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Corporates weigh risks, opportunities of changing climate

April 5, 2014 in Adaptation, Banking, Business, Climate risk, Economy, Europe, Resource shortages

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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

Climate science ‘is beyond argument’

March 17, 2014 in Arctic, Business, Carbon, Climate deniers, Deep Ocean, Economy, Fish, Food security, Global Ocean Commission, Ice Loss, Marine ecology, Ocean acidification, Ocean Warming, Polar ice, Pollution, Science

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Not as sunny as it seems: The ocean is under attack on many fronts, with climate change foremost among them Image: kein via Wikimedia Commons

Not as sunny as it seems: The ocean is under attack on many fronts, with climate change foremost among them
Image: kein via Wikimedia Commons

By Alex Kirby

The Global Ocean Commission says climate change is one of the key threats to the health of the world’s marine life, which it says faces multiple pressures in a warming world.

HONG KONG, 17 March - South Africa’s former Finance Minister, Trevor Manuel, has derided those who deny the scientific argument that climate change is an urgent problem caused largely by human activity.

He told journalists here: “The science is now incontrovertible. There are a few people in the world who deny it, but they are mainly in lunatic asylums.”

Mr Manuel is one of three co-chairs of the Global Ocean Commission, a panel of global leaders who have just ended a meeting here to finalise the proposals they will present to the United Nations in June.

The meeting agreed that another key threat to the world’s oceans is overfishing and the subsidies which help to make it possible. It says this, and the other factors causing ocean degradation, threaten the food security of as many as 500 million people.

It is deeply worried about pollution. With plastic remains now so pervasive that they are found even in deep seafloor sediments, Mr Manuel said, it sometimes seemed that “you might as well not bother to buy seafood at all – just buy the plastic bag it comes in and eat that.”

Shells corroded

The Commission says climate change threatens the oceans in three main ways: by raising the temperature of the water; by reducing its oxygen content; and by increasing its acidity. Antarctic pteropods, small sea snails also known as sea butterflies, are already being found with severely corroded shells because of acidification, and larger creatures, including bigger shellfish and corals, are likely to be seriously affected.

Another of the co-chairs, José María Figueres, the former president of Costa Rica, told the Climate News Network the Commission was concerned at the prospect of exploitation of the high seas in the Arctic as the region’s sea ice continues to melt.

He said: “Beyond Arctic countries’ EEZs (exclusive economic zones stretching 200 nautical miles from the coast), the melting will leave us with a doughnut-shaped hole in the Arctic high seas, which are not under international control.

“Some nations are now looking to explore there for fish, minerals, valuable biodiversity and other resources. I believe we should not go down that route.

We should listen to the science and follow the precautionary principle, keeping this pristine area off-limits for exploitation until we understand the consequences.

Coalition builders

“We’re already pushing the high seas to the limit. We don’t need to push them over the edge by a lack of proper precaution in the Arctic.”

He said: “The jury is still out on whether we have 20 or 30 years ahead as a window of opportunity to act. But why wait? Listen to the science, which is overwhelming, and to the economics, which are sound.”

Describing the Commission as “not just a bunch of treehuggers, but a group that’s grounded itself in good sound economics”, Mr Figueres said the recommendations it planned to present to the UN on 24 June would represent about 20% of its work. The other 80% would involve building coalitions around each recommendation: there are expected to be no more than 10 in total.

The Commission’s third co-chair is the UK’s former Foreign Secretary, David Miliband. He told the Network: “Answers that sit on a shelf are a waste of time, and people who are positively inclined to protect the oceans are held back by institutional inertia.

“But the interplay between climate change and ocean damage is rising, and it very much needs to. The science of most of the last half-century shows us how we’ve been playing tricks with nature.” – Climate News Network

Biofuels from waste ‘need EU backing’

March 3, 2014 in Adaptation, Agriculture, Biofuels, Business, Carbon Dioxide, Energy, European Union, Forests

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The bales head  for the farm: Straw is an agricultural waste suitable for making biofuel Image: Ian Kirk from Broadstone, Dorset, UK via Wikimedia Commons

The bales head for the farm: Straw is an agricultural waste suitable for making biofuel
Image: Ian Kirk from Broadstone, Dorset, UK via Wikimedia Commons

By Alex Kirby

The countries of the European Union could slash their greenhouse gas emissions and save significant amounts of oil by making fuel from waste, researchers say. But they think policymakers should give a lead.

