Browsed by
Tag: Gas

The argument for divesting from fossil fuels is becoming overwhelming

The argument for divesting from fossil fuels is becoming overwhelming


Powered by Guardian.co.ukThis article titled “The argument for divesting from fossil fuels is becoming overwhelming” was written by Alan Rusbridger, for theguardian.com on Monday 16th March 2015 13.06 UTC

The world has much more coal, oil and gas in the ground than it can safely burn. That much is physics.

Anyone studying the question with an open mind will almost certainly come to a similar conclusion: if we and our children are to have a reasonable chance of living stable and secure lives 30 or so years from now, according to one recent study 80% of the known coal reserves will have to stay underground, along with half the gas and a third of the oil reserves.

If only science were enough.

If not science, then politics? MPs, presidents, prime ministers and members of congress are always telling us (often suggesting a surrender of civil liberties in return) that their first duty is the protection of the public.

But politics sometimes struggles with physics. Science is, at its best, long term and gives the best possible projection of future risk. Which is not always how politics works, even when it comes to our security. Politicians prefer certainty and find it difficult to make serious prudent planning on high probabilities.

Climate change petition

On climate change, the public clamour is in inverse proportion to the enormity of the long-term threat. If only it were the other way round. And so, year after year, the people who represent us around the UN negotiating tables have moved inches, not miles.

When, as Guardian colleagues, we first started discussing this climate change series, there were advocates for focusing the main attention on governments. States own much of the fossil fuels that can never be allowed to be dug up. Only states, it was argued, can forge the treaties that count. In the end the politicians will have to save us through regulation – either by limiting the amount of stuff that is extracted, or else by taxing, pricing and limiting the carbon that’s burned.

If journalism has so far failed to animate the public to exert sufficient pressure on politics through reporting and analysis, it seemed doubtful whether many people would be motivated by the idea of campaigning for a paragraph to be inserted into the negotiating text at the UN climate talks in Paris this December. So we turned to an area where campaigners have recently begun to have marked successes: divestment.

There are two arguments in favour of moving money out of the biggest and most aggressive fossil fuel companies – one moral, the other financial.

The moral crusaders – among them Archbishop Desmond Tutu – see divestment from fossil fuels in much the same light as earlier campaigners saw the push to pull money out of tobacco, arms, apartheid South Africa – or even slavery. Most fossil fuel companies, they argue, have little concern for future generations. Of course, the companies are run by sentient men and women with children and grandchildren of their own. But the market pressures and fiduciary duties involved in running public companies compel behaviour that is overwhelmingly driven by short-term returns.

So – the argument goes – the directors will meanwhile carry on business as usual, no matter how incredible it may seem that they will be allowed to dig up all the climate-warming assets they own. And, by and large – and discounting recent drops in the price of oil – they continue to be reasonably good short-term businesses, benefiting from enormous subsidies as they search for even more reserves that can never be used.

What is fossil fuel divestment and why does it matter?

The pragmatists argue the case on different grounds. It is simply this: that finance will eventually have to surrender to physics.

If – eventually – the companies cannot, for the sake of the human race, be allowed to extract a great many of the assets they own, then many of those assets will in time become valueless. So people with other kinds of fiduciary duty – people, say, managing endowments, pension funds and investment portfolios – will want to get their money out of these companies before the bubble bursts.

Alan Rusbridger in London, for the launch of the Guardian's climate change campaign.
Alan Rusbridger in London, for the launch of the Guardian’s climate change campaign. Photograph: David Levene

Of course, the financial risk comes not simply from the threat of regulation, but could also be hastened by the march of alternative clean energy. Global investment in clean energy jumped 16% in 2014 to £205bn, but because of the rapid drop in the price of that energy (the cost of solar has dropped by two-thirds in 6 years), the money invested last year bought almost double the amount of electricity capacity as in 2011.

