Category: Economics

Matters of money

Net zero climate targets

In the lead-up to the Canadian federal election in October, Justin Trudeau’s Liberals promised legally binding targets for Canada to be at net zero emissions by 2050. Specifically, they promised:

  • “We will set legally-binding, five-year milestones, based on the advice of the experts and consultations with Canadians, to reach net-zero emissions by 2050”
  • “We will exceed Canada’s 2030 emissions goal”

Ignoring for now how we’re not on track for the 2030 target, let’s consider what “net zero” means. Essentially, the idea is that through a combination of emission reductions, carbon offsets, and negative emissions through CO2 removal (through air capture or bio-energy with carbon capture) Canada will no longer produce a net positive contribution to the accumulation of greenhouse gases including CO2 into the atmosphere.

The most credible way to reach net zero is to actually end fossil fuel production, import, and use. That we could call “true zero” and it would be a better kind of target for ambitious organizations. It would be focusing because of the long-lived character of infrastructure. If the University of Toronto, for instance, was to be true zero by 2050 then it would need to stop putting natural gas boilers into new buildings wherever they would be expected to run past that date. Similarly, they would need to stop buying gasoline-powered vehicles and everything else that depends on fossil fuels for energy, and do so early enough for everything they operate to be replaced with a climate-safe alternative before the deadline. This is a much more radical and demanding idea. When I promoted a “true zero” promise as a plank in the new “Beyond Divestment” campaign at U of T, which was planning to offer the administration the same easy escape of net zero by hoping to fund reductions elsewhere and hoping for carbon removal at scale, the idea was rejected by the campaign organizers as too demanding and incompatible with pledges being made elsewhere.

The reason to promise “net zero” instead — as a country or a university — is in the optimistic case a sincere belief that offsets and negative emissions can be meaningful and significant. In what’s perhaps a more plausible case, it’s a way of avoiding the politically intolerable suggestion that we’re actually going to stop using fossil fuels to combat climate change. That avoids antagonizing the industry and its supporters, while placating those who may not be paying much attention with the belief that this is equivalent to true decarbonization. It is telling that fossil fuel corporations also like net zero targets, since they allow the current leadership to continue with expanding production and emissions while leaving the problem for someone else to fix later. That position is delusional because every year of delay in starting with true decarbonization makes it far harder to stabilize at any temperature limit while raising the cost of doing so by requiring the projects we built to be shut down before the end of their economic lifespans and increasing how quickly emissions must be cut when we finally get serious.

In the case of the Canadian promise, it seems like another manifestation of Trudeau’s determination to promise action to protect the climate in the long term as a way to legitimize and justify actions that worsen the problem while they actually hold power. While in office, you approve major new fossil fuel infrastructure projects, while saying with no authority to do so that future governments will counteract those choices. This proposition doesn’t even make sense in the short term because of that long-lived infrastructure problem. No oil pipeline, LNG facility, or bitumen sands mine that is built in 2020 is intended to be shut down before 2050. And so, today’s pro-fossil expansion policies directly and immediately contradict the net zero target. It’s another sense in which we have been drawn toward shadow solutions by our unwillingness to take the actions really required to stabilize the climate. It’s a sign of how little Canadians understand the problem, and how much they choose to believe what they prefer over what is supported by evidence, that many have accepted such promises as evidence of commitment and seriousness on the issue.

Cycles in environmental policy

Scientists alert people to the problem. Environmentalists are the first to believe them. Corporations that are implicated as contributing to the problem either deny the threat or balk at the cost of addressing it, fearful of government red tape and loss of profits. Eventually, enough public concern prompts politicians to act. They respond with tougher standards, and on rare occasions with policies that change prices. The standards force technological change. The threat is diminished. Afterwards, almost no one can say what technologies and what policies were involved. But if asked, they admit they didn’t change their behaviour.

Jaccard, Mark. The Citizen’s Guide to Climate Success: Overcoming Myths that Hinder Progress. Cambridge University Press, 2000. p. 155

Oil and stock price shocks

The always-slightly-overenthusiastic Slate.com reports:

The financial world resumed melting into goo on Monday thanks to the global coronavirus outbreak, with stocks falling so hard and fast in the morning that it triggered a rare 15-minute timeout on trading. By day’s end the S&P 500 collapsed by 7.6 percent—its worst showing since the financial crisis. The sell-off followed after Saudi Arabia’s leaders decided that now would be a good time to purposely crash the price of oil, a shocking and risky move likely to further destabilize a world economy that’s already wobbly thanks to the incipient pandemic.

…

The events that sparked Monday’s panic were the result of a clash between Saudi Arabia and Russia over what to do about oil prices, which have been tumbling ever since the number of coronavirus cases began to surge in China around January. Initially, the Saudis argued that its fellow OPEC members and their allies, including Russia, should respond by cutting production to prop up prices in the face of falling demand. But Moscow officially rejected that proposal on Friday.

