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Decline and Fall: The Size & Vulnerability of the Fossil Fuel System

By Kingsmill Bond, Ed Vaughan, and Harry Benham - Carbon Tracker, June 4, 2020

Renewable costs are below those of fossil fuels. Five years ago, fossil fuels were the cheapest baseload. The collapse in renewable costs means that for 85% of the world, renewable electricity is the cheapest source of new baseload. By the early 2020s it will be every major country. Because of the rise of cheap renewables, the fossil fuel system is ripe for disruption. This disruption will be have profound financial implications for investors as a quarter of equity markets and half of corporate bond markets are ‘carbon entangled’.

Those responsible for our pension schemes should sit up and take notice; but even greater concern should be felt by financial regulators, as they grapple with finding the right tools to manage the risks of a deflating ‘carbon bubble’.

The world faces two contrasting pathways. Either it can secure the ‘trillion dollar green gigafall’, the trillions that can be generated at low cost from the sun and the wind – particularly benefiting the poorest inhabitants of the world currently dependent upon high cost fossil fuel imports. Or it can stay locked into business as usual, tied into a declining industry that both threatens the global economy with the worst effects of a warming planet, and damages investors with losses, low returns and destabilised equity and credit markets.

In Carbon Tracker’s first report, some ten years ago, entitled ‘Unburnable Carbon – are the World’s Financial Markets Carrying a Carbon Bubble’ we highlighted that listed fossil fuel companies have the potential to develop enough reserves to take the world way beyond 3˚C. Our second report, ‘Unburnable Carbon – Wasted Capital and Stranded Assets’, noted that if we can’t burn what we have already found, why continue to invest in the fossil fuel industry’s expansion? Yet today, we know that some $1 trillion is spent annually on expanding supply and this report goes more into these numbers. Before we wind down the fossil fuel system, we need to stop expanding it.

Some argue that ‘fossil fuels will go away of their own accord’ as the result of the rapid progress made by cleaner technologies and the collapse in demand for fossil fuels driven by the terrible COVID-19 epidemic. Unfortunately, as this report makes clear, financial markets are still heavily tied in to the fossil fuel system.

Read the report (PDF).

Still Digging: G20 Governments Continue to Finance the Climate Crisis

By Bronwen Tucker and Kate DeAngelis - Oil Change International and Friends of the Earth - May 2020

In 2015, governments around the world committed to hold global warming to well below 2 degrees Celsius (°C) and to strive to limit warming to 1.5°C by adopting the Paris Agreement. This analysis shows that since the Paris Agreement was made, G20 countries have acted directly counter to it by providing at least USD 77 billion a year in finance for oil, gas, and coal projects through their international public finance institutions. These countries provided more than three times as much support for fossil fuels as for clean energy.

With the health and livelihoods of billions at immediate risk from COVID-19, governments around the world are preparing public spending packages of a magnitude they previously deemed unthinkable. In normal times, development finance institutions (DFIs), export credit agencies (ECAs), and multilateral development banks (MDBs) already had an outsized impact on the overall energy landscape and more capacity than their private sector peers to act on the climate crisis. In the current moment, their potential influence has multiplied, and it is imperative that they change course. The fossil fuel sector was showing long-term signs of systemic decline before COVID-19 and has been quick to seize on this crisis with requests for massive subsidies and bailouts.1 We cannot afford for the wave of public finance that is being prepared for relief and recovery efforts to prop up the fossil fuel industry as it has in the past. Business as usual would exacerbate the next crisis— the climate crisis—that is already on our doorstep.

Read the report (PDF).

Alberta’s Coal Phase-out: A Just Transition?

By Ian Hussey and Emma Jacksonn - Parkland Institute, November 2019

This report explains that Alberta will have little coal-fired electricity left by the end of 2023, six years ahead of the federally mandated coal phaseout deadline of December 31, 2029. This relatively rapid transition away from coal power is the result of numerous decisions made since 2007 by various provincial and federal governments, a few arms-length agencies of the Alberta government, and several large publicly traded corporations that produce electricity for the Alberta market. Our report aims to evaluate Alberta’s electricity transition to date against principles and lessons gleaned from the just transition literature.

