08/06/2021

(AU SMH) Survey Reveals A World Still Hooked On Coal Despite Best Intentions

Sydney Morning Herald - Nick O'Malley

Plans are in place to increase global coal capacity by almost a third of the 2019 total despite global ambitions to abandon it to reduce greenhouse gas emissions and meet the Paris Agreement goal of limiting global warming to 1.5 degrees.

The Mount Arthur coal mine near Muswellbrook in the Upper Hunter. Credit: Janie Barrett

The new coal capacity of 2277 million tonnes per annum, which includes both mines planned and those under construction, runs contrary to the International Energy Agency’s roadmap to global net zero emissions by 2050, which shows the world would need to reduce capacity by 11 per cent a year over the coming decade to hit Paris Agreement targets.

   
If all 432 new mines developments and expansions went ahead without unprecedented cutbacks in existing production over the next decade, proposed capacity could boost supply to over four times a 1.5 degrees-compliant pathway, according to a survey of the industry published on Friday by Global Energy Monitor, a United States-based environmental organisation.

Australia is one of the four nations with the biggest plans for new coal development, along with China, India and Russia. Together the four nations have 1750 million tonnes of coal mine capacity in the pipeline, or over three-quarters of the global total.

The world’s largest energy conglomerates, such as Glencore, Mechel, and BHP, remain invested in new mines and mine expansions, though small and independent firms have shown the greatest appetites for new projects, especially in Australia and Russia.

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About 70 per cent of the new coal capacity planned is for thermal coal used to make electricity, rather than metallurgical coal that is needed for steel production. Should the capacity come online, it would produce as much greenhouse gas emissions as the United States.

The report’s chief author Ryan Driscoll Tate said demand for coal is plummeting and financing for new coal projects is drying up.

“New mines and expansions of existing mines will be producing coal for a world in which coal is unviable economically and untenable for the environment,” he said.

The report comes as the Group of Seven wealthy nations increases its efforts to step away from coal. In May the G7 announced its members had agreed to end international finance of coal projects that emit carbon by the end of the year and to phase out all fossil fuels.

The Welzow-Sud open-cast coal mine in Germany’s Brandenburg state. Credit: The New York Times
The declaration was considered significant because it included the support of Japan which has wavered on the issue, and because it was made in the weeks before the coming G7 summit on June 11, to which Australia has been invited even though it is not a G7 member.

United Kingdom Prime Minister Boris Johnson, who is the host of both the G7 summit and this year’s COP26 climate talks in Glasgow, is expected to use the summit to push for increased climate action, particularly from Australia which is yet to announce a more ambitious 2030 emissions reduction emissions target.

The COP26 president Alok Sharma said in a speech in mid-May, “If we are serious about 1.5 degrees, Glasgow must be the COP that consigns coal to history… we are working directly with governments, and through international organisations, to end international coal financing. This is a personal priority. And to urge countries to abandon coal power, with the G7 leading the way.”

Prime Minister Scott Morrison has emphasised Australia’s preference to get to net zero by 2050 and the government’s so-called technology roadmap to achieve emission reductions without increasing taxes.

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A UK government official told the Sydney Morning Herald and The Age on Friday that Australia’s policies were not viewed as credible in climate diplomacy circles.

“You can have a roadmap to lose 10 kilos in six months, but if you’re not exercising now and if you’ve got no plans to start, it’s really hard to see how you are going to get there.”

She said Japan’s support for the G7’s declaration was particularly significant for Australia because it signalled a shift away from coal for Australia’s biggest coal customer.

Japan imports 170 million tonnes of coal each year, around 60 per cent of it from Australia, and burns around twice as much Australian coal as Australia does, according to a new report released by the Australia Institute this week.

Japan has 162 coal-fired power plants operating and a further 16 are planned for the future.

At a US-Japan Leaders’ summit in April, US President Joe Biden and Japanese Prime Minister Yoshihide Suga signed the US–Japan Climate Partnership on Ambition, Decarbonization and Clean Energy.

Japan announced it would cut its GHG emissions to 46 per cent below 2013 levels by 2030, with the aim of achieving a 50 per cent reduction.

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(UK The Telegraph) Climate Goals Caught In A Litigation Trap

The Telegraph - 

Energy giants are using international trade tribunals to claim damages over governments’ green policies

It was hailed as a “stunning victory” for climate change activists. A Dutch court last month ruled that Shell would have to cut its CO2 emissions by 45pc by 2030 compared to 2019 levels.

