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Resilient Societies or Fossil Fuel Bailouts?

By staff - Oil Change International - April 22, 2020

The COVID-19 crisis poses a threat to people’s health, their jobs and their lives, and like all crises, exacerbates already existing inequalities. Trillions in public finance will be needed to get through the current pandemic. This briefing outlines why continuing to rely on fossil fuels, in particular oil and gas, is not compatible with long-term recovery. It does not make sense to use the COVID-19 stimulus packages to try to revive a sunsetting industry which will not deliver on economic recovery, only to shut it down a few years later to meet climate goals.

Governments now face a choice: fund a just transition away from fossil fuels that protects workers, communities, and the climate — or continue funding business-as-usual toward climate disaster. Governments should invest in a green recovery that protects and creates long lasting jobs, resilient economies and accelerates climate action. This briefing details why this is the most effective route for recovery and lays out the dos and don’ts for governments in their response to the current crisis.

Key Recommendations (DO’s):

  • Ensure national and international equity and a just transition is at the heart of any government response to the current crisis.
  • Protect workers and communities affected by the crisis, including those in the oil and gas sector, and create long-lasting green jobs by investing in resilient infrastructure and emerging low carbon industries that will continue to create jobs for decades.
  • Ensure Green New Deal frameworks provide the basis for stimulus packages to help rewrite the social contract in a people-centered response to the current crisis. 
  • End fossil fuel subsidies and finance and ensure any carbon price reflects climate and equity imperatives in order to ensure renewables remain competitive and incentivize efficient energy use in light of low oil prices while supporting a just transition.
  • Introduce oil and gas production caps as a first step to limiting emissions. The world is running out of storage capacity and production limits are needed to ensure a managed decline of the industry.
  • Make decision-making processes and response measures transparent in order to allow public scrutiny.
  • Bring the oil and gas industry into public ownership in the right circumstances, as it may be the most straightforward path to ensure a just transition for workers and communities and a managed phase-out.
  • Link any support provided to the industry to a requirement to align with climate goals and plan for a managed decline.
  • Ensure the polluter pays principle is upheld. Broadly speaking, over the past few decades, the financial rewards of the industry have been privatized, while the risks have been socialized.

Key Pitfalls to Avoid (DON’Ts):

  • DON’T bail out oil and gas companies or increase fossil fuel subsidies.
  • DON’T bail out other polluting industries, such as the aviation and shipping industries.
  • DON’T continue the construction or operation of fossil fuel infrastructure at the expense of the health of workers and communities.
  • DON’T roll back existing policies or regulations, or extend licensing agreements.
  • DON’T delay responses to the climate crisis amid the flurry of immediate priorities. If anything, the current pandemic has shown that a crisis demands a timely response to prevent it from escalating further.

While the fossil fuel sector may struggle to return to business as usual, without policies aimed at emerging from the crisis with a cleaner energy system, surviving companies may be in a position to capitalize on rising oil prices as the cycle turns. There are currently no safeguards against a future price spike and subsequent return to the volatile boom-bust cycle. This briefing advises governments to adopt recovery measures that will ensure a just transition off oil and gas, accelerate climate goals and build resilient societies, and center people instead of corporate executives and shareholders — all while tackling today’s parallel health, economic, and climate crises at once.

Read the report (PDF).

The Future of Alberta's Oil Sands Industry: More Production, Less Capital, Fewer Jobs

By Ian Hussey - Parkland Institute, March 2020

Major restructuring and consolidation of the Alberta-dominated Canadian oil and gas industry has been taking place since 2014 (Hussey et al. 2018), when the lower-for-longer oil price scenario in which the province still finds itself began.

This report explores the employment, capital spending, and operational spending implications of the ongoing restructuring and consolidation of the industry. More specifically, the report explains that oil sands industry maturation—which was significantly advanced over the latest commodity cycle—means there has been a recent shift in the industry from its growth phase (2000–2018) to its mature phase (2019 onward).

Read the report (Link).

Fossil Futures: The Canada Pension Plan's Failure to Respect the 1.5-degree Celsius Limit

By James K. Rowe, Steph Glanzmann, Jessica Dempsey and Zoë Yunker - Canadian Centre for Policy Alternatives, November 2019

THE WORLD’S LARGEST PENSION FUNDS comprise over half of global investment capital. The Canada Pension Plan Investment Board (CPPIB) manages one of the country’s largest pools of investments, at $400 billion. How pension funds choose to invest has significant bearing on how we collectively address the climate emergency and the needed energy transition away from fossil fuels. In this report we ask: Is the CPPIB investing with the 1.5-degree Celsius limit on global average temperature rise in mind?

