Forge the Future #43 - Oil is cheaper than coal as the current crisis worsens
|Oli Hall||Mar 25|
Welcome to Forge the Future, your weekly guide to all things climate.
Once again, the coronavirus pandemic has dominated the news this week, with the crisis growing ever more serious. At times like these I wonder if I’m not being crass and heartless for not focusing on the immediate threat posed by the situation. However, I, like many others, feel helpless in the face of this virus that is changing our world in all sorts of unpleasant ways, and at least with this newsletter I can still take some meaningful action in these crazy times. After all, once the dust settles and we look to start putting things together again, the climate crisis will still be a real and pressing danger.
Speaking of the climate, a new report was released this week by a consortium of climate groups, revealing the extent to which the world’s largest investment banks are funding fossil fuels. The top 35 have put more than £2.2tn into fossil fuels since the Paris agreement, with funding showing no signs of slowing down. In slightly more positive news, Sweden’s AP1 pension fund (with around $37bn in assets) is divesting from fossil fuels.
State of the Climate
CO2 levels this week: 414.28 ppm
This time last year: 411.77 ppm
The locust swarms sweeping across East Africa have also spread into Asia, with Pakistan particularly hard-hit. The country has halved its estimates of economic growth for this year, as the insects decimate both wheat and cotton crops. That’s not taking into account further losses from the coronavirus pandemic, which will strain things yet more. The virus has slowed efforts to fight the insects in Africa, as reduced flights mean that pesticides are either more expensive or not possible to ship at all.
Loss of ice from the Greenland ice sheet was so severe last summer that it raised global sea levels by 2.2mm in just 2 months, with 600 billion tons of ice lost. A new study has found the Denman glacier in East Antarctica has retreated by 3 miles in 22 years. The glacier contains enough ice to raise sea levels by 5 feet, and due to the shape of the land beneath, scientists worry that melting rates could increase rapidly from now on.
Plans for a spaceport in the Scottish highlands have run into environmental opposition, as the planned facility would sit on the largest peat bog in Europe, which contains around 400m tons of carbon, and is home to numerous protected species.
Scientists hunting down a puzzling increase in the levels of banned CFCs (the ozone-depleting chemicals banned under the Montreal Protocol 30 years ago think they’ve found the source. Their research suggests old equipment containing the chemicals leaks over the years, and that there’s enough around to set back ozone recovery by as much as 6 years.
Visualisation of the Week
This week’s visualisation shows the levels of sea rise required to put a number of well-known coastal cities at risk.
Apart from the now ever-present spectre of COVID-19, one of the biggest stories has been the massive drop in oil prices, which is now beginning to have serious effects. Texas is considering imposing the first limits on its oil production in decades, as prices threaten to drop into single digits per barrel - a situation not seen since the early 1970s.
Canadian oilsands projects are also now in limbo, with some 45 projects previously approved now hanging in the balance as low prices and demand make them less and less viable. Unlike Trump, the Canadian government has yet to confirm a financial support plan for the oil and gas industry, although given its key place in the economy, it seems likely that some boost will come soon enough. Oilsands projects are some of the dirtiest and most expensive sources of oil, and are likely to be the first to crumble in the face of sustained low prices.
The CEO of Enel, a major Italian electricity provider, thinks that cheap oil might actually hasten the clean energy shift, as the economic argument for renewables has never been stronger. Others have suggested that given the vastly stronger position of renewables now versus previous crashes, renewables may actually be seen as the safe bet for investors fleeing from failing oil production.
It’s not all good - corn-ethanol biofuel is suddenly under massive pressure, as lowering oil prices have combined with booming corn prices to make the fuel much less competitive. Particularly in Brazil, the biofuel competes directly with fossil fuels, as many cars in the country have flex-fuel systems that can run on either.
In a novel turn of events, coal has suddenly become the world’s most expensive fossil fuel, as oil prices have now dipped below those of the solid fuel. Coal has been in decline for some time, but this may just be the final nail in the coffin.
As with any situation on this scale, the full implications of the low oil price aren’t entirely clear yet. The longer the low prices continue, the more promising the situation may become for renewables. There would be a certain irony in an excess of oil production hastening the demise of fossil fuels, but these are strange times indeed - anything is possible.
US vs the Climate
Exxon Mobil has lost an attempt to move one of the lawsuits against it to the district court. The case, brought by the Massachusetts Attorney General, accuses the company of hiding its early knowledge of climate change from the public and investors.
Lawmakers are debating whether to attach emissions conditions to potential bailouts of airlines - the massive payouts could be one of the best opportunities to establish such rules without massive industry pushback.
US traffic pollution has plummeted as people have been forced to stay at home in the current crisis.
Various industries are lobbying for relief from regulations during the current pandemic. Some are legitimate, but the coal industry in particular is trying to dodge mine cleanup payments as well as gain financial relief to keep loss-making power plants going.
The Solar Energy Industries Association has warned that the US solar workforce could be cut in half by the current crisis.
The US Department of Interior has sold off over 14,000 oil and gas leases in the Gulf of Mexico for $100m - the lowest price during the entire Trump presidency.
The Trump Administration is continuing with environmental rollbacks despite the current situation, refusing extensions for public comment periods despite numerous attempts by environmental groups.
Congress has proposed a bill to support the reuse and recycling of lithium ion batteries and critical minerals, as demand for rare earth metals skyrockets.
Carbon prices in Europe have plummeted as demand for electricity has dropped off a cliff. Prices have been further pushed down by traders suddenly dumping options on carbon permits that suddenly became valuable as the price fell.
China is considering delaying or relaxing emissions regulations on cars to help rekindle its car industry, which was already suffering before the current crisis.
A new study has found that EVs and heat pumps are less emissions intensive than their fossil-fueled brethren for around 95% of the world’s transport and heating demand. This is before any further decarbonisation of the grid, meaning eventual savings could be even greater in future.
Research flights planned as part of the MOSAiC Arctic expedition have had to be cancelled due to Norway’s travel restrictions. One participant in the flights has already tested positive for coronavirus causing delays.
The Agrochemical giant Monsanto was found to have secretly funded studies used to lobby against bans on its ‘Roundup’ weedkiller in Europe. The company has courted controversy for years, and was recently ordered to pay $2bn to individuals with cancer in the US after a series of lawsuits.
Climate change could reverse recent drops in inequality between countries, as the impacts of global warming will hit the poorest countries hardest.
CarbonBrief does another deep dive, this time on tree planting and forestry in the UK, analysing whether the government’s ambitious plans are realistic.
The story of how the kākāpō, one of the rarest birds in the world, was nursed through an infection that threatened to wipe out the entire species.
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 out there, isolate if you can, and try to stay sane amid these tumultuous times.
See you next week,