London in November 2018. It is the first time a human-rights commission has heard evidence on whether large emitters violate basic human rights by causing climate change…

 Where the hearings become more unusual is in investigating the link between the damage caused by climate change and the behaviour of large industrial companies. This is predicated on recent efforts to trace greenhouse-gas emissions back to large corporate and state-owned producers of fossil fuels and cement, dubbed the “carbon majors”. The latest analysis by cdp (formerly the  Carbon Disclosure Project), a non-governmental organisation that works with companies, cities and states to measure their environmental impact, published in 2017, found that 100 of them had produced just over half of emissions since the Industrial Revolution.

The Philippine hearings will come to a close in December in Manila. The commission does not have the power to compensate victims of typhoons or to sanction emitters of carbon dioxide. According to Roberto Cadiz, one of the commissioners, that isn’t even the point. His wish is to open a dialogue about possible solutions to climate change that includes the industrial emitters. So far, however, only one side of the story is being heard. The emitters have declined to participate.

Excerpts from Climate Change: The Blame Game, Economist, Nov. 17, 2018

Keep Forests Standing: the forests bond

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Launched on November 1, 2016, the Forests Bond will provide investors the opportunity to invest in a traditional financial product that offers the unique option of receiving interest payments in the form of environmental impact — in this case, verified carbon credits generated through REDD, an initiative that rewards landholders for protecting forests, thereby reducing carbon emissions that worsen climate change. The development of the bond is a collaboration of the International Finance Corporation (IFC), a member of the World Bank Group, and BHP Billiton with technical support from Baker & McKenzie and Conservation International (CI).

REDD (short for Reducing Emissions from Deforestation and forest Degradation), which offers financial incentives to landholders in tropical countries to keep their forests standing, has met with mixed success since its launch in 2005, in part because the lack of a carbon market left it dependent on voluntary action and bereft of the certainty needed to attract private funding.

“If you look at the scale of the problem, roughly US$ 100 billion to 300 billion needed to cut deforestation by half over the next decade, it’s clear that we need to mobilize private institutional investors, who control vastly greater amounts than public or philanthropic aid can deliver,” said Agustin Silvani, Conservation International’s vice president of conservation finance. “The REDD mechanism has mostly excluded them because it required specific carbon expertise or a specific interest in forests to engage with it.”

The Forests Bond supports a REDD project in Kenya, and investors can choose between a cash or carbon credit coupon (the interest received from the bond), or a combination of both. This unique element of the bond is made possible by the price support that BHP Billiton**is providing, which means that investors can either 1) elect to take the carbon credits to offset corporate greenhouse gas emissions or 2) sell them on the carbon market, or 3) take a traditional financial return instead. This provides the certainty needed to attract institutional investors while still generating verified reductions in deforestation, in the form of REDD credits…

The REDD project that the Forests Bond will support takes place in the Kasigau Corridor in eastern Kenya….Forest protection activities include forest and biodiversity monitoring, funding for community wildlife scouts, forest patrols, social monitoring and carbon inventory monitoring. Community development activities include reforestation of Mount Kasigau; establishment of an eco-charcoal production facility; support to community-based organizations; and expanding an organic clothing facility.

The bond is listed on the London Stock Exchange and has raised US$152 million from institutional investors.

**BHP Billiton is providing a price support mechanism of US$12 million that ensures that the project can sell a pre-defined minimum quantity of carbon credits every year until the Bond matures, whether or not investors in the Bond elect to receive carbon credit coupons.

Excerpt from Bruno Vander Velde  New bond aims to unlock private investment to protect forest, Reuters, Nov. 1, 2016 and BHP Billiton and IFC collaborate on new Forests Bond, Press Release of BHP Billiton, Nov. 1, 2016

Why Illegal Logging Persists

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The European Union (EU) adopted in 2010 Regulation (EU) No 995/2010 laying down the obligations of operators who place timber and timber products on the market (the Timber Regulation,, as part of the implementation of the Action Plan on Forest Law Enforcement, Governance and Trade……[The EU adopted the Regulation because] llegal logging is a pervasive problem of major international concern. It has a devastating impact on some of the world’s most valuable remaining forests as well as on the people who live in them and who rely on the resources that forests provide. It contributes to tropical deforestation and forest degradation, which may be responsible for 7 to 14%3 of total CO2 emissions from human activities; it threatens biodiversity and undermines sustainable forest management and has a negative impact on poverty reduction…..

