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.
All the latest research from OxCarre and beyond
Wednesday, September 30, 2015
Thursday, September 24, 2015
Geotermal energy as natural resource: a starter
Geothermal energy is not something that is much written about in economic journals. I think this is remarkable to say the least, because there is some nice potential on identification using spatial techniques, while the countries involved, those that have developed geothermal power are often not the ones we associate with having energy resources of the fossil kind (below I list 5, France, Italy, Iceland, Japan, and New Zealand). The main reason may be that the amount of energy created with it as a share of the total for many countries is minor, even thought the local impact might by quite large.
However, one should note that geothermal has both the potential as a source of electricity production through steam power, and by using the heat directly, for instance to heat buildings. The use of the latter than would result in saving of, for instance, gas to heat houses. So measuring total exploitation of geothermal energy can be a bit tricky.
Geophysically it's also an interesting topic with regards to other renewable energy sources. A geothermal source needs to be managed, in the sense that, when exploited too much at a time it will exhaust. So there is a limit to be observed in order to make it a sustainable long-term producer. Not much different from something like fisheries I suppose.
So here a small country overview to get you started on a topic. They were selected based on what I came across. In terms of use, the US and China are the largest [wikipedia.org]. In terms of capacity, Indonesia and the US are, but Indonesia has not much production installed. All interesting variations that may be used for new research.
France
A geothermal source exists tight under Paris, which is being exploited to heat 170,000 homes (NYTimes.com). France banned fracking [FT.com], and while the proponents of fracking found that inconsistent with the approval for geothermal development, the judge disagreed. Find some more information of french geothermal development here [ea-gia.org]
Iceland
As a share of total energy production, Iceland ranks top. 65% of its energy use is derived from geothermal resources [wikipedia.org], most of it used for heating homes. It is the major facilitator for its aim to become the first country that lives entirely of renewable resources. If you write a paper, perhaps you can present it here [geothermalconference.is] next year.
Italy
The economist writes about Italian geothermal development in tuscany this week. Italy is the major [geosee.eu] exploiter of geothermal in Europe. In terms of numbers it is still a small percentage of total energy production [wikipedia.org].
Japan
Japanese onsen are the ultimate enjoyment of geothermal activity. The fact that one can find onsen scattered all over the country means that geothermal energy can be exploited throughout the county [wikipedia.org]. About 10% of national energy production was provided by geotermal plants. This is still low [japanfs.org] given the capacity. Development is still ongoing [cleantechnica.com]. According to Japanfs, Japan has the largest capacity for geothermal use after Indonesia and the US. I don't feature these countries here, but they may still be very interesting to look at.
New Zealand
New Zealand is boiling over with geothermal activity, especially on the North Island. A significant part of the energy supply comes from geothermal resources. Here we also find Professor Basil Sharp, at the University of Auckland who was visiting Oxford last year and has written about the topic. The interesting thing I also found was that geothermal resources have a special value and (religious) meaning for Maoris. So in order to exploit these resources, their rights and preferences are taken into account. At the same time, since they have ownership rights over some of the locations where geotermal energy can be exploited for commercial production, they can receive a royalty income stream (Sharpe and Malafeh, 2005 Energy Policy). So similar to what is observed in mining, there is a potential for local spillovers and development from natural resources.
Time to get these papers written!
So here a small country overview to get you started on a topic. They were selected based on what I came across. In terms of use, the US and China are the largest [wikipedia.org]. In terms of capacity, Indonesia and the US are, but Indonesia has not much production installed. All interesting variations that may be used for new research.
France
A geothermal source exists tight under Paris, which is being exploited to heat 170,000 homes (NYTimes.com). France banned fracking [FT.com], and while the proponents of fracking found that inconsistent with the approval for geothermal development, the judge disagreed. Find some more information of french geothermal development here [ea-gia.org]
Iceland
As a share of total energy production, Iceland ranks top. 65% of its energy use is derived from geothermal resources [wikipedia.org], most of it used for heating homes. It is the major facilitator for its aim to become the first country that lives entirely of renewable resources. If you write a paper, perhaps you can present it here [geothermalconference.is] next year.
