Category Archives: Business

Waste problems still haunt nuclear option

Closing shot: the nuclear popwer plant at San Onofre, California Image: D Ramey Logan/WPPilot via Wikimedia Commons
Closing shot: the nuclear power plant at San Onofre, California
Image: D Ramey Logan/WPPilot via Wikimedia Commons

By Paul Brown

Nuclear power is seen as one of the possible solutions to climate change, but the recent closure of five US power stations is forcing the industry to face up at last to the damaging legacy of how to deal with radioactive waste.

LONDON, 15 July, 2014 − Long-term employment is hard to find these days, but one career that can be guaranteed to last a lifetime is dealing with nuclear waste.

The problem and how to solve it is becoming critical. Dozens of nuclear power stations in the US, Russia, Japan, and across Europe and Central Asia are nearing the end of their lives.

And when these stations close, the spent fuel has to be taken out, safely stored or disposed of, and then the pressure vessels and the mountains of concrete that make up the reactors have to be dismantled. This can take between 30 and 100 years, depending on the policies adopted.

In the rush to build stations in the last century, little thought was given to how to take them apart 40 years later. It was an age of optimism that science would always find a solution when one was needed, but the reality is that little effort was put into dealing with the waste problem. It is now coming back to haunt the industry.

Profitable business

Not that everyone sees it as a problem. A lot of companies view nuclear waste as a welcome and highly profitable business opportunity.

Either way, because of the dangers of radioactivity, it is not a problem that can be ignored. The sums of money that governments will have to find to deal with keeping the old stations safe are eye-wateringly large. They will run into many billions of dollars − an assured income for companies in the nuclear waste business, stretching to the end of this century and beyond.

The US is a prime example of a country where the nuclear waste issue is becoming rapidly more urgent.

The problem has been brought to the fore in the US because five stations have closed in the last two years. The Crystal River plant in Florida and San Onofre 1 and 2 in California have closed down because they were judged too costly to bring up to modern standards. Two more − Kewaunee in Wisconsin andthe  Vermont Yankee plant − could no longer compete on cost with the current price of natural gas and increased subsidies for renewables.

Nuclear Energy Insider, which keeps a forensic watch on the industry, predicts that several other nuclear power stations in the US will also succumb to premature closure because they can no longer compete.

The dilemma for the industry is that the US government has not solved the problem of what to do with the spent fuel and the highly radioactive nuclear waste that these stations have generated over the last 40 years. They have collected a levy − kept in a separate fund that now amounts to $31 billion − to pay for solving the problem, but still have not come up with a plan.

Legal action

Since it costs an estimated $10 million dollars a year to keep spent fuel safe at closed stations, electricity utilities saddled with these losses, and without any form of income, are taking legal action against the government.

The US government has voted another $205 million to continue exploring the idea of sending the waste to the remote Yucca Mountain in Nevada − an idea fought over since 1987 and still no nearer solution. Even if this plan went through, the facility would not be built and accepting waste until 2048.

The big problem for the US, the utility companies and the consumers who will ultimately pay the bill is what to do in the meantime with the old stations, the spent fuel, and the sites. Much of the fuel will be moved from wet storage to easier-to-manage dry storage, but it will still be a costly process. What happens after that, and who will pay for it, is anyone’s guess.

The industry is having a Nuclear Decommissioning and Used Fuel Strategy Summit in October in Charlotte, North Carolina, to try to sort out some of these issues.

But America is not alone. The UK has already closed a dozen reactors. Most of the rest are due to be retired by 2024, but it is likely that the French company EDF, which owns the plants, will try to keep them open longer.

The bill for dealing with existing nuclear waste in Britain is constantly rising and currently stands at £74 billion, even without any other reactors being decommissioned.

The government is already spending £2 billion each year trying to clear up the legacy of past nuclear activities, but has as yet found no solution to dealing with the thousands of fuel rods still in permanent store at power stations.

As with the US, even if a solution is found, it would be at least 2050 before a facility to deal with this highly dangerous waste could be found. By that time, billions of pounds will have been expended just to keep the used fuel from igniting and causing a nuclear meltdown.

It is hard to know how the industry’s finances could stand such a drain on its resources without going bankrupt.

Similar problems are faced by Germany, which is already closing its industry permanently in favour of renewables, and France, with more than 50 ageing reactors.

Japan, still dealing with the aftermath of the Fukushima accident in 2011, is composed of crowded islands where few people will welcome a nuclear waste depository.

Many countries in the former Soviet bloc with ageing reactors look to Russia − which provided them − to solve their problems. But this may be a false hope, as Russia has an enormous unsolved waste problem of its own.