Following the introduction, the report proceeds as follows. In Section 2, we provide an overview of Alberta’s coal power industry, communities, and workforce. In Section 3, we delineate key principles and lessons from the just transition literature. In Section 4, we present case studies on the three companies affected by the Notley government’s accelerated coal phase-out (TransAlta, ATCO, and Capital Power). We examine the Notley government’s transition programs for coal workers in Section 5 and for coal communities in Section 6. Section 6 also includes a case study of Parkland County, which is the municipal district in Alberta perhaps most affected by the phase-out of coal-fired electricity. In Section 7, we provide an analytic discussion of our research results by evaluating the government’s transition programs against the key principles and lessons drawn from the just transition literature. In Section 8, we outline our conclusions based on the research results.

Read the report (Link).

Sea Change: Climate Emergency, Jobs and Managing the Phase-Out of UK Oil and Gas Extraction

By Greg Muttitt, Anna Markova, and Matthew Crighton - Oil Change International, Platform, and Friends of the Earth Scotland, May 2019

This new report released by Oil Change International, Platform and Friends of the Earth Scotland shows that a well-managed energy transformation based on Just Transition principles can meet UK climate commitments while protecting livelihoods and economic well-being, provided that the right policies are adopted, and that the affected workers, trade unions and communities are able to effectively guide these policies.

This report examines the future of UK offshore oil and gas extraction in relation to climate change and employment. It finds that:

  • The UK’s 5.7 billion barrels of oil and gas in already-operating oil and gas fields will exceed the UK’s share in relation to Paris climate goals – whereas industry and government aim to extract 20 billion barrels;
  • Recent subsidies for oil and gas extraction will add twice as much carbon to the atmosphere as the phase-out of coal power saves;
  • Given the right policies, job creation in clean energy industries will exceed affected oil and gas jobs more than threefold.

In light of these findings, the UK and Scottish Governments face a choice between two pathways that stay within the Paris climate limits:

  1. Deferred collapse: continue to pursue maximum extraction by subsidising companies and encouraging them to shed workers, until worsening climate impacts force rapid action to cut emissions globally; the UK oil industry collapses, pushing many workers out of work in a short space of time. Or:
  2. Managed transition: stop approving and licensing new oil and gas projects, begin a phase-out of extraction and a Just Transition for workers and communities, negotiated with trade unions and local leaders, and in line with climate change goals, while building quality jobs in a clean energy economy.

The report recommends that the UK and Scottish Governments:

  • Stop issuing licenses and permits for new oil and gas exploration and development, and revoke undeveloped licenses;
  • Rapidly phase out all subsidies for oil and gas extraction, including tax breaks, and redirect them to fund a Just Transition;
  • Enable rapid building of the clean energy industry through fiscal and policy support to at least the extent they have provided to the oil industry, including inward investment in affected regions and communities;
  • Open formal consultations with trade unions to develop and implement a Just Transition strategy for oil-dependent regions and communities.

Read the text (PDF).

Realizing a Just and Equitable Transition Away From Fossil Fuels

By Georgia Piggot, Michael Boyland, Adrian Down, and Andreea Raluca Torre - Stockholm Environment Institute, January 2019

Meeting agreed climate goals requires a rapid decarbonization of the global energy system, which in turn necessitates a reduction in fossil fuel production. While limiting fossil fuel use will likely bring a multitude of societal benefits — related to reduced climate risks, sustainable economic growth, air quality and human health — it is important to recognize that not everyone will benefit equally from a transition to a low-carbon economy. In particular, those who rely on fossil fuel production for their livelihood, or who were anticipating using fossil-fuelled energy to meet development needs, may carry a disproportionate share of the burdens of an energy transition.

The need for a “just transition” to a low-carbon economy — namely, a transition that minimizes disruption for workers and communities reliant on unsustainable industries and energy sources — is gaining traction in climate policy and political discourse. A call for “a just transition of the workforce” was included in the preamble to the Paris Agreement, and the United Nations Framework Convention on Climate Change (UNFCCC) secretariat has prepared a technical paper on transition planning.10 In addition, several national and regional governments have recently announced new transition planning processes, including Canada, Germany, Spain, Scotland, New Zealand, and the European Union.

A central concern of just transition efforts is to ensure that low-carbon transitions address social and economic inequality. The UNFCCC calls for a transition that “contribute(s) to the goals of decent work for all, social inclusion and the eradication of poverty.” Likewise, the European Commission aims to “boost the clean energy transition by bringing more focus on social fairness.” And the Scottish Government is seeking a transition that “promotes inclusive growth, cohesion and equality.”

