NYT: ExxonMobil investigated for frauding investors over climate research

Back in september we looked at a report on Exxon's shifts from climate export to being a fierce critic. The New York Times reports that the New York Attorney General has now started an investigation into the issue and whether ExxonMobil may have mislead investors.

The investigation focuses on whether statements the company made to investors about climate risks as recently as this year were consistent with the company’s own long-running scientific research.

FT opinion: ‘Fossilist’ finance blocks ‘clean trillion’

The FT has an interesting piece from David Pitt-Watson (executive fellow of finance at London Business School and chair of the UN Environment Program Finance Initiative)  claiming that "Capital markets have unintended bias to unsustainable investment."

FT: BoE Chief warns of risk of stranded assets from unburnable fossil fuels.

Related to earlier discussions featured on this blog [here, here and here], the FT writes that Mark Carney, the chief of the Bank of England, warns of the potentially massive downside risk in the UK if binding climate change policy would left the majority of proven reserves unburnable (in the near future). He noted that 19% of the companies on the FTSE100 are related to extractive industries, and that if the world would decide on the 2 degrees limit, and without massive involvement of carbon capture, 'carbon budgetting' would imply that around two thirds of currently proven reserves should not be extracted.

Good read of Inside Climate News: Exxon: The Road not taken

Inside Climate News has an interesting 3 part (1 still to come) story on how Exxon was once on the forefront of climate science. Its researchers underwrote during the late 1970s the consensus on climate change: That the burning of fossil fuels were a major cause of increased CO2 in the atmosphere and that this would result in rising global temperatures.

Based on this analysis, Exxon set up a major research effort to further understand how this really came to be, for instance, investigating the role of oceans in absorbing CO2 from the atmosphere, and the role of deforestation in contributing CO2 levels.

The business case of the research was clearly presented as understanding the implications for the firm at a very long time horizon. The conclusion that Exxon might have to change from being an oil and gas company to diversify away towards renewable and sustainable energy sources was already suggested.

This is then contrasted to Exxon's later activities in sponsoring climate sceptic and denial organisations.

The story is an interesting read, but after part 2 I'm still left wondering where, when and why the decision was taken to depart from having the best knowledge on the climate towards presenting exactly the opposite. Perhaps in the third part, to be published soon.

See also the piece on PBS Frontline.

New Research: The Resource Curse Revisited

The Chatham House group on natural resources and conflict has released a new paper titled,

"The Resource Curse Revisited", available here, see also the comment on the FT, authored by Paul Stevens, Glada Lahn, and Jaakko Kooroshy.

The paper takes stock of the achievements of the 'extractives-led development agenda', where it has failed and how it should adapt to a new environment that is increasingly concerned with carbon intensity of fossil fuels and the emerging world of low commodity prices.

What I find interesting is the explicit question of the use of extra fast extraction of natural resources, and whether the option of leaving things 'under ground' may make actually more sense. A view not very often expressed indeed.

Shift from Coal to Gas? Not too quick please, says BHP Billiton Chief

The CEO of BHP Billiton, Andrew Mackenzie, takes issue [ft.com] with vocal natural gas producers who claim that gas should replace coal in energy production as fast as possible as a bridge to an economy based on lower CO2 emission.

I think there is a marketing ploy, which is ‘give up coal and burn more gas.’ (...) I am not against the trend, but come on — the last time I looked there was plenty of carbon in methane and there is huge amounts of carbon in oil, and the carbon emissions from transport are just as much a problem as the carbon emissions from coal-fired power stations.

Personally, I've noted especially the aggressive ad campaign of Statoil, claiming that gas is the energy of the immediate future until renewable energies can take over.

So what's his favoured solution? So he actually doesn't disagree with the shift to gas, even if it's a "marketing ploy", as long as it'll be slow. In the mean time, carbon capture and storage (CCS) should be developed. CCS is currently not a very popular strategy in the mix of CO2 reductions, partly due to costs, which may go down once further research and pilot programs are executed. The time required to develop the technology further will probably be measured in decades.

