Martin Wolf makes an observation in the FT this morning that my friend and Green New Deal colleague Jeremy Leggett has been making for some time, which is that we cannot burn our way to growth.
As both have pointed out, if the current established reserves of the major extractive industry companies were all burnt we would incinerate the world through global warming. The precise details as to timing may be open to discussion but the conclusion is not. Unless a majority of those reserves (yes, you read that right: a majority) stay in the ground in any foreseeable future then we can kiss the long germ goodbye.
And yet, despite that, as Wolf points out, energy companies continue to invest in discovering new reserves, and are valued in no small part on the basis of their success in doing so. Now, of course, there is merit in finding more accessible reserves. That I accept. But when searching goes in in high risk and deeply inaccessible areas or the search focuses on strategies with low yield ( like UK fracking and even fracking in general,where US yields are rapidly falling, as Jeremy assures me is the case) the this is a collective act of disregard for economic sense.
No one pretends that this is not a difficult issue. It is. This is about the whole way we live, from my use of the iPad on which I am writing this onwards. I know that. But equally it is an area where collective disregard for facts seems to have taken hold. As Wolf points out, to value current extractive industry activity in the way the market is doing requires what is, in effect, collective disregard for the possibility that climate change science is right when most scientists concur with it, as do most politicians, governments and official bodies.
Now, again, science can be wrong, and deep down I would love that to be true here (come on, who wouldn't?: change of the scale this science demands is uncomfortable). But even giving credit to the fact that the science may be right requires a significant discount to be given to the value that the market is giving to extractive industry companies.
This matters. The extractive industries are, after banks, pretty dominant in the FTSE 100. Royal Dutch Shell is by value by far the largest company in the FTSE with BP third after HSBC and with other major extractive companies appearing high in the rankings too. If this money is misplaced then this has major impact not just in energy invetsment terms but also in terms of pension portfolio valuations.
There is an alternative, of course. We could invest in new energy thinking. We could insulate the UK. We could make every building a power station. We could release a carbon army to green our UK energy investment and deliver the low carbon sustainable future we need. That is what the Green New Deal group has been calling for. It is the basis for economic transformation in the UK, but right now the money is backing finding oil and gas that cannot ever be burnt. That's the inefficiency of markets. Someone, somewhere, has to decide that this current allocation of resources is wrong. I just hope it is soon, for all our sakes.
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The perversity of the market, Richard, here perhaps more than anywhere. But as you note, the major hurdle to the required change in behaviour (which has to be individual, societal and economic) is the scale and scope of what’s required. In short, it’s so fundamental that it’s so difficult to visualise that I think most ordinary people simply find it far easier to ignore. And for that reason more than any other leadership and leading by example is required from those in positions to do so.
The problem is that they are members of the 1%, or their lapdogs and servants. And ultimately I think that as with much else they do, their attitude (whether they recognise it or not) is simply to believe that when the shit really does start to hit the fan they will simply buy themselves out of the mess. After all, when you can buy politicians, governments, the law, and almost any other “commodity” you care to name, why not salvation from global warming.
If you then add into that mix the obvious disregard that the 1% and their supporters show on a daily basis for the lives and misfortune of other human beings not of their “class” (which I dare say many of them justify through their belief in “survival of the fittest”), and underpin that with beliefs such as there are too many people on the earth anyway, that crises such as may be heading our way are excellent opportunities for totalitarianism, and so on, then why bother disrupting an otherwise cosy existence, and probably isolating yourself from the 1% clan by taking the lead.
Given what I’ve said above it won’t be a surprise when I conclude by saying that, sadly, I see absolutely no sign whatever that anything of the required significance will be done this year, next year, or in the next decade to address climate change or the terrible impact it will have on so many of the world’s population. It simply isn’t in the short or medium term interests of the 1% that actually control what goes on in the world in which we live to do so.
Depressingly pertinent observation, I am afraid
Especially as you are probably right
As far as CO2 goes, the relationship between emissions/temperature is logarithmic: the more there is, the smaller the increase in temperature. As far as powering the nation from ‘renewables’, OK. But until a reliable means of storing energy, lots of energy, and energy capable of being released very quickly, is established, then renewables (wind/solar) just will not power the nation.
Try starting by recognising that renewables are not limited to just wind and solar. Hydroelectric is currently used for when there are surges in energy demands. Just open your mind a little to the possibilities. instead of insisting its all too hard.
Tidal remains the great opportunity
Technology will work but we must drive it instead of subsidising banking largesse.
Look at sythnetic fuels, power shifting storage technology and other energy tech.
We don’t need war to provide impetus!
The logarithmic relationship is correct, JohnM, but as far as I’m aware, as the climate warms the threat increasingly comes from methane not CO2. As I understand it, there’s no such relationship there. More methane simply means more – and faster – warming.
“Given what I’ve said above it won’t be a surprise when I conclude by saying that, sadly, I see absolutely no sign whatever that anything of the required significance will be done this year, next year, or in the next decade to address climate change or the terrible impact it will have on so many of the world’s population. ”
That’s a very strange thing to say. The Stern Review said that we needed to have an $80 per tonne carbon tax in order to beat climate change. The UK pretty much has that now (the combination of the carbon price floor, the EU ETS, APD, fuel price escalator and so on) so both something has been done and what has been done is about what needed to be done.
It would be far more accurate to state that the UK has already done what is needed than anything else. Agreed, other countries not so much but the UK has.
Another exercise in you entirely missing the point Tim
It was ever thus
Tim. Given what’s happened globally (or hasn’t to be more accurate) re climate change since the Stern Review I’d think it highly likely that the calculations that Stern based his recommendations on are now out of date and so the $80 carbon tax is no longer sufficient. But even if it’s still relevant I was careful to say ‘anything of the required significance’, and action by one country, or indeed even right across the EU, is simply not sufficient for what’s required now we’ve traveled so far down the climate change road. And it’s particularly not so, when, as Richard’s blog highlights, the market “incentivises” the extractive industries to simply carry on doing what they’ve always done, and the rest of us, to carry on burning what they produce by one means or another.
Stern had another paper out just this week from the LSE. Using a different model (DICE, from Bill Nordhaus)and that is being waved around to prove that the numbers should be much higher, as you say. However, when you actually read the report (which I have) he ends up at the same level: around $80 now.
But you are taking the worm’s eye view that this is an issue dealt with by nations in isolation
It isn’t
Swings and roundabouts.
Oil will be needed ad-infinitum.
Ignoring energy generation, it is the feedstock of the chemical industry.
In the lack of large-scale, high-energy-storage, we need dispatchable power generation.
Since this is the age of electronic power supplies and energy-saving lighting, brown-outs are a thing of the past.
This is also the age of ‘demand-side-planning’.
Which means power cuts, albeit by consent. This is also the age of Short-Term-Operating-Reserve, which means, largely, diesel generators. Megawatts of same. The costs of such are paid by consumers.
The alternative is to reduce the population to a green-sustainable 13 million. Those will be interesting times.