LONDON, 3 March – Europe has the technology and the raw material to make a big cut in the amount of oil its transport uses, researchers say. But it will fail to reap the benefits on offer unless the European Union comes up with more radical policies.

A report, Wasted: Europe’s Untapped Resource, says the continent has significant unexploited potential to convert waste from farming, forestry, industry and households into advanced low-carbon biofuels, saving more than a sixth of the EU’s expected total fuel consumption for road transport 16 years from now.

But it says the conversion will not happen unless EU policymakers give greater priority to sustainability and to the need to lower the dependence of transport on high-carbon fuels by 2030.

The research which produced the report was carried out by the International Council on Clean Transportation (ICCT) and NNFCC, a UK research consultancy. The project was supported by a group of companies interested in introducing new technology, including two airlines, British Airways and Virgin, and by WWF, BirdLife Europe and several other environment NGOs.

The report says that if all sustainable waste from farms, forests, households and industry is used for transport fuels, that could make enough to replace about 37 million tonnes of oil annually by 2030 – the equivalent of 16% of the EU’s road transport fuel demand by then.

Safeguards needed

It also says that so long as the new fuels came from sustainable sources, they would produce less than 40% of the carbon dioxide emissions from fossil fuels. Using them would inject up to €15 billion (US$21 bn) of extra revenue into the rural economy every year and create up to 300,000 new jobs by 2030.

The sorts of wastes that could be used include straw and other crop left-overs, forestry residues, municipal solid waste and used cooking oil.

But the report carries a warning too: safeguards would be needed to ensure the waste was obtained sustainably, including land management methods to protect biodiversity, water and soil.

And the benefits of biofuel from waste would have to be paid for. The report says some combinations of feedstock and technology would need short-term financial incentives, although others are already close to being competitive and would need little more than certainty about policy.

Easier challenge

The authors say cautiously that the research shows it is possible to develop a biofuel industry based on farm and forest wastes “which in the case of the cheapest feedstocks could become cost-competitive with only modest incentives…” Biofuel from other wastes might need different levels of subsidy.

Chris Malins led the analysis for the ICCT. He said: “Even when taking account of possible indirect emissions, alternative fuels from wastes and residues offer real and substantial carbon savings. The resource is available, and the technology exists – the challenge now is for Europe to put a policy framework in place that allows rapid investment.”

David Turley of the NNFCC, who led the economic analysis, said advanced biofuels from agricultural and forest wastes would require “little or only a modest additional incentive” to stimulate production at prices comparable to those of current fuels made from specially-grown crops.

The report concludes that while trying to use all the available waste might be thought optimistic, achieving just 2% of current EU road transport fuel use in 2020, as suggested by the European Parliament, would be less challenging.

Even that more modest aim, the report says, would still add about €163 million (US$224 m) in net revenues to the agricultural sector and €432 m (US$594 m) to the forestry sector. It would also generate an extra 37,000 permanent jobs in the rural economy, and 3,500 more in biofuel refineries. – Climate News Network

EU’s new energy strategy faces doubts

January 21, 2014 in Business, Carbon Trading, Economy, Emissions reductions, European Union, Renewables

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Tidal electricity generator awaiting installation: Europe is rich in renewable energy potential Image: MyName (Fundy) via Wikimedia Commons

Tidal electricity generator awaiting installation: Europe is rich in renewable energy potential
Image: MyName (Fundy) via Wikimedia Commons

By Kieran Cooke

The European Union has been a world leader in establishing binding targets on reducing greenhouse gas emissions and building up renewable energy supplies. But as officials in Brussels unveil a new energy strategy, questions are being asked about Europe’s commitment to combatting climate change.

LONDON, 21 January – Governments have stated their positions. Legions of lobbyists have presented final arguments. On 22 January the European Commission is scheduled to release its latest comprehensive climate and energy package, focused on developments in the energy sector up to the year 2030.