So that's where I'm not fully understanding the claim. On the one hand, coal producers state that pressure to "close coal" [oxcarre.blogspot.com] "a very western, rich country solution" [ft.com], given that it's a cheap and abundant source of energy for developing countries.
McKenzie stated in an earlier interview, “I don’t think the answer is to keep it [coal] in the ground because energy prices will just shoot up.” [ft.com]
However, if he then then argues that there should be a global carbon price and investments in one of the most expensive CO2 reducing options, then doesn't this inevitably increases the price?

UK Budget: North sea oil industry tax reductions. Anything green to compensate?

After requests from the UK oil and gas industry to reduce production levies and increase investment support, discussed earlier [oxcarre.blogspot.com], the UK Budget for the next few years includes sizeable reductions in taxes for the industry (see also The Economist [economist.com] of this week). There is not much about cutting carbon however.

A simple sum of multi-year measures makes a £1345M reduction in taxes for the Oil industry (Budget here, p. 68, account 11-14, all years to 2020, £275M for this year only). Add to that £1125M on decreases on fuel duties (account 8). Against that I found £340M of tax increases on company cars in 2020 (account  37), which I suppose is not really a green consideration, and £40M of tax increases on energy and water efficient technology through capital allowance from 2016 onwards (account 40; Yes an increase, it has the opposite sign from the tax reductions of oil industry, so it should count as more tax, or less subsidy).

Besides the oil industry in Scotland, another example is the story [BBC.co.uk] of businesses located in Wales that are being compensated for the high energy prices. "It is understood 16 firms including Tata Steel in Port Talbot qualify in Wales, sharing some £240M compensation." Interestingly, it is reported that the head of Tata Steel in Europe made this request directly, because "'heavy industries in the UK were burdened with environmental obligations that pushed up their energy bills, sometimes to levels 50% higher than their European competitors.'" The last part is weird, because for households the energy price difference between UK and continental Europe is the other way around as far as I remember. To push the argument, "[chemical and metal-based] companies employed nearly half a million people in the UK and accounted for 30% of total exports and imports."

The main thing highlighted by the government on sustainable energy is opening of negotiations on a £1000M Swansea Tidal Lagoon energy project [bbc.com], but part of this £1B is financed by private sector and individuals (SWL website), but it's unclear how much.*  So that puts things in perspective.

* Apparently the government has to guarantee a sales price, much like it did with the Nuclear plant in Somerset, decided earlier this year (strike price ~£90/MWh for 35 years). The Telegraph [telegraph.co.uk] put it at "tens of millions" in subsidy. Why? The guaranteed price is £168 per MegaWattHour (MWh) for 35 years. £168 is 4 times current price (so the government puts up the difference between spot and guarantee), the capacity is 500GWh/year. I get to ~£60M annual subsidy ( (168-168/4)*500.000 ). Over 35 years, with energy prices assumed increasing 2% year (so making the subsidy decline) and a 5% discount rate, a ~£1B subsidy Net Present Value (actually £948.6B). So the key figure: if the government was suppose to spend it's subsidy the coming fiscal year it would amount to £63M additional subsidy counted for a green energy measure.

The Guardian's "Keep it in the ground" campaign

As part of his final months as editor of the Guardian, Alan Rusbridger [guardian.co.uk] has started a climate campaign called "keep it in the ground" [guardian.co.uk]. In short, if we take the 2 degree Celsius limit seriously, we can still burn 575 Gigatons of carbon while the currently proven reserves of oil gas and coal contain 2795 Gigatons (see opening letter of him).

This relates to the idea of unburnable assets which we posted about last year, here  [oxcarre.blogspot.com], and of which also a related paper exist from Paul Collier and Tony Venables (Closing Coal: Economic and Moral Incentives [oxcarre.ox.ac.uk], and blog [oxcarre.blogspot.com]).

Today's Guardian frontpage has the UK Energy Secretary Ed Davies supporting [guardian.co.uk] the campaign, but this we already knew [oxcarre.blogspot.com].

Big Oil and the value of their assets 2

In an update to a post [oxcarre.blogspot.com] of last summer, the UK Energy Secretary has backed [FT.com] the idea that oil companies' reserves may need to be revalued in light of the world's commitment to not exceed aparticular stock of carbon in the atmosphere.