It was the first time a large company had been legally obliged to comply with the Paris Climate Agreement, marking what some said was a historic moment in the fight against global warming.

But this was just one victory in a wider political war. Behind the scenes a far more brutal battle has been playing out between politicians and corporations – one that threatens to derail climate targets all together.

Energy giants are increasingly using an obscure legal system to bypass domestic courts and sue governments for billions in earnings they deem to have been unfairly lost as a result of government action on climate change.

German energy giant RWE, for instance, is suing the Netherlands for €1.4bn (£1.2bn) for its plans to phase out coal. Uniper has filed a similar claim, while UK company Rockhopper is suing Italy over a ban on new oil and gas drilling near the country’s coast.

‘Chilling effect’

“They’re aiming at a chilling effect so the target is not just the Netherlands government, they are trying to send a warning signal to other governments,” says Jean Blaylock, a policy manager at campaign group Global Justice Now.

The legal rights to sue are written into thousands of investment treaties worldwide, including the Energy Charter Treaty (ECT), which allows companies to sue any of the 53 signatory countries – including the UK – if they feel they have been treated unfairly.

Oil rig platforms at sea. The UK is extremely vulnerable to legal action by the biggest polluting companies because it has fossil fuel infrastructure worth more than £120bn, according to analysis by Investigate Europe.  Credit: iStockphoto 
Politicians, keen to secure post-Brexit trade deals, are also continuing to consider them as part of free trade agreements.

The British trade minister recently confirmed that the legal mechanism, known as investor-state dispute settlement (ISDS), is being discussed in the final negotiations for the Australia-UK free trade agreement.

Proponents of ISDS say it encourages foreign investment because it stops governments from taking action that companies deem to be unfair.

But its impact could be devastating, experts warn. Blaylock says the ISDS is an “appallingly biased system” that gives large corporations a powerful tool to challenge decisions made following democratic processes. “It needs to be understood as completely disreputable for a company to use it.”

The UK is extremely vulnerable to this kind of legal action because it has fossil fuel infrastructure worth more than £120bn, according to an analysis by Investigate Europe.

Lawsuits expose gulf between polluters’ words and actions

In November, the UK will host the COP26 climate talks in Glasgow, where it is hoped that leaders will devise a global plan to drive greenhouse gas emissions to an average of zero to stabilise the climate.

“Everything good you envision coming out of [COP26] is in jeopardy if you don’t take proactive steps to remove this litigation trap that has been set in treaties that hardly anyone has ever heard of,” says Gus Van Harten, law professor at York University, Toronto.

The ISDS system was designed to protect corporations that invested in countries with uncertain legal situations from expropriation of assets and other mistreatment.

Its scope, however, is so broad that companies now use it to sue for compensation if government policy might affect current or future earnings, and has been used to challenge decisions where courts have ruled in favour of climate campaigners.

Fossil fuel demand goes into precipitous decline under the IEA's net zero scenario

Source: IEA
There is no cap on the damages that tribunals can award – which totalled $50bn (£35bn) in one case – and a state’s goods and assets abroad can be seized in payment.

Countries cannot use the system to sue companies, nor is it open to domestic companies. In practice, the only companies that can afford to bring cases are deep-pocketed multinational corporations and investors.

The lawsuits shine a light on the apparent gulf between companies’ words and actions on climate change. RWE, for example, has committed to becoming carbon neutral by 2040 and trumpets its €5bn (£4bn) investment in wind and solar power by 2022. But it remains Europe’s largest emitter of carbon dioxide and does not plan to stop burning lignite, the most polluting grade of coal, until 2038.

While the Netherlands can afford a costly lawsuit, Blaylock says developing countries might delay taking climate action for fear of being landed with legal bills they cannot pay.

China is by far the world's largest emitter of C02
Top 10 global carbon emitters in 2019 plus the UK (billions of tonnes C02)
Billions of tonnes C02
Source: Our World In Data/GCP/CDIAC
Even if the companies lose, she claims these cases could slow down action on climate change with devastating effects.

“In the context of the climate crisis, we’ve already wasted so much time. If it ends up being delayed for just another five years, we can’t afford that.”

Climate targets in jeopardy

Adriaan van der Maarel, a spokesman for RWE, said: “We are not against the phase-out of coal but we are against the fact that there is no compensation in this law.”

He says RWE is not trying to influence other governments’ actions on climate change.