So Saudi Arabia resorted to its Plan B. Over the weekend, the kingdom embarked on a surprise price war designed to cut into Russia’s sales, while promising to further flood the market by increasing its own production. It’s a move we’ve seen before from the country, which waged a brutal price war in 2014 and 2015 that eventually forced Russia to start coordinating its production with OPEC. But as of now, the Russians have responded by vowing to pump more of their own oil. We appear to be entering a standoff.

Of course this has been dominating the news for weeks, as people discuss the overlapping consequences of decreased oil demand due to coronivirus-induced reductions in travel and energy use; changing energy production policies from OPEC, Russia, and other jurisdictions; and whatever else is panicking global markets and making people willing to buy 30-year Treasury bonds with less than 1% interest.

Feel free to discuss scenarios. Will the coronavirus recession be the straw that brings down Trump? How will high-cost oil jurisdictions respond to these economic conditions? Will non-fossil fuel energy be hurt by cheap fossil fuel prices, or encouraged by concern about fossil fuel price volatility and political instability?

Potential leadership in fossil fuel communities

Fossil fuel-endowed regions would benefit if some of their trusted leaders questioned the prudence of doubling-down on coal, oil, and even natural gas. Such visionaries would argue that fossil fuel expansion increases the region’s economic vulnerability to the future time when humanity finally accelerates on the decarbonization path. Unfortunately, such regions tend to produce political and corporate leaders who perpetuate the myth that they can thrive indefinitely on the fossil fuel path, simply by repelling attacks from environmentalists, foreign billionaires, Hollywood celebrities, and neighbouring jurisdictions. That is why, sadly, sudden economic decline is the more likely future for the most fossil fuel-dependent regions.

Jaccard, Mark. The Citizen’s Guide to Climate Success: Overcoming Myths that Hinder Progress. Cambridge University Press, 2020. p. 244

Robots in agriculture

The Economist recently printed an article describing experimentation in the use of robots for agriculture, which included some interesting claims about potential environmental benefits:

The company will offer its robots as a service. Tom will live in a kennel on the farm, where it will download data for the farmer and recharge. Dick and Harry will be delivered to farms as and when they are needed, much as farmers already bring in contractors. This business model, reckons Mr Scott-Robinson, will demonstrate to farmers that the cost of using agribots will be competitive with other weed-control measures and provide additional benefits, such as being chemical-free.

…

When chemicals are required on crops, both tractor-towed systems and agribots could apply microdoses to the individual plants that require them, rather than spraying an entire field. Some trials have suggested microdosing could reduce the amount of herbicide being sprayed on a crop by 90% or more. basf, a German chemical giant, is working with Bosch, a German engineering firm, on a spraying system that identifies plants and then applies herbicides in just such a targeted way.

That’s certainly attractive compared to indiscriminate spraying of whole fields, though there will surely be downsides to such automation as well. Few people work in agriculture in rich societies already, but such technologies could affect the relationship between capital and labour nonetheless, and much more so in places where farming is less automated already.

Jason Kenney and the end of oil

Don Braid is reporting on recent comments from Alberta premier Jason Kenney, presumably uttered in the hope of bolstering the chances the Trudeau cabinet will approve the Teck Frontier mine:

“Over the next decades as we go through the energy transition, we all know that there will be a continued demand for crude,” he told a panel at Washington’s Wilson Center last Friday.

Kenney added: “It is preferable that the last barrel in that transition period comes from a stable, reliable liberal democracy with among the highest environmental, human-rights and labour standards on earth.”

Energy transition. Last barrel. Transition period. Six not-so-little words we’ve never heard clearly from Kenney before.

“I have a firm grasp of the obvious,” Kenney said in a later interview. “There is no reasonable person that can deny that in the decades to come we will see a gradual shift from hydrocarbon-based energy to other forms of energy.”

There is still a lot to criticize, of course, and Canadian oil is far less positive from an environmental and human rights stance than industry boosters admit.

Still, there is cause to see these comments as significant. Even for a politician that defines their political programme in terms of support to the oil and gas industry it has become necessary to acknowledge that there is a limit to total permissible global production because of climate change, even if Kenney talks about it here in the impersonal and indirect language of a ‘change in demand’.

Kenney is setting out the logic of the bitumen industry’s downfall here, even though he is trying to do the opposite. Once you accept that oil production can’t continue forever or until all reserves are exhausted, and then you start deciding which oil to produce or not produce on economic and environmental grounds, unless you have motivated reasoning and a set conclusion all along, few people are going to conclude that it makes sense for that oil to come from the bitumen sands.

Carbon capture options

Because the alternative is deep and rapid emissions cuts which countries are unwilling to implement, the IPCC now assumes that stabilizing the climate will involve heavy use of negative emission technologies: “between 100bn and 1trn tonnes of CO2 to be removed from the atmosphere by the end of the century if the Paris goals were to be reached; the median value was 730bn tonnes–that is, more than ten years of global emissions.”

