Geraldine Clayton looks at the urgency of building a new green economy post pandemic and reviews the Absolute Zero report, which was published in November 2019.
Discussions are now underway on how best to restart our economy after the coronavirus crisis. There is much to play for, and many groups and organisations have taken the message they want from the present crisis. We all, however, want to build a more efficient and less fragile economy than that which came about after the banking crash. For this to happen we will need a skilled workforce spread across the country able to take on the challenges ahead. The answer is surely in the regional planning and industrial strategies we can use to revitalise communities across the country by working towards a real zero carbon future.
In the world of finance, investors are now looking towards green policies for economic recovery. Unless policy makers put these at the top of the agenda we will be jumping from the coronavirus frying pan into the climate change fire. We need to be making structural changes now; investing in the supply chain for a green economy, changing legislation and regulation, and implementing an environment-led stimulus package. Putting the energy sector into some form of public ownership would place workers and communities at the centre of the recovery through public enterprise strategies and regional planning. The Scottish government could take advantage of the fact that EU state aid rules have been largely suspended to take over strategic sectors of the economy such as clean energy production. This would provide badly needed revenue. Profits would not be going onto the balance sheets of companies owned in this country and subject to future takeover activity, or to overseas investors. By acting now will we be advancing progress on tackling the climate emergency. But there is no time to waste. The government must either lead from the front or it will become irrelevant to the changes taking place around it.
What better way to build the economy than around tasks such as retro-fitting insulation for energy saving, getting rid of old gas boilers, building district heating systems, smartening up the grid, and developing, manufacturing and installing the new technologies we will need to conform to our carbon reduction targets?
The UK FIRES ‘Absolute Zero’ report which came out last November, written across five universities in the UK, funded by the government and endorsed by the House of Lords, states that we need to be out of fossil fuels by 2029, including that used in shipping and aviation. The only exception to this will be for a limited amount of oil to be used in the making of some plastics.
Sad to say the oil majors and fossil fuel companies, while publicly endorsing the need to act on Climate Change, are at the same time massively increasing their investments in a huge expansion of oil and gas extraction. They are putting themselves forward as the solution, when they are a major part of the problem.
The industry spends a lot of money and effort on lobbying. They have set up a network of supposedly independent organisations around the world whose job it is to lobby policy makers with positions that run counter to a lot of the top line statements of the major companies. This practice is known as ‘astroturfing’. It’s a murky business, but thanks to a determined group of academics, journalists and investigators some of these activities have been exposed. Another strategy is to hide behind trade organisations. Cross sector industry bodies tend to adopt the positions of their most vocal members, often fossil fuel related companies. The other majority members tend to stay silent, so these stances prevail. Trades associations have been weaponized by the fossil fuel companies to allow them to outsource the ‘negative stuff’. These, along with other lobbying strategies, have hindered governments globally in their efforts to implement policies aimed at allowing us to reach our climate change targets. The industry says its position on climate change is transparent and clear, yet their lobbying activities tell another story. Added to that, years of suggested solutions based on breakthrough technologies, including projects such as Carbon Capture and Storage (CCS), and on market driven fixes like carbon markets have held us back from dealing with the ecological tsunami which could soon overtake us. For years the industry has proposed these types of solutions, and has been asking governments for money for funding CCS and other projects. These solutions are expensive and up until now none of these schemes has been proven to work at scale.
The Absolute Zero report states “The target of zero emissions is absolute. There are no negative emissions options or meaningful carbon emissions offsets. The UK is responsible for all emissions, including imported goods and international flights and shipping.” “Breakthrough technologies cannot be deployed at the scale needed rapidly enough.” We are concerned that most plans for dealing with climate change depend on breakthrough technologies, so will not be delivered in time. Until we wake up to the fact that breakthrough technologies will not arrive fast enough we cannot even begin having the right discussion.”
The stark reality is that the carbon to CO2 ratio is 1:3.7, which means that to stick to absolute zero emissions, for every ton of carbon we burn, we would have to take 3.7 tons of CO2 out of the atmosphere. (Professor Miles Allan , in ‘The Life Scientific’ on Radio 4).
The current crisis has exposed the cracks in our system, and we now have a clearer understanding of what an emergency is. Even the super-rich cannot escape in any meaningful sense. Our life support systems are under threat, and there is a danger we could soon reach the point where, in a world in which biodiversity loss is amplified by climate change, there will be no turning back. Coronavirus will be brought under control eventually, but environmental collapse will be permanent from a human perspective.
If the fossil fuel industry wants to sell its product it should demonstrate that it can be used safely, and that the industry can clean up its own mess. It cannot do either. The fact that the industry spends so much time and effort in lobbying demonstrates that its arguments are weak. These arguments include;
“We can’t get out of oil and gas because if we do, production will be taken up by the ‘bad’ producers, such as Russia and Saudi Arabia. Our oil is good oil.”
The Deep Water Horizon well was exploratory at the time of the disaster, but the oil destined for production would presumably have gone under the heading ‘good oil’. Would the people of the Niger Delta, who have lost much of their livelihoods to oil pollution think Shell’s oil is ‘good oil’? It takes nine times more land to produce a barrel of oil on the US mainland than it does in Russia or Saudi Arabia because of the amount that is recovered from fracking. That is neither environmentally nor financially sound. We have a moratorium in Scotland on onshore fracking, but companies such as INEOS are pushing hard to have the moratorium overturned. In any case, the ‘chemically enhanced’ treatments used in oil recovery to get that ‘extra bit’ of oil out of a well are now standard practice across the world, including in the North Sea.
