Economics – Page 9 – a sibilant intake of breath

Forgone fossil fuels

Back in 2012, Justin Trudeau said that “there’s not a country in the world that would find 170 billion barrels of oil under the ground and leave them there.”

At an event in June organized by Bank of America, Saudi Energy Minister Prince Abdulaziz bin Salman supposedly said: “We are still going to be the last man standing, and every molecule of hydrocarbon will come out.”

Since avoiding catastrophic climate change is chiefly a problem of prompt global fossil fuel abolition, such sentiments are positively frightening. Trudeau’s cynicism may not be entirely justified, however, as there are examples of government choosing not to develop fossil energy, either out of innate concern about climate change or because they expect such industries to be in decline as the world decarbonizes.

For example, Greenland has banned oil exploration and Quebec’s government rejected a $14 billion LNG export project.

A few examples don’t make a trend, and enormous investments in fossil fuels continue to be made. At the same time, every noble example provides a case that can be raised with politicians who say action is impossible or that nobody will do it. If countries like Canada which have become rich on a high-carbon trajectory and which maintain excessively high per capita emissions continue to refuse to decarbonize we perpetuate a global suicide pact in which we all end up with ruin because each jurisdiction scrambled to pull in as much fossil cash as possible beforehand.

Canada submits new 2030 climate target

Canada is now promising the UN that it will cut greenhouse gas emissions to 40–45% below 2005 levels by 2030.

The government says emissions are already set to fall from 729 million tonnes (MT) in 2018 (the last year with final figures) to 468 MT by 2030.

Canada’s choice of a 2005 baseline sets it apart from the global standard of setting targets compared to 1990 emissions as required by the UNFCCC reporting guidelines, effectively forgiving 15 years in which bitumen sands output and Canadian GHG pollution rose substantially. Canada’s emissions rose from 600 MT to 747 MT between 1990 and 2005.

The insurance industry as a leverage point for fighting climate change

One of the revelations about fighting climate change that seems to have echoed broadly since 350.org started the fossil fuel divestment movement is the degree to which the industry can be suppressed by denying it access to financial services.

That includes denying it the ability to borrow from banks and institutional investors, who are increasingly concerned both about the reputational risk of supporting a world-wrecking industry and the financial risk of contributing to new fossil fuel projects which will need to be shut down to avoid worst-case climate change scenarios.

It also includes the insurance industry. To begin with, they face enormous financial risks from climate change impacts as diverse as rising sea levels, extreme storms, and wildfires. The concept of insurance is that the premiums are reasonable because things won’t go wrong for everyone at the same time; you can get affordable fire insurance, for instance, because in most cases the insurer can be confident that only a small fraction of insured properties will burn each year. That calculation changes when climate change coordinates risks for billions around the world, whether that’s coastal property at risk to rising seas and hurricanes or towns in wildfire zones that now face an existential risk every time there is a bad fire season. With those kinds of risks now evident, it’s unsurprising that the insurance industry is expressing concern and calling for action.

In addition to those insured against climate change risks, insurance is also necessary for fossil fuel project proponents. That leverage point is being made use of by anti-pipeline activists in B.C. who are pushing for insurers to refuse to cover the Trans Mountain pipeline:

Over the course of the week, Indigenous rights and climate activists from Vancouver to Kiribati to Sierra Leone called on Liberty Mutual, Chubb, AIG, W.R. Berkley, Lloyd’s of London, Starr, Stewart Specialty Risk Underwriting, and Marsh to publicly pledge to refrain from doing any future business with the project.

…

Argo, one of the companies that currently insures Trans Mountain, recently confirmed it will not cover the pipeline or its expansion project, which would carry an extra 590,000 barrels of oil a day from the Alberta oilsands to British Columbia. Since then, two other insurance companies that had previously insured Trans Mountain but are not current insurers, Scor and Lancashire, have cut ties too.

No doubt this will lead to howls from pro-fossil entities, but in the long run blocking these projects has the promise of avoiding massive further investment in unusable energy.

The fossil fuel industry has been able to impose as much harm on the world as it has because there haven’t been mechanisms to make it care about the losses being suffered by others. If that freeloading dynamic changes, the world will have a better chance of avoiding climate catastrophe. Insurers can play an important role in driving the shift.

The origin of high capacity oil pipelines in America

After finding his quartet of books about the global history of nuclear weapons so valuable and intriguing, when I saw that a used book shop had a recent history of energy by Richard Rhodes I picked it up the next day.

It includes some nice little historical parallels and illustrations. One that I found striking illustrates how recent the oil-fired world which we now take for granted really is. Rhodes describes how “big-inch” pipeline technology was developed in the 1930s in America, allowing pipes of greater diameter than 8″ which would have split with earlier manufacturing techniques, but saw relatively little use due to the great depression. In 1942, the first “Big Inch” pipeline was built from east Texas refineries to the northeast (p. 286), partly to avoid the risk of U-boat attack when shipping oil up the east coast.

In addition to illustrating how America’s mass-scale oil infrastructure is mostly less than one human lifetime old, the Big Inch example demonstrates how long-lasting such infrastructure is once installed. Rhodes points out that Big Inch and its near parallel Little Inch (constructed after February 1943) companion are still operating today (p. 271).

Bitumen producers’ distant, unlikely, and disingenuous promises

In perhaps the ultimate demonstration that ‘net zero’ promises are a delaying tactic meant to preserve the status quo which favours fossil fuel producers, Canadian bitumen sands giants Canadian Natural Resources, Cenovus Energy, Imperial Oil, MEG Energy, and Suncor Energy have formed “an alliance to achieve net-zero greenhouse gas emissions from their operations by 2050.”