So there’s a risk calculation to be done by anyone invested in fossil fuels – which, one way or another, is probably most of us. Get out too early and you might forgo the reasonable returns based on current performance and the book value of the assets that are notionally exploitable.

But what of the risk of being a late exiter? Do you wait and judge when the politicians could finally summon the will to start making regulatory and market interventions … and then get out? And at the same time as everyone else is trying to do the same?

This is why the divestment movement has changed from being a fringe campaign to something every responsible fund manager can no longer ignore. How could they, when even the governor of the Bank of England, Mark Carney, has warned that the “vast majority of reserves are unburnable” and the bank itself is conducting an inquiry into the risk that inflated fossil fuel assets pose to the stability of the financial system?

When the president of the World Bank, Jim Yong Kim, urges: “Be the first mover. Use smart due diligence. Rethink what fiduciary responsibility means in this changing world. It’s simple self-interest. Every company, investor and bank that screens new and existing investments for climate risk is simply being pragmatic”?

When the Bank of England’s deputy head of supervision for banks and insurance companies, Paul Fisher, warns, as he did this month: “As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels – a growing financial market in recent decades – may take a huge hit”?

Or listen to Hank Paulson, no bleeding liberal, but secretary of the Treasury under Bush and former CEO of Goldman Sachs: “Each of us must recognise that the risks are personal. We’ve seen and felt the costs of underestimating the financial bubble. Let’s not ignore the climate bubble.”

President Obama puts it most pithily: “We’re not going to be able to burn it all.”

So the argument for a campaign to divest from the world’s most polluting companies is becoming an overwhelming one, on both moral and pragmatic grounds. But the divestment movement is sometimes misunderstood. The intention is not to bankrupt the companies, nor to promote overnight withdrawal from fossil fuels – that would not be possible or desirable.

Divestment serves to delegitimise the business models of companies that are using investors’ money to search for yet more coal, oil and gas that can’t safely be burned. It is a small but crucial step in the economic transition away from a global economy run on fossil fuels.

The usual rule of newspaper campaigns is that you don’t start one unless you know you’re going to win it. This one will almost certainly be won in time: the physics is unarguable. But we are launching our campaign today in the firm belief that it will force the issue now into the boardrooms and inboxes of people who have billions of dollars at their disposal.

It’s clear, from our researches over the past few weeks, that many company directors and fund managers have had a nagging feeling that this is something coming up the agenda that – one day – they will have to think about. As the Guardian’s campaign mounts, we hope they will appreciate that there is some urgency about the choices they make.

Who will take the lead? Some huge endowments and investment funds have already announced that they will be decarbonising their portfolios, exiting fossil fuels altogether and/or investing in cleaner alternatives.

They include the Rockefeller Brothers Fund; Stanford, Glasgow and Australian National Universities; the British Medical Association; Norway’s Government Pension Fund Global, which has sold off 32 coal companies on climate and environmental grounds; AP4, the giant Swedish pension fund; and many other faith groups, local councils and asset managers. The World Council of Churches has committed not to invest.

Our own campaign will give readers the information they need to make their own investment decisions and to apply pressure on the workplaces, unions, schools, colleges, churches, NGOs, pension advisers and charities in their lives. But we also want to try to change minds at one or two institutions that have demonstrated inspiring thought leadership in other spheres of life.

Professor Jeremy Farrar, director of the Wellcome Trust.
Professor Jeremy Farrar, director of the Wellcome Trust. Photograph: James Drew Turner/Guardian

The Wellcome Trust handles a portfolio of more than £18bn and invests around £700m a year in science, the humanities, social science education and medical research. The Bill and Melinda Gates Foundation has an endowment of .5bn. Last year it gave away .9bn in grants towards health and sustainable development.

In 2014 the Wellcome Trust had £564m invested in Shell, BP, Schlumberger, Rio Tinto and BHP Billiton alone. The Gates Foundation has a financial stake of over bn in fossil fuel companies.

