Fossil fuel giants still betting trillions on nothing changing

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New report says fossil fuel industry is betting on business-as-usual demand for coal, oil and gas, despite the emergence of new technologies, and the individual country commitments to the Paris climate change talks.

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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.

 Global coal demand is also in structural decline. China has shifted its energy system to such a degree that peak coal demand could occur in the very near-term. India has an ambitious short-term solar PV plan (160GW of solar and wind by 2022) that, by Carbon Tracker’s calculations, could displace 158 million tonnes – roughly India’s total coal imports in 2012.
The report also takes issue with the Big Coal marketing line, eagerly repeated by the Turnbull government in defence of the Carmichael mine and the Galilee Basin coal province, that coal is an answer to global energy poverty.
It points out that two countries with large numbers of people without power – India and Indonesia – have large amounts of coal but have not been able to build the infrastructure. And many other countries, particularly in Africa, have no access to coal.
“Coal is not the most appropriate solution for these countries to try and connect the rural poor with power because expensive new grid and importing infrastructure would be needed,” it says. “The poor will not save coal demand.”
The analysis also says the fossil fuel industry is completely ignoring the potential take up of electric vehicles, suggesting negligible take up by 2040.
To illustrate the conservative nature of “industry” and agency forecasts, Carbon Tracker uses this graph showing how the IEA completely missed the solar market, which incidentally had been accurately forecast by NGOs such as Greenpeace.

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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.

 The IEA says that Paris pledges mean that more than 60 per cent of new power generation out to 2030 is expected to come in the form of renewable energy. This amounts to $US4 trillion, with one third in wind power, one third in solar, and one quarter in hydro. It suggests an extra $US1 trillion is needed to meet 2C climate targets.

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.

“The real threat lies in the potential for low-carbon technologies to combine and transform society’s relationship with energy. This is currently being overlooked by Big oil, coal and gas.”

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.

 

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49 Comments
  1. Doug Cutler 4 years ago

    Wile E. Coyote is about to look down and find nothing beneath his feet.

    • John McKeon 4 years ago

      or … in the old money … The Emperor Has NO Clothes …

  2. Reality Bites 4 years ago

    Gee NEWS BREAK: an anti carbon activist bleats on about how carbon companies want BAU! In case Leeton did not know it, it has not been BAU for coal companies or even oil and gas for a number of years now. The sector is in decline in the developed world and even now in the worlds biggest market China. Of course the fossil entities will say big things are happening! This is exactly why the fossil fuel sector must be a part of COP21. They represent around 40% of the worlds energy mix and need to be part of the longer term plan rather than denial of the other on both sides.

    • Pedro 4 years ago

      I would be sure that the FF industry would be welcome at the COP21 if they are prepared to be constructive. They could start by not funneling millions of dollars into climate change denier think tanks.

      • Reality Bites 4 years ago

        Well the activists have mounted a campaign to ban all FF entities! Sort of like holding peace talks in the middle east with one side attending and the other not welcome. Would the activists also be constructive? The unrelenting chorus I am hearing…. exterminate coal, with extreme prejudice.

        • Pedro 4 years ago

          I think FF fuel interests will be well represented by many pro FF politician/nations attending. Australia for one leading the pack. A better analogy may be having a lung cancer conference with the tobacco industry represented.

          Perhaps one of the contributing factors to these climate summits and COP21 being taken more seriously by politians is due to climate activists. You are also an activist bleating a differing opinion.

          • Reality Bites 4 years ago

            You make some good points, however I just believe that a lot of what is said by the anticoal activists is delusional. The fact is coal is still a large chunk of the energy mix and renewables and storage are not yet the total solution. When they have storage sorted, then I would totally agree that coal should go.

          • John McKeon 4 years ago

            So let’s take away the diesel fuel subsidies for coal mining. Let’s resolve not in any way to help Adani tear up our artesian water basin in central Queensland.

            Whose side are you Really on???

          • Reality Bites 4 years ago

            John, they have been mining for hundreds of years, all around the world and very successfully protected artesian basins, so that is a furphy. I am on the side of reality. Pedro is maybe right, RE is not there yet and, in my opinion, it will be much more than 15 years and more like 30 years. If we stop the coal sector, most of the existing thermal coal mines will be shut within the next 10 years, so better buy a diesel genset and stock up on diesel. And in my opinion it’s Fossil Fool Subsidies.

          • John McKeon 4 years ago

            ” … they [Adani???] have been mining for hundreds of years, all around the world and very successfully protected artesian basins, so that is a furphy.”

            Ohh, Paleeeeeeeeeeeeeez …..

            How much do you get paid per word to be a troll in this space???

            Right out of George Orwell’s “Newspeak” …….. the corporates have managed to engender “Newspeak” to a finer, toxic art than even Joe Stalin’s Russia.