There are numerous possible options. CO2 could be separated from flue gasses from power plants, compressed, and injected underground. If those power plants burn biomass which recently took CO2 out of the atmosphere, that could help draw down the stock of carbon in the atmosphere. That approach is called bioenergy with carbon capture and storage or BECCS. It’s also possible to separate CO2 directly from the air and bury it (direct capture). It’s also worth bearing in mind that sometimes CO2 is injected underground to push up oil to be sold (enhanced oil recovery or EOR). In that case, it likely creates more emissions than it avoids since the same volume of oil is pushed out and then likely burned in a vehicle where it cannot be captured.

All this may be highly questionable as a climate change solution and, indeed, the main push for CCS is from corporations and states that don’t want to give up fossil fuel production. The notion the technology will eventually exist at scale helps justify today’s fossil fuel burning, even though right now we’re buying about 40 million tonnes of CO2 while emitting 43.1 billion tonnes. Burying any substantial fraction of global CO2 emissions would mean compressing and burying many times the total quantity of oil we take out of the ground — with everything that implies about costs, deployment times, and capital requirements — and this whole infrastructure would require energy to run instead of producing it, either requiring us to deploy yet-more climate-safe energy to build and power the equipment or putting us in the self-defeating position of burning more fossil fuels to generate energy to bury the CO2 from the fossil fuels we already burned.

Related:

Police and intelligence services as defenders of the status quo

In Victoria today, about ten young Indigenous protestors were arrested after occupying the Ministry of Energy, Mines and Petroleum Resources building.

Meanwhile, British security authorities have categorized Greenpeace and the Extinction Rebellion with far-right groups and neo-Nazis.

Today’s George Monbiot column calls out how government security forces have often been more focused on threats to the political and economic order than on genuine threats to security:

The police have always protected established power against those who challenge it, regardless of the nature of that challenge. And they have long sought to criminalise peaceful dissent. Part of the reason is ideological: illiberal and undemocratic attitudes infest policing in this country. Part of it is empire-building: if police units can convince the government and the media of imminent threats that only they can contain, they can argue for more funding.

But there’s another reason, which is arguably even more dangerous: the nexus of state and corporate power. All over the world, corporate lobbyists seek to brand opponents of their industries as extremists and terrorists, and some governments and police forces are prepared to listen. A recent article in the Intercept seeks to discover why the US Justice Department and the FBI had put much more effort into chasing mythical “ecoterrorists” than pursuing real, far-right terrorism. A former official explained, “You don’t have a bunch of companies coming forward saying ‘I wish you’d do something about these rightwing extremists’.” By contrast, there is constant corporate pressure to “do something” about environmental campaigners and animal rights activists.

Decarbonization is going to be a huge political fight, and it’s clear that the fossil fuel industry has the support of the security and surveillance states which have exploded since the September 11th, 2001 attacks. At the societal level we need to reconceptualize the threats which we face and the appropriate means for dealing with them. Armed force in defence of economic interests which hope and plan to keep fossil fuel use going as long as possible is the opposite.

BlackRock shifting from fossil fuel investments

The CBC is reporting: BlackRock, world’s largest asset manager, changing its focus to climate change.

This is intriguing in several ways. Climate change action is held up politically in part because right wing parties have embraced climate change denial and the defence of the fossil fuel industry. Even progressive parties seem to take the Trudeau approach of promising ambitious targets for long after they are in power, making incremental positive changes, but then continuing to support fossil fuel development to such a degree that those positive changes are overwhelmed.

If the world’s vast pools of finance capital have begun to seriously question the financial return from fossil fuel investments it could do more to decarbonize the global economy than anything which humanity has done so far. It would also be interesting politically if the aims of a climate activist movement which is largely anti-capitalist and redistributive in its membership end up being adopted more immediately and meaningfully by for-profit actors than by governments notionally accountable to the public. It would be interesting too to see what effect this kind of capital shifting may have on right-wing politics.

The Teck Frontier mine

Not only is the Trudeau government calling into question its seriousness about decarbonization by allowing the Trans Mountain pipeline expansion, they are considering allowing Teck to build another open-pit bitumen sands mine which will produce 6 million tonnes of CO2 per year in its operations and far more when the fuel it produces is burned.

Every Canadian government must live in fear of being the ones in power when the markets and Canadians finally realize that developing the bitumen sands has been a mistake and the industry has no future. Since every government wants to avoid the blame when that happens, they each do what they can to maintain the illusion of a future for the industry which will justify the tens of billions that have been invested. In so doing, they inadvertently tell Canadians and the world that they are willing to create a permanently destabilized global climate in exchange for as many more years of oil profits as they can get away with.