Negotiations on the package have been long and arduous: power utilities and big industrial conglomerates within the EU have been particularly vociferous in their opposition to a further set of emissions reductions or renewables targets which, they say, will seriously undermine the EU’s economic competitiveness.

Key issues to be announced by the Commission are 2030 targets for reductions in emissions of greenhouse gases (GHG) and the renewables share of the EU’s energy mix and – crucially – whether these targets will be made legally binding on states within the union.  Measures aimed at achieving greater energy efficiency within the EU will also form part of the new package.

Present EU legislation sets binding targets of a 20% reduction in GHG emissions from 1990 levels and achieving a 20% share of renewables in energy consumption by 2020. The legislation also sets an indicative, non-binding, target of making a 20% improvement in energy efficiency.

The big question now is at what level the Commission proposes to set its 2030 targets: while many countries in the EU, including Germany, France, Italy, the Netherlands and Spain, support a binding target of a 40% cut in emissions by 2030, others – including Poland with its large coal industry – say that target is too high.

Meanwhile green groups and non-governmental organisations say the EU must be more ambitious. They say a 2030 emissions reduction target of at least 50% is needed if the internationally agreed goal of limiting the rise in the global average temperature to 2°C over pre-industrial levels by 2050 is to be achieved and runaway climate change prevented.

Resistance to renewables

They also say the EU cannot expect cutbacks on GHG emissions by other nations – particularly by high carbon emitters such as China and India – if the Commission fails to back continuing substantial GHG cutbacks within the EU.

The EU has declared a long-term target of cutting GHG emissions by between 80 and 95% by 2050.

Upping the target on renewables is proving even more contentious. Though most countries within the EU subscribe to the idea of achieving a greater share of renewables in their energy mix, several are opposed to the setting of legally binding targets. Included in this group is the UK, which has recently announced a major expansion in nuclear energy and also plans a large-scale programme for the exploitation of shale gas.

Latest figures indicate global investments in renewables and low carbon energy fell last year for the second year in a row, with investments in Europe falling by more than 40%.

The EU’s power utilities and other large industrial enterprises have been lobbying hard against setting binding renewables targets and have called for the reduction or abolition of subsidies given to the renewables sector.

‘Uncompetitive’

They say the EU, by emphasising renewables, is jeopardizing Europe’s economic future: they say EU industries can no longer compete with those in the US, where energy costs are substantially lower due to the large-scale take-up of shale-based oil and gas in recent years.

Jose Manuel Barroso, President of the EU Commission, is reported to be among those against any insistence on establishing a legally binding target for renewables for 2030.

On the other side of the argument members of the European Parliament’s environment and energy committees earlier this month voted in favour of legally binding targets for both emissions and renewables. They also said there must be more decisive action on reducing overall energy usage within the EU and called for a binding 40% target on energy efficiency by 2030.

The new EU climate and energy package is expected to include measures aimed at reforming the EU’s Emissions Trading Scheme (ETS), once touted as a key element in cutting industrial GHG emissions. The ETS has underperformed due to mismanagement and an oversupply of emissions allowances or so-called “pollution credits”.

In March 2014 leaders of the EU’s 28 member states are due to meet to decide whether or not to endorse the Commission’s new proposals. – Climate News Network

Carbon trading slides again

January 4, 2014 in Business, Carbon Trading, Climate finance, Economy, Europe

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Emissions from an Estonian power station: Without ambitious climate targets, carbon prices will remain low Image: By Ivo Kruusamägi via Wikimedia Commons

Emissions from an Estonian power station: Without ambitious climate targets, carbon prices will remain low
Image: By Ivo Kruusamägi via Wikimedia Commons

By Kieran Cooke

Carbon trading has been lauded by some as a key way to cut back on climate-changing greenhouse gas emissions. Trouble is, the market has been stuck in the doldrums for years.

LONDON, 4 January – The performance of the world carbon market continues to disappoint.

According to the latest figures from Thomson Reuters Point Carbon, a specialist group analyzing carbon market activity, a total of €38.4 bn worth of carbon allowances and credits was traded last year – a decline of nearly 40% on the 2012 figure.

The value of trading in the market has now declined for three years in a row – in 2011 trades were valued at €96 bn. 2013 also saw the volume of emissions units traded around the world drop for the first time since 2010.

