A Time of Turmoil
Forge the Future #41 - The impacts of coronavirus, and the oil and gas price crash
Welcome to Forge the Future, your weekly guide to all things climate.
UBS has joined the ranks of major western banks renouncing Arctic oil drilling, as it tries to reduce its climate exposure. It will also no longer finance new oilsands projects. Meanwhile, despite the bevy of banks dropping out of coal finance, the industry still is not struggling for money, thanks to Asian banks and private equity which, for now, is happy to still finance the fuel. One battle down, but the war goes on… Speaking of war, ExxonMobil used their annual investor day to deride other oil companies for making efforts to lower emissions. The company refused to set carbon targets, and is putting $35bn into oil exploration in the next 5 years. I suspect that won’t save their valuation, which has dropped by $315bn in the last 13 years.
On a more positive note, Grist have released their ‘Grist 50’ for 2020 - 50 emerging leaders in sustainability and environmentalism. There’s a whole lot of awesome people doing amazing work who you may not have seen in the headlines!
State of the Climate
CO2 levels this week: 413.87 ppm
This time last year: 411.91 ppm
It’s official - Europe’s winter was its warmest ever, with temperatures on average 3.4°C hotter than the normal December-January average. That contributed to the first ever failure of Germany’s ice wine harvest - the ultra-low volume drink is made from grapes frozen on the vine, but temperatures failed to reach the required -7°C.
Research finds this week are grim reading - another study has confirmed that Australia’s hellish recent wildfire season was made at least 30% more likely by climate change, and that conditions will only get worse from here. A new study on air pollution data from 2015 found that it likely caused 8.8m premature deaths that year, more than any other cause. The impacts added up to an average shortening of life expectancy for everyone on earth by 3 years. And finally, tropical forests look to be absorbing less CO2 as time goes on, likely a combination of higher temperatures, droughts and deforestation. If trends continue, the average tropical forest will become a carbon source by the 2060s.
Vietnam’s Mekong Delta is facing a massive drought, with 5 states declaring a state of emergency. River flow rates are 20% lower than 2016, which was the worst drought in a century. The lack of water is compounding with increasing salinity to ruin what is one of the country’s prime food-growing regions. US farmers meanwhile are facing the opposite issue, with massive losses from fields that are too waterlogged to plant. Heavy rains are impacting both farming as well as shipping up the major rivers, which are all in near flood conditions. Losses are not certain yet, but look likely to be less than last year’s $20bn costs, which were the costliest in a decade.
Visualisation of the Week
This week’s visualisation comes from Climate Central, and simply shows the hottest 10 years on record. As you can see, the hottest five years were the last 5, and the earliest year here is from 2005!
We live in interesting times. I’ve said it before in this newsletter, but it seems especially true this week. I, like many others, have been watching the ever-worsening coronavirus pandemic with bated breath, hoping it doesn’t spread further, and taking some solace in the surreal trend of folks panic buying toilet paper.
However, beyond the personal implications, the situation has some serious effects on the environment. Airlines are experiencing massive drop in demand as travel suddenly looks a whole lot less appealing for many, but European airlines must run flights in 80% of their slots or risk losing allocation. The result? Empty ‘ghost flights’, burning fuel for zero reason. I assume regulators will see sense and suspend the rules, as they have done for flights to Hong Kong and mainland China, but it’s a surreal situation.
Last week’s visualisation was of the stunning drop in pollution over Wuhan as the Chinese economy all but shut down to control the virus. However, that has serious implications - not only is it having effects on the supply of renewable energy infrastructure, but China places economic growth highly, and it’s looking likely that the government will roll back environmental regulations in order to boost growth once the worst is past.
Meanwhile, OPEC and Russia have decided that now is the best time to institute a price war over oil, with prices dropping by almost a third. OPEC was trying to persuade Russia to cap supply in the wake of lowered demand, but after Russia walked out of the talks, Saudi Arabia decided to try and call their bluff and increase supply. It’s uncertain what the implications are, as the situation is markedly different to the last price crash. US shale oil has made the world less dependent on OPEC, but that also means that the US shale industry could be crippled by this price shift, as will many other oil-dependent economies around the world.
What also remains to be seen is the impact on the renewables industry. In the short term, lower oil prices mean increased incentives for oil use, but the clean tech industry is a lot more mature than it was, and the longer lowered prices go on, the more likely investors are to shift away from oil into renewables. It would be ironic indeed if increasing the supply of oil hastened its decline, but these are strange times.
News Highlights
US vs the Climate
The Trump administration is undermining the scientific credibility of NOAA by pushing to change recommendations on seismic surveys that would harm endangered right whales.
After Super Tuesday, the Democratic field has become all but a two-horse race between Joe Biden and Bernie Sanders, who have radically different plans for the climate.
GM is making a big push into EVs, announcing a new battery with a 400mi range. The company is dedicating $3bn annually to EV R&D over the next 5 years.
The Science Advisory Board has attacked the EPA’s revamped Clean Water Act, saying many crucial elements are not adequately based upon science.
The SEC is considering making ESG funds prove that they are actually sustainable. This would be in line with existing rules requiring funds’ names to broadly reflect what they invest in.
Tesla has just produced their millionth electric car - the first car company to do so. They are now on track to produce 650k cars a year, and are (barring German red tape) hoping to open their German factory by 2021.
US coal power averaged below 50% capacity factor for the first time ever in 2019. Even with coal plant closures, those still running are being used less than half the time.
Other News
The Supreme Court in Canada has decided not to hear further appeals against the expansion of the Trans Mountain pipeline, meaning that the project will likely go ahead.
Norway’s sovereign wealth fund is pushing for companies to produce better sustainability data. Similarly, in the EU, banks and other financial institutions want the EC to force businesses to report more on sustainability.
Horizon Organic, the world’s largest organic dairy, is planning to become carbon neutral by 2025, and after that carbon positive. Given the high emissions of cattle, they have a tall task ahead of them.
A Danish startup has come up with a method to recycle wind turbine blades into noise suppression panels for motorways and factories.
Airlines are pushing back on emissions taxes as they face heavy financial blows from the coronavirus situation. The IATA predicts airline revenue will fall at least 11% this year.
Long Reads
CarbonBrief analyse the UK’s 29% drop in emissions over the past decade, and what the future looks like for UK emissions.
A look at the transformative effect the Hornsdale Power Reserve (a giant battery storage facility) has had on the Australian power market.
An exploration of how Shell wants to reinvent themselves as a way out of the climate crisis.
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 oli@forgethefuture.com). If you feel like sharing this, I’d massively appreciate it!
See you next week,
Oli