Dramatic rise

In all these countries, the issue of nuclear waste and what to do with it is a problem that has been put off − both by the industry and politicians − as an issue to be dealt with sometime in the future. But the problem is becoming more urgent as the costs and the volume of waste rises dramatically.

Unlike any other form of generation, even dirty coal plants, getting rid of nuclear stations is no simple matter. To cleanse a nuclear site so that it can be used for another industrial use is difficult. Radioactivity lasts for centuries, and all contamination has to be physically removed.

For many critics of the industry, the nuclear waste issue has always been a moral issue − as well as a financial one − that should not be left to future generations to solve. The industry itself has always relied on its continuous expansion, and developing science, to deal what it calls “back end costs” at some time in the distant future.

But as more stations close, and fewer new ones are planned to raise revenue, putting off the problem no longer seems an option, either for the industry or for the governments that ultimately will have to pick up the bill. – Climate News Network

Critics refute assets claim by ‘Orwellian’ Shell

 

Clouded view? A Shell oil refinery in the UK Image: S Parish/geograph.org.uk via Wikimedia Commons
Clouded view? Sunset over a flare stack at a Shell oil refinery in the UK
Image: S Parish/geograph.org.uk via Wikimedia Commons

By Alex Kirby

The world’s biggest oil company has been accused of ‘doublethink’ in claiming that its fossil fuel assets will continue to be highly profitable and in demand, while recognising the need for decisive action on climate change.

London, 9 July 2014 − Is investment in fossil fuels a prudent bet? For some time, critics have been warning major oil and gas companies that their reserves could soon be worthless if the world acts decisively on climate change.

The world’s biggest oil company, Shell, recently insisted that its reserves would remain in demand and would continue to sell at a profit, and that no global climate agreement would damage its profits.

But now two groups − the Carbon Tracker Initiative (CTI) and Energy Transition Advisors (ETA) − have today published a response to Shell’s “stranded assets” statement.

The debate itself is warming up, with one critic dismissing Shell’s statement as “Orwellian doublethink”.

The thinktanks’ reply is based on a detailed technical analysis of Shell’s argument. They say they welcome the company’s engagement with the issue, but accuse it in effect of cherrypicking the arguments to suit its case.

Weaker demand

Shell’s approach, they say, is based on dismissing potentially weaker demand for its oil as a result of tougher climate policies, technological advances and slower economic growth.

They also say the company selectively applies different timelines to fit its business strategy, highlighting conventional projects with short lead times and lower capital costs, rather than its growing unconventional and deepwater resources portfolio. This will be more capital-intensive, have longer lead times, and extended payback periods.

Shell, they say, considers only its proven oil and gas reserves, equalling 11.5 years of production at current rates. Adding existing discoveries would extend that period to 25 years, and possibly longer.

The analysis by CTI and ETA points out that while Shell recognises the need for urgent action, it argues that the world will fail to meet the internationally-agreed global warming target of no more than a 2°C rise in temperature.

“. . .as classic a case of Orwellian doublethink
as you are likely to find.”

Anthony Hobley, CEO of CTI, said: “Acknowledging the seriousness of the climate challenge whilst at the same time asserting no effective action will be taken until the end of the century is as classic a case of Orwellian doublethink as you are likely to find.”

The groups also say the company relies on carbon capture and storage (CCS) as a panacea to combat climate change, although it has yet to prove itself at a commercial scale. CTI’s 2013 research showed that CCS could provide only a limited extension (14%) of the carbon budget − the amount the world can afford to emit − to 2050.

Shell’s response, the report’s authors say, selectively focuses on producing oil fields and projects nearest to completion. They point out: “Our analysis examines a broader range of its assets. . . Over the next 10 years, we estimate that Shell could invest some $77 billion in high-risk, high-cost projects (needing a market price over US$95 per barrel).

“If Shell invests the proceeds from its producing assets into resources such as these, it will be at a progressively greater risk to changes in demand caused by measures to cut pollution.”

Unlike Shell, they say, they believe that climate regulation and related environmental policy is gathering pace, while other economic forces such as efficiency are also affecting demand.

Mothballed projects

They believe there is a real risk that global oil demand will decline within the next 10-15years − even without a global climate deal. They say that the lead times of 15-20 years required to bring many newly-discovered resources to market will only compound the possibility that scarce pension fund money and other investments will be lost in mothballed projects.

Oil companies, they recommend, should examine and disclose risks to all potential future production, rather than restricting focus to proven reserves alone.

Shell should also provide more detail on the role its internal carbon price of $40 per tonne plays in hitting demand for its oil, and its $77 billion of potential capital expenditure (2014-25) on new high-cost oil production (above a market price of $95 per barrel) ought to be a focal point for engagement with investors.

