We need to stop burning fossil fuels. Because we just do

20 February 2013

Not that I was much of a fan of it in the first place, but can we now scratch the ‘peak oil’ idea? Fossil fuels aren’t about to run out, not in any kind of useful timescale anyway. Instead, buckle up for what looks like a 20 per cent increase in global oil production by 2020. 

This is what you get when you mesh together growing demand, sharply improved extractive technology and techniques, and all the wrong price signals being sent by Governments, including perverse subsidies. As energy pundit Dieter Helm has said, the real problem is not that there aren’t enough fossil fuels, but that we have more than sufficient to “fry the planet several times over”.   

Carbon Tracker’s ‘Carbon Bubble’ analysis suggests that only 20 per cent of currently proven fossil fuel reserves can be burned if we want to give ourselves a decent change of not crossing the commonly-agreed danger threshold of  a two-degree temperature rise. That means 80 per cent of the stocks of potential oil and gas held by major companies would – should – become worthless.

Instead of ‘peak’ fossil fuels, we need to start thinking instead of ‘unburnable’ fossil fuels. We don’t have the luxury of sitting back and waiting for the pumps to cease of their own volition, so we – that’s the planetary ‘we’: consumers, markets and governments – are going to have to do something much tougher: voluntarily stop.  

What US climate activist  Bill McKibben calls the raw “math” of climate change means we probably don’t have much choice; we have to muster our optimism that Governments won’t in the final analysis actually let the planet go to hell in a handcart. If you knew with certainty that global emissions would absolutely not be allowed to rise above the levels scientists say is enough, you’d certainly think differently about the value of investing in both suddenly much-less-attractive fossil fuels, and suddenly much-more-attractive renewable energy.

McKibben’s ‘divestment’ campaign is making headroom, corralling pressure from investors to withdraw their pensions from fossil fuels. I mentioned the excellent Carbon Tracker work already, and elsewhere here in Blighty bits of big finance are sticking their heads above the parapet to commission powerful studies into what climate impacts and resource constraints might do to long-term economic growth. Oxford University has just established a hugely important programme to map out in detail what changing environmental assumptions might do to big investments.

But there’s one heck of a way to go. It would be splendidly naïve to ignore that one of the very reasons we haven’t got a truly effective national and international climate policy regime is because so much massive capital would lose out so heavily from not having one. Here in the UK, Chancellor George Osborne has in the last year given roughly a billion pounds in tax breaks to oil companies to encourage them to wring every last drop of fossil fuels from the North Sea, marking the UK’s contribution to what appears to be a desperate race to the bottom.  More tax breaks are imminent for gas from shale.  Hardly a surprise that markets don’t see an end to fossil fuels.

Clean investment requires a watertight and coherent political response commensurate with the scale of the climate crisis. That means ditching economically daft subsidies for new oil and gas production and doing more of the good stuff; increasing support for clean energy;  redoubling efforts on energy efficiency; decarbonising cars, and coughing up for affordable, efficient public transport. The things the Government is getting right, like subsidies to get renewable energy onto a level playing field, are frustratingly buffeted by the things it gets less right.

At present the UK Government induces a tizzy of uncertainty in clean energy investors every time it opens its collective gob. Its dogmatic refusal to set a 2030 decarbonisation target for electricity, for example – despite colossal pressure from business and beyond – only serves to underline the general feeling of muddiness and faff. While the financial crisis showed us that when it comes to properly assessing the risk of things going belly up the market sometimes has dung for brains, if I was an investor I wouldn’t yet put much of a price on this Government being serious about ending fossil fuel use either.

 

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