In April 2016, Canada was among 195 countries that signed the Paris Agreement, committing to “holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius.”

Our major finding is that the CPPIB is not investing with the 1.5-degree limit in mind. Within its public equities portfolio, it has over $4 billion invested in the top 200 publicly traded fossil fuel reserve holders (oil, gas and coal). To stay within 1.5 degrees, these companies can extract only 71.4 billion tonnes of carbon dioxide, yet the companies the CPPIB is invested in have 281 billion tonnes in reserve, meaning they have almost four times the carbon reserves that can be sold and ultimately burned to stay within 1.5 degrees. Since reserves are factored into current company valuations, this means the CPPIB has invested billions of dollars in companies whose financial worth depends on overshooting their carbon budget.

This is a moral and ecological failure. It is also a financial risk. As energy generation shifts away from fossil fuels, investors who do not respond could be left with “stranded assets”—investments that are no longer profitable. In its 2019 Financial System Review, the Bank of Canada included climate risk in its analysis for the first time. Canadian fossil fuel companies and their investors are especially exposed to stranded asset risk since the majority of oil produced in Canada is high-cost, carbon-intensive bitumen from the oil sands. And yet, the CPPIB remains exposed to the biggest oil sands majors, with over $1.2 billion invested in Canadian Natural Resources Ltd., Suncor Energy Inc. and Cenovus. Canadian pension beneficiaries may therefore be particularly vulnerable to stranded assets and the financial risks they pose.

Read the report (PDF).

Remaking Our Energy Future: Towards a Just Energy Transition (JET) in South Africa

By Richard Halsey, Neil Overy, Tina Schubert, Ebenaezer Appies, Liziwe McDaid and Kim Kruyshaar - Project 90 by 2030, September 19, 2019

A just transition (JT) is a highly complex topic, where the overall goal is to shift to systems that are better for people and the planet, and to do so in a fair and managed way that “leaves no one behind”. A JT is about justice in the context of fundamental changes within the economy and the society.

Both of these areas are extremely contested, consensus is hard to achieve, and people are generally resistant to change. A JT confronts “business as usual” and threatens powerful vested interests in certain economic sectors. In recent years, a vast amount of literature on the subject has been published, and in South Africa the conversation has picked up pace. The urgency of acting now is indisputable.

While a JT can apply to many sectors and industries, this publication focuses on energy. In addition to being a major contributor to climate change, environmental damage and impacts on human health, the energy sector (particularly Eskom), is facing significant challenges in South Africa. We fully acknowledge that energy is linked to other sectors such as transport, agriculture, water and land use, and that a just energy transition (JET) is a part of a wider JT. While the focus of this report is on one sector, we do so recognising that it is linked to other parts of a larger system in many ways.

Our approach was to look at what we can learn from international experience, to combine that with what has already been done in South Africa, and to make recommendations about how to move forward. This publication focuses on the shift from coal to renewable energy (RE), mainly for electricity generation. We are well aware that a movement away from fossil fuels (coal, oil and gas) is far more than just moving from coal to RE, but as discussed in Chapter 3, this particular transition is the obvious starting point in South Africa. The lessons and recommendations presented here can also be adapted to other fossil fuel sectors. While the focus of this study is on coal, a big picture perspective of the energy system is crucial. South Africa must adopt an integrated planning approach, for energy and other sectors.

Read the text (PDF).

The Huntley Experiment

By Richard Lipsitz and Rebecca Newberry, Labor Network for Sustainability, May 9, 2017

As the Huntley coal-fired power plant in Tonawanda, NY, a working class suburb of Buffalo, NY, began cutting back on its production, the company began cutting back on its payments to the town; as a result, three schools were closed and 135 school employees lost their jobs. The workforce at the plant was slashed from 125 to 75. In response to the likely closing of the plant, the Kenmore-Tonawanda Teachers Association, the IBEW, the Western New York Area Labor Federation, and the Clean Air Coalition formed the Huntley Alliance.

They won funding from the new state Fossil Fuel Plant Closure Fund to offset lost tax revenue. And they are continuing to campaign for jobs and/or retraining for those employed at the plant and reuse of the plant for activities that will enhance the economic and cultural life of the community. Richard Lipsitz, President of the Western New York Labor Federation, and Rebecca Newberry, Executive Director of the Clean Air Coalition of Western New York, tell the inside story of this successful effort in “Huntley, a Case Study: Building Strategic Alliances for Real Change.”

