All eyes on Paris: a lot is at stake for a successful climate summit

November 23rd, 2015, Published in Articles: Energize

 

Delegates from around the world are getting ready to camp out in the French capital for an annual event that has had little to show for all the effort that has gone into it for 20 years. Many, however, are optimistic that this year will be different and the City of Light will finally shed some light on the thorny and controversial issue of how to limit carbon emissions globally.

The United Nations Framework Convention on Climate Change (UNFCC), also referred to as Conference of Parties 21 (COP21) designating the 21st such event organised by the UN, will take place in Paris from 30 November until 11 December 2015.

Needless to say, both sides of the debate – those who wish to see a globally binding treaty and those who believe that climate can wait another day – have been frantically at work trying to influence the outcome one way or another or to sabotage the entire effort. There is the usual rancor among the poor and the rich countries about who is to blame and who should foot the bill. If anything comes out of Paris, it will most likely be some sort of a compromise that at least gets the ball rolling in the right direction.

A lot is at stake for a lot of companies and countries depending on what, if anything is decided and how it will be enforced given UN’s ambiguous mandate and history of not being able to deliver on promises in the past.

Annual emissions from fossil fuels

Fig. 1: Annual emissions from fossil fuels

 

A number of energy companies as well as those who are major energy users have already made pledges of various kinds, some of dubious value, others even less so. Many are merely trying to jockey for position, hoping to get favourable treatment or be spared by agreeing to go with the flow. Others are sitting on the fence or on the sidelines, waiting to see what comes out once the dust settles. If past COPs are any indication, there will be plenty of drama, last minute arm twisting, horse trading and grandstanding before it is over.

Among the virtually meaningless pledges made in advance of the COP was a statement by chief executives of the world’s ten largest oil and gas companies, including Saudi Arabia’s state oil company, vowing to do more to fight global warming by – among other things – promoting gas over coal, by flaring less gas at wellheads and so on. America’s ExxonMobil and Chevron did not even bother to join the effort, making the pledge even more nebulous.

Companies, institutions and individuals committed to divesting from fossil fuels

Fig. 2: Companies, institutions and individuals committed to divesting from fossil fuels.

 

The environmental lobby correctly called it pure hypocrisy, which it is. The coal lobby was not pleased either, as coal is increasingly labelled as the worst fossil fuel with the highest carbon content, which it also is.

Benjamin Sporton, the CEO of the World Coal Association, said the suggestion that natural gas could replace coal was unrealistic. As far as he is concerned, coal is abundant and cheap and that is all that matters. The fossil fuel industry needs to work together, he said, presumably against the climate.

Many in the fossil fuel business appear reluctant and/or unable to step out of the fossil fuel box to conceive a different energy future – which makes contrarian views such as the one espoused by Carbon Tracker (Lost in transition: how the energy sector is missing potential demand destruction) all the more interesting.

This year’s COP has been preceded with the usual interventions from a number of non-traditional parties, including Pope Francis and Dalai Lama, the spiritual leaders of Catholics and Buddhists, respectively, to mention a few.

More surprising, however, was a speech delivered by Mark Carney, head of the Bank of England at a gathering of insurance companies organised by Lloyds of London in late September 2015. Instead of talking about the usual – and one might add – boring topics such as economic growth, unemployment, inflation or monetary policy – the stuff that usually concerns bankers and investors – Mr. Carney stunned his audience by pointing out the obvious, that billions of dollars invested in fossil fuel assets could conceivably become stranded as governments try to curb global warming.

The Financial Times (FT) (1 October 2015) wondered if Mr. Carney was a far-sighted visionary or a dangerously deluded fool. Not surprisingly, Carney became an instant celebrity among proponents of climate change, and a villain among climate skeptics. What he uttered was not particularly new or novel – environmentalists have been saying it for some time. What made his comments controversial and important was that the words came from the head of Bank of England, an institution which oversees 1700 banks, investment companies, pension funds, etc., together holding vast sums of private and public money. Among his responsibilities is to prevent another collapse of the global financial systems as occurred in 2008.

Total CO2 of coal, oil and gas reserves

Fig. 3: Total coal, oil and gas reserves listed on stock markets.

Those who praised him for his blunt talk believe he did what his job entails, namely to warn investors about carbon’s potential risks – which may be substantial. The insurance industry, his audience at the Lloyds of London gathering, holds upwards of $2-trillion of assets, much of which – perhaps as much as a third – may be invested in carbon-heavy assets.

Others believe he might have stepped out of bounds by speaking about a topic that people in his position should stay away from. Philip Lambert, the founder of Lambert Energy Advisory, for example, was quoted in the same FT article saying: “How on earth can the governor of one of the most responsible institutions in the world think that the thing that produces 85% of the current global energy mix (fossil fuels) can just suddenly become stranded at a time of rising energy demand and the absence of an affordable alternative?”.

One can, of course, find flaws in Lambert’s remarks:

  • First, it can be argued that people like Carney in fact have a fiduciary duty to warn investors of financial risks to investments and assets when and if they see them
  • Second, Lambert has apparently not been following the news about sagging demand for energy
  • Third, Lambert also appears to be poorly informed about the relative affordability of renewables – there are and will increasingly be affordable alternatives to fossil fuels
  • Lambert, like many in the fossil fuel business, have always lived and thought within the fossil fuel box. Indeed, they are trapped in the proverbial box. For them, there are no alternatives to fossil fuels.

In an editorial on the subject in the same issue, FT opined, in part: “Mitigating climate change will be expensive and contentious, creating technological winners and losers along the way. Warning of the risks falls one side of the line, advocating concrete steps on the other.” By this measure, Carney’s comments clearly fall on the appropriate side of the line. Not only were they justified, but indeed timely and, one might add, courageous.

Send your comments to: energize@ee.co.za

 

 

Related Articles

  • Managing and operating solar assets: Five key considerations
  • Support a budding scientist and help build a skilled South Africa
  • Invitation to attend SANEA’s Carbon Tax Colloquium
  • SA biogas conference generates renewed interest
  • Benefits of battery energy storage for frequency control in renewable energy systems