“The main explanation for the falling prices in carbon markets around the world is the very modest emissions reduction targets adopted for the period up to 2020”, says Anders Nordeng, senior carbon analyst at Point Carbon.

“Without ambitious climate targets there is no need for deep emission reductions and carbon prices will remain at low levels.“

Too cheap to work

The EU’s Emissions Trading System (ETS) dominates the world’s carbon trading, accounting for 94% of the market’s total value and 88% of the volume of emission units traded.

The scheme, which has been in operation since 2005, was set up with the aim of reducing CO2 emissions by requiring companies such as energy suppliers and other industrial conglomerates to pay for their emissions through the buying and selling of allowances or “pollution permits.”

Initial market mismanagement resulted in a chronic over-supply of tradeable permits. In recent years Europe’s economic crisis lessened economic activity and reduced the demand for allowances.

Allowances, based on the market price of a tonne of carbon, are now trading at around the €5 mark though at one stage in 2013 the price dropped to under €3.  Market analysts say a price of at least €25 is needed in order to persuade companies to decarbonise and for carbon reduction targets to be achieved.

Point Carbon says it’s not all gloom in the market. While the ETS continues to underperform, other carbon markets are developing. Trading in North America, driven by activity in California, in north-eastern states in the US and Quebec in Canada, grew both in value and volume last year.

Chinese potential

“2013 was the year the North American carbon markets blossomed”, says Olga Chistyakova, a Point Carbon analyst.

China is also stepping up carbon trading, having launched the first of seven proposed regional trading schemes in mid-2013.

“Although the traded volumes are still modest, the sheer size of some of the covered provinces and cities (Guangdong, Beijing, Shanghai) points to a great potential”, says Point Carbon.

Meanwhile, the ETS has undergone some limited changes aimed at shoring up carbon prices. After months of wrangling between states, the sale of 900 million ETS allowances has been postponed. And what’s billed as a comprehensive structural reform of the ETS is due to be announced in mid-January.

There are also signs that the corporate sector, particularly in the US, is adopting carbon trading as part of business strategy. A recent survey by the Carbon Disclosure Project found that many large US corporations are setting their own internal carbon pricing in anticipation of future environmental legislation and to assess the value and risk of various investment projects. – Climate News Network

‘Illegal UK state aid’ probe hits nuclear plans

December 12, 2013 in Business, Energy, Europe, Nuclear power, Renewables, United Kingdom

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The present power station at Hinkley Point: Can the UK legally fund those who build and back it? Image: Roger Cornfoot via Wikimedia Commons

The present power station at Hinkley Point: Can the UK legally fund those who build and back it?
Image: Roger Cornfoot via Wikimedia Commons

By Paul Brown

An EU investigation into the UK’s financial support for new nuclear power stations is dividing Europe, with critics saying London is flouting EU rules by offering illegal subsidies.

LONDON, 12 December – A full-scale investigation is being launched into whether Britain’s deal with French nuclear giant EDF, backed with money from Chinese nuclear generators, to build new stations at Hinkley Point in the west of England, is illegal state aid.

The investigation by the European Commission is a serious blow to the nuclear industry in Europe and across the western world, because it delays any expansion of the industry for at least a year and may possibly permanently damage its prospects.

It is a test case because nuclear subsidies have never been looked at previously in Europe, since they pre-date existing EU policy on competition and so have never been challenged. However, countries like Germany, which have decided to phase out nuclear power in favour of renewables following the Fukushima accident, believe the UK’s nuclear subsidy is not compatible with EU policy.

Across Europe other critics of nuclear say that no new station has ever been built without state subsidies, and that since subsidies distort competition in electricity markets, they are therefore illegal in Europe.

Guaranteed price

The UK argues that a guaranteed price for electricity over 35 years, plus £10 billion (US $16.36 bn) in loan guarantees for building the station, and insurance cover in case of accident, do not constitute subsidies beyond what would be available to other low carbon forms of generation, and are therefore permissible.

Tom Burke, former advisor to Conservative environment minister John Gummer, asks why, if there is no public subsidy, the Government needs to apply to Brussels for state aid clearance for this deal.