To help shareholders to assess risk, oil companies should disclose estimated break-even oil prices (BEOPs) of all new projects, CTI and ETA argue. − Climate News Network

UK doctors vote to end fossil fuels funding

Unhealthy view: fossil fuel industries will not be funded doctors Image: Peter Gordois/geograph.org.uk via Wikimedia Commons
Clean break: fossil fuel industries will no longer get funding from the UK medical profession
Image: Peter Gordois/geograph.org.uk via Wikimedia Commons

By Alex Kirby

The British medical profession’s influential national organisation has sent out a strong message about climate change by deciding to withdraw its funds from the fossil fuel industry and to support renewable energy instead.

LONDON, 1 July, 2014 − The body that represents doctors in the UK has voted to end its investments in fossil fuel companies − making it the first national medical organisation in the world to do so.

A motion passed at the annual representatives’ meeting of the British Medical Association (BMA) − in effect, its annual general meeting − marks its commitment to withdraw financial support for fossil fuels and to pursue instead a corresponding increase in its investments in renewable energy.

This is in keeping with the statement by the recent Lancet Commission that climate change “could be the biggest global health threat of the 21st century”.

The BMA motion is understood to have been passed by a majority of about two-thirds, as part of a broader motion calling for a switch to renewable energy and the creation of a new alliance of health professionals focusing on the health effects of climate change.

Growing support

Tabled by members of the BMA’s Retired Members’ Forum and several of its local committees, the motion is part of growing support for the fossil fuel divestment movement, both internationally and in the UK.

Supporters of disinvestment argue on two main grounds. They say avoiding the worst impacts of climate change demands a rapid move away from fossil fuels; and if world leaders agree to do this, they say, most oil and gas will have to be left in the ground as unburnable, becoming “stranded assets”.

There were some dissenting voices during the debate on the BMA motion, but most of those who opposed it questioned how affordable and achievable it was likely to be, rather than expressing misgivings about what it set out to do.

The clause that called for divestment passed as a “reference”, meaning that the spirit and intent are kept but the BMA’s Council is not required to adhere to the exact wording. However, BMA watchers insist that it does represent a clear commitment to divest.

During the debate, the BMA’s Chair of Council and its treasurer said the Association would seek to divest “carefully and properly”, and not “only if [they] feel like it”.

An editorial published in the British Medical Journal in March called for divestment from fossil fuels because of the “scale and immediacy of the threat to human survival, health and wellbeing” posed by unmitigated climate change.

“The decision of the BMA adds momentum to a growing
divestment movement . . . around the world”

The health charities Medact, the Climate and Health Council and Healthy Planet UK, which represent health professionals and medical students, have since called on other UK health organisations to divest from fossil fuels.

Sir Andy Haines, professor of public health and primary care at the London School of Hygiene & Tropical Medicine, told the Climate News Network: “The decision of the BMA adds momentum to a growing divestment movement, including universities, cities and theological institutions and foundations around the world.

“There is a growing body of evidence that many policies to reduce greenhouse gas emissions can improve health in the near term as well.

Principled position

“Undoubtedly, the principled position of the BMA will encourage other institutions to do the same and increase the likelihood that a strong agreement on climate change can be negotiated by the end of 2015.”

Isobel Braithwaite, a medical student who is the co-ordinator of Healthy Planet UK, told the Network: “In a sense, this vote is symbolic, because unless an organisation has billions to invest it can’t by itself make a huge difference.

“But we think that the leadership the BMA has shown will help to encourage other health organisations, in the UK and elsewhere, to follow suit.”

David McCoy, a doctor who chairs Medact, said: “In the same way that ethical investors choose not to profit from tobacco and arms sales, the health community worldwide is correctly calling for divestment from another set of harmful activities.” − Climate News Network

Tofu offers a taste of cheaper solar energy

 

Traditional tofu production points the way to cheaper solar energy Image: DryPot via Wikimedia Commons
Traditional tofu production points the way to cheaper solar energy
Image: DryPot via Wikimedia Commons

By Tim Radford

The discovery by British scientists that a chemical used in making tofu and gritting icy roads is a much cheaper, safer option in the production of solar cells could have huge financial benefits for the renewable energy market.

LONDON, 30 June, 2014 − British researchers have found a new way to cut the cost of solar cell manufacture, and at the same time make the process less hazardous. Ironically, it is also very old way – using a chemical important in turning soy milk into tofu.

