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Fossil fuel firms risk wasting $2 trillion on uneconomic projects

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Fossil fuel companies risk wasting up to $2.2 trillion in the next decade, threatening substantially lower investor returns, by pursuing projects that could be uneconomic in the face of a perfect storm of factors including international action to limit climate change to 2˚C and rapid advances in clean technologies, think tank the Carbon Tracker Initiative warns today.

No new coal mines will be needed, oil demand will peak around 2020, and growth in gas will disappoint industry expectations, it finds in a new report highlighting the danger zone between industry business-as-usual strategies and action that would be needed to meet the UN commitment to limit climate change to 2˚C.

The $2 trillion stranded assets danger zone: How fossil fuel firms risk destroying investor returns, maps out coal, oil and gas supply that makes neither financial nor climate sense in a 2˚C world and how this affects both listed and public companies.  The report warns: “If the industry misreads future demand by underestimating technology and policy advances, this can lead to an excess of supply and create stranded assets. This is where shareholders should be concerned – if companies are committing to future production which may never generate the returns expected.”

James Leaton, head of research and co-author of the report, said: “Too few energy companies recognise that they will need to reduce supply of their carbon-intensive products to avoid pushing us beyond the internationally recognised carbon budget. Clean technology and climate policy are already reducing fossil fuel demand – misreading these trends will destroy shareholder value. Companies need to apply 2˚C stress tests to their business models now.”

The US has the greatest financial exposure with $412 billion of unneeded fossil fuel projects to 2025 at risk of becoming stranded assets, followed by Canada ($220bln), China ($179bln), Russia ($147bln) and Australia ($103bln).

The companies that represent the biggest risk in a demand misread to the climate and shareholders alike in the next decade are a mix of state and listed companies, including oil majors Royal Dutch Shell, Pemex, Exxon Mobil, and coal miners Peabody, Coal India, and Glencore. Around 20-25% of oil and gas majors’ potential investment is on projects that will not be needed in a 2˚C scenario, and cancelling them would mean going ex-growth.

The report looks at production to 2035 and capital investment to 2025. It warns that energy companies must avoid projects that would generate 156 billion tons of carbon dioxide (156Gt CO2), in order to be consistent with the carbon budget in the International Energy Agency’s 450 demand scenario, which sets out an energy pathway with a 50% chance of meeting the UN 2⁰C climate change target.

Mark Fulton, advisor to Carbon Tracker, former head of research at Deutsche Bank Climate Change Advisors, and co-author of the report, said: “Our work shows thermal coal has the most significant overhang of unneeded supply in terms of carbon of all fossil fuels on any scenario. No new mines are needed globally in a 2˚C world.”

Carbon Tracker warned last month that big energy companies are ignoring rapid advances in clean technologies which threaten to undermine their business models, such as renewables, battery storage and electric cars, in a report challenging nine business as usual assumptions made by the industry to argue that coal, oil and gas will all continue to grow in the next decades.

Anthony Hobley, CEO of Carbon Tracker, said: “Business history is littered with examples of incumbents[2] who fail to see the transition coming. Fossil fuel incumbents seem intent on wasting capital trying to hold onto growth by doing what they have always done rather than embracing the energy transition and preserving value by adopting an ex-growth strategy. Our report offers these companies both a warning and a strategy for avoiding significant value destruction.”

COALIn a 2˚C world, demand can be met from existing mines and no new mines will be needed. “It is the end of the road for expansion of the coal sector,” the new report states. Over the next decade, capital expenditure of $177 billion on new projects and $42 billion on existing ones is unneeded.

China, the US, Australia, India and Indonesia have the greatest exposure, accounting for over 90% of unneeded investment. Export markets are in structural decline as China seeks to peak its coal demand and India aims to become more self-sufficient in energy, threatening big exporters like Australia and Indonesia. In the US half of all potential projects from Peabody, Murray and Foresight will be unneeded.