          • MaxG 4 years ago

            Spot on too 🙂

          • Mark Roest 4 years ago

            Your opinion is wrong. It will be about 17 years — 2 to reach the turning point in competitiveness to the extent that it’s absolutely undeniable, and 15 to roll it out globally. Read The Chasm Theory of Marketing and skip to the Tornado of Demand.

          • Pedro 4 years ago

            There would be those on the very fringe of anti FF activists that delusionaly think we can shut down FF generated power literally overnight. The majority are rational and a 15-30 year time frame to transition from FF power to largely RE is achievable and reasonable with the political will.

            The FF power industry has all the tools and advantages to be a major player and profit from the RE transition. BP and Shell did manufacture good quality panels at the time. What happened there? Origin and AGL have significant RE generation, why not do more and start retiring aging inefficient fossil assets? All the engineering and technical expertise around off shore oil drilling could be directed at off shore wind turbines. The FF industry can definitely be part of the solution if they wanted.

          • Mark Roest 4 years ago

            As the details of the Exxon story make clear, those who control the oil companies are ideologically opposed to putting the interests of humanity and Life ahead of profit. Many of their companies were influenced by, and temporarily joined in with, those who could see the truth, but then chose to fight for their obsolete business model, which is the only business that would continue to give them such huge personal wealth and power, over all persuasion otherwise. In short, they chose the Dark Side and are in a death-grip embrace with it.

          • MaxG 4 years ago

            Spot on!

          • Pedro 4 years ago

            In my more pessimistic moments I suspect the goal of many corporations is to pollute the environment to such an extent that we are forced to live in hermetically sealed shopping malls and pay for breathable air and drinkable water.

        • Mark Roest 4 years ago

          Yes, and oil, too — read my comment about Exxon’s betrayal of humanity and Life after your comment above. Then start to think about what’s more important — wealthy people’s egos and power, or living beings, in ecosystems.

    • Mark Roest 4 years ago

      Check the latest Exxon scandal — since 1977 their scientists helped develop the understanding of global warming, then their executives put profits before humanity and Life itself, and they are still doing it — just read the other story in Renew Economy today! That, dunderhead, is why we are trying to disinvite them — we don’t want a pedophile in a little girl’s birthday party.

      • John McKeon 4 years ago

        I thoroughly recommend to fellow readers/commenters to check out Mark’s pointer about Exxon.

        Think Tobacco … think “Public Relations” Misinformation campaigns … think Fossil Fuels. Same outfits, same lies …. their product is Doubt …

      • Reality Bites 4 years ago

        Dunderhead, really.

  3. Jacob 4 years ago

    Telstra built a mobile phone network and now get more profits from wireless than from copper wires.

    The coal merchants need to do the same.

    • Reality Bites 4 years ago

      Maybe they could build houses with it…..!?

  4. Radbug 4 years ago

    Solar Methanol/Solar Ammonia is the only way to power ten million electric vehicles in a renewable manner.

  5. MaxG 4 years ago

    Well, “whatever”… there will be business as usual, unless both major parties are voted out and the Australian public takes an interest in the future of their children. I do not see that happening.

    • John McKeon 4 years ago

      I like your forthrightness MaxG. May I make a suggestion to fellow readers which just pushes your envelope that bit further … vote One for the Greens. Send a couple of Rockets up the COALition And the Labor party. Don’t muck about. Look up the Greens policies. It’s easy these days.

      • Reality Bites 4 years ago

        Cannot wait until the next election to see the Greens and labor smashed by MT.

        • John McKeon 4 years ago

          My hope would be that Malcolm actually leads the Cory Bernardi types of his party by the nose … to break them out of their ideological haze.

      • MaxG 4 years ago

        Thanks; had a look… seems the way to go 🙂
        I need to do more research though…

  6. BsrKr11 4 years ago

    Until solar, wind and other renewable sources of energy can close the loop on getting their materials from the ground, refined, manufactured and distributed without fossil fuels , then they really can’t be called energy sources…. this perhaps is why the fossils fuel companies are still investing in the status quo.

    the lack of strategic thinking on renewables is alarming… we’re all focused on the end user reducing emissions, but no one , at least that I have read, has seriously tackled the issues of the requirement of fossil fuels in the mining, refining, manufacturing and distribution of solar and wind.

    Let’s imagine that we are successful in converting the political will across the globe to tackle climate change and we celebrate that there is now a unified global policy to shift off fossil fuels… just how do you suggest we are going to supply the infrastructure at that scale?
    the only energy source capable of doing this , is fossil fuels. Isn’t it logical then we would potentially see a temporary spike in emissions as the globe wholesale turned to renewable energy?