Jonathan Major and colleagues at the University of Liverpool report in Nature journal that magnesium chloride − traditionally added to soy milk as a coagulant to make tofu, but also used in gritting roads in winter time, used as bath salts, and sometimes even sold as a health supplement – could replace cadmium chloride as a “doping agent” to increase the efficiency of cadmium telluride solar cells.

Dangerous to handle

Cadmium chloride is very expensive, costing $0.30 (£0.18) per gram. It is also highly toxic and very dangerous to handle, which adds to the process costs. Naturally-occurring magnesium chloride costs only $0.001 per gram, and is one of the substances that makes the ocean salty. Since the planet is two-thirds ocean, there is no danger of running out of supplies.

Photovoltaic solar cells that convert sunlight directly to electricity are now big business, and getting bigger. They can be made of thin slivers of silicon, but the silicon wafer has to be 99.999% pure, and 200 microns thick  (0.2 millimetres). So industry has also started using cadmium telluride to make sheets of photovoltaic cells that have a thickness of only two microns (0.002mm) − so thin and flexible they could even be sold by the roll.

The problem with cadmium telluride is that, to make it efficient enough to compete, it must be washed with a doping agent − an impurity added to a pure substance to produce a deliberate change− and, so far, the industry has relied on cadmium chloride. Cadmium is a dangerous metal, toxic if swallowed, fatal if inhaled, and linked by some researchers to breast cancer, cardiovascular disease, and even gout. It isn’t very good for aquatic life either.

Extra expense

Cadmium telluride is a stable salt and safe to handle, but cadmium chloride separates in solution into cadmium and into chlorine, another toxic substance. So manufacturers have the extra expense of safety during production, and then of safe disposal of waste.

Dr Major and his team at the university’s Stephenson Institute for Renewable Energy are competitors in a worldwide search for ingenious ways to exploit renewable energy and reduce fossil fuel emissions.

They started this latest research by considering what it was about the cadmium chloride that made it effective, and then whether some other salt might serve the same purpose. They found that magnesium chloride had some of the same important physical properties, and then tested it.

“If renewable energy is going to compete with fossil fuels, then the cost has to come down,” Dr Major said. “Great strides have been made, but the findings in this paper have the potential to reduce costs further.” – Climate News Network

Longer flight paths can cut climate impact

Aircraft contrails in the sky above Reading, just west of London Image: University of Reading
Aircraft condensation trails line the sky above Reading, just west of London
Image: University of Reading

By Alex Kirby 

British scientists have developed a simple framework that shows how aircraft can become more environmentally friendly by choosing flight paths that reduce the formation of their distinctive vapour trails − even if it means flying further

LONDON, 21 June, 2014 − Air travel is a rapidly-growing source of carbon dioxide and is helping to heat the Earth. It accounted for 6% of the UK’s total greenhouse gas emissions in 2011.

But researchers from the University of Reading, UK, say the CO2 that aircraft emit may be less damaging to the climate than the vapour trails they often leave behind them.

Writing in the journal Environmental Research Letters, the scientists demonstrate that aircraft contribute less to global warming when they avoid the places where the thin-shaped clouds of vapour − called condensation trails, or contrails − are produced, even if that means flying further and emitting more CO2.

Wispy clouds

Contrails form only in parts of the sky with very cold and moist air, often in the ascending air around high pressure weather systems. They sometimes stay in the air for many hours, eventually spreading out to resemble natural, wispy clouds.

Previous research by scientists at Reading has shown that, on average, 7% of the total distance flown by aircraft is in cold, moist air where long-lasting contrails can form − 2.4 billion km out of a global total of 33 billion km flown in 2005.

The new findings from Reading follow research published recently in the journal Nature Climate Change showing that the amount of global warming caused by contrails could be as large as, or even larger than, the contribution from aviation’s CO2 emissions.

The work was carried out by three scientists in Reading’s Department of Meteorology − Dr Emma Irvine, Professor Keith Shine, and Professor Sir Brian Hoskins, who is also chair of the Grantham Institute at Imperial College London.

“It may be possible to mitigate [contrails’] effect
by routing aircraft to avoid them”

Dr Irvine said: “If we can predict the regions where contrails will form, it may be possible to mitigate their effect by routing aircraft to avoid them. Our work shows that, for a rounded assessment of the environmental impact of aviation, more needs to be considered than just the carbon emissions of aircraft.”

Just like natural clouds, contrails reflect some of the sun’s incoming energy, and so produce a cooling effect. But they also trap some of the infra-red energy that radiates from the Earth into space, and so have a warming effect − again, like other clouds. The researchers say detailed calculations show that, generally, the warming influence is greater than the cooling.