But the UK Department of Energy and Climate Change countered: “The Commission is aware of our timetable for implementation. We are confident that the case we have put forward is robust and consistent with state aid rules.”

In other words, the British Government officials are optimistic that the investigation can be over quickly. It believes that by mid-2014 clearance will have been given for two reactors – costing £16 bn – to be built. If built on time they would provide 7% of Britain’s electricity by 2023.

Numerous objections

Objections to the deal are expected to be numerous, however, and an investigation could take far longer than that. If the decision goes in favour of the UK it will be a serious blow to the renewable industry, so supporters of wind, solar, wave, tidal and bio-gas technologies are all likely to submit objections.

For example Mark Turner, a director at the UK’s leading solar power generator, Lightsource Renewable Energy, has written to Prime Minister David Cameron to point out that Britain’s solar industry can deliver the same energy production at the planned Hinkley Point C within 24 months and at comparable cost.

Hinkley won’t be able to contribute to reducing dependence on fossil fuels for the ten years it would take to build the plant. Solar power, on the other hand, could provide energy security quickly, reduce electricity bills and protect the environment at the same time, he said.

One curious aspect of the saga is that the British Government pledged before the last election that nuclear power stations would be built only if they could compete with other forms of generation without subsidy. They then spent two years negotiating with EDF and agreed to pay £92.50 per megawatt hour for the electricity over 35 years, double the existing price of electricity.

UK gambles

The Government is therefore gambling that the price of electricity will double before the station starts up and that it will therefore not have to pay the subsidy. Among the issues the commission will be looking at is whether the deal gives EDF and its Chinese backers excess profits at the expense of British consumers.

In the wider context the deal is important because the nuclear industry’s revival in democracies depends on it being classed as a low carbon generator, which can benefit from carbon credits and other subsidies in the same way as renewables. This has already been ruled out in most democratic countries outside Europe.

Without state aid the large capital expenditure needed to build nuclear plants is hard to find from the private sector, and the time it takes to build reactors makes the return on capital long-term. Two stations being built in Finland and France are both up to seven years late and construction budgets have already doubled. They are the same design as the reactors intended for Britain. – Climate News Network

Climate threatens retirement savings

December 10, 2013 in Business, Carbon Budget, Climate finance, Insurance, Pensions

EMBARGOED until 2130 GMT on 10 December

It's expensive - but is it worth it? Hydrocarbon assets 'could be wasted' Image: Cipiota via Wikimedia Commons

It’s expensive – but is it worth it? Hydrocarbon assets ‘could be wasted’
Image: Cipiota via Wikimedia Commons

By Alex Kirby

A group which monitors how investment funds manage the risks of climate change says many are exposing their investors to massive future losses.

LONDON, 10 December – The Asset Owners Disclosure Project (AODP) asked the world’s thousand largest asset owners what they were doing to guard against the possibility that their investments in fossil fuels could, in future, become worthless.

Together, the owners manage more than US$70 trillion of funds. The Project found that only 27 of the 460 investment funds replying to its request are currently addressing climate risk at what it considers a responsible level.

Only five of the 460 achieved the AODP’s top AAA, with an additional 29 rated A or above. Only these groups, says the Project,  “will survive a carbon crash in any kind of good shape”. .

Of the 1,000 asset owners approached, 80% are either D rated (abysmal) or X rated (doing nothing). A further 540 funds did not disclose sufficient information to allow a rating.

“A majority of the world’s investment industry are clearly acting contrary to the interests of those whose money they represent – this is an outrageous situation” says Sharan Burrow, an AODP board member and general secretary of the International Trade Union Confederation.

“It must be remembered that much of the money being held by these organisations is the product of workers’ lifelong savings.”

The survey looked at several categories of investment behaviour, including transparency, risk management and low carbon investment. Asset owners examined came from 63 countries, in all regions of the world.

Solution neglected

Those the AODP approached included over 800 pension funds, 80 insurance companies, 50 sovereign wealth funds and 30 foundations or endowments. The survey findings are published in the Project’s second Global Climate Investment Index.

The risk to investors from climate change is that a stringent and effective global agreement on reducing greenhouse gas emissions – which does not yet exist – would mean massive amounts of coal, oil and gas reserves, listed as assets by energy and mining companies, would have to be left in the ground.