The following major challenges to the effective application of the Timber Regulation have been identified in the evaluation process: insufficient human and financial resources allocated to the [authorities dealing with implementation], varying types and level of sanctions across EU states and a lack of uniform understanding and application of the Regulation throughout the EU. Those challenges have translated into uneven enforcement, which creates a non-level playing field for economic operators….

In order to address the shortcomings identified, EU states should significantly step up their implementation and enforcement efforts. The current level of technical capacity and resources (both human and financial) allocated to the [authorities dealing with implementation] does not match with the needs and must be reinforced in most of the Member States with the aim to increase the number and quality of compliance checks.

Excerpts from REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Regulation EU/995/2010 of the European Parliament and of the Council of 20 October 2010 laying down the obligations of operators who place timber and timber products on the market (the EU Timber Regulation, Feb. 18, 2016,  COM(2016) 74 final

 

Demand for Carbon Tax

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“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

Climate Change 2015

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Global carbon emissions were 58% higher in 2012 than they were in 1990. The atmospheric concentration of carbon dioxide has risen from just under 340 parts per million in 1980 to 400 in 2015.  To stand a fair chance of keeping warming to just 2°C by the end of the century—the goal of global climate policy—cumulative carbon emissions caused by humans must be kept under 1 trillion tonnes. Estimates vary but, according to the Intergovernmental Panel on Climate Change, the total had hit 515 billion tonnes by 2011. Climate Interactive, a research outfit, reckons that if emissions continue on their present course around 140 billion tonnes of greenhouse gases will be released each year and temperatures could rise by 4.5°C by 2100. And even if countries fully honour their recent pledges, temperatures may still increase by 3.5°C by then.

The world is already 0.75°C warmer than before the Industrial Revolution….

Melting glacier ice, and the fact that warmer water has a larger volume, mean higher sea levels: they have already risen by roughly 20cm since 1880 and could rise another metre by 2100. That is perilous for low-lying islands and flat countries: the government of Kiribati, a cluster of tropical islands, has bought land in Fiji to move residents to in case of flooding. Giza Gaspar Martins, a diplomat from Angola who leads the world’s poorest countries in the climate talks, points out that they are particularly vulnerable to the effects of a warming planet. Money alone, he argues, will not fix their problems. Without steps to reduce emissions, he predicts, “there will be nothing left to adapt for.”…

For every 0.6°C rise in temperature, the atmosphere’s capacity to hold water grows by 4%, meaning storms will pour forth with greater abandon. The rains of the Indian monsoon could therefore intensify, cutting yields of cereals and pulses.

Climate change seems also to be making dry places drier, killing crops and turning forests into kindling. Forest fires in Indonesia, more likely thanks to the current El Niño weather phenomenon, could release 2 billion tonnes of carbon dioxide, about 5% of annual emissions due to human activity, says Simon Lewis of University College London. In recent months fires have swallowed more than 2.4m hectares of American forests. Alaska suffered 80% of the damage—a particular problem because the soot released in these blazes darkens the ice, making it less able to reflect solar radiation away from the Earth.

Developments in the Arctic are worrying for other reasons, too. The region is warming twice as fast as the rest of the world, a trend that could start a vicious cycle. Around 1,700 gigatonnes of carbon are held in permafrost soils as frozen organic matter. If they thaw, vast amounts of methane, which is 25 times more powerful as a global-warming gas than carbon dioxide when measured over a century, will be released. One hypothesis suggests that self-reinforcing feedback between permafrost emissions and Arctic warming caused disaster before: 55m years ago temperatures jumped by 5°C in a few thousand years…

And on September 29th Mark Carney, the governor of the Bank of England, warned that though measures to avoid catastrophic climate change are essential, not least for long-term financial stability, in the shorter term they could cause investors huge losses by making reserves of oil, coal and gas “literally unburnable”.