Many people still believe we import much of our gas supply from Russia. In fact we weaned ourselves off Russian gas years ago, and now import only a tiny fraction from there. Most of our gas comes from Norway, while the Norwegians obtain their own domestic power from hyrdro-electricity.
We were fed a similar line regarding the ethics of supplying arms during the seventies and eighties by the arms industry, who told us that if British companies stopped selling weapons this would allow the ‘wicked’ arms sellers to take over. Decades later the world is still awash with arms, and we are entering into yet another arms race. Oil, and the rights of access to it have both stimulated and fueled conflicts for a very long time now. But natural resources for clean energy are spread across the planet. There is no point in fighting for the wind, the sun or underground and airborne heat sources.
“We need to produce more oil and gas to save on expensive importing.”
Oil and gas is bought and sold on the world’s markets, so the oil produced here will go to the highest bidder. A report in January 2019 from the UK’s National Audit Office estimated the costs of dismantling offshore oil and gas infrastructure in the North Sea over the next twenty-five years could exceed £240 billion, most of which will be funded by the taxpayer. When this, along with the tax handouts and generous benefits handed out to companies are taken into account, the product appears to be rather expensive.
“We have the skills and the technological know-how to solve the problem of climate change.”
They are right, but it’s time for the industry to put their money where their mouth is. Their biggest resource lies in their workforce, who have families, and like us are hoping to live in a world where the future will be safe for their children and grandchildren. This is a truly solvable problem, and the fossil fuel companies have the resources, capital, cash flow and engineering capability to make this happen. Together they account for 10% of the world’s economy. But it requires the whole industry to clean up its waste rather than hoping someone else will do it for them.
“We will still need a mix of fuels by 2050”
Just listen to the science.
The sharp drop in the price of oil allows us to see what will happen in the future. The value of these companies lies in the value of their oil, and they have tanks of it. The days of peak oil have gone, but still many of them continue to take on debt to enable them to carry on with exploration and drilling. Offshore drilling tends to be done at greater depths than previously, and in more hazardous conditions. Clean-up operations will become much more difficult and expensive in the future. Oil leaks have increased recently, including in the North Sea, and the oil companies have been told to clean up their act. Climate change means insurance firms will be hit with increasing claims related to extreme weather, and fossil fuel companies will lose their value as the world implements increasingly urgent climate targets.
The Arctic is now being viewed as one of the most lucrative places for fossil fuel investment, but oil production in the area is beset with environmental dangers. Protection treaties have not been agreed for oil and mineral extraction in the Arctic, and there are no safety protocols in place for the region. The detrimental effects of oil spills in such a cold climate will be many times longer lasting than in temperate areas (think how much longer things last when kept in your fridge or freezer). The Deepwater Horizon disaster was estimated to have cost $100 billion to clear up. Any such occurrences in the Arctic region could be much costlier and more damaging to the environment. Shell, to its credit, has said it will not explore in the region until regulatory measures are put in place, but many other companies are keen to get started.
For pension funds and other investors, oil dividends and investments have up until now been safe and lucrative, but this cannot continue. Shell has for the first time in decades cut its shareholder dividends, and BP has seen a sharp drop in profits. Over the past three to five years global stock indexes without fossil fuel holdings have held steady with, and even out-performed otherwise identical indexes that include fossil fuel companies. Fossil fuel companies once led the economy and the world stock markets. They now lag.
According to the Institute for Energy, Economics and Financial Analysis, trustees face growing fiduciary pressure to divest from fossil fuels due to volatile revenues, limited growth opportunities and a negative outlook. Scottish local government pension funds have been advised by the Scottish Local Government Fiduciary Duty Guidance Advisory Board that pension committees may take environmental social and governance considerations into account in relation to investments if the financial performance of that investment may be impacted as a result of any particular environmental, social and governance considerations. Legal & General has put climate change risk as its top concern in terms of profit warnings.
Oil tends to mirror the stock market’s rise and fall, so it’s not a particularly good investment in a properly diversified portfolio. The value of these companies is bound to crash. We don’t know when this will happen, but we know it will.
Fossil fuel and aviation companies are currently asking the government for yet more handouts and tax breaks. The UK already has some of the lowest oil tax rates in the world. Last year Shell paid no tax at all on its UK operations. They already receive handsome tax breaks on investments and decommissioning, but the taxpayer can no longer keep on funding private businesses only to see them create more costs in the future in the form of climate impacts. The UK should remove all incentives and tax breaks from oil and gas extraction and redirect them to funding a just transition. Money spent on green initiatives will provide decent training and employment opportunities and help small and start-up businesses which are well placed to deploy new technologies. Given the right policies, job creation in clean energy industries will exceed affected oil and gas jobs more than three times over. These opportunities will be spread across the UK.
Our situation regarding climate change and loss of biodiversity is very serious indeed. We are closer to a real tipping point than we think. The stimulus packages released now hold the key as to whether this coronavirus crisis delays or advances progress on tackling the climate emergency. As the saying goes, why not make an opportunity out of a crisis? After all, I don’t think we will get another chance.