Key messages:

  • Governments are introducing new “just transitions” policies to help workers and communities move away from fossil fuels.
  • Most policies assume that justice goals will be achieved by helping those dependent on coal, oil and gas move into new roles; however, there is little critical reflection on what justice means in the context of an energy transition away from fossil fuels.
  • There are a number of gaps in current just transition policies when viewed through a justice lens. For example, no policies contain measures to improve the lives of people currently marginalized in the energy system.
  • Creating just and equitable transition policies requires collecting data on the current distribution of the harms and benefits of the energy system, and mapping out how this will change as fossil fuels become a less-prominent part of the energy mix.
  • By taking justice considerations into account, transition policies are more likely to limit social and political resistance, win a broad consensus, and achieve effective implementation.

Read the text (PDF).

Just cuts for fossil fuels? Supply-side carbon constraints and energy transition

By Philippe Le Billon and Berit Kristoffersen - Economy and Space, November 2018

Reducing greenhouse gas emissions has generally been approached through demand-side initiatives, yet there are increasing calls for supply-side interventions to curtail fossil fuel production. Pursuing energy transition through supply-side constraints would have major geopolitical and economic consequences. Depending on the criteria and instruments applied, supply cuts for fossil fuels could drastically reduce and reorient major financial flows and reshape the spatiality of energy production and consumption. Building on debates about just transitions and supply constraints, we provide a survey of emerging interventions targeting the supply of, rather than the demand for, fossil fuels. We articulate four theories of justice and selection criteria to prioritize cuts among fossil fuel producers, including with regard to carbon-intensity, production costs, affordability, developmental efficiency, and support for climate change action. We then examine seven major supply-constraint instruments, their effectiveness, and possible pathways to supply cuts in the coal, oil and gas sectors. We suggest that supply cuts both reflects and offers purposeful political spaces of interventions towards a 'just' transition away from fossil fuel production.

Read the text (PDF).

What’s the plan?

By Hannah McKinnon - Oil Change International, November 1, 2017

Why we can’t hide from the discussion about a managed decline of fossil fuel production.

It is clear that the end of the fossil fuel era is on the horizon. Between plummeting renewable energy costs, uncharted electric vehicle growth, government commitments to decarbonization enshrined in the Paris agreement, and a growing list of fossil fuel project cancellations in the face of massive public opposition and bad economics, the writing’s on the wall.

The question now becomes: What does the path from here to zero carbon look like? Is it ambitious enough to avoid locking in emissions that we can’t afford? Is it intentional enough to protect workers and communities that depend on the carbon-based economy that has gotten us this far? Is it equitable enough to recognize that some countries must move further, faster? And is it honest enough about the reality that a decline of fossil fuels is actually a good thing?

In short – will this be a managed decline of fossil fuel production, or an unmanaged decline? What is the plan?

Let’s take a closer look:

Restoring the Heartland and Rustbelt through Clean Energy Democracy: an Organizing Proposal

By Steve Ongerth - IWW Environmental Unionism Caucus, April 29, 2017

The world faces a crises of enormous proportions. Global warming, caused by the continued burning of fossil fuels, threatens life on Earth as we know it, and yet, those most responsible for causing the crisis, the fossil fuel wing of the capitalist class, seems hell bent on doubling down on business as usual. In the United States of America, whose corporate overlords are among the worst offenders, they are led by the recently elected Donald Trump, whose cabinet is bursting at the seams with climate change denialists and fossil fuel capitalist industry representatives. Instead of transitioning to a clean energy economy and decarbonizing society as quickly as possible, as climate scientists overwhelmingly recommend, Trump and his inner circle would seemingly rather not just maintain the status quo; they’ve signaled that they intend to make the worst choices imaginable, putting all of the US’s energy eggs into the oil, natural gas, and coal basket.

Worse still, Trump claims to enjoy a good deal of support for such moves from the Voters who elected him, which includes a good portion of the "White working class" who have traditionally supported the Democratic Party, whose policies are just barely more favorable to addressing the problems of global warming (which is to say, still woefully inadequate). Meanwhile, the leadership of the AFL-CIO, pushed principally by the Building Trades unions, have doubled down on their efforts to continue to serve as capital’s junior partners, even as the latter continues to liquidate them in their ongoing campaign of systemic union busting.  Just recently, science teachers across the country began to find packets in their school mailboxes, containing a booklet entitled "Why Scientists Disagree About Global Warming", a DVD, and a cover letter urging them to "read this remarkable book and view the video, and then use them in your classroom," courtesy of the climate change denialist Heartland Institute.