Excerpts from Climate Change: It’s Getting Hotter, Economst, Oct. 3, 2015, at 63

 

The Risk of Unburnable Carbon

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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

How to Avoid the Carbon Tax

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According to the Union of Concerned Scientists (UCS),  a Climate of Corporate Control, statements and actions on climate science and policy by 28 U.S. companies, shows how these contributions can be problematic, and suggests steps that Congress, the public, the media, and companies themselves can take to address the problem.  Corporations have the right, of course, to weigh in on public policy issues that affect their interests. But too often they do so irresponsibly, misrepresenting and misusing science at the public’s expense, and in recent years their influence has grown.

Corporations skew the national dialogue on climate policy in a variety of ways—making inconsistent statements across different venues, attacking science through industry-supported organizations, and taking advantage of the secrecy allowed them by current legal and regulatory structures.

Inconsistency: Having It Both Ways–Some corporations are contradictory in their actions, expressing concern about the threat of climate change in some venues—such as company websites, Security and Exchange Commission (SEC) filings, annual reports, or statements to Congress—while working to weaken policy responses to climate change in others.  For example, ConocoPhillips has acknowledged on its website that “human activity…is contributing to increased concentrations of greenhouse gases in the atmosphere that can lead to adverse changes in global climate.” Yet in its comments on the 2009 EPA Endangerment Finding, the company claimed that “the support for the effects of climate change on public health and welfare is limited and is typified by a high degree of uncertainty.”

Using Outside Organizations: Contrarians By Proxy–One way a company can work against effective climate policy while avoiding accountability for that work is to provide funding to outside groups that lobby against climate legislation and regulation or engage in advocacy campaigns against climate science. Such groups range from business associations such as the National Association of Manufacturers to front groups like the Heartland Institute.

Echoing the inconsistency in their other statements and actions on the issue, many companies belong to groups lobbying on both sides of the climate policy debate. For example, Caterpillar is affiliated both with the World Resources Institute and Nature Conservancy, which advocate global warming solutions, and with the Cato Institute and Heritage Foundation, which oppose them.  Of course, corporations may point out that the organizations they support work on many issues besides climate—but the fact remains that many of these groups take starkly anti-science positions on climate change and work aggressively to challenge science-based climate policies.

A Lack of Transparency–When business interests can hide their influence on policy-making processes from public view, it becomes easier for them to manipulate perceptions of science and skew policy discussions. There are several areas in which greater transparency is needed:  Charitable contributions. Current law only requires corporate foundations to disclose their donations to the IRS; companies can get around this requirement by making their donations directly, bypassing their foundations. This information is also hidden from shareholders: several corporations have received proposals from their shareholders demanding access to the company’s charitable contributions, and legislation to require such disclosure has been proposed in Congress.  Lobbying and political expenditures. While companies are legally required to report their total expenditures on political contributions and lobbying, they are not required to disclose the particular issues for which these contributions are targeted. So it is not possible to determine how much lobbying corporations are doing on climate issues. Business risks from climate change. Publicly traded companies are required to discuss risks that might materially affect their business in their annual SEC filings. The report shows that compliance with this requirement with regard to climate change is not consistent; some companies address climate-related risks fully, some discuss only the possible impacts of climate regulation, neglecting the physical impacts of climate change, and others ignore the issue entirely.

Good and Bad Behavior–It’s not all bad news out there: The report shows that some companies, such as NIKE, appear to be consistently constructive in their climate-related statements and actions.  At the other extreme, some companies appear to be almost uniformly obstructionist on climate issues. This list is dominated by fossil-fuel companies such as Peabody Energy and Marathon Oil.  But because of the lack of disclosure, it is impossible to say for sure whether companies are completely constructive or obstructionist.  Inappropriate corporate influence on the national dialogue on climate science and policy is a large-scale, complex problem requiring large-scale, complex solutions.

Excerpt from A Climate of Corporate Control