    I am wide open to be proven wrong on this and would welcome being set correct, but as i type this I am unaware of any research findings or technology that would be capable other than fossil fuels to provide the energy to initially set up a global distributed energy grid powered by the sun and wind.

    • John McKeon 4 years ago

      “… fossil fuels to provide the energy to initially set up a global distributed energy grid powered by the sun and wind.”

      Calm down, BsrKr11. It is actually happening right now. We’re now getting right into the beginnings of the great transition. I just hope we are in time for our grandchildren.

      • Reality Bites 4 years ago

        Sort of half right. Yes you can power the building of renewable generation mostly from renewables. Creating steel though requires coking coal (other renewable methods not economically viable yet). Then powering residential and commercial sites is verging on possible with RE and battery storage, though storage is in its infancy. Powering large scale industrial and resource projects by RE is not currently viable, apart from a few rare examples in remote locations, that only operate during sunlight hours or have backup via diesel gensets. The issue here is that Giles and the RE fans think that it is already here, but it is not.

        • John McKeon 4 years ago

          We don’t think it is already here, “Reality Bites”. We see the desperate need to get it all up and running as soon as possible.

          The carbon that has already been taken from underground and poured into the atmosphere has induced climate change that will now be with our children and their children for maybe one or two thousand years. The point is to stop making matters even worse.

          While you have been busy patronising the more active amongst us with your wisdom, the fossil fuel interests have been successful in delaying action for the best part of two decades.

          • Reality Bites 4 years ago

            John, CO2 is not radioactive that lasts for thousands of years. CO2 is absorbed by plants via photosynthesis and by the oceans in massive amounts. What we need to do is revert to a balance and allow nature to equalise again. There are a lot of other things besides stopping coal that can be done, like reducing agricultural impacts, reduce animal production in favour of crops, reduce or reverse land clearing, stop venting gases, move to EV’s etc.

          • John McKeon 4 years ago

            “John, CO2 is not radioactive that lasts for thousands of years.”

            Oh, Look!!! Another Straw Man!!!

          • Reality Bites 4 years ago

            Ok John so you think CO2 is radioactive? Or you are one of those weak individuals who just reverts to name calling when you don’t have a valid argument? Which one is it?

          • Miles Harding 4 years ago

            Not radioactive, but it does have a millenium long tail and, if it isn’t curbed, has the capacity to unhinge the world ecology and ultimately civilisation in a way that nuclear ‘accidents’ can’t. This makes it a very important issue.

            Coal is a big one, as it has the capacity to render the world incompatible with civilisation on it’s own.

            I don’t see it necessary to be totally FF free in the near term, what is important is to reduce consumption to a survivable level. This makes the problem a lot more tractible, as the first 90% can be achieved relatively easily compared to the last 10%. I suspect that electricty and transport will follow this 90/10 rule fairly well.

            The limits we will hit on the way to a low carbon future is a matter of concern. There are so many being approached these days that it’s impossible to guess which will be first and what wll happen.

            My list includes:
            o Phosphorous and Water
            o Rare earths and essential metals
            o Affordable Oil
            o Debt and money.

            Debt may be the first, as the zero interest rate and QE policies look to have been a complete failure at doing anything more than inflating the price of securities and fuelling speculation in increasingly risky ventures.

        • Mark Roest 4 years ago

          Yes, the storage is the issue, and if you look a couple of years out, you can see it almost out of the oven at prices that won’t even make people blink.

        • arne-nl 4 years ago

          “Creating steel though requires coking coal”

          How do you know? Can you prove with hard evidence that there is REALLY no other way of producing steel than by means of coking coal?

          I posted a link in another comment to MIT research that has lead to a process of producing steel without CO2 emissions. And they are certainly not the only one investigating that.

          “other renewable methods not economically viable yet”

          It is a question of when this planet will make our current way of life “economically unviable”.

          • Reality Bites 4 years ago

            That is not what I said, yes you can make steel from other methods. Try and concentrate…..

      • BsrKr11 4 years ago

        You and me both….

    • GodoStoyke 4 years ago

      BsrKr11, this has actually been exhaustively researched. The energy required to produce solar electric modules (PV) is paid back by the system in about 3.5 years (http://www.nrel.gov/docs/fy04osti/35489.pdf; followed by e.g. 46.5 years of emission free electricity), large wind turbines have a 1 year energy payback or less (6 months for large turbines), followed by 20 to 25 years of emission free production. So, even if renewables were produced with 100% fossil fuels (which they aren’t), the emission reduction is tremendous.

      • BsrKr11 4 years ago

        Great. I didn’t ask about the EROEI ratio. I asked where would the energy come from to mine the raw materials?

        • arne-nl 4 years ago

          GodoStoyke showed that the emissions savings by the end user totally eclipse the remaining emissions from production.

