Australian Business Woefully Unprepared For Climate Change Post Paris Agreement

Fairfax - Julien Vincent*

On Friday, the Paris climate change agreement comes into legal force. It signals profound changes to energy and resources markets that, frankly, a lot of companies look woefully unprepared for.
The goal of the Paris agreement is to contain global warming to well below two degrees above pre-industrial levels.

How does the insurance industry prepare for climate change?
Elizabeth Bryan, chairman of the Insurance Australia Group, talked up the need for infrastructure investment in communities before damaging climate change related weather events happen on Wednesday's Australian Financial Review & J.P Morgan Chanticleer lunch.

The Carbon Tracker Initiative has pointed out that the amount of booked coal, oil and gas consumption is already multiples above what can be safely burned in this "below 2°C warming" scenario.
Even the International Energy Agency said five years ago that by 2017, no investment could be made in fossil fuel electricity generation unless it was zero carbon.

The vast majority of companies seem intent to continue with their current business model. Photo: Dallas Kilponen

No  new fossil fuel power stations? Stranded assets sitting on the books of coal, oil and gas companies? Sounds like cause for concern, especially when considering the rather placid response from the fossil fuel sector so far.
This concern has been underscored over the past week, first with the former Bank of England deputy Paul Fisher describing a sudden repricing of assets due to climate change action as a possible trigger for the next financial crisis.
Then this week, Sydney barrister Noel Hutley, SC, released a memorandum of opinion, explaining how directors are legally bound to consider and act upon climate change risks to their business.

Suspicious rosiness
To their credit, some companies have attempted to understand how they might fare in an economy that is aiming to hold global warming below two degrees, stress testing their assets and operations against this scenario.

Barack Obama and Leonardo DiCaprio discuss climate change in Before The Flood. Photo: National Geographic

While they all seem to turn out suspiciously rosy, that's a discussion for another day. The vast majority of companies have no plan and seem intent to continue with their current business model, regardless of the risks.
Take, for instance, three oil and gas companies with annual general meetings coming up in the next few weeks.

If investors want us to believe they can deliver real change through engagement, now would be a good time to prove it. Photo: Tanya Lake

Karoon Gas, Senex Energy and AWE are continuing to explore for additional fossil fuel reserves, embedding this practise into their DNA by offering six-figure bonuses to their CEOs for meeting exploration and reserve replacement objectives.
Already, this incentive doesn't seem to be doing the companies much good. Karoon, for instance, wrote off $150 million in exploration expenditure last year, but are still offering chief executive Bob Hosking another $450,000 to continue this unsustainable practise.

Sydney barrister Noel Hutley, SC. Photo: Michele Mossop

No surprise then to see Karoon jumping on Brazil's policy change to open up oil reserves to foreign investors, and venturing into deepwater oil exploration in the Great Australian Bight, a move that even BP has backed away from.
AMP Capital points out that remuneration structures tell us "not only who but also what a company values". Whether explicit or not, incentives like these are commonplace in the fossil fuel industry, and driving activity that is about as incompatible with the goals of the Paris agreement as you can get.
Its easy to criticise these outdated bonuses but let's remember they exist not just because boards offer them to executives, but they are voted for by investors, including super funds, which together own 20 per cent or more of all ASX300 companies.

No sense
Many of these funds shun the idea of divestment because they believe they have a better chance of reforming a company through active ownership and engagement. Sounds nice, but in lieu of evidence that's a hard one to take seriously.
Even harder when you look at the voting records of super funds that clearly appreciate the significance of climate change, but continue to vote for executive bonuses that incentivise fossil fuel exploration efforts that make as much sense as pouring a bucket of water into an overflowing sink.
Last year, the lowest vote for any of the three oil and gas companies mentioned earlier was for Senex Energy, whose remuneration report passed with 96 per cent support.
If investors want us to believe they can deliver real change through engagement, now would be a good time to prove it.
Even before the Paris agreement was signed, communities around the world made it clear that urgent action was needed to minimise the damage that climate change poses to humanity.
Now with Paris coming into force, the scrutiny on companies and their investors exposed to climate change risks will only intensify.
You've foreseen the risk. What are you going to do next?

*Julien Vincent is executive director of Market Forces 

Watch Before the Flood until 6th November.


Links

• Global markets prepared for Trump, another GFC? Not sure: Bank of England veteran
• Adani mine would wipe out Direct Action gains within a year: Estimates
• Departing green finance chief says Australia must improve on climate
• Million new jobs in prospect by 2040 even as emissions dive: study

Climate Change And The Risks Of Denying Inconvenient Truths

Financial Times - Martin Wolf

That it was not thought worth raising in the US presidential debates is astounding

Nature does not care what we think about it. Indeed, nature does not care about us at all. But we should care about nature. Above all, we should care about nature if our actions are affecting it adversely. Probably the most important way in which we are affecting nature is via the climate. Yet our response is foolish denial and fond hope. Nature will not be impressed.

What nature is doing at present is heating the planet. Of this no serious doubt remains. The global warming “pause” of 1998-2013 is definitively over. Even before recent temperature rises to the highest on record, the notion of a pause was absurd. In 1998 there was a strong El Niño — a feature of which is high global temperatures. What was remarkable is that the years after 1998 remained so hot.