Uniper says its case is focused on the legality of the Netherlands phasing out coal without compensation. It says it is not seeking a specific level of compensation, although the coal plant in question cost €1.6bn.

There have been attempts to reform the ECT but progress is slow and France and Spain, along with a number of MEPs from across the EU, have suggested withdrawing from the treaty, which they say poses a serious threat to their climate targets.

The UK’s Department for Business, Energy and Industrial Strategy says it supports efforts to modernise the ECT but would not be drawn on what that entails. A spokesman says: “The UK supports the work of the Energy Charter Treaty in promoting investment in the energy sector and fostering international energy cooperation, including in the development of renewable energy worldwide.”

As campaigners increasingly use the courts to push for a tougher response to climate change, governments now face legal action on two fronts: from companies, if they bring in policies to tackle climate change that damage earnings; and from campaigners, if policies are not considered sufficient to meet their commitments to meet the Paris climate agreement.

Greenhouse gas emissions targets
Source: Energy Systems Catapult 

Van Harten says that is another reason countries should remove themselves from treaties that include ISDS, but notes that not all forms of litigation are created equal.

“The tools available to people trying to protect their future by suing for climate action are vastly weaker than the tools available to fossil fuel companies.”

The imbalance risks undermining the world’s environmental efforts and setting countries back decades on their climate goals.

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(AU AFR) Global Bankers Warn Australian Investors On Carbon Risk

AFR - Jacob Greber

Australian government bond issuers, companies and boardrooms face an accelerating global push towards forced disclosure of climate risks that investors warn could hamper or raise the cost of the country’s access to global capital.

A major meeting late last week of central bankers – organised and hosted by the Switzerland-based Bank for International Settlements – and a separate G7 finance ministers’ meeting in London on Sunday also put Australian regulators as well as state and federal treasurers on notice that international scrutiny of carbon risks and emissions could soon become mandatory.

US Treasury Secretary Janet Yellen and OECD Secretary-General Mathias Cormann at this weekend’s G7 summit that included a new call for better climate change financial disclosures. AP
The global shift, which has quickened following the election of Joe Biden and ahead of this year’s UN climate summit in Britain later this year, raises the stakes for Australian money managers, particularly if the country fails to counter a deepening global perception that it is a laggard on climate policy.

“There’s active discussion going on at the G7, G20 and central banks are co-ordinating, and if Australia is not careful and takes a wait-and-see approach, many of our international institutions are going to be covered by mandatory regimes,” said Erwin Jackson, director of the Sydney-based Investor Group on Climate Change, whose members include industry and retail super funds overseeing more than $2 trillion in assets.

“We’ll have a dog’s breakfast for investors and companies because we won’t have the clarity we need to play in those markets,” Mr Jackson said.

While Australia’s prudential regulators are increasingly telling companies that expectations on disclosures are rising – including remarks last week by ASIC commissioner Cathie Armour to resources companies – Mr Jackson said there is an urgent need for a co-ordinated approach.

“There’s an exponential rate of growth in these kind of measures going on globally and we need clarity from Australia and Australian regulators about what Australia’s role is going to be.”

G7 pledges to ‘green the financial system’

The Reserve Bank of Australia and Treasury are understood to be monitoring developments closely and have found themselves answering questions about Australia’s fossil fuel exports from foreign counterparts that buy sovereign debt. So far, the Australian government has been silent on the latest global developments.

Group of Seven finance ministers and central bank chiefs declared after their meeting that there is a growing need to “green the financial system so that financial decisions take climate considerations into account” and backed calls for mandatory climate-related financial disclosures on a uniform basis.

The group said in a post-meeting statement that there is growing demand for more information on the impact that firms have on the climate and the environment.

“We recognise that many jurisdictions and organisations are already developing impact reporting initiatives, including but not limited to reporting on net zero alignment and broader sustainability metrics.”

Officials pose after the G7 meeting. From left: EU Economy Commissioner Paolo Gentiloni, Eurogroup President Paschal Donohoe, World Bank President David Malpass, Italian Finance Minister Daniele Franco, French Finance Minister Bruno Le Maire, Canadian Finance Minister Chrystia Freeland, British Chancellor of the Exchequer Rishi Sunak, IMF Managing Director Kristalina Georgieva, German Finance Minister Olaf Scholz, US Treasury Secretary Janet Yellen, Secretary-General of the OECD Mathias Cormann and Japanese Finance Minister Taro Aso.