OIL – “In the 450 scenario oil demand peaks around 2020. This means the oil sector does not need to continue to grow, which is inconsistent with the narrative of many companies,” the report states. Spending of $1.3 trillion on new projects and $124 billion on existing projects is unneeded. Overall 43% of investment in new projects and 33% of new supply should be avoided to align with a 2˚C scenario, avoiding 28Gt of CO2.

The countries with the greatest financial exposure are the US, Canada, Russia, Mexico and Kazakhstan. The biggest risk is from shale oil in the US, oil sands in Canada and conventional oil in Russia. All three, with Norway, are exposed to Arctic oil. Deep water projects in the US and Mexico and Venezuela’s heavy oil are also in the danger zone. However, OPEC conventional production faces little risk due to its low cost.

GAS – In a 2C world gas growth will be “at a lower level than expected under a business as usual scenario”, the report finds. Capital expenditure of $459 billion on new projects and $73 billion on existing projects is surplus to requirements. Overall 41% of investment in new projects and 25% of new supply, accounting for 9 Gt of CO2, is unneeded.

The US, Australia, Indonesia, Canada and Malaysia have the greatest exposure, accounting for three-quarters of investment risk. Within the markets we analyse (North America, Europe, and the LNG export market), two-thirds of new coal bed methane and Arctic projects are in the danger zone; half of the supply in new LNG projects is unneeded and very little new capacity will be needed in the US and Canada in a 2˚C scenario.

CARBON CAPTURE AND STORAGE – Carbon Tracker’s analysis assumes 24Gt of CO2 will be captured by CCS by 2035 in line with the IEA 450 scenario, but it warns that this would require CCS to grow to a level 150 times where it is today. Delays in CCS could significantly increase the reductions in coal that will be needed and the IEA has estimated that a 10-year delay in large-scale CCS deployment from 2020 to 2030 could cost fossil fuel producers $1.35 trillion in lost revenues.

The report is available here.

Energy

7 New Technologies That Could Radically Change Our Energy Consumption

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Energy Consumption
Shutterstock Licensed Photo - By Syda Productions | https://www.shutterstock.com/g/dolgachov

Most of our focus on technological development to lessen our environmental impact has been focused on cleaner, more efficient methods of generating electricity. The cost of solar energy production, for example, is slated to fall more than 75 percent between 2010 and 2020.

This is a massive step forward, and it’s good that engineers and researchers are working for even more advancements in this area. But what about technologies that reduce the amount of energy we demand in the first place?

Though it doesn’t get as much attention in the press, we’re making tremendous progress in this area, too.

New Technologies to Watch

These are some of the top emerging technologies that have the power to reduce our energy demands:

  1. Self-driving cars. Self-driving cars are still in development, but they’re already being hailed as potential ways to eliminate a number of problems on the road, including the epidemic of distracted driving ironically driven by other new technologies. However, even autonomous vehicle proponents often miss the tremendous energy savings that self-driving cars could have on the world. With a fleet of autonomous vehicles at our beck and call, consumers will spend less time driving themselves and more time carpooling, dramatically reducing overall fuel consumption once it’s fully adopted.
  2. Magnetocaloric tech. The magnetocaloric effect isn’t exactly new—it was actually discovered in 1881—but it’s only recently being studied and applied to commercial appliances. Essentially, this technology relies on changing magnetic fields to produce a cooling effect, which could be used in refrigerators and air conditioners to significantly reduce the amount of electricity required.
  3. New types of insulation. Insulation is the best asset we have to keep our homes thermoregulated; they keep cold or warm air in (depending on the season) and keep warm or cold air out (again, depending on the season). New insulation technology has the power to improve this efficiency many times over, decreasing our need for heating and cooling entirely. For example, some new automated sealing technologies can seal gaps between 0.5 inches wide and the width of a human hair.
  4. Better lights. Fluorescent bulbs were a dramatic improvement over incandescent bulbs, and LEDs were a dramatic improvement over fluorescent bulbs—but the improvements may not end there. Scientists are currently researching even better types of light bulbs, and more efficient applications of LEDs while they’re at it.
  5. Better heat pumps. Heat pumps are built to transfer heat from one location to another, and can be used to efficiently manage temperatures—keeping homes warm while requiring less energy expenditure. For example, some heat pumps are built for residential heating and cooling, while others are being used to make more efficient appliances, like dryers.
  6. The internet of things. The internet of things and “smart” devices is another development that can significantly reduce our energy demands. For example, “smart” windows may be able to respond dynamically to changing light conditions to heat or cool the house more efficiently, and “smart” refrigerators may be able to respond dynamically to new conditions. There are several reasons for this improvement. First, smart devices automate things, so it’s easier to control your energy consumption. Second, they track your consumption patterns, so it’s easier to conceptualize your impact. Third, they’re often designed with efficiency in mind from the beginning, reducing energy demands, even without the high-tech interfaces.
  7. Machine learning. Machine learning and artificial intelligence (AI) technologies have the power to improve almost every other item on this list. By studying consumer patterns and recommending new strategies, or automatically controlling certain features, machine learning algorithms have the power to fundamentally change how we use energy in our homes and businesses.