As a consequence, the value of investments in those companies would fall sharply which, among other things, would lead to considerably lower levels of retirement savings for individual stakeholders.

While the AODP says many investment funds are threatening investors with potentially massive losses through exposure to climate risks, it believes the Index shows the world’s investment system can drive the transition to a low carbon economy.

Julian Poulter, the executive director of AODP, said: “While we can see some leaders emerging, many haven’t acknowledged their dangerous and foolhardy addiction to investments riddled with climate risk, let alone checked themselves into rehab.”

But he added: “What is clear is that the world has an investment system capable of driving the low carbon transition – If all the funds we surveyed had a triple AAA rating, we would be well advanced on meeting the global climate challenge upon us.” – Climate News Network

Warsaw – Day 8: King Coal gets a kicking

November 18, 2013 in Banking, Business, China, Climate finance, Coal, Economy, Europe, Investment, UNFCCC

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One of Poland's coal-fired power plants, which produce 86% of its electricity Image: Slawomir Duda-Klimaszewski via Wikimedia Commons

One of Poland’s coal-fired power plants, which produce 86% of its electricity
Image: Slawomir Duda-Klimaszewski via Wikimedia Commons

By Paul Brown in Warsaw

Paul Brown, a Climate News Network editor, is in the Polish capital for the UN climate talks – the 19th Conference of the Parties of the UN Framework Convention on Climate Change. Today he reports on concerns at COP 19 that banks are paving “the highway to hell” by investing billions in coal and so worsening climate change.

Coal has dominated the agenda in Warsaw, with demonstrations against the Polish Government’s decision to hold a coal summit during the climate talks.

Scientists, UN officials and green groups said coal reserves must be left in the ground if the climate is not to overshoot the internationally agreed safe maximum temperature increase of 2°C over pre-industrial levels.

Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, who had left the climate talks to address the Coal and Climate Summit, had an uncomfortable message for the assembled chief executives of coal companies.

“I am here to say coal must change rapidly and dramatically for everyone’s sake”, she told them. Coal use could continue only if carbon dioxide was captured and stored, otherwise the world should switch to wind and solar, which she said were already competitive on cost in many parts of the world.

During the coal summit 27 of the world’s leading climate and energy scientists issued a statement saying investment in new coal plants without capturing the carbon dioxide emissions from them was unacceptable.

Banks’ “hypocrisy”

One of them, Dr Bert Metz, a former co-chair of the Intergovernmental Panel on Climate Change (IPCC), said even the most efficient coal plants were unacceptable if the climate was to be kept safe – they were twice as polluting as gas and 15 times more so than renewables. Alternatives to fossil fuels are readily available and affordable, he said.

Beata Jaczewska, head of the Polish delegation at the climate talks, defended her Government’s decision to call a coal summit at the same time as the climate talks by saying that “coal has to be part of the solution.” Poland produces 86% of its electricity from coal.

Environment campaigners exposed what they called “the hypocrisy of banks” in claiming they care about the climate while providing billions of dollars to finance new coal mines, underwrite share issues and even own mines themselves.

A report, Banking on Coal, “provides a Who’s Who list of the financial institutions undermining the Earth’s climate system and our common future.” The report says American, Chinese and British banks are currently the biggest investors in coal, and if all the investments pay off then there is no hope of saving the planet from the ravages of global warming.

Heffa Schücking, one of the report’s authors, said: “It is mind-boggling to see that less than two dozen banks from a handful of countries are putting us on a highway to hell when it comes to climate change. Big banks already showed that they can mess up the real economy. Now we’re seeing that they can also push our climate over the brink.”

American banks lead

In the period since the Kyoto Protocol came into force in 2005 four American banks, Citi, Morgan Stanley, Bank of America and JPMorgan Chase, have been the biggest coal investors. Between them they have ploughed more than €24 billion into mining coal.

To expose their “hypocrisy”, the report says some of the banks claim to be carbon-neutral while investing in the fossil fuel that is most damaging to the planet. Citi claims to be “most innovative investment bank for climate change and sustainability.” Morgan Stanley will “make your life greener and help tackle climate change”, while Bank of America claims to be “financing a low carbon economy.”