But the picture is more complex than that. For a start, the team estimates that smaller aircraft can fly much further to avoid forming contrails than larger ones.

With a small aircraft that is predicted to form a contrail 20 miles long, an alternative route would have a smaller climate impact if it adds less than 200 miles to its journey . For larger aircraft, the alternative route could still be preferable, but only if it added less than 60 miles to the journey.

But there is a further twist. The team had to allow for the varying length of time the different impacts would persist. As Dr Irvine explained: “Comparing the relative climate impacts of CO2 and contrails is not trivial. One complicating factor is their vastly differing lifetimes. Contrails may last for several hours, while CO2 can last for decades.”

Feasible and safe

Nor are the relative climate impacts the only factors for aviators to think about. Air traffic controllers would need to be sure re-routing aircraft flight by flight is both feasible and safe, and weather forecasters would want to know whether they can reliably predict when and where contrails are likely to form.

As well as CO2, aircraft engines emit a number of other gases and particles that can also alter climate – such as oxides of nitrogen and sulphur gases − and their effects might also depend on the route taken.

The researchers have devised a framework to calculate how much further an aircraft could travel in a single flight before the extra CO2 that is emitted causes more warming than the contrail would have caused. It takes into account the characteristics of the aircraft and the prevailing weather conditions, since the altitude at which contrails are formed depends greatly on weather patterns.

They are confident their work has practical implications. “The mitigation targets currently adopted by governments all around the world do not yet address the important non-CO2 climate impacts of aviation, such as contrails,” Dr Irvine said.

“We believe it is important for scientists to assess the overall impact of aviation and the robustness of any proposed mitigation measures in order to inform policy decisions.” − Climate News Network

Grass is greener for biofuels future

 

Coarse switchgrass grows fast and freely in the US Image: Lynn Betts/USDA NRCS via Wikimedia Commons
Fields of dreams: switchgrass, a coarse native plant, flourishes in America
Image: Lynn Betts/USDA NRCS via Wikimedia Commons

By Tim Radford

A genetically-engineered bacterium developed by scientists in the US can produce ethanol biofuel from coarse, wild-growing switchgrass, rather than using vital food crops such as maize

LONDON, 10 June − Scientists in the US claim they have developed a simple, one-step process that turns plant tissue into biofuel. A genetically-engineered bacterium can convert switchgrass into ethanol directly, without any expensive pre-treatment with enzymes to break down the cellulose fibres into something suitable for fermentation.

Biofuel is already big business in the US, with 13.3 billion gallons of ethanol delivered for vehicle fuel in 2012. It represents a carbon-neutral form of fuel, which is good, but not so good is that much of it has been converted from maize, a food crop requiring vast tracts of agricultural land that may one day be better used to produce food.

However, researchers at the University of Georgia at Athens report in the Proceedings of the National Academy of Sciences that their new microbe, called Caldicellulosiruptor bescii, can not only convert biomass cellulose to sugars, but also turn the sugars to ethanol for fuel.

Waste lands

And it works on switchgrass, a North American native plant that flourishes on marginal and waste lands.

The researchers selected their candidate bacterium – found all over the world, usually in uncomfortable places such as hot springs – and introduced into it genes from other bacteria that produce ethanol.

They then had something that could turn fibrous grass into motor fuel, rather in the way that more traditional microbes turn barley into beer or grapes into wine.

“Given a choice between teaching an organism how to deconstruct biomass or teaching it how to make ethanol, the more difficult part is deconstructing biomass,” said Janet Westpheling, a member of the research team.

“This is the first step towards an industrial process
that is economically feasible.”

“Now, without any pre-treatment, we can simply take switchgrass, grind it up, add a low-cost, minimal salts medium, and get ethanol out the other end. This is the first step towards an industrial process that is economically feasible.”

The conversion of energy-rich corn or sugar cane to biofuels is an interim solution, because soon such produce will be more valuable as food.

The University of Georgia team is only one of hundreds that are experimenting with new ways to turn inedible plant growth from waste land into some form of fuel. The challenge to be overcome is the sheer toughness of plant fibres.

At least one team has looked for a way to exploit the soft, fast-growing tissues of duckweed; another has found a way to get high-grade rocket fuel out of a native American fir tree; and a third team has managed to convert algae into fuel oil.  In Finland, meanwhile, researchers are investigating ways to convert waste wood into methanol. In all cases so far, the work is either experimental or in a prototype stage.

Reliable supplies

The long-term prize will go to the production system that can deliver, on an industrial scale, the most reliable supplies of liquid energy at the most cost-effective rate.

So far, the genetically-modified C. bescii looks promising. In experiments, it has converted switchgrass to fermentation products that are 70% ethanol.