The G7 push was bolstered by the world’s most powerful central bank chiefs, who attended the BIS’ virtual Green Swan summit, underscoring a twin challenge for Australian governments and companies; momentum is growing for global standards of disclosure, and that costs may rise for sovereign debt issuers in economies with high carbon emissions.

European Central Bank President Christine Lagarde told the BIS summit that central banks would be failing to do their jobs if they didn’t account for climate when understanding and measuring inflation.

“We would be failing on our mandate if we do not measure the impact that climate change has on the assets that we hold, on the assets that we buy, and on the collateral that we have in stock,” Ms Lagarde said.

US Federal Reserve chairman Jerome Powell said that “anything that can affect the outlook for the economy can, in principle, affect monetary policy”.

“So climate change would certainly qualify for that.”

China to make climate disclosure mandatory

People’s Bank of China Governor Yi Gang urged the world’s politicians to ramp up efforts to make global finance more green and revealed China has plans to make disclosure of climate and carbon emissions mandatory in future.

“Our goal is to make a uniformed disclosure standard, and in the future, we will go in the direction of mandatory disclosure of climate-related information,” said People’s Bank of China governor Yi Gang.  AP

“Our goal is to make a uniformed disclosure standard, and in the future, we will go in the direction of mandatory disclosure of climate-related information,” Mr Yi said on Friday.

The remarks underscore the degree to which central banks and regulators are becoming entangled in questions of how and whether to manage the consequences of climate change on financial markets and assets. Such comments were rare even a year ago.

France’s central bank governor, François Villeroy de Galhau, told the Financial Times last week that talks between government and central bank officials on new climate risk disclosure rules were progressing faster than expected.

He also implied an international framework could be agreed in time for November’s UN COP26 climate conference in Glasgow.

“Proper disclosure should become mandatory – I would expect this as a first step,” he said. “Nobody expected six months ago for us to go as quickly as we did and to say perhaps we could have a positive conclusion on mandatory disclosure at the COP26.”

Developments are ‘significant and fast moving’

Bank of England governor Andrew Bailey said the central bank’s interest rate setting committee for the first time discussed the economics of climate change.

“When it comes to climate change, we cannot stand still,” Mr Bailey told the BIS conference. “We need to continue to be bold and learn from our work so far to deepen our understanding and inform future actions.”

Simon O’Connor, chief executive of the Responsible Investment Association Australasia – which led the establishment of last year’s Australian Sustainable Finance Initiative to help banks and insurers increase transparency on climate risks – described the weekend’s BIS and G7 meetings as “significant and fast moving”.

“You’ve got the major global central banks sitting around talking about climate change and the financial consequences,” Mr O’Connor said. Meanwhile, the “climate conversation in Australia misses the global shift”.
I would be boggled if we are immune from those trends and we’re already showing we’re not.
— Tennant Reed, Australian Industry Group
“But unfortunately, our capital markets are linked globally. All our banks and insurers have to navigate this and it’s made difficult for our country not having strong nationalised targets in place.

“It means we have to navigate global regulatory requirements without a strong net zero trajectory in Australia.”

Australian companies are already adjusting to the looming changes, particularly across resources and energy sectors, said Tennant Reed, Australian Industry Group’s principal national advisor on public policy.

“And that’s been happening more or less in the absence of a national policy requirement,” he said. “This has been happening in the private sector and a sense of growing awareness from financial regulators and [Australian state] treasuries that this was important.”

Creating standard governance and disclosure rules around climate will also depend on the size of businesses involved, Mr Reed said, adding the government is already encouraging voluntary reporting.

Whether those efforts are enough for offshore jurisdictions is an open question.

“If these expectations become cemented overseas, inevitably that is going to affect Australian finance and businesses which are deeply intertwined with overseas operations in overseas jurisdictions.

“I would be boggled if we are immune from those trends and we’re already showing we’re not.”

Mr Jackson cautioned there is a significant financial danger for Australia in taking a wait-and-see approach to the global developments.

“Traditionally we’ve allowed [global] regulatory standards to sit for a while and p

lay out – we’re no longer in that environment.”

“We need financial regulations to keep up, and it’s emerging as one of the key planks for the role governments can play unlocking trillions in low-carbon investments.

“Global capital markets will come to Australia when they feel more confident the disclosures being put forward are real and actionable,” Mr Jackson said.

“Investors aren’t going to come to countries where disclosure is very poor.”

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