Forge the Future #52 - Should Microsoft give up their massive oil and gas contracts in the name of the environment?
|Oli Hall||May 27|
Welcome to Forge the Future, your weekly guide to all things climate. This week’s edition is a bit lighter on the news front, as bank holidays on both sides of the Atlantic have meant a slightly quieter week.
After Google’s announcement last week that they would stop ‘custom’ AI solutions for oil and gas contracts, someone decided to run the numbers on Microsoft’s work in the industry. AWS and Azure are far ahead of Google, and it turns out that the emissions just from Microsoft’s contract with ExxonMobil alone would increase its carbon footprint by 21%. Not the best look for a company trying to go carbon negative! It may be that Google’s announcement puts more pressure on Microsoft to move away from fossil fuels, but that may be too much to hope for given the vast amounts of money changing hands.
In the banking world, the importance of sustainability seems to be hitting home, as an ever-increasing group of managers (including BlackRock, Invesco and Allianz) are realising that ESG indices are generally not being hit quite as hard as conventional benchmarks, further fueling growth in the space. Citigroup announced last week that they will be adding an investment banking division focusing on sustainability, the latest of a number of banks to do so. As with all such macro trends, it’s gradual, but establishment mindsets seem to be more open than ever before to embracing sustainability. Let’s hope it’s not too late.
State of the Climate
CO2 levels this week: 418.04 ppm
This time last year: 414.96 ppm
Cyclone Amphan has killed at least 88 people in India and Bangladesh. The full extent of the damage won’t be known until communications are restored, but it’s pretty severe, especially for two countries already hit hard by COVID-19. A new study released this week suggests that this could be a sign of things to come, as hurricanes have become steadily stronger over the past four decades as the planet has warmed.
A study on carbon absorption by tropical forests has found that 2°C of warming will push most such forests above their heat threshold, and potentially cause them to become net carbon sources. Various studies have suggested similar trends in the past, but this is one of the most comprehensive global studies to date.
Eastern Europe is currently being gripped by the worst drought in a century. Poland, Romania and the Czech Republic are suffering crop losses and other damage in some of the poorest regions of Europe, already hit hard by economic losses from the current pandemic.
In brighter news, wild white storks have hatched in the UK for the first time in hundreds of years. The nest is part of a project trying to reintroduce the birds to southern England, and they are hoping to establish a permanent community.
Visualisation of the Week
This week’s visualisation shows the massive spike in temperatures in Siberia this year versus the 1981-2010 average. The whole region is more than 5°C warmer than usual, and is one of the fastest warming areas on the planet.
One of the areas brought up in recent discussions of the big tech companies and their climate commitments is - how responsible should these companies be for what their customers use their technology for?
Emissions are a complex topic - even the general division into scope 1 (direct emissions), scope 2 (emissions from electricity and heat) and scope 3 (emissions from supply chains and other sources) is not firmly agreed upon. Should a utility company pay for the emissions produced in generating electricity used by others?
When a tech company provides AI tools to fossil fuel companies, should they be responsible for the emissions produced? They’re not actually burning the fuel, nor handling it directly. However they are accelerating extraction and reducing its cost (otherwise why would the oil co’s pay for the tools?). This fuzziness allows wiggle room for tech companies to shrug off responsibility for the emissions produced from the tools it produces, even in settings such as oil and gas extraction.
However, when a company has taken as strong a stance as Microsoft has on the climate, it feels very difficult to ignore the downsides of them continuing to do business with the fossil fuel industry. Yes, the contract sizes are massive, and thus the financial downsides to cancelling them are significant. But let us not forget - Microsoft has a market capitalisation over $1 trillion. These are companies with highly profitable business models and vast amounts of capital. Microsoft’s announcements on the climate front are significant, but given the relatively low direct carbon footprint of the tech business, and their huge profits, the cost of those measures is relatively cheap.
Microsoft are trying to have their cake and eat it - they want to be strong on the environment, but they want to keep their massively profitable contracts and turn a blind eye to the consequences. Their carbon negative stance is laudable, but means little unless they back it with meaningful stakes.
US vs the Climate
More than 250 EPA employees have reported managers interfering with scientific results in a survey of staff at the agency.
Lower emissions due to the pandemic are meaning lower revenues from California’s cap-and-trade system, reducing the money available for a plethora of programs, from electric school buses to high-speed rail.
The BLA under Trump has approved every single application to cut royalties for oil and gas drillers on federal land in Utah, at a time where oil and gas prices are at record lows.
Houston may reach its goal of 100% renewable power for government properties five years early after signing a five year deal with NRG Energy.
The EU is poised to unveil a massive green recovery package, as it pivots the Green Deal momentum into an economic recovery from COVID-19. The plan would push huge sums towards EV rollout, improved home insulation as well as renewable energy and hydrogen infrastructure. The EU is also proposing a massive overhaul of agriculture to reduce emissions and reduce the environmental impact of farming.
Renewables supplied over 40% of UK power in the first quarter of 2020, with wind hitting record capacity factors (50% for onshore, and 60% for offshore).
The German cabinet has approved a plan to extend carbon pricing to heating and roads. Some of the extra revenue could go towards cutting power bills, which are currently some of the highest in Europe.
CarbonBrief dives into the carbon savings of US emissions restrictions on motor vehicles - the measures have potentially saved up to 17bn tons of CO2 since 1975.
The End Times
That’s all I have for you this week. As always, thanks for reading, and if you’ve any feedback or suggestions for me, I’d love to hear them (you can reach me at email@example.com). If you feel like sharing this, I’d massively appreciate it!
Stay safe, and see you next week,