Italy
The economist writes about Italian geothermal development in tuscany this week. Italy is the major [geosee.eu] exploiter of geothermal in Europe. In terms of numbers it is still a small percentage of total energy production [wikipedia.org].
Japan
Japanese onsen are the ultimate enjoyment of geothermal activity. The fact that one can find onsen scattered all over the country means that geothermal energy can be exploited throughout the county [wikipedia.org]. About 10% of national energy production was provided by geotermal plants. This is still low [japanfs.org] given the capacity. Development is still ongoing [cleantechnica.com]. According to Japanfs, Japan has the largest capacity for geothermal use after Indonesia and the US. I don't feature these countries here, but they may still be very interesting to look at.
New Zealand
New Zealand is boiling over with geothermal activity, especially on the North Island. A significant part of the energy supply comes from geothermal resources. Here we also find Professor Basil Sharp, at the University of Auckland who was visiting Oxford last year and has written about the topic. The interesting thing I also found was that geothermal resources have a special value and (religious) meaning for Maoris. So in order to exploit these resources, their rights and preferences are taken into account. At the same time, since they have ownership rights over some of the locations where geotermal energy can be exploited for commercial production, they can receive a royalty income stream (Sharpe and Malafeh, 2005 Energy Policy). So similar to what is observed in mining, there is a potential for local spillovers and development from natural resources.
Time to get these papers written!
Monday, September 21, 2015
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.
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.
Thursday, September 17, 2015
Pipelines through native land. Developments in Northern British Columbia.
Oil and gas retrieved in Canada's most northern parts and Alberta's tar sands is generally speaking geographically far from 'world markets'. Proposals to fix this with new pipelines have faced delays because of such things as environmental risks highlighted by the those that rely on the land for other sources of income. For instance, this is among the reasons for the delay of the KeystoneXL pipeline, proposed to bring Alberta's oil to refineries in Southern USA.
The other route is to bring the oil and gas westwards through British Columbia, where it can reach the coast, and carriers can ship it to Asia, where major demand growth is expected to come from for the future. Although these proposals too ran in objections of First Nations, and alternative route, proposed by another company, has recently won their support.
Many pipeline proposals for the route west have run in strong opposition from First Nations in Alberta. Their opposition is to large extent based on the risk that a pipeline poses to their traditional hunting and fishing ground. Although poverty is major problem in some of those communities, proposals by international construction companies have not everyones favour. "The answer is still no" [fernwoodpublishing.ca], a book consisting of series of interviews conducted by two academics with representatives of the region, details their arguments and objections to such plans, in this case particular the one proposed by Enbridge.
An another gas pipeline was recently rejected by Lax Kwa'laams who where offered CA$1B for their consent of a gas terminal on their lands, an island in front of the B.C. main coast in the region of Price Rupert, at the mount of the Skeena river. The dangers that the first nation sees has both to do with the construction phase, that could harm marine life in an area used by salmon to mature before moving up-river, the impact of pipeline on the seabed marine life, as well as the impact on marine environment of daily arrival and departure of LNG carriers. For these reason they recently rejected the plan (CBC.ca, Globe and Mail, HuffingtonPost.ca).
As these articles highlight, and is also part of the discussions in the "The answer is still no", it is not that First Nations reject every such development, although this is occasionally how it is portrayed (sometimes quite viciously, labelling environment protestors and first nations terrorists, Globe and Mail, see also the recent interview with the newly elected Ms Universe, Ashley Callingbull-Burnham). A direct competitor proposal to the Enbridge pipeline, Eagle Spirit Energy Holding, recently gained (newswire.ca, prnewswire.ca) the support of First Nations, including those of Lax Kwa'laams. The trick? Eagle Spirit offers [financialpost.com] a different stake in the project to first nations, proposes a route that circumvents more of the vulnerable waters, going more through grounds of first nations supportive of the plan, and ends in a different area at the coast where it is expected to cause less environmental harm to the wider region. It helped too that the company is headed by members of local first nations, and the plan was made in direct consultation with first nations in B.C. and in cooperation with first nations in Alaska and Alberta. This contrasts with the lack of sincere consultation of Enbridge as perceived by First Nations.