One might think, given all of these situations, that…well, to put it mildly…we’re doomed. However, nothing could be further from the truth. In fact, in spite of the bleakness of these circumstances, a deeper look behind them reveals that fossil fuel capitalism is in terminal decline, that their hold over our lives hangs by a thread, so much that we the people, the workers and peasants of the world, have the ability to transform the human existence to one based not on plundering the Earth and exploiting the masses for the profit of a few, but one based on true grassroots democracy, free of suffering and want, and one that exists in harmony with the Earth. The key to making this transformation lies with clean energy, and the people who can make this transformation are the very people who helped elect Donald Trump themselves. One may justifiably ask, how is this even remotely possible?

This new organizing proposal, Restoring the Heartland and Rustbelt through Clean Energy Democracy, offers a potential solution and practical steps to achieve it which can not only break the reactionary tide, perhaps once and for all, but also can greatly accelerate the very necessary process of abolishing capitalism and building a new, ecological sustainable world in the shell of the ecocidal old by building an intersectional movement championing "Clean Energy Democracy". Such a movement has the potential to unite workers, rural and rustbelt communities, climate justice activists, environmentalists, indigenous peoples, and farmers of all backgrounds and revitalize a vibrant and grassroots democratic anti-capitalist left, and it offers goals that help address the intertwining crises of global warming, decadent capitalism, failing economies, and demoralized communities plagued by economic depression, racism, and reactionary nationalism.

While the burgeoning "resistance", loosely led by a coalition of groups and movements with a smorgasbord of goals and demands, many of which are reformist and defensive (though not undesirable if seen as steps along the way to more revolutionary and transformative demands) has so far successfully held back much of the worst intentions of Trump and the forces he represents, making the latter fight tooth and nail for every single inch (as well they should), such resistance still lacks the positive vision needed to truly meet the needs of most people, including especially the most oppressed and downtrodden. By contrast, Restoring the Heartland and Rustbelt through Clean Energy Democracy offers one piece of a revolutionary and transformative vision that can truly help build a new world within the shell of the old, thus putting an end to capitalist economic oppression as well as the ongoing systematic destruction of the Earth's ability to sustain life.

Download the Proposal (PDF File).

Standing Rock in Tacoma, Washington

By Sarah Morken - The North Star, April 16, 2017

Tacoma has been one of the main dumping grounds for polluting industry in western Washington. We are home to nine EPA Superfund clean up sites.

This week we gathered on the Tacoma tide flats outside outside the site where Puget Sound Energy (PSE) is preparing to build the nations largest fracked gas storage plant (Liquid Natural Gas or LNG). There were members of the Puyallup Tribe, Standing Rock Tribe, the Palouse Tribe and their non-native allies from local political and environmental groups. We were about 50 people coming and going. The protest was hosted by Tacoma Direct Action and sponsored by Redline Tacoma, Save Tacoma Water and Green Party Tahoma. This was the first local protest actually at the site.

Takes More Than Prayer

James Rideout, member of the Puyallup Tribe and geoduck diver started the protest with a prayer and a song, with help from Jesse Nightwalker a member of the Palouse Tribe. James asked how far we were willing to go to fight this project, reminding us that it was going to take more than prayer, reminding us about what happened in Standing Rock.

ILWU

We stood on the four corners at the intersection located between the LNG site and Totem Ocean Trailer Express (TOTE). TOTE is supposedly one of the primary customers of the LNG. We handed out flyers to Longshore workers (ILWU 23) as they drove through the gate at TOTE and also to other port workers as they drove by. Some of the cars drove past without stopping, but many of them took our flyers. Most of them were not even aware of the project. They weren’t aware that their union leadership supports the project. The decision to support LNG was voted on at a general membership meeting without effort to truly inform the members on the issue. The union has been helping with the million dollar greenwashing campaign for PSE.