Bill and Melinda Gates.
Bill and Melinda Gates. Photograph: Oli Scarff/Getty Images

By most standards, these are huge sums of money, helping to fund the extraction of unusable oil gas and coal on a massive scale. But, as a proportion of the foundations’ own endowments, they are relatively small – just a few percent for the fossil fuel investments we know about. So they could, we think, be divested without damaging overall returns. Indeed, we think they could achieve higher and, over time, safer returns by putting their money into other investments with real opportunities for growth in a world tackling climate change

Because both foundations are a) so progressive in their aims and actions and b) have human health and science at the heart of everything they do, we hope they, of all institutions, will see the force of the call for them to move their money out of a sector whose actions, if unchecked, could cause the most devastating harm to the health of billions. A landmark report by the Lancet and University College London concluded in 2009: “Climate change is the biggest global health threat of the 21st century.”

The ask of them is, we think, both modest and simple. We understand that fund managers do not like to make sudden changes to their portfolios. So we ask that the Gates Foundation and Wellcome Trust commit now to divesting from the top 200 fossil fuel companies within five years. And that they immediately freeze any new investment in the same companies.

We will, of course, suggest that the Guardian Media Group does the same, and keeps you informed about its own deliberations and decisions.

Please sign, retweet and generally spread news about the petition. In everything we say to these foundations, we will emphasise that we come in admiration for what they have done, and continue to do for human health and wellbeing. They aren’t the “bad guys”. But they could certainly show themselves to be the good guys in this matter of life and death.

Petition sign-up

One final thing. This campaign is going to be backed up by much reporting and analysis. We would be very pleased to hear from anyone working in the fossil fuel industries at a senior level, either currently or recently. We are interested, for instance, to learn about internal discussions and papers about the state of knowledge and debate about the environmental harm caused by the extractive industries. You can email me confidentially at alan.rusbridger@theguardian.com; see my PGP key on @arusbridger on Twitter; or use the Guardian’s encrypted securedrop platform, which enables anyone to send us documents without being traced.

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Shale gas should be at centre of next government’s energy policy – Tim Yeo

Shale gas should be at centre of next government’s energy policy – Tim Yeo


Powered by Guardian.co.ukThis article titled “Shale gas should be at centre of next government’s energy policy – Tim Yeo” was written by Fiona Harvey, for theguardian.com on Thursday 12th March 2015 06.01 UTC

Shale gas exploration can be environmentally sound, and should be the centrepiece of the next government’s energy policy, the Conservative’s most senior green-leaning MP has urged.

Tim Yeo, the Tory former minister, and chairman of parliament’s energy and climate committee, said the time had come to make the “green” case in favour of fracking, and that the incoming government after the general election must seize on the technology for the good of the UK’s environment and economy.

“There is an opportunity now, and it might not exist in a few years [when other European countries have developed fracking],” he told the Guardian. “People who think fracking is an environmental problem are mistaken.”

He said that the regulations governing fracking in this country were sound, and that related problems such as tremors were very small, and there would be no danger to the water supply here, as there has been in some places in the US. “Once people see that horizontal drilling is not causing earthquakes or poisoning the water they will be satisfied,” he said.

While warning that shale gas would not be the “transformational” industry it has been in the US, where the widespread exploitation of fracking technology has sent gas and oil prices tumbling, Yeo said it would be cheaper for the UK and have less impact on the climate than importing gas.

Fracking involves blasting water, sand and chemicals at dense rock to release tiny bubbles of gas trapped within, but the technology has been slow to be adopted in the UK after a series of hitches in the first targeted sites.

At the general election, Yeo will leave parliament after 32 years, having been de-selected by his constituency party, apparently for spending more time on national than local issues. A former environment minister and shadow environment secretary, he is one of the longest-standing and most influential champions of green issues among the ranks of Tory MPs, and chairs the influential parliamentary cross-party select committee on energy and climate change.

He makes his last major speech on energy and the environment on Thursday, at a conference that will highlight some of the committee’s progress on making policy recommendations in the current parliament.