Making the Investment

All technologies need time, money, and consumer acceptance to be developed. Fortunately, a growing number of consumers are becoming enthusiastic about finding new ways to reduce their energy consumption and overall environmental impact. As long as we keep making the investment, our tools to create cleaner energy and demand less energy in the first place should have a massive positive effect on our environment—and even our daily lives.

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Energy

Responsible Energy Investments Could Solve Retirement Funding Crisis

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Energy Investments
Shutterstock / By Sergey Nivens | https://www.shutterstock.com/g/nivens

Retiring baby-boomers are facing a retirement cliff, at the same time as mother nature unleashes her fury with devastating storms tied to the impact of global warming. There could be a unique solution to the challenges associated with climate change – investments in clean energy from retirement funds.

Financial savings play a very important role in everyone’s life and one must start planning for it as soon as possible. It’s shocking how quickly seniors can burn through their nest egg – leaving many wondering, “How long your retirement savings will last?

Let’s take a closer look at how seniors can take baby steps on the path to retiring with dignity, while helping to clean up our environment.

Tip #1: Focus & Determination

Like in other work, it is very important to focus and be determined. If retirement is around the corner, then make sure to start putting some money away for retirement. No one can ever achieve anything without dedication and focus – whether it’s saving the planet, or saving for retirement.

Tip #2: Minimize Spending

One of the most important things that you need to do is to minimize your expenditures. Reducing consumption is good for the planet too!

Tip #3: Visualize Your Goal

You can achieve more if you have a clearly defined goal in life. This about how your money can be used to better the planet – imagine cleaner air, water and a healthier environment to leave to your grandchildren.

Investing in Clean Energy

One of the hottest and most popular industries for investment today is the energy market – the trading of energy commodities. Clean energy commodities are traded alongside dirty energy supplies. You might be surprised to learn that clean energy is becoming much more competitive.

With green biz becoming more popular, it is quickly becoming a powerful tool for diversified retirement investing.

The Future of Green Biz

As far as the future is concerned, energy businesses are going to continue getting bigger and better. There are many leading energy companies in the market that already have very high stock prices, yet people are continuing to investing in them.

Green initiatives are impacting every industry. Go Green campaigns are a PR staple of every modern brand. For the energy-sector in the US, solar energy investments are considered to be the most accessible form of clean energy investment. Though investing in any energy business comes with some risks, the demand for energy isn’t going anywhere.

In conclusion, if you want to start saving for your retirement, then clean energy stocks and commodity trading are some of the best options for wallets and the planet. Investing in clean energy products, like solar power, is a more long-term investment. It’s quite stable and comes with a significant profit margin. And it’s amazing for the planet!

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