The Americans do not have a monopoly on any hypocrisy, because most of the 20 leading fossil fuel banks mention their relatively tiny investments in renewables or energy efficiency, and make their underwriting of vast coal developments hard to find. All of them claim to be responsible lenders.

Chinese on the rise

European and Chinese banks fill most of the remaining top 20 places in the table of what the report calls “mining banks.”  Researchers note that since 2011 the Chinese have stepped up their coal investments and have leapfrogged other banks to take four of the top seven places in the coal investment league.

Despite this, the US has still been the biggest coal investor in the last two years, with more than €15 bn in direct loans or underwriting shares and bonds. China is second, with just below €15 bn, the UK third with €8 bn and France fourth with just under €5 bn.

Top 20 mining banks 2011- mid-2013. 1 Morgan Stanley, 2 Citi, 3 Industrial and Commercial Bank of China, 4 Bank of America, 5 China Construction Bank , 6 Agricultural Bank of China, 7 Bank of China, 8 Royal Bank of Scotland, 9 BNP Paribas, 10 China Development Bank, 11 JPMorgan Chase, 12 Standard Chartered, 13 Barclays, 14 Deutsche Bank, 15 UBS, 16 Credit Suisse, 17 Mitsubishi UFJ Financial Group, 18 HSBC, 19 Sumitomo Mitsui, 20 Goldman Sachs.

Banking on Coal was published by the German environmental NGO Urgewald, the Polish Green Network, the international NGO network BankTrack and the CEE Bankwatch Network.

Insurance shortfall for world’s poorest

November 14, 2013 in Business, Climate risk, Economy, Extreme weather, Insurance, Philippines

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Less-developed societies lose far more economically from natural catastrophes: Insurance can help Image: UNPhoto/Fred Noy

Less-developed societies lose most economically from natural catastrophes
Image: UN Photo/Fred Noy

By Kieran Cooke

People in the Philippines are struggling to rebuild their lives after the devastation of Typhoon Haiyan.  Insurance would help – but most don’t have any.

LONDON, 14 November – The Philippines is located at the centre of one of the world’s most severe storm regions. Scientists say that climate change is increasing the frequency and ferocity of such events.

Yet despite the growing risk to their homes and livelihoods, most of the’ 96m Filipinos have no insurance cover. According to insurance brokers in the Philippines, only 13% of the population have any life or accident insurance – and only a small proportion of the millions of farmers in the country have any crop insurance.

Munich Re is one of the world’s biggest re-insurance groups, covering risks of  insurance companies themselves. In 2012 it produced a map of the world’s most – and least – insured regions.

While the US, Canada, much of Europe, Japan and Australia have what’s referred to as high insurance penetration, there are vast swathes of the world, including much of sub-Saharan Africa, the Indian subcontinent, China and south-east Asia, which are classed as being either inadequately or only basically insured.

Pay-outs in advance

The east coast of the US is regularly buffeted by hurricanes. Hurricane Sandy, which struck late last year, is estimated to have caused $68bn worth of damage in the US. While many US homeowners are still fighting for their insurance money, at least they have some cover. If you live in the Philippines or Bangladesh, it’s very unlikely that any such financial help is available.

A recent survey by Munich Re found it’s the poorer economies that lose most: on average the lesser developed economies lose about 2.9% of their gross domestic product each year due to natural catastrophes, while industrialised counties lose  0.8%.

The big reinsurance groups have been studying risks associated with climate change for several years and are now trying to extend their business and come up with plans which will give some cover to those in poorer regions.

A series of micro-insurance schemes have been launched around the world, offering financial protection to farmers and others affected by extreme weather. In many cases policies are paid out before rather than after such events: when satellites record the approach of weather patterns – such as a storm or a drought of a particular and agreed-upon intensity – a policy pay-out is triggered.

Munich Re, in association with local insurers and other groups, has introduced such schemes in Jamaica and on other island states in the Caribbean. Swiss Re, another of the big reinsurance companies, has launched similar schemes in the Tigray region of Ethiopia and in Senegal, in collaboration with the UN’s World Food Programme (WFP) and Oxfam. Less than half of one per cent of Ethiopia’s 85m people have any insurance cover.