          Look at it from the other side: The industries that produce the materials that go into a wind turbine for example. Research is being done to reduce or even eliminate CO2 emissions from iron and concrete. Some examples:
          http://news.mit.edu/2013/steel-without-greenhouse-gas-emissions-0508
          http://news.cision.com/jernkontoret/r/ironarc-revolutionises-iron-production—carbon-dioxide-emissions-halved,c9366169
          http://www.theguardian.com/environment/2008/dec/31/cement-carbon-emissions

          You can not blame the renewable energy industry for not taking the world on its shoulders. Each industry has its own obligation to reduce and eventually eliminate CO2 emissions. Only a tiny fraction of the world’s iron ends up in wind turbines, so the iron industry has to clean up its act anyway, with or without wind power. And as they do, so will the CO2 emissions from turbine production be reduced.

          “the lack of strategic thinking on renewables is alarming” seems to be not only hyperbole, but also not very practical and assuming we need some grand masterplan from central command.

          As GodoStoyke showed, a wind turbine cuts CO2 emissions by 95%, why delay taking that 95% reduction until you have solved the gazillion problems that constitute the remaining 5%? Don’t make Perfect the enemy of Progress.

    • Mark Roest 4 years ago

      Thank you for covering that base, GodoStoyke.
      BsrKr11, just why do you think, that the mining companies are going to solar to power their mining operations? One, that it’s cheaper. Two, that we have an industrial base that is very rigid, no matter how much variety each branch can produce within its charter. It may take ten more years to put out so much renewable energy and storage that the overwhelming preponderance of electricity is produced by it. If someone looks back at your statement then, they will think you were massively shortsighted. Obviously, the amount of electricity from fossil fuels will decrease in inverse relationship to the increase in renewable energy — and in storage (coming at under 1 cent US per kWh levelized cost within 5 years) — to make it dispatchable 24/7/365.
      If you persist in your line of writing, it will be obvious to all that you are a climate denying oil adherent putting out red herrings.

      • BsrKr11 4 years ago

        Funny you should mention solar and mining companies. I worked at one of the best solar companies in Australia who installed plenty for the miners. Diesel is expensive to generate electricity and solar makes excellent economic sense.
        What I was asking and you seem to have not understood is where do we get the REST of the energy from?
        Oil. No one has seriously put forward a way of replacing diesel fuel in the super sized fleet of vehicles which ties into the transport to the refiners. Why aren’t we reading how solar thermal could replace coking coal in iron ore smelting? Where is the excitement is getting solar or wind to power aluminum smelting?
        Just how are we going to keep the smelting operations going since last I checked inverters need metal panels need metal and other rare earth ingredients.
        So I’m not a climate denier but asking hard questions because I see the scale of the challenge we face and I can see that we’re going to use a shite load of fossil fuels to deploy renewable energy infrastructure on the scale we want…

    • hydrophilia 4 years ago

      So…. are you saying that we will be using coal and nuclear power for all this mining and other transportation? Or are you saying we will need transportation fuels, either refined petroleum or various advanced biofuels?

      Studies have shown that electric cars work well, but that we might need IC engines for heavy mining and other heavy transport…. and air travel. That’s OK: that transportation fraction is rather small compared to our entire FF usage.

  7. Ian 4 years ago

    It’s understandable that the FF industry would want to, or be prone to, both painting it’s prospects more positively to investors than is realistic and also deceiving itself in the same direction. But I think at this point they are really starting to fear a real, serious threat from renewables, more so in electricity than in transport for now. Which will be all the more reason for them to try to get new nukes and coal projects, and their related transmission infrastructure funded and in the ground- all risk to the rate payer and taxpayer now, of course- before it’s too late. I think we should expect a continuing amplification of FF industry propaganda.

  8. Rockne O'Bannon 4 years ago

    “The multi-trillion dollar global fossil fuel industry continues to believe ”

    I think I should have stopped reading right there. How facile. Somehow the writer wants … expects… everyone to swallow the notion that a huge huge group of industries has one “mind” that “believes” something.

    What volume of analysis can overcome this simplistic, childish world view? Imagine someone coming up to you and saying “Tibet believes” or “the elderly believe.”

    I am just going to go out on a limb and say that there are plenty of people involved in very diverse industries related to fossil fuels. They have all kinds of expectations and positions, which might be proven right or wrong someday. It does nobody any good whatsoever to pretend that they are monolithic, and recommending to people that they should be regarded that way is a step backward for any analyst.

    An example? Easy. Oil producers worldwide have extreme difficulty TODAY trying to agree what an oil price should be, why oil prices are low, who is affecting them, etc. The sheer diversity in that one single fossil fuel market is a characteristic of energy producers, not an exception. They agree on everything only in some Bizarro world of bad journalism.

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