It is also versatile. The Georgia team reports that it has also been used to make other fuels, such as butanol and isobutanol.

“This is really the beginning of a platform for manipulating organisms to make many products that are truly sustainable,” Prof Westpheling said. – Climate News Network

China coal cap could strand assets

FOR IMMEDIATE RELEASE

A barge being loaded from huge coal hoppers in China Image: Rob Loftis via Wikimedia Commons
Loaded question: a barge being filled from huge coal hoppers in China
Image: Rob Loftis via Wikimedia Commons

By Alex Kirby

Coal consumption in China may be cut much faster than observers expect, leaving the mining sector − and foreign exporters − in disarray.

LONDON, 5 June − Analysts believe that China − the world’s largest producer and consumer of coal, accounting for almost half of global consumption − could be close to making an abrupt and drastic change of track.

A report by the Carbon Tracker Initiative and the Association for Sustainable and Responsible Investment in Asia (ASrIA) says that when China’s demand for thermal coal (cheap coal burned in power stations to generate electricity) peaks, this will leave up to 40% of its coal-fired power generation capacity potentially useless − and that could be in barely five years’ time.

Thermal coal currently provides just under 80% of China’s power, the report says, with up to US$21 billion spent annually on the sector’s assets.

Peak sooner

But some forecasts suggest China’s thermal coal demand will peak between 2015 and 2030. The report says that that peak could be reached sooner rather than later − perhaps by 2020. It suggests four possible reasons:

  • Slowing GDP growth and decreasing energy intensity reducing growth in China’s demand for power;
  • Policy responses to the air pollution and water scarcity crises reducing the attractiveness of coal as a fuel;
  • Pilot emissions trading schemes and discussions about a carbon tax increasing the perceived risk to the future cost competitiveness of coal power;
  • Strong predicted growth for China’s renewable energy technologies and other non-coal power sources.

By 2020, the difference between a business-as-usual path and a trajectory towards such an early peak from a combination of these factors equals 56% of China’s thermal coal supply in 2012.

Put another way, it represents 437 GW of coal-fired power capacity – 40% of total capacity in 2020. This shows, the authors say, that there is significant potential “asset stranding” − this happens when an asset has become obsolete and is depreciating − as a result of lower-than-expected demand within China’s thermal coal sector.

The report’s warning is aimed not only at investors in China’s coal industry. It says the changing dynamics of the country’s power sector also pose a risk to international coal exporters who are prepared to bet that China’s apparently insatiable demand for coal will continue.

The authors say that if China’s import demand decreases rapidly, that would require exporters to find another market or be left with stranded assets. They say this risk applies especially to Australian and Indonesia exporters.

“Investors need to dispel any belief
that Chinese coal demand is insatiable”

The report contains recommendations for investors and policy-makers, and says there is an opportunity for China and other countries to ease the potential disruption and risks associated with stranding assets.

It wants investors and financial institutions with significant assets at risk to be supported in developing a plan of action for managing the stranding process.

Jessica Robinson, ASrIA’s chief executive officer, said: “Investors need to dispel any belief that Chinese coal demand is insatiable, and integrate this transition into their decision-making by stress-testing the relative risks of different future demand scenarios.”

Price forecasts

Luke Sussams, Carbon Tracker’s senior researcher and the report’s lead author, said: “Investors in Australian and Indonesian exporters of coal, in particular, must factor much lower Chinese demand into their demand and price forecasts.

“If China becomes a zero imports market, which is possible, there is a noticeable lack of any viable alternative growth market for seaborne traded coal. Where will Australia’s US$50bn of thermal coal go instead?”

China aims by 2020 to produce at least 15% of its energy from renewable sources. Chinese companies invested $65bn in renewable energy projects in 2012 − an increase of 20% on 2011 investment − and they plan to spend $473bn between 2011 and 2015, according to the country’s Five-Year Plan.

In 2011, China was the world’s second-largest wind producer, and it is also investing in solar power, hoping to increase capacity by almost 12 times from 2012 to the end of 2015. − Climate News Network

Insurance leaders pack climate punch

FOR IMMEDIATE RELEASE

 

Flimsy insurance: thousands of sandbags to try to stop the Missouri River flooding Jocelyn Augustino/FEMA via Wikimedia Commons

Under-insured: sandbags to try to stop flooding after extreme rainfall in the US
Image: Jocelyn Augustino/FEMA via Wikimedia Commons

By Kieran Cooke

The heavyweights of the global insurance industry, well aware of the risks posed to their finances by extreme weather events, have made a renewed commitment to use their financial clout and influence to tackle the climate impacts of a warming world

LONDON, 23 May − It might have the reputation of being rather a dull − some might even say boring – business, but there’s no doubting the insurance industry’s financial muscle.