The underlying dynamics are about balancing the (deemed inevitable) development of arctic and other previously hard to extract natural resources, the impact of such developments on local communities to their traditional income sources (forestry, fishing, hunting etc), their (hedonistic) value of the local environment and the benefits that may accrue to local communities from resource extraction. A non-negligible factor also appears to be the process through which these plans are pushed through and property rights. Much of the power of first nations comes from their rights as traditional dwellers of the land, whereas the federal and provincial government still tends to see these lands as theirs, or crown land, to do with as they please.
Although I tried my best, I'm not entirely confident that I presented all facts and views entirely correct. Comments are welcome below or by email.
The other route is to bring the oil and gas westwards through British Columbia, where it can reach the coast, and carriers can ship it to Asia, where major demand growth is expected to come from for the future. Although these proposals too ran in objections of First Nations, and alternative route, proposed by another company, has recently won their support.
Many pipeline proposals for the route west have run in strong opposition from First Nations in Alberta. Their opposition is to large extent based on the risk that a pipeline poses to their traditional hunting and fishing ground. Although poverty is major problem in some of those communities, proposals by international construction companies have not everyones favour. "The answer is still no" [fernwoodpublishing.ca], a book consisting of series of interviews conducted by two academics with representatives of the region, details their arguments and objections to such plans, in this case particular the one proposed by Enbridge.
An another gas pipeline was recently rejected by Lax Kwa'laams who where offered CA$1B for their consent of a gas terminal on their lands, an island in front of the B.C. main coast in the region of Price Rupert, at the mount of the Skeena river. The dangers that the first nation sees has both to do with the construction phase, that could harm marine life in an area used by salmon to mature before moving up-river, the impact of pipeline on the seabed marine life, as well as the impact on marine environment of daily arrival and departure of LNG carriers. For these reason they recently rejected the plan (CBC.ca, Globe and Mail, HuffingtonPost.ca).
As these articles highlight, and is also part of the discussions in the "The answer is still no", it is not that First Nations reject every such development, although this is occasionally how it is portrayed (sometimes quite viciously, labelling environment protestors and first nations terrorists, Globe and Mail, see also the recent interview with the newly elected Ms Universe, Ashley Callingbull-Burnham). A direct competitor proposal to the Enbridge pipeline, Eagle Spirit Energy Holding, recently gained (newswire.ca, prnewswire.ca) the support of First Nations, including those of Lax Kwa'laams. The trick? Eagle Spirit offers [financialpost.com] a different stake in the project to first nations, proposes a route that circumvents more of the vulnerable waters, going more through grounds of first nations supportive of the plan, and ends in a different area at the coast where it is expected to cause less environmental harm to the wider region. It helped too that the company is headed by members of local first nations, and the plan was made in direct consultation with first nations in B.C. and in cooperation with first nations in Alaska and Alberta. This contrasts with the lack of sincere consultation of Enbridge as perceived by First Nations.
The underlying dynamics are about balancing the (deemed inevitable) development of arctic and other previously hard to extract natural resources, the impact of such developments on local communities to their traditional income sources (forestry, fishing, hunting etc), their (hedonistic) value of the local environment and the benefits that may accrue to local communities from resource extraction. A non-negligible factor also appears to be the process through which these plans are pushed through and property rights. Much of the power of first nations comes from their rights as traditional dwellers of the land, whereas the federal and provincial government still tends to see these lands as theirs, or crown land, to do with as they please.
