Introduction

Welcome to our two weekly review of energy and environmental events and developments from both here in New Zealand and around the world. As always, we hope you find our collection of articles to be of interest in what continues to be a rapidly evolving area.

We are sending out a ‘Special Edition’ of Snippets this week. It focusses on the tussle between the Renewables and the Fossil Fuel sectors, and between a purely economic model and an environmentally sustainable model for business. A major paradigm shift is essential if we are to keep temperature rises within the 2^oC maximum, but this won’t be easy, as it will need to overcome the ‘business as usual’ camp, or those who want to keep the rich becoming even richer, irrespective of the cost to the majority.

Our first series of articles focuses on what we see as the positives in this tussle – the view held by progressives that using renewable energy and incorporating sustainability into business models is a good thing. There is now widespread evidence of business beginning to change, with pension funds and even some cities divesting from fossil fuels, an increasing awareness of the possibility of stranded assets, the rise of large global companies shifting to renewables and supply chain sustainability transparency.

James Richen, in his article on Natural Capital Valuation, discusses how this provides a way to measure the benefits of a company’s sustainability programme, as well as the practical tools with which to implement it. Investors can then see a monetary value on the costs of sustainability initiatives in the business, and also how this will enable the business to avoid future costs of reputational damage, tighter regulations and higher insurance premiums amongst others. The article on ‘Reasons to invest in Climate Resilience’ also discusses these benefits and more.

In her article on Supply Chain Transparency, Heather Clancy notes that it can be a long process, but once implemented can enable companies to generate money in a more sustainable way, with stakeholders deep in the supply chain understanding the economic opportunities provided by sustainable resource management. Some very large global companies now have this as a policy, especially those who have a direct link to the end consumer. McDonalds is now requiring this transparency. Apple and Google are shifting out of fossil fuels and towards clean energy. It’s ‘just smart business’ to their leaders, and those of other large global companies.

Some cities are also divesting from fossil fuels and we have the example of Oslo, Norway that has done just this. Others are following suit – we understand that the City of London is about to do the same. PR Firms are also abandoning the fossil fuel industry, the likes of Edelman, one of the world's biggest. If it appears like it is one-way traffic, then it is because it is. The proverbial floodgates have truly opened.

However, fossil fuels still have a role to fulfil for the short to medium term, but rather as a transition fuel for renewables. That renewables are the future would now appear beyond any question, for example at the Geneva International Motor Show this month automakers vowed not to give up on electric vehicles, as they see them as the future, even though sales are currently relatively small. This, along with the “Great Sustainable Race” - a race around the globe without using fossil fuels, gives us hope for the future. The race will likely bring attention to many around the world, of a future without fossil fuelled vehicles. Jeremy Clarkson will probably shed a few tears.

With the UN’s Intergovernmental Panel on Climate Change, backed by 194 governments, recently concluding about 80% of all coal reserves are going to have to stay in the ground to tackle global warming, it’s worth noting the fossil fuel industry response.

At the beginning of this introduction, we presented this as a tussle and as in any good fight the other side is pushing back. As Mahatma Gandhi said “First they ignore you, then they laugh at you, then they fight you”. So it is with the fossil fuel industry and we examine their efforts to ramp up the attack against fossil fuel divestment.

The fossil fuel industry has hit back pointing out that over the past 50 years, investment portfolios containing fossil fuel companies have out-performed those without. But investors need to look forward. As Ben Caldecott, at the University of Oxford’s Smith School of Enterprise and the Environment says, “It is completely wrong to assume the drivers of stock performance in the last 50 years will be same for the next 50 years”.

The fossil fuel companies themselves are also talking things up. For example BP, one of the world’s six biggest oil and gas companies, says it expects global emissions of CO₂ to rise by a quarter in the next twenty years. Christiana Figueres, the executive secretary of the UN Framework Convention on Climate Change, said earlier this year that changing the world’s model of economic development would “not happen overnight and it will not happen at a single conference on climate change… It just does not occur like that. It is a process, because of the depth of the transformation.” We agree.

One thing for sure is that change is underway. The Bank of England recently added their voice to the concern over the stranding of fossil fuel assets. As Paul Fisher, deputy head of the bank’s prudential regulation authority, advises “As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels – a growing financial market in recent decades – may take a huge hit”. Not may, but WILL take a hit if they don’t divest. For example, Chinese concerns about the environmental damage being caused by burning coal has led to a dramatic slowdown in their demand for coal and the likelihood of stranded coal assets in Australia.

In the transition to renewables, capturing as much carbon as possible is essential. We examine some fuel cell technology that does just that by burning the leftover gas from coal fired power stations to generate electricity and then capture the carbon as a secondary part of the process. Very elegant.

Thanks for taking the time to read this issue and we look forward to catching up with you again. If you have any items of interest you would like to submit, then please feel free to forward them.