He has chosen to make the green case for shale gas as his parting shot, because he believes the coalition has been too timid in persuading the public of the value of shale. Yeo has no current financial interest in shale and does not intend to take up any such interests on leaving parliament.

He will also use Thursday’s speech to argue strongly in favour of onshore wind turbines, which he will say are a cheap and reliable form of low-carbon energy. David Cameron has vowed to end subsidies for onshore wind, despite polls showing most people are in favour of the turbines.

Yeo said that reducing the UK’s greenhouse gas emissions would still leave the country reliant on gas for years to come, and that fulfilling heating and power needs using domestic sources of gas would be both lower in emissions and cheaper than importing liquefied natural gas from overseas.

“I yield to no one in my desire to [tackle climate change] but the fact is we will not get by without consuming a lot of gas between now and the 2030s, so better to have a domestic source than to import it,” he said. “I do not think that a single extra cubic metre of gas will be consumed in the UK because of a domestic fracking industry.”

He said many green groups were opposing fracking because of a “visceral reaction to anything involving fossil fuels”, but he said the UK could meet its commitments on carbon reduction while producing gas from shale.

He will tell the conference: “The next government must stand up to the fuzzy-headed ideological fringes that oppose fracking. The greens opposed to fracking do not have evidence on their side.”

He will add: “Too many of us take the ready availability of energy, and the prosperity it makes possible, for granted. We expect electricity and gas to be constantly available – but we won’t accept the energy infrastructure on which that availability depends.”

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

10 myths about fossil fuel divestment put to the sword

10 myths about fossil fuel divestment put to the sword


Powered by Guardian.co.ukThis article titled “10 myths about fossil fuel divestment put to the sword” was written by Damian Carrington, for theguardian.com on Monday 9th March 2015 16.00 UTC

1. Divestment from fossil fuels will result in the end of modern civilisation

It is true that most of today’s energy, and many useful things such as plastics and fertilisers, come from fossil fuels. But the divestment campaign is not arguing for an end of all fossil fuel use starting tomorrow, with everyone heading back to caves to light a campfire. Instead it is arguing that the burning of fossil fuels at increasing rates is driving global warming, which is the actual threat to modern civilisation. Despite already having at least three times more proven reserves than the world’s governments agree can be safely burned, fossil fuel companies are spending huge sums exploring for more. Looked at in that way, pulling investments from companies committed to throwing more fuel on the climate change fire makes sense.

2. We all use fossil fuels everyday, so divestment is hypocritical

Again, no-one is arguing for an overnight end of all fossil fuel use. Instead, the 350.org group which is leading the divestment campaign calls for investors to commit to selling off their coal, oil and gas investments over five years. Fossil fuel burning will continue after that too, but the point is to reverse today’s upward trend of ever more carbon emissions into a downward trend of ever less carbon emissions. Furthermore, some of those backing a “divest-invest” strategy move money into the clean energy and energy efficiency sectors which have already begun driving the transition to a low-carbon world.

3. Divestment is not meaningful action – it’s just gesture politics

The dumping of a few fossil few stocks makes no immediate difference at all to the amount of carbon dioxide entering the atmosphere. But this entirely misses the point of divestment, which aims to remove the legitimacy of a fossil fuel industry whose current business model will lead to “severe, widespread and irreversible” impacts on people. Divestment works by stigmatising, as pointed out in a report from Oxford University: “The outcome of the stigmatisation process poses the most far-reaching threat to fossil fuel companies. Any direct impacts pale in comparison.”

The “gesture politics” criticism also ignores the political power of the fossil fuel industry, which spent over 0m (£265m) on lobbying and political donations in 2012 in the US alone. Undercutting that lobbying makes it easier for politicians to take action and the Oxford study showed that previous divestment campaigns – against apartheid South Africa, tobacco and Darfur – were all followed by restrictive new laws.

