The multi-trillion dollar global fossil fuel industry continues to believe that nothing much will change, despite the push to lock in ambitious climate policies in Paris next month, and the emergence of new technologies that completely change the energy market.
A new report “Lost in Transition, How the energy sector is missing potential demand destruction” from the London-based Carbon Tracker Initiative points out that Big Oil, and Big Coal, want investors to back their multi-billion dollar projects on the basis of a false hope: that nothing will change.
This is despite pledges already made in the lead up to the Paris climate change conference that even the conservative International Energy Agency says will result in minimal growth in emissions between now and 2030 – meaning little growth in the market for coal, oil and gas plants.
As Carbon tracker’s James Leeton describes it, the big fossil fuel giants are not just trying to kid their consumers – as VW did through its massive diesel emissions fraud – they are also trying to kid themselves and their investors.
Leeton points out nine assumptions of “business as usual” made by Big Oil and Big Coal in defending their belief that the use of oil, coal and gas will grow by up to 50 per cent in the next few decades, and still account for 75 per cent of the energy mix in 2040.
“Fossil fuel industry thinking is skewed to the upside, and relies too heavily on high demand assumptions to justify new and costly capital investments to shareholders,” Leeton says.
“We have seen in recent weeks how the fossil fuel sector has misled consumers and investors about emissions — the Volkswagen scandal being a case in point — and deliberately acted against climate science for decades, judging from the recent Exxon expose.
“Why should investors accept their claims about future coal and oil demand when they clearly don’t stack up with technology and policy developments?”
The Carbon Tracker analysis suggests that the fossil fuel industry is too optimistic on a range of assumptions, including population and economic growth, and completely ignores the recent climate pledges from more than 150 nations.
Indeed, the fossil fuel industry – and some government policy making such as Australia’s recent energy white paper – relies on the IEA’s “new policies scenario”, which essentially means business as usual. It misses 100GT of reduced emissions from the Paris pledges.
Big Oil and Big Coal also ignore the technology and structural change sweeping global markets. The speed and scale of advancements in the competitiveness of renewable energy technologies is exceeding expectations, particularly in the case of battery storage. “The synergy between energy storage and renewable energy technologies has the potential to transform energy markets, but is not being factored into fossil fuel scenarios,” it says.
This is not just the fault of the fossil fuel interests themselves, but a whole infrastructure and network of agencies and institutes that have guided energy policy, and continues to be ultra conservative.
The IEA continues to get it wrong. New reports about the potential growth of solar are effusive, but it is still accused of underestimating its potential cost reductions and growth rates. One study suggested it was because it always assumed linear rather than exponential growth rates.
Still, its latest report, an assessment of individual country pledges to the Paris conference, known as INDC (, the IEA says this represents a significant deviation from business as usual, with energy-related GHG emissions to plateau or be in decline by 2030, including the EU, the US, China, Japan, Korea and South Africa. This is despite a 40 per cent increase in overall demand.
It says that by 2030, there will still be 42GT of energy related emissions across the globe. The proposed Carmichael coal mine, for instance, could account for 6GT of emissions. Even the Bank of England has pointed to the risk of stranded assets, noting that the majority of fossil fuel reserves need to be left in the ground to meet climate targets and adhere to the “carbon budget.”
“The incumbents are taking the easy way out by exclusively looking at incremental changes to the energy mix which they can adapt to slowly,” Carbon Tracker’s senior analyst and co-author, Luke Sussams, said.
In Australia, this trend has been reflected in conservative estimates on technology costs, and a bias towards “conventional fuels” over new technologies. The networks and government regulators over inflated demand forecasts, resulting in a $75 billion spend on poles and wires when demand actually remained static.
There is now a major push for nuclear, partly justified by optimistic cost estimates from the Bureau of Resource and Energy Economics that completely ignore the experience in other deregulated markets in Europe and the US.
The trend continues, with a new report by the Australian Energy Market Commission and CSIRO predicting slow take-up of battery storage and electric vehicles over coming decades, despite predictions by financial analysts, and agencies such as the Climate Council, which predict rapid and widespread take up within a decade.
The AEMC used the analysis to conclude that its policy regime is solid enough – with maybe a few small adjustments – to cope with the introduction of new technologies.
Most independent analysts differ, saying that policy makers and regulators are hopelessly behind, and risk repeating the same mistakes that were made with rooftop solar, despite the endless warnings.