The Geneva Association − a leading international insurance thinktank, whose members have total assets of nearly US$ 15 trillion − has been meeting in Toronto, Canada. And the focus has been very much on climate change.

The Association, issuing a climate risk statement calling for urgent action by governments and other bodies, said: “The prospect of extreme climate change and its potentially devastating economic and social consequences are of great concern to the insurance industry.”

Those putting their names to the document – 66 chief executives of the world’s leading insurers − commit themselves to a set of guiding principles on what they describe as the substantial role the insurance industry can play in tackling risks related to climate change.

Low carbon projects

The insurers pledge to market insurance policies aimed at promoting the development of low carbon energy projects. They also say they will work to attract investors to such schemes, and use their combined investment muscle to promote low carbon initiatives.

The commitments made by the Geneva Association members are likely to have considerable impact on the development of low carbon energy projects worldwide. The availability of insurance is often a key ingredient in determining whether or not such schemes are implemented.

“In the face of the increasing economic costs caused by climate-related disasters, it is vital that the full potential of insurance and reinsurance is harnessed effectively,” says Shuzo Sumi, chairman of the Tokio Marine group.

Among other pledges in the risk statement, insurers say they will implement measures backing new building codes, with the aim of promoting energy efficiency and sustainability. They will also use their influence to encourage politicians to better understand the potential costs of climate change.

Uncertain era

The big insurance companies have spent considerable time and resources over the years investigating the likely impacts of climate change. A Geneva Association report last year warned of a significant upward trend in the insured losses caused by extreme weather events, saying the insurance industry was entering a new, highly uncertain era.

Speaking at the meeting in Toronto, Al Gore, the former US vice-president, said insurers had the capacity to influence policy makers on how to go about tackling climate-related risks, but argued that the industry must be more forthright.

“Now that our world is facing the gravest risks it has ever faced, the world should turn to insurers for advice,” he said: “In turn, insurers must be more vocal about the challenges they see.” − Climate News Network

Oil companies take trillion-dollar gamble

FOR IMMEDIATE RELEASE

 

Evidence of waste: the site of a former shale mine in Estonia Image: Hannu via WikiMedia Commons

Wasteland: the unrehabilitated site of a former shale oil mine in Estonia
Image: Hannu via Wikimedia Commons

By Paul Brown

Financial experts warn investors that their money is being used by oil companies for high-risk extraction projects on the dubious assumption that oil prices will go on rising, and with little or no regard for climate change factors

LONDON, May 8 − Investors are being urged to warn oil companies that they are risking trillions of dollars in exploiting oil fields that will probably never be profitable − and to consider selling their shares if the companies fail to listen to them.

A report out today from the Carbon Tracker Initiative, a not-for-profit organisation of specialists who assess climate risk in today’s financial markets, says it was surprised to find that many of the investments by oil companies were financially dubious − even without taking into account climate change factors.

To justify the high capital costs of extracting oil from shale deposits, oil sands, ultra-deep sea sites and Arctic regions, the companies are making assumptions that the price of oil of will rise and stay high.

Risky fields

The dozens of company investment portfolios analysed in the report include global names such as ExxonMobil, Shell, BP, Chevron, Total, Statoil and Gazprom. Many of these companies have large reserves where the cost of exploitation is well below the market price, but they are also still investing in high-cost, risky fields.

Smaller companies, on the other hand, often have even greater exposure to risk, believing that the high price of oil will eventually make their investment worthwhile. The report also names these companies, and the size of the investments that authors of the report believe are at risk.

The report says that oil companies are generally assuming that oil demand will continue to rise, and are taking little or no account of the fact that governments may act to keep their pledge to prevent the world warming by 2 degrees Centigrade.

Many projects cost far too much to fit with the low-demand, low-price scenarios that would result if governments take action to limit oil-related emissions and save the planet from undue warming.

To test their theory, the experts took a figure of $95 a barrel for oil as a level above which shareholders would be unwise to invest in new fields. Although the price of oil is above this at the moment, the report says it has twice been below $40 a barrel in the last 10 years.

The research identified $1.1 trillion dollars of potential capital expenditure by 2025 on oil fields where the oil would cost more than this to produce, and so expose shareholders to a loss on all the production from the new fields. The report says that the companies were “betting on a high demand and price scenario”, and that investors might want to consider whether this capital was being wasted.

Those conclusions would apply even if governments took no action on climate change. The oil companies’ gamble is that the world’s economies − particularly China and other developing countries − will go on expanding at the current rate.