Both last year and this one, with another strong El Niño, temperatures have hit records. A straight line between the peaks of January 1958 and February 2016 lies above the temperature in all intervening months. The same is true for a line drawn between March 1990 and February 2016. Twelve-month and 60-month moving averages give a similar picture. No slowdown in underlying rates of temperature rises is happening. After this El Niño another purported pause might occur — but probably at a higher average level than during the previous one. (See charts.)

Just as the world is hitting peak temperatures (relative to the 1951-80 average and pre-industrial levels), so is it hitting peak concentrations of carbon dioxide in the atmosphere. This year, the global average will almost certainly pass 400 parts per million, which is more than 40 per cent above pre-industrial levels. Given the well-known physics of the greenhouse effect, the causal relationship between the rising concentrations of greenhouse gases and consistently rising temperatures is at the very least overwhelmingly plausible.

Finally, we also know that the rise in concentrations of carbon dioxide are sure to continue, and for a long time. This is because emissions have themselves continue to rise, despite the talk about bringing them under control. So not only are the stocks of carbon dioxide continuing to rise but even the emission flows from human activities.

It is a remarkable fact that, given these simple truths, the question of climate change was barely addressed in the US presidential debates. This is not because it cannot matter. It is not because the candidates do not disagree. It is because few wish to think about the implications of these realities.

The two dominant responses to the evident reality of climate risks are denial. But they are very different forms of denial. I think of them as “denial major” and “denial minor”.

“Denial major” comes from the right. It starts from two facts and one supposition. Fact one is that many of the people who take climate change seriously are very suspicious of — if not downright hostile to — the market economy. Fact two is that climate change implies a costly global spillover from market-driven economic activity. The supposition is that doing anything to mitigate climate change must entail massive interference in the market economy and impose large economic costs.

The natural conclusion is that the idea of man-made climate change has to be fraudulent because the possibility of its truth is too painful to contemplate. It would be possible for those who want no action to agree, instead, that climate change is true but not worth any action. The drawback of this is that it would force a discussion about why doing nothing makes sense.

“Denial minor” comes from those who recognise the evident dangers but argue that tackling climate change effectively is a relatively low-cost and simple challenge. This, too, is implausible. Even if, as some argue, the technologies needed to sustain economic growth while progressively eliminating carbon emissions are either here or arriving at ever-falling cost, the political, social and economic challenge of delivering a decisive break in these trends is daunting. It is too easy to get away with applauding what are in fact little more than gestures in the direction of tackling climate risks as if they are the real thing.

The much-praised Paris agreement of December 2015 is not only toothless but would fall far short even of keeping temperature rises below 2C, let alone below the 1.5C thought more desirable. This has to be a global effort of appropriate scale and urgency. Otherwise nothing relevant would change.

“Denial major” guarantees failure. It is what a President Donald Trump would take with him into the White House. Under him, the US would presumably abandon the modest steps taken under President Barack Obama. But the US is not just the world’s second-largest emitter; it is one of the biggest emitters per head. Without the US, the effort to reduce climate risks would be dead. That this was not thought worth even raising in the debates is astounding.

A President Hillary Clinton would not be guilty of “denial major” but is likely to indulge in “denial minor”, substituting modest gestures for policies able to bring credible change.

Indeed, without at least a start on carbon pricing and a determination to develop technologies far faster, the necessary shift in trends could not happen in time. The world would then have to adapt to the consequences of climate shifts it did not have the capacity to mitigate.

It is impossible to have just a US climate policy or a Chinese climate policy. It has to be a global policy. Much has changed in attitudes since the UK government published the Stern review a decade ago. But little has yet altered on the ground. Only if we collectively recognise and act upon the realities right now is anything much likely to change. On this, I remain pessimistic.

Links

• Hope on Marrakesh talks to limit global warming
• BlackRock calls for higher carbon price to tackle climate change
• Renewables overtake coal as world’s largest source of power capacity
• Big companies fail to meet carbon goals

Four Environmental Reasons Why Fast-Tracking The Carmichael Coal Mine Is A Bad Idea

The Conversation - April Reside | Bonnie Mappin | James Watson | Sarah Chapman | Stephen Kearney

Abbot Point port would have to be expanded to ship coal from the proposed new mine. AAP Image/Greenpeace

Pressure is mounting for Adani’s Carmichael coal mine to proceed in inland Queensland. Recently the state government quietly gave the project “critical infrastructure” status to prioritise its development.
Providing this level of government status to a private enterprise is unusual – the last time it happened was in the early 2000s, and it is usually reserved for projects associated with national security, public education and health.
In response to delays and finance issues, Adani has also reportedly scaled back its initial proposal to increase the mine’s viability. There are also growing political calls to weaken the ability of environmental groups to challenge infrastructure projects.
Others have commented on the mine’s issues around employment, finance, and indigenous and rural communities. But as ecologists, there are four good reasons why we believe the mine should not go ahead.