When firms that see their futures as continuing to dig up the world’s dirtiest hydrocarbons en masse it becomes clear how ‘ambitious’ promises set in the far future are a tactic to avoid meaningful regulation and lobby for additional subsidies right now. In a world genuinely heading for net zero, there will be no reason to exploit the world’s dirtiest fossil fuels, including coal and the bitumen sands. Furthermore, the idea that ‘net zero’ can apply in this context is fanciful. Using a technology like direct air capture to collect all the emissions associated with extracting, upgrading, and burning oil from the bitumen sands would cost so much that it would undermine any economic rationale for extracting the oil in the first place. Furthermore, the idea that the pollution can just be buried fails to fairly consider the scale at which CO₂ would need to be buried. There is simply no comparison between the total amount of carbon pollution we emit and the amount we might plausibly bury given the need for a vast new infrastructure to sequester carbon by the gigatonne, and the fact that this infrastructure would only consume money and energy without producing anything of value except reduced pollution. Rather than keep pounding back whisky in the hope that we can build a machine to clean our blood before we die, we really just need to abolish the practice which is creating these dire risks, namely continued fossil fuel exploitation.

Health and climate change

I was surprised just now to see that I don’t think I have a general thread on climate change and human health.

I’d say there are at least two big relevant dimensions to it.

First, because fossil fuel use causes so many bad health impacts, phasing out fossil fuels brings major co-benefits in terms of avoiding disease.

Second — whereas people seem to find environmental problems generally abstract and of low salience — people seem to have a much more consistent willingness to prioritize health related items. Thus, emphasizing the health impacts of climate change may help to motivate those presently unmoved or hostile to climate action.

There are certainly other important links, including how climate change will alter the distribution of mosquito-borne and other diseases and of course the intersectional ways in which health connects with public policy, economic justice, race, and global equity.

I did for a while host a Canadian government report on human health and climate change, which the Harper government decided to make available to the public only through the mail on a CD.

Health was also an important part of the case we made for divestment at U of T (PDF page 50 / printed page 44-7).

Waterloo commits to divestment

The University of Waterloo has joined the set of Canadian schools committing to fossil fuel divestment, specifically with pledges for a “50% reduction in carbon emissions by 2030” and “no material positions in fossil fuel exploration and extraction companies by 2025.”

Cindy Forbes, chair of Waterloo’s Board of Governors, specifically cited the financial case for divestment and argued that it is compatible with fiduciary duty:

To protect our investments, we’re making the decision that we will reduce our exposure to carbon. In doing so we are protecting our primary fiduciary duty to maximise pension fund and endowment returns using measurable science-based targets.

While it contradicts the justice-based framing preferred by most climate activists, purely bottom-line driven divestment arguably has greater potential to spread through the financial system, since the system’s norms heavily emphasize an obligation to reduce risk and maintain profits, whereas commitments to justice and equity are at best controversial.

CBC on the war against the fossil fuel industry

The CBC has two new podcast episodes related to my research. Front Burner has an episode on the movement to divest from the bitumen sands, which tracks the movement’s progression from church groups to universities to major banks and insurers. It notes that only half as many insurers are willing to cover the industry as before the divestment movement began in 2011/12. The second describes Supran and Oreskes’ new analysis of how ExxonMobil has worked to delay climate action and mislead the public, notably by emphasizing consumer responsibility (like the idea of carbon footprints) to try to avoid regulation.

The International Energy Agency (IEA) on the carbon bubble

The International Energy Agency has released a report on what would be necessary to achieve a ‘net zero‘ global economy by 2050: Net Zero by 2050 A Roadmap for the Global Energy Sector.

Unsurprisingly, it replicates the carbon bubble / stranded assets argument: “The global pathway to net‐zero emissions by 2050 detailed in this report requires all governments to significantly strengthen and then successfully implement their energy and climate policies. Commitments made to date fall far short of what is required by that pathway.”

It also asserts the basic concept of a contraction and convergence framework for global equity in emission reductions: “advanced economies have to reach net zero before emerging markets and developing economies, and assist others in getting there.”

Most encouragingly, it avoids the assumption that massive carbon removal technologies will be deployed, meaning a net zero pledge based around effective fossil fuel abolition:

Net zero means a huge decline in the use of fossil fuels. They fall from almost four‐fifths of total energy supply today to slightly over one‐fifth by 2050. Fossil fuels that remain in 2050 are used in goods where the carbon is embodied in the product such as plastics, in facilities fitted with CCUS, and in sectors where low‐emissions technology options are scarce.

This is naturally an enormous challenge to the companies and governments choosing to pretend that there will be an easy technological fix which reconciles controlling climate change with continued fossil fuel use.

Unsurprisingly, the CBC describes Canadian reactions to the report as “mixed”.

Greyhound shutting down in Canada

After shutting down everywhere in Canada except Ontario and Quebec in 2018, Greyhound is now shutting down in Canada completely, aside from some routes across the border by the American company (Toronto to Buffalo and NYC; Montreal to Boston and NYC; Vancouver to Seattle).

When the government is so keen to help out those who drive or fly, I can’t understand why they are willing to let intercity bus services come to an end. Particularly given the safety concerns about hitchhiking or traveling informally in remote areas, I think it would make sense for the government to take over intercity bus services as a nationalized entity if there is no commercial operator willing to do it. With passenger train services as slow, expensive, and infrequent as they are in Canada, there ought to be an option for people unable to afford flying or unwilling to use such an emissions-intensive form of transport.