Bleaker outlook

However, if climate change is taken into account, and action is taken to reduce carbon emissions, the outlook for investors in high-cost oil projects looks even bleaker.

Anthony Hobley, chief executive of the Carbon Tracker Initiative, said: “Our analysis also shows that if demand for oil is not substantially reduced, we are clearly heading for a level of warming far in excess of 2C, which reveals that there is no free lunch here for investors. Either policy and technological tipping points (like electric cars) will reduce demand in line with our analysis, or we will face levels of warming described as catastrophic by man.

“There is a realisation that ignoring climate risk and hoping it will go away is no longer an acceptable risk management strategy for investment institutions.”

Hobley said that pensions funds and other big investors were under increasing pressure to explain how they were adapting to climate and market investments.

Previous investor concerns that the increased costs of hard-to-recover reserves could not be justified led to a dismissive response from ExxonMobil, one of the key companies named in this report as planning to exploit marginal fields.

The company’s assessment is: “We believe producing these assets is essential to meeting growing energy demand worldwide, and in preventing consumers, especially those in the least developed and most vulnerable economies, from themselves becoming stranded in the global pursuit of higher living standards.”

The company added that it did not believe that renewables could expand fast enough to meet increasing energy demand, and would comprise only about 5% of the total energy mix by 2040. – Climate News Network

Corporates weigh risks, opportunities of changing climate

FOR IMMEDIATE RELEASE

Swings and roundabouts: For many enterprises, climate change can have a silver lining Image: User:klip game via Wikimedia Commons

Swings and roundabouts: For many enterprises, climate change can have a silver lining
Image: User:klip game via Wikimedia Commons

By Kieran Cooke

While politicians dither about what action to take on climate change, it appears that the corporate world – in Europe at least – is taking the issue seriously and adapting its operations.

LONDON, 5 April – Europe’s company board rooms are very much alive to the risks posed by climate change – and are also busy analysing business opportunities it might provide.

That’s among the findings of a survey by the Carbon Disclosure Project (CDP), an EU-based non-profit organisation specialising in corporate environmental information, and Acclimatise, a consultancy group which gives business advice on climate change adaptation and management.

Altogether 270 of Europe’s largest companies from across 20 countries were contacted concerning their attitudes to a changing climate.

The resulting report on the survey, Climate Change Resilience in Europe, indicates that a majority of companies see climate change having a negative impact on their operations: companies identified 780 risks to their finances compared with 379 opportunities that might be available as a result of climate change.

Risk to reputations

The biggest risk foreseen is a reduction or a disruption in production capacity. “Extreme weather, drought and flooding may disrupt the supply of certain produce and products”, says one respondent, a spokesperson for the Maersk shipping and industrial conglomerate.

“This can directly affect the revenue of our supply chain but also can have a negative impact on our reputation and create a demand for more local sourcing.”

There are other expected risks: a large banking group in the Netherlands is concerned that climate change-related flooding could have an adverse impact on  its data centres.

Energy companies worry about higher temperatures disrupting the operation of power plants, while banks are concerned about their investments in companies exposed to rising sea levels.

Boost for business

“Many of the essential conditions on which businesses rely are changing, leading to increasing prices, as well as shortfalls in the quality and supply of goods and services provided to customers”, says Steven Tebbe, managing director of CDP Europe.

Yet not everyone in Europe’s corporate world is pessimistic. The report says more than 40% of companies look forward to a growing demand for their services as a result of climate change.

Construction companies in some regions of Europe might benefit from a warming climate. “Shorter and milder winters with less snow and cold can increase the productivity at some construction sites, as construction activity may experience less potential delays due to snowfall”, says Skanska AB, the Sweden-based building group.

Adaptation is key to maintaining the health of corporate finances. “Through the development of financial instruments such as catastrophe bonds, especially for regions of Africa which are particularly impacted by climate change, the financial risks posed by natural disasters and droughts can be avoided”, says Barclays, the banking group.

Staying healthy

Meanwhile Diageo, the drinks conglomerate, says that by replacing barley in its beer with less thirsty, more climate change-resistant raw materials it can gain a competitive advantage on its rivals.

“To stay competitive, business leaders must account for climate impacts and work to understand if, how and where climate risks are material to their bottom line”, says John Firth, CEO of Acclimatise.

Steven Tebbes of CDP sees a direct link between an awareness of the impact of climate change and the financial well-being of a company.

“Industry environmental transparency and performance is today a prerequisite for attracting new investments and creating new jobs – there’s increasing evidence of the links between how well a company manages environmental and climate issues and its financial performance or access to capital.” – Climate News Network