Interestingly, ILWU 23 sent a delegation with supplies and money to Standing Rock showing solidarity with the Water Protectors against the oil and gas industry there. Can the dockworkers be convinced to stand in solidarity with the Puyallup Tribe right here at home? Or will they instead support the the oil and gas industry? In my opinion, it would be helpful if Puyallup Tribe members ask their Tribal Council to set up a meeting with ILWU 23 and have a conversation about this. As union members, as the working class, our natural allies are fellow exploited/oppressed/discriminated people, like Native Americans, not Puget Sound Energy!

Can Coal Make a Comeback?

By Trevor Houser, Jason Bordoff, and Peter Marsters - Columbia Center on Global Energy Policy, School of International and Public Affairs, and the Rhodium Group, April 2017

From the introduction: Six years ago, the US coal industry was thriving, with demand recovering from the Great Recession, and global coal prices at record highs along with the stock prices of US coal companies. By the end of 2015, however, the industry had collapsed, with three of the four largest US miners filing for bankruptcy along with many other smaller companies. While coal mining employment has been on the decline for decades – from a peak of more than 800,000 in the 1920s to 130,000 in 2011 – the pace of job loss over the past six years has been particularly dramatic. After campaigning on a promise to end what he called his predecessor’s “War on Coal,” President Donald Trump signed an Executive Order in March 2017 ordering agencies to review or rescind a raft of Obama-era environmental regulations, telling coal miners they would be “going back to work.”

This paper offers an empirical diagnosis of what caused the coal collapse, and then examines the prospects for a recovery of US coal production and employment by modeling the impact of President Trump’s executive order and assessing the global coal market outlook. In short, the paper finds:

  • US electricity demand contracted in the wake of the Great Recession, and has yet to recover due to energy efficiency improvements in buildings, lighting and appliances. A surge in US natural gas production due to the shale revolution has driven down prices and made coal increasingly uncompetitive in US electricity markets. Coal has also faced growing competition from renewable energy, with solar costs falling 85 percent between 2008 and 2016 and wind costs falling 36 percent.
  • Increased competition from cheap natural gas is responsible for 49 percent of the decline in domestic US coal consumption. Lower-than-expected demand is responsible for 26 percent, and the growth in renewable energy is responsible for 18 percent. Environmental regulations have played a role in the switch from coal to natural gas and renewables in US electricity supply by accelerating coal plant retirements, but were a significantly smaller factor than recent natural gas and renewable energy cost reductions.
  • Changes in the global coal market have played a far greater role in the collapse of the US coal industry than is generally understood. A slow-down in Chinese coal demand, especially for metallurgical coal, depressed coal prices around the world and reduced the market for US exports. More than half of the decline in US coal company revenue between 2011 and 2015 was due to international factors.
  • Implementing all the actions in President Trump’s executive order to roll back Obama-era environmental regulations could stem the recent decline in US coal consumption, but only if natural gas prices increase going forward. If natural gas prices remain at or near current levels or renewable costs fall more quickly than expected, US coal consumption will continue its decline despite Trump’s aggressive rollback of Obama-era regulations.
  • While global coal markets have recovered slightly over the past few months due to supply restrictions in China and flooding in Australia, we expect this rally to be short-lived. Slower economic growth and structural adjustment in China will continue to put downward pressure on global coal prices and limit the market opportunities for US exports. Indian coal demand will likely grow in the years ahead, but not enough to make up for the slow-down in China. The same is true for other emerging economies, many of whom are negatively impacted by decelerating Chinese commodities demand themselves.
  • Under the best case scenario for US coal producers, our modeling projects a modest recovery to 2013 levels of just under 1 billion tons a year. Under the worst case scenario, output falls to 600 million tons a year. A plausible range of US coal mining employment in these scenarios ranges from 70,000 to 90,000 in 2020, and 64,000 to 94,000 in 2025 and 2030 -- lower than anything the US experienced before 2015.

These findings indicate that President Trump’s efforts to roll back environmental regulations will not materially improve economic conditions in America’s coal communities. As such, the paper concludes with recommendations for steps that the federal government can take to safeguard the pension and health security of current and retired miners and dependents and support economic diversification. Attracting new sources of economic activity and job creation will not be easy, and even at its most successful will not return coal country to peak levels of past prosperity.

But responsible policymakers should be honest about what’s going on in the US coal sector—including the causes of coal’s decline and unlikeliness of its resurgence—rather than offer false hope that the glory days can be revived. And then support those in America’s coal communities working hard to build a new economic future.

Read the text (PDF).

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