Bankruptcy threat

Insurance analysts say that while those in poorer regions struggle to afford some form of insurance cover, those in richer areas exposed to storms and other climate change-related events are facing big hikes in their premiums.

In the US figures collated by the National Association of Insurance Commissioners indicate average homeowners’ insurance went up 36% between 2003 and 2010, with premium rates rising particularly sharply in states round the Gulf of Mexico – a region of intense hurricanes.

In Florida rates went up by more than 90%, with many large insurers refusing to cover properties. The state, concerned about any slowdown in development, has been offering its own subsidised insurance. The trouble, say insurance experts, is that one big storm could effectively bankrupt the state.

Meanwhile the federal government, through its new Flood Insurance Reform Act, is removing subsidies from flood insurance, meaning ever higher premiums for those living in known flood zones. – Climate News Network

Energy investors pile on the pressure

October 25, 2013 in Business, Climate, Economy, Energy, Investment, Regulations, Sustainable Development

FOR IMMEDIATE RELEASE

Energy companies such as ones in the oil & gas sector will have to assess their asset risks towards  climate change. Image: Dragon Oil via Wikimedia Commons

Energy companies such as ones in the oil & gas sector will have to assess their asset risks towards climate change.
Image: Dragon Oil via Wikimedia Commons

By Kieran Cooke

Fossil fuel companies are feeling the heat from investors concerned that moves towards a global low-carbon economy could leave many of their assets worthless.

LONDON, 25 October - In recent days a group of 70 investment managers from around the world – controlling funds worth a total of more than US$3 trillion – have launched the first ever coordinated campaign aimed at making the large energy and power companies disclose how they assess the risks of climate change.

Under what is called the Carbon Asset Risk (CAR) initiative, the investors have sent letters to 40 of the world’s major oil and gas, coal and electric power companies requesting detailed responses to questions about the financial risks posed to corporate accounts by climate change. The companies have been asked to provide answers before the next annual round of shareholder meetings begins early next year.

The CAR campaign follows on from a number of other initiatives, with increasing numbers of shareholders around the world demanding more corporate disclosure on the impact on company revenues posed by climate change.

The CAR investors, mainly based in the US and Europe, include California’s two largest public pension funds and the UK-based Scottish Widows Investment Partnership, one of Europe’s largest asset management companies.

“We would like to understand (the company’s) reserve exposure to the risks associated with current and probably future policies for reducing greenhouse gas emissions by 80% by 2050”, says the investors’ letter.

“We would also like to understand what options there are for (the company) to manage these risks by, for example, reducing carbon intensity of its assets, divesting its more carbon-intensive assets, diversifying its business by investing in lower carbon energy sources or returning capital to shareholders.”

Radical cutbacks required

The UN’s Intergovernmental Panel on Climate Change (IPCC) and other international bodies say that in order to limit the rise in global average temperatures to 2C above pre-industrial levels by 2050 there must be a radical cut-back in the use of fossil fuels. This means that a large portion of fossil fuels already discovered – and which are listed as assets on the books of the corporate energy giants – must stay in the ground.

“As long-term investors, we see the world moving toward a low-carbon future in which fossil fuel reserves that companies continue to develop may actually become a liability, which could take a toll on shareholder value”, says Jack Ehnes, the head of the California State Teachers’ Retirement System, the second largest public pension fund in the US, managing assets of $172 bn.

According to a recent report produced by the Carbon Tracker group and the Grantham Research Institute on Climate Change and the Environment the world’s 200 largest publicly quoted fossil fuel companies spent an estimated total of $674 bn in 2012 on finding and developing new reserves of fossil fuels – some of which may never be used, becoming what are termed “stranded assets”.

“Companies must plan properly for the risk of falling demand by stress-testing new investments to minimize the risk our clients’ capital is wasted on non-performing projects”, says Craig Mackenzie, head of sustainability at Scottish Widows Investment Partnership.

The CAR campaign is being coordinated by the Carbon Tracker group and Ceres, a US-based organisation which lobbies for more sustainable business practices.

“Fossil fuel companies are the biggest sources of carbon pollution by far, which means they are also uniquely positioned to lead the world in responding to global climate risks”, says Mindy Lubber, the Ceres president. - Climate News Network