Although I tried my best, I'm not entirely confident that I presented all facts and views entirely correct. Comments are welcome below or by email.
Tuesday, September 15, 2015
The sight of inevitability
Kazakhstan has been devaluing it's currency since last month. See the story in the FT for some comments by the Central Bank Chief Kairat Kelimbetov.
Azerbaijan has been doing the same at the beginning of the year, while Saudi Arabia has been running down its reserves. I put some of these series together in a graph (sorry for the overflow to the right).
Azerbaijan has been doing the same at the beginning of the year, while Saudi Arabia has been running down its reserves. I put some of these series together in a graph (sorry for the overflow to the right).
New Research: How does Local Mining Impact on Rural Immigration: Case of Mongolia
A short paper by Amartuvshin Amarjargal (University of the Humanities, Ulaanbaatar) , Yaoqi Zhang School of Forestry & Wildlife Sciences, Auburn University, Jiquan Chen (Michigan State University) write on
How does Local Mining Impact on Rural Immigration: Case of Mongolia
Abstract
What is also suggested in the paper, but doesn't come out strongly in the statistics is that mining may cause an outward push from local communities away from mining because of harmful effects of mining development on their traditional sources of income of cattle. Mining is accompanied with the buildup of dust, and pollution of water resources that force nomadic communities to move away. Consequently, since these negative effects are born by a some communities more than others, they add to the unequal distribution of the rents. At least, this is what anecdotal evidence suggest [futurechallenges.org] according to the first author. Better data, particularly with a time-dimension, would be required to show these things in a statistical way.
How does Local Mining Impact on Rural Immigration: Case of Mongolia
Abstract
After 70 years of communist regime, Mongolia chose a radical transition for democracy and a market economy in 1990. Since the 2000s, the Mongolian government has been promoting the mining industry to increase its foreign exchanges. The mining sector may offer local job opportunities and revenues, but might also cause loss and degradation of pasture land the local people depend on. An empirical study is conducted to investigate whether the immigration of rural people from a mining area is different from that of a non mining area using a probit model based on a 2013 workforce survey of Mongolia. The result shows that mining soums receive fewer outsiders than the non-mining soums, suggesting local mining activities exert limited economic linkage in local community for a case of Mongolia.See paper here [colostate.edu].
What is also suggested in the paper, but doesn't come out strongly in the statistics is that mining may cause an outward push from local communities away from mining because of harmful effects of mining development on their traditional sources of income of cattle. Mining is accompanied with the buildup of dust, and pollution of water resources that force nomadic communities to move away. Consequently, since these negative effects are born by a some communities more than others, they add to the unequal distribution of the rents. At least, this is what anecdotal evidence suggest [futurechallenges.org] according to the first author. Better data, particularly with a time-dimension, would be required to show these things in a statistical way.
Some analysis on recent metals price trends
The Wall Street Journal on its "Real Time Economics"-Blog highlights some forecasts on metal price trends, based on a recent IMFdirect post from Rabah Arezki and Akito Matsumoto.
Bottomline, expect prices to remain low/trending downward for the foreseeable future as the period of high prices encouraged increase supply capacity which is now combined with lower demand, which in the case of metals is for an important part driven by the expected slowing of growth in China.
The IMFdirect post highlights that for oil the downward price trend is to a larger extent driven by the supply factor and for metals the price trend is more a factor of global (Chinese) demand.
Bottomline, expect prices to remain low/trending downward for the foreseeable future as the period of high prices encouraged increase supply capacity which is now combined with lower demand, which in the case of metals is for an important part driven by the expected slowing of growth in China.
The IMFdirect post highlights that for oil the downward price trend is to a larger extent driven by the supply factor and for metals the price trend is more a factor of global (Chinese) demand.
Monday, September 7, 2015
Azerbaijan jails journalist who exposed president's family links to gold mine ownership
A court in Azerbaijan sentenced, Khadija Ismayilova, a journalist to 7.5 years in prison for tax evasion and embezzlement (see reports by the Guardian, incl. response of mother, FT, and Radio Free Europe).