[Full Text] of the case study

Fuel to the Fire: How Geoengineering Threatens to Enrich Fossil Fuels and Accelerate the Climate Crisis

By Carroll Muffett and Steven Felt - Center for International Environmental Law, February 2019

The present report investigates the early, ongoing, and often surprising role of the fossil fuel industry in developing, patenting, and promoting key geoengineering technologies. It examines how the most heavily promoted strategies for carbon dioxide removal and solar radiation modification depend on the continued production and combustion of carbon-intensive fuels for their viability.

It analyzes how the hypothetical promise of future geoengineering is already being used by major fossil fuel producers to justify the continued production and use of oil, gas, and coal for decades to come. It exposes the stark contrast between the emerging narrative that geoengineering is a morally necessary adjunct to dramatic climate action, and the commercial arguments of key proponents that geoengineering is simply a way of avoiding or reducing the need for true systemic change, even as converging science and technologies demonstrate that shift is both urgently needed and increasingly feasible. Finally, it highlights the growing incoherence of advocating for reliance on speculative and risky geoengineering technologies in the face of mounting evidence that addressing the climate crisis is less about technology than about political will.

Read the report (Link).

The Sky's Limit: Why Denmark Must Phase Out North Sea Oil and Gas Extraction

By Bronwen Tucker, et. al. - Oil Change International, September 2019

Over the past thirty years, Denmark has positioned itself as a global climate leader through its policies to support wind power, district heating, and energy efficiency, amongst other actions.5Building on this, in June 2019, the newly elected Danish government committed to a new climate target of reducing emissions 70 percent below 1990 levels by 2030, surpassing its previous goal of 40 percent by 2020.

However, Denmark’s plans to expand North Sea oil and fossil gas extraction undermine this record of climate action. This is because the potential carbon emissions from the oil, gas, and coal in the world’s currently operatingfields and mines would already fully exhaust and exceed carbon budgets consistent with the Paris goals. Simply put, we cannot afford to bring new extraction online — in Denmark or anywhere else.

This report applies these stark global carbon budget limits to the outlook for oil and gas production in Denmark. We find that Denmark’s plans to allow new North Sea oil and gas projects in the 2020s and 2030s would undermine its aspirations of climate leadership. The carbon dioxide (CO2) emissions from burning Danish-produced oil and gas would be substantial, overtaking Denmark’s total expected domestic CO2 emissions from energy by mid-2025 (see Figure 1, with details on the domestic reduction curves in Section 1). In other words, if current plans to expand North Sea extraction are left unaddressed, Denmark will either (a) meet its domestic emissions targetsbut export oil and gas with associated emissions that overshadow this domestic progress, or (b) fail to meet its emissions targets and continue to consume more oil and gas domestically than is Paris-aligned.

Source: Oil Change International analysis based on data from Rystad UCube, Danish Energy Agency, and 92 Group.8There is a cumulative 665 million tonnes (Mt) of CO2 associated with Danish oil and gas between 2019 and 2050. Of these potential CO2 emissions, 401 Mt of CO2 would come from new projects yet to be developed that would peak between the mid-2020s and mid-2030s. This means over 60 percent of anticipated emissions related to Denmark’s oil and gas extraction in the coming decades are not yet committed — the projects they are associated with will either require new licenses from the Danish government or final investment decisions (and final government approval) to be developed.

Read the report (PDF).

Banking on Climate Change: Fossil Fuel Finance Report 2020

By Alison Kirsch, et. al. - Rainforest Action Network, et. al., January 2019

Financial companies are increasingly being recognized — by their clients, shareholders, regulators, and the general public — as climate actors, with a responsibility to mitigate their climate impact. For the banks highlighted in this report, the last year has brought a groundswell of activism demanding banks cut their fossil fuel financing, at the same time that increasingly extreme weather events have further underscored the urgency of the climate crisis.