Climate change
To meet the obligations under the Paris climate agreement to limit warming to well below 2℃, it is widely accepted that 90% of Australia’s coal will need to stay in the ground.
The proposed extraction of 2.3 billion tonnes of coal from the Carmichael mine flies in the face of global efforts to stop climate change. The emissions from the coal from this one mine would exceed 0.5% of the entire global carbon budget – the total amount of carbon than can be emitted without exceeding 2℃ warming.
Put another way, the 4.7 billion tonnes of greenhouse gas emissions associated with the mine will be equivalent to nine times Australia’s overall emissions in 2014.
Yet these emissions have been given little consideration in the mine’s approval process. Adani’s Environmental Impact Statement makes little reference to the mine’s “downstream” emissions, and Australia’s former environment minister Greg Hunt, in his reasons for approving the mine, said the emissions would be “managed and mitigated through national and international emissions control frameworks”, including in those countries that import the coal.
Following an appeal challenging Hunt’s assertion that these emissions would have no directly quantifiable impact on the Great Barrier Reef, the Federal Court found that the minister was entitled to find that the burning of the coal will have no relevant impact on the reef.

The Great Barrier Reef
The shipping of coal from the Carmichael mine is contingent upon redeveloping the shipping port at Abbot Point, which requires dredging the seabed.
Following public opposition to dumping dredge spoil at sea, the most recently approved proposal is to dredge 1.1 million cubic metres of the seabed and dump the spoil on land next to the Caley Valley Wetlands.
The wetlands are important habitat for at least 22 migratory shore birds listed under the national environmental legislation, so the current plan is still contentious.
The current plan to dump the dredge spoil on land still won’t save the reef because the actual dredging process removes the seabed, along with the seagrass and animals that survive there.
Dredging also releases fine sediments, reducing water quality while smothering surrounding seagrass beds and coral reefs, with some models predicting the spread of fine sediments up to 200km from where the activity took place, within 90 days.
Corals exposed to dredge material are twice as prone to suffer disease. Improving water quality is a key factor for increasing the resilience of coral reefs to major bleaching events.

Water
The Carmichael Mine as currently proposed would extract 12 billion litres of water each year. Removing this water to access the coal seam will reduce water pressure in the aquifer (rock that stores water underground), with knock-on effects. The mine is situated close to the Great Artesian Basin, a key resource for agriculture across inland Australia
For instance, this drawdown could reduce water reaching the Mellaluka and Doongmabulla Springs Complexes, which have exceedingly high conservation value. These springs are some of the largest examples remaining and provide habitat for many species of specialised plants that are only known from spring-fed wetlands.
If the springs go dry, even temporarily, endemic species will not survive and will become extinct at the site.
Removing groundwater is expected to increase the duration of zero- or low-flow periods in the Carmichael River system. The communities and ecosystems in the region are already highly reliant on groundwater, due to variable surface waters. This could also affect the acidity and salinity of soils.
Clearing the land for the mine itself – an area equivalent to Queensland’s Moreton Island - will likely reduce local rainfall considerably.
Due to the high uncertainty surrounding groundwater, the independent scientific committee recommended improvements in groundwater modelling and monitoring before proceeding with the project. The high degree of uncertainty and inadequate treatment of groundwater impacts in the Environmental Impact Statement were the subject of legal proceedings in the Land Court in 2015.

Threatened species
The Carmichael mine site is home to the largest known population of the endangered southern Black-throated finch (Poephila cincta cincta), which has lost 80% of its former habitat.
The intact areas of continuous habitat in this region - such as that at the mine site - have so far remained in good condition and relatively free of the invasive weed species that are contributing to the finch’s decline in other parts of its range.
The Black-throated Finch Recovery Team highlighted their concern over the Carmichael development with state and federal agencies.

Conservationists have expressed concerns over the mine’s impact on the black-throated finch. Eric Vanderduys, Author provided

Adani has proposed to offset the loss of finch habitat resulting from the mine by protecting alternative, nearby habitat. But losing the best remaining habitat means the most viable population will be compromised. Experts have warned that offseting the loss of habitat from mine development will not avoid serious detrimental impacts on the finch.
Keeping this habitat intact, continuous and unfragmented will be key to maintaining its suitability for the finch. The only way to avoid severely impacting the finch is to avoid destroying its high-quality habitat – which would mean not digging the mine in these areas.

A brighter future
Giving the mine “critical infrastructure” status allows special dispensations to ignore normal approval processes. And this decision sends a signal to the wider community that this type of short-term thinking is front and centre in the state government’s mind.
Given the clear environmental impacts this mine will have, not just for the region but for the whole planet, we question the effectiveness of Australia’s current environmental laws that have allowed it to be approved. We believe it is time to place the entire social and environmental costs and benefits of this mine on the public table, and ask the question of the politicians who are meant to make decisions in our best interest: is the short-term profit of selling some coal worth it?

Links

• Greg Hunt approves Adani’s Carmichael coal mine, again: experts respond
• Approval of Australia’s largest coal mine ignores climate and water
• Mounting evidence shows dredge spoil threat to the Great Barrier Reef
• Adani court case leaves the climate change question unanswered