Those comparisons also highlight the moral dimension at the heart of the divestment campaign. Another dimension is warning investors that their fossil fuel assets may lose their value, if climate change is tackled. Lastly, backing divestment does not mean giving up putting direct pressure on politicians to act or any other climate change campaign.

A cardboard version of the Statue of Liberty stands in the ocean at the Gaviota Azul beach in Cancun December 8, 2010. Greenpeace staged a performance sinking the world's best known landmarks in the ocean as climate talks take place in the beach resort.
A cardboard version of the Statue of Liberty stands in the ocean at the Gaviota Azul beach in Cancun, Mexico. Photograph: Stringer/Reuters

4. Divestment is pointless – it can’t bankrupt the coal, oil and gas companies

More organisations are divesting all the time, from Oslo city council to Stanford University to the Rockefeller Brothers Fund, but the sums are indeed relatively small when compared to the huge value of the fossil fuel companies. But the aim of divestment is not to bankrupt fossil fuel companies financially but to bankrupt them morally. This undermines their influence and helps create the political space for strong carbon-cutting policies – and that could have financial consequences.

Investors are already starting to question the future value of the fossil fuel companies’ assets and, for example, it is notable that no major bank is willing to fund the massive Galilee basin coal project in Australia. This myth can also be turned on its head by considering the risk of fossil fuel companies bankrupting their investors. Many authoritative voices, such as the heads of the World Bank, Jim Yong Kim, and the Bank of England, Mark Carney, have warned that many fossil fuel reserves could be left worthless by action on climate change. If the retreat from fossil fuels does not happen in a gradual and planned way investors could lose trillions of dollars as the “carbon bubble” bursts.

5. Divestment means stocks will be picked up cheaply by investors who don’t care about climate change at all

To sell a stock you have to have a buyer. But the amounts being divested are too small to flood the market and cut share prices, so they won’t be going cheap. Also, the buyers of the stock are taking on the risk that the fossil fuel stocks may tank in the future, if the world’s nations fulfil their pledge to keep global warming below 2C by sharply cutting carbon emissions. If these stocks are risky, then the public and value-based institutions primarily targeted by the divestment movement should not be holding them. The argument that owning a stock gives you influence over a company leads us neatly into the next divestment myth.

Guardian journalists explain the ‘keep it in the ground’ theory in easy to understand terms

6. Shareholder engagement with fossil fuel companies is the best way to drive change

This argument would have merit if there was much evidence to support it. When, for example, the Guardian asked the Wellcome Trust to give instances where engagement had produced change, it could not. And as campaigner Bill McKibben has pointed out, engagement is unlikely to persuade a company to commit to eventually putting itself out of business. In fact some market regulators, such as in the US, do not allow this kind of engagement.

The leading environmentalist Jonathon Porritt spent years engaging with fossil fuel companies only to conclude recently that such efforts were futile. Nonetheless, serious engagement could drive some change and 2015 has seen both BP and Shell having to support such shareholder resolutions. But such resolutions need specific changes and deadlines to be effective. Whatever your view, remember this is not an either/or situation. Many campaigners view divestment as the stick and engagement as the carrot, with both aiming for the same ultimate goal.

Traders work in the crude oil options pit at the New York Mercantile Exchange in New York, U.S., on  February 23, 2011. Oil surged to 0 a barrel in New York for the first time in two years as Libya's violent uprising threatened to disrupt exports from Africa's third-biggest supplier and spread to other Middle East oil producers.
Traders work in the crude oil options pit at the New York Mercantile Exchange in New York, US. Photograph: Michael Nagle/Getty Images

7. Divestment means investors will lose money

Many of those who have divested so far are philanthropic organisations, universities and faith groups who use their endowments to fund their good works. Selling out of fossil fuels would cut their income, say critics, as those companies have been very profitable investments over the last few decades.