This report maps out case studies where bank financing for fossil fuels has real impact on communities — from a planned coal mine expansion in Poland, to fracking in Argentina, to LNG terminals proposed for South Texas. Short essays throughout highlight additional key topics, such as the need for banks to measure and phase out their climate impact (not just risk) and what Paris alignment means for banks. Traditional Indigenous knowledge is presented as an alternative paradigm for a world increasingly beset with climate chaos. November’s U.N. climate conference in Glasgow, on the fifth anniversary of the adoption of the landmark Paris climate agreement, will be a crucial deadline for banks to align their policies and practices with a 1.5° Celsius world in which human rights are fully respected. The urgency of that task is underlined by this report’s findings that major global banks’ fossil financing has increased each year since Paris, and that even the best future-facing policies leave huge gaps.

Read the report (PDF).

Drilling Towards Disaster: Why US Oil and Gas Expansion is Incompatible With Climate Limits

By Kelly Trout and Lorne Stockman - Oil Change International, et. al., January 2019

World governments, including the United States, committed in 2015 in the Paris Agreement to pursue efforts to limit global average temperature rise to 1.5 degrees Celsius above pre-industrial levels and, at a maximum, to keep warming well below 2 degrees Celsius (°C). This report is part of The Sky’s Limit series by Oil Change International examining why governments must stop the expansion of fossil fuel production and manage its decline – in tandem with addressing fossil fuel consumption – to fulfill this commitment.

The global Sky’s Limit report, released in 2016, found that the world’s existing oil and gas fields and coal mines contain more than enough carbon to push the world beyond the Paris Agreement’s temperature limits. This finding indicates that exploring for and developing new fossil fuel reserves is incompatible with the Paris goals. In fact, some already-operating fields and mines will need to be phased out ahead of schedule.

Since the global Sky’s Limit report in 2016, new scientific evidence has added urgency to this call for a managed decline of fossil fuel production. The latest report from the Intergovernmental Panel on Climate Change warns that reaching 2°C of warming would significantly increase the odds of severe, potentially irreversible impacts to human and natural systems, compared to limiting warming to 1.5°C. The difference could be the wipeout or resilience of whole communities and ecosystems. The report underscores that a 1.5°C path is possible but will require “rapid and far- reaching” transitions and “deep emissions reductions in all sectors” so that carbon pollution nears zero by 2050.

Unfortunately, existing climate measures aren’t cutting it – literally. Current national policy pledges under the Paris Agreement would put the world on course for 2.4 to 3.8°C of warming, a catastrophic outcome.

This glaring gap in ambition has been driven in part by a systemic policy omission. Over the past three decades, climate policies have primarily focused on addressing emissions where they exit the smokestack or tailpipe. Meanwhile, they have largely left the source of those emissions – the oil, gas, and coal extracted by fossil fuel companies – to the vagaries of the market.

Basic economics tells us that the consumption of any product is shaped by both supply and demand. It follows that reducing supply and demand together, or ‘cutting with both arms of the scissors,’ais the most efficient and effective way to reduce a harmful output. Putting limits on fossil fuel extraction – or ‘keeping it in the ground’ – is a core yet underutilized lever for accelerating climate action.

Curbing the supply of fossil fuels does not mean turning off the taps overnight. Rather, it means stopping new projects that would lock in new pollution for the coming decades. It means managing an orderly and equitable wind-down of existing fossil fuel infrastructure and extraction projects within climate limits. It makes it possible to plan for a just transition for workers and communities.

If the world is to succeed in meeting the Paris goals, this type of comprehensive and clear-eyed approach is urgently needed everywhere, and particularly in the United States – one of the world’s top producers and users of fossil fuels.

Read the report (PDF).

A New Horizon: Innovative Reclamation for a Just Transition

By various - Reclaiming Appalachia Coalition, 2019

The certainty of an Appalachian transition has become self-evident. The questions that remain are “What shape will that transition take?” and “Will our region seize the opportunity to establish just and sustainable economic models that invest in our strengths and set the region up for meaningful and healthy participation in the new economy?” Foundational to our coalition’s work is the understanding that specific, targeted intervention is necessary to ensure that an equitable vision becomes reality.

Appalachia is at the threshold of a paradigm shift into the new economy, ushered in by communities that are taking their futures into their own hands like never before and implementing innovative ways to address long-standing economic issues with degraded lands. The table on page 6 shows funded projects illustrating this shift that have been supported by our coalition, ranging from ecotourism, renewable energy, arts and culture, and creative waste recycling.

This report highlights the successes achieved in 2019 from previously submitted projects and showcases a brand new round of innovative projects. We’re very excited about both the successes that have already been funded and implemented, as well as the new opportunities that are currently being considered for Abandoned Mine Lands (AML) Pilot funding.

Read the report (Link).

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