Working for Radio Free Europe, she has exposed the links of the family of the President Aliyev to profitable Azerbaijan businesses, including a Gold mine [rferl.org] in the west and mobile phone operator.
However, the gold mine is not the 'big thing' in Azerbaijan (the mine reportedly contains US$2.5B worth of minerals), oil and gas is. Although there is strong interest in this story from western governments, including the US [rferl.org], and international organisations, Azerbaijan position in the supply of natural gas from the Caspian sea to the same countries, makes a criticism muted. BP has largest stake in the gas project Shah Deniz in Azeri Caspian Sea, next to Socar, the national oil and gas company, followed with smaller stakes of others. Norway's Statoil and France' Total recently sold [bloomberg.com, see also FT] their stakes in the project.
Some human rights organisations now press governments to consider sanctions [eurasianet.org] on Azerbaijan for its crackdown on and jailing of human rights activists and journalists. As the article in Eurasianet indicates, the potential for sanctions has recently increased as the geopolitical position of and western corporate interests in Azerbaijan have diminished.
The situation that would make potential action against the Azeri government possible, may simultaneously also be the reason why the government is behaving as it does. Weakened links with western countries may make it feel more independent. At the same time, de decline of energy prices makes there less of the spoils to around, which may explain the resulting tendency of the more autocratic leaning governments to start using the stick to stay on top. This was also something that came up during our visit to Baku in February.
Ms. Ismayilova thought it funny she was jailed for things that she accuses the government and presidential family of. She wrote in her closing statement [rferl.org] to the court that she would continue exposing government abuse from prison.
Working for Radio Free Europe, she has exposed the links of the family of the President Aliyev to profitable Azerbaijan businesses, including a Gold mine [rferl.org] in the west and mobile phone operator.
However, the gold mine is not the 'big thing' in Azerbaijan (the mine reportedly contains US$2.5B worth of minerals), oil and gas is. Although there is strong interest in this story from western governments, including the US [rferl.org], and international organisations, Azerbaijan position in the supply of natural gas from the Caspian sea to the same countries, makes a criticism muted. BP has largest stake in the gas project Shah Deniz in Azeri Caspian Sea, next to Socar, the national oil and gas company, followed with smaller stakes of others. Norway's Statoil and France' Total recently sold [bloomberg.com, see also FT] their stakes in the project.
Some human rights organisations now press governments to consider sanctions [eurasianet.org] on Azerbaijan for its crackdown on and jailing of human rights activists and journalists. As the article in Eurasianet indicates, the potential for sanctions has recently increased as the geopolitical position of and western corporate interests in Azerbaijan have diminished.
The situation that would make potential action against the Azeri government possible, may simultaneously also be the reason why the government is behaving as it does. Weakened links with western countries may make it feel more independent. At the same time, de decline of energy prices makes there less of the spoils to around, which may explain the resulting tendency of the more autocratic leaning governments to start using the stick to stay on top. This was also something that came up during our visit to Baku in February.
Ms. Ismayilova thought it funny she was jailed for things that she accuses the government and presidential family of. She wrote in her closing statement [rferl.org] to the court that she would continue exposing government abuse from prison.
Wednesday, September 2, 2015
FT: Oil bear bets on return to $25 a barrel
The FT reports on a hedgefund manager who has been successful in betting on the recent patterns (spike and bust) of the oil price. The manager reckons a low ($25-$50) oil price for the next two years.
Expect some interesting "Bust" papers coming out over the same period.
A taster from the OxCARRE Blog:
VoxEU: Commodity prices: Over a hundred years of booms and busts (Thursday, April 30, 2015)
Expect some interesting "Bust" papers coming out over the same period.
A taster from the OxCARRE Blog:
VoxEU: Commodity prices: Over a hundred years of booms and busts (Thursday, April 30, 2015)
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