The first response to this is money does not trump morality for many of these groups. But the second is that when it comes to investments, the past is no guide to the future. Coal stocks have plummeted in value in recent years, as has the oil price in recent months, meaning recently divested funds have actually avoided losses. Furthermore, a series of analyses have suggested divestment need not dent profits.

Of course, oil prices might rebound, possibly even coal prices. But such volatility is unwelcome for investors looking for steady incomes. And for long-term investors, major financial institutions including HSBC, Citi, Goldman Sachs and Standard and Poor’s have all warned of the risks posed by fossil fuel investments, particularly coal.

Perhaps the best response to this myth is that the proof of the pudding is in the eating: over 180 organisations have already asked themselves if divestment would help or hinder their missions and then gone ahead and done it. The most notable is the Rockefeller Brothers Fund, founded on a famous oil fortune. Valerie Rockefeller Wayne noted that funding companies that cause the problems being tackled by their programmes is pretty dumb: “We had investments that were undermining our grants.”

Climate signup new

8. Fossil fuels are essential to ending world poverty

Fossil fuel supporters often argue that coal, oil and gas made the modern world and is vital to improving the lives of the world’s poorest citizens. It is an emotive argument. But the most recent report from the UN’s Intergovernmental Panel on Climate Change, written and reviewed by thousands of the world’s foremost experts and approved by 195 of the world’s nations, concluded the exact opposite. Climate change, driven by unchecked fossil fuel burning, “is a threat to sustainable development,” the IPCC concluded.

It warned that global warming is set to inflict severe and irreversible impacts on people and that “limiting its effects is necessary to achieve sustainable development and equity, including poverty eradication”. The IPCC went even further, stating that climate change impacts are projected “to prolong existing and create new poverty traps”.

That could not really be clearer. The challenge is to ensure poverty is ended by the large-scale deployment of clean technology, and shifting money out of fossil fuels by divesting could help that.

An airplane flies past the Canton Tower (L), or Guangzhou TV Tower, during a hazy day in Guangzhou, Guangdong province January 21, 2015.
Smog in China: an airplane flies past the Canton Tower, better known as Guangzhou TV Tower, on a hazy day in Guangzhou, Guangdong province, China. Photograph: China Stringer Network/Reuters

9. Most fossil fuels are owned by state-controlled companies, not the publicly traded companies targeted by divestment

This is true. The International Energy Agency estimates that 74% of all coal, oil and gas reserves are owned by state-controlled companies. The most straightforward response to this is that divestment is just one of many ways of trying to curb carbon emissions and that international action at state level will of course be essential. But there are reasons why divestment could help. The listed fossil fuel companies have huge influence and undermining their power could embolden politicians in leading nations to deliver ambitious international climate action.

In any case, many of the biggest state-controlled companies float some of their stock, while also contracting the publicly traded companies to help extract their reserves. Furthermore, the state-controlled reserves tend to be the ones that are easiest and cheapest to extract and are therefore the most sensible to use in filling up the last of the atmosphere’s carbon budget, the trillion tonnes or so of carbon that scientists say is the limit before dangerous climate change kicks in. Last, the extreme and expensive hydrocarbons that really must stay in the ground – such as tar sands, the Arctic and ultra deep water reserves – are the near exclusive preserve of listed companies.

10. It’s none of your business how other people invest their money

First, some divestment campaigners target their own pensions funds – it is their money. But even if it is not, the impacts of fossil fuel investments are not limited to the stock owners themselves. The carbon emissions from fossil fuel burning are causing climate change that affects everyone on Earth. Furthermore, the “none of your business” argument would imply no divestment campaign was legitimate, meaning the harm caused by tobacco and apartheid South Africa would have gone on longer.

More information:

350.org’s Fossil Free campaign

Carbon Tracker Initiative

The Burning Question, by Mike Berners-Lee and Duncan Clark

The geographical distribution of fossil fuels unused when limiting global warming to 2C, by Christophe McGlade and Paul Ekins (Nature, 2015)

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.