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Fossil fuel divestment campaigns can help ‘stigmatise’ industry

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A new study has outlined how investors and campaigners can effectively leverage their collective influence to get the most out of the fossil fuels divestment movement.

The study, by the Smith School of Enterprise and the Environment (SSEE) at the University of Oxford, calls on investors to get to grips with the reasons and costs behind divestment strategies.

It uses the tobacco and South African apartheid divestment campaigns as examples of divestment movements that effected real change in the investment world.

The SSEE research urges investors to “closely monitor fossil fuel exposure”, adding, “There are a wide range of current and emerging environmental risks that could result in stranded assets. These risks are poorly understood and are regularly mispriced, which may result in a significant over-exposure to environmentally unsustainable assets throughout portfolios.”

Click here to read The Guide to Climate Change 2013

The report comes less than two weeks since the release of the Intergovernmental Panel on Climate Change’s (IPCC) study into the physical science of climate change. It also builds on work done by the thinktank Carbon Tracker, whose Unburnable Carbon research series suggests some 60-80% of oil, gas and coal reserves might need to be left in the ground if the world wants to avoid the worst effects of climate change.

Prudent investors want to be ahead of pack, not following the herd, so they will be preparing for a world where we leave fossil fuels in the ground – avoiding assets that cannot be realised safely in a carbon-constrained world”, said David Nussbaum, chief executive at WWF-UK.

If they do nothing, the risk is that policy changes and pressures such as the divestment campaign will mean investments could depreciate in value and might become stranded.”

A study by Impax Asset Management in July said that divesting from fossil fuels was a compelling win-win for investors, but not everyone in the investment community is of the same opinion. The divestment movement, some argue, has flaws that need to be addressed.

Seb Beloe, head of sustainability research at WHEB Asset Management, said, “We have been supporters of the divestment campaign, though my main take-away from the discussions that I have been part of, as well as the report, is that the indirect impacts associated with changing market norms are going to have a bigger impact than the direct impacts of divestment itself.

My concern with the divestment movement is that the response from investors will be to avoid coal but remain quite happily invested in lower carbon – but still carbon intense – fossil fuels. This is obviously a move in the right direction, but the science clearly says that this is likely to be too little too late.”

Instead of divestment, Mark Dampier, head of research at Hargreaves Lansdown, said, “What we need is not subsidies of renewables now but huge amounts of research and development to search for something that that makes renewables the obvious and natural choice.  

At that stage, like Kodak found with digital, the fossil fuel industry will be dead.”

Meanwhile, Mark Hoskin, a financial adviser at Holden & Partners, said that while SSEE’s research was useful to understand how markets behave, divestment for socially motivated reasons was “unlikely […] to be an important aspect in the long-term erosion of returns of oil companies”.

He added, “It is far more important to get investors to think about the downward pressures which will be put on an oil company’s profits and cashflows in the future from a lack of easily accessible reserves, alternative energy and a changing legislative approach brought on by climate change.

Doing what our grandfathers did in the 1970s is not necessarily the best investment approach today. This should be the message to the finance world, not one about social conscience and comparisons to the Tobacco industry are unhelpful in my view.”

The SSEE report concludes, “Divestment campaigns will probably be at their most effective in triggering a process of stigmatisation of fossil fuel companies. We find that even if the direct impacts of divestment outflows are limited in the short-term, the campaigns will cause neutral equity and/or debt investors to lower their expectations of fossil fuel companies’ net cash flows in the long-term.

The process by which uncertainty surrounding the future of fossil fuel industry will increase is through stigmatisation. In particular, the fossil fuel divestment campaign will increase legislative uncertainty and potentially also lead to multiples’ compression causing more permanent damage to the companies’ enterprise values.”

It makes it clear that even though stigmatisation could hit fossil fuel companies hard financially, it is “unlikely to threaten their survival”.

Further reading:

How to invest in energy once you’ve ditched fossil fuels

The investment case for fossil fuel divestment

Climate change a ‘firmly established’ material risk for mainstream investors

Norwegian pension fund divests from ‘financially worthless’ fossil fuel firms

The Guide to Climate Change 2013

Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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