Tag Archives: climate change

Ruling Blocks New Fracking Rules Pt.2 – 8/8/16

After a federal judge’s ruling blocked efforts to institute new fracking rules for public lands. the Obama administration is getting ready to bring the case to higher courts.

The case will likely follow the same path as the Clean Power Plan which recieved a stay from the Supreme Court until a final decision is made sometime next year. The CPP, which focuses on carbon dioxide emissions from power plants, and another case focusing on what waters are under U.S. jurisdiction are only a couple of the instances of new rules that are attracting conflict.

The fracking rule would have forced companies to disclose the chemicals they pump underground and seal off waste water in storage tanks. Judge Skavdahl, an Obama appointee, said the fracking rule exceeded the Bureau of Land Management’s powers.

While oil industry groups hailed the ruling as victory for state control over regulation and claimed that the rules would have unnecessarily doubled up with existing standards, Environmentalists supporting the rule said the additional rules are needed to safeguard water supplies as fracking activity expands.

The ruling may affect other issues facing the Bureau of Land Management. With the decision comes a precedent for questioning the BLM’s authority in blocking companies from burning or releasing natural gas at oil wells on federal lands.

Environmentalists that have lobbied the BLM to crack down on methane emissions from natural gas say the agency has the right to regulate based on a 1920 law governing U.S. mineral leasing that gives the power “to prevent waste of oil or gas” developed on federal lands. It is questionable if higher courts will accept that argument.

The cases are State of Wyoming v. U.S. Department of the Interior, 15-cv-43, U.S. District Court, District of Wyoming (Casper) and Independent Petroleum Association of America v. Jewell, 15-cv-41, U.S. District Court, District of Wyoming (Casper).

New Rules Add to Cost of Arctic Drilling – 8/4/16

As Arctic ice recedes amid rising global temperatures, drilling companies are eyeing oil reserves in Northern waters estimated to hold 24 billion barrels of oil. Standing in the way of efforts to tap the newly accessible stores are high costs and low oil prices combined with regulatory battles that seem to be lost more than won nowadays.

The latest regulatory loss for energy companies comes in the form of new regulations for offshore drilling in Arctic waters that will add more hurdles to already difficult work. Companies will have to take potentially costly steps meant to prevent oil spills that the Interior Department estimates the measure will cost as much as $2 billion over the next 10 years. The lion’s share of the cost is expected to come from the cost of having a backup rig on hand to bore a relief well in case of an emergency.

The move comes as no surprise after President Barack Obama and Canadian Prime Minister Justin Trudeau recently pledged to maintain high standards for any commercial activities in the Arctic. For now the Obama administration is still planning to sell oil and gas leases in Arctic seas beginning in 2020, though that could change as environmentalists and oil companies battle to persuade the administration to drop or keep proposed auctions as it decides what new offshore drilling rights will be available from 2017 to 2022.

Compared to fracking on mainland US fields, arctic drilling loses out on many fronts: weather is harsher, more capital is needed to get started, spills are harder to contain, and encroaching ice can halt operations. Persistently low oil prices, regulatory uncertainty, and the already high costs of prospecting in the harsh climate of the Arctic region have spurred energy companies to given up more than a million acres’ worth of drilling rights, according to Bloomberg, which should not be surprising when shale-oil fracking exists as a cheaper alternative.

The world the way it is now, it looks as though drilling in the icy seas of the Arctic will take a back seat to shale.

Fossil-Fuel Projects Face a Tough Crowd – 8/3/16

Between new regulations, and activist opposition, fossil-fuel project developers across the U.S. are struggling to keep projects on track.

Since 2012, about $33 billion worth of projects have been cancelled or rejected by regulators with billions more sunk into projects that have yet to be approved, according to Wall Street Journal, including a $850 million coal-export terminal proposed for Cherry Point, Wash. Five of the last six export projects proposed in the Pacific Northwest failed to survive regulatory challenges, the sixth is awaiting approval.

Coal may be especially unpopular, but natural gas and oil infrastructure projects are also finding it difficult to get the green light from government entities. The case of the Keystone XL Pipeline Project in particular comes to mind. The years of debate leading up to the rejection of the project by President Obama saw some of the most conspicuous examples of conflict between political, industry, and activist forces, and though the project’s demise in late 2015 coincided with the glut that killed so many other projects, it exposed bitter divisions in Congress that would make any developers wary.

In its push to encourage lower-carbon, higher-cost electricity sources, the Obama administration is encouraging environmental groups to create obstacles for developers already facing skeptical investors.

In late April, Kinder Morgan abandoned its Northeast Energy Direct, a roughly $3 billion gas transport project in Massachusetts, citing a lack of interest from utilities after local activist opposition. Later that month, New York regulators refused to issue a water quality permit for Constitution, a natural gas pipeline. Most new pipelines are concentrated in high production areas, such as North Dakota and Texas, rather than heavily populated areas on the coasts.

With the Clinton administration expected to continue the policies in place, fossil-fuel projects will probably continue to see capital flow towards less controversial renewable energy projects. Nate Silver’s 538 Election Forecast Polls-plus forecast puts Clinton at around an 80% chance of victory.

Carbon Markets in Trouble – 7/25/16

Carbon markets are in trouble.

The system, under which businesses buy and sell permits for their carbon emissions, was meant encourage early adoption of low carbon technologies, but new mandates and messy politics have created a mismatch in supply and demand so large that permit prices are plunging. According to Bloomberg, the price of carbon permits in the U.S. has dropped 40% since the start of 2016.

Screenshot 2016-08-01 at 12.41.09 PM

Instead of weathering the storm of lobbying efforts that would come before, during, and after attempts to strengthen caps on emissions, many policymakers have chosen to pursue more inconspicuous, if less efficient, measures. California, for example, now requires less carbon intense gasoline and mandates that utilities to buy more solar and wind power. With other policies driving down emissions faster than politicians can lower caps on overall emissions, demand for permits is falling fast and carbon markets are fast losing their purpose.

Carbon markets were meant to be a free market solution to climate change; they were supposed to be the most cost-effective, dollar per ton of CO2, means of fighting emissions. Instead, more money is flowing to things like renewable-energy subsidies directly from the government. That’s not to say that it is bad to have money flowing to solar and wind, it’s just that there might’ve been a better method that fell by the wayside.

A carbon market could easily encourage investment in alternative energy if the officials behind it had the political will to run it the way it was meant to be run. In theory, well-implemented carbon markets with a steadily falling caps on total emissions would distribute capital faster and with less wasteful spending than the government could hope to. Sadly, not all ideas that make sense in theory survive real world testing and, for now at least, carbon markets seem like a smart idea that stumbles when up against a less than logical political scene.

Peabody Reveals Climate Denial Machinations – 6/21/16

Court filings related to the bankruptcy of Peabody Energy, America’s largest coal mining company, have revealed that it funded dozens of groups in order to cast doubt on man-made climate change and oppose environment regulations. Analysis by the Guardian, revealed the funding spanned many lobbying groups and think-tanks, as well as political organizations with ties to both major parties.

The filings do not list amounts or dates, but more information on the size of contributions and their relation to major climate litigation cases will be available following the bankruptcy proceedings.

Its adamant public rejection of climate science made Peabody a strange case even among fossil fuel companies. The company was one of the few going so far as to claim rising carbon emissions were beneficial even as most shied  away from public climate change denial. Attempting to confuse correlation and causation, the company claimed rising emissions meant increased economic prosperity while wrapping it up in an emotional appeal claiming coal was the best way to lift people out of poverty. Their work largely ignored or obscured the significant body of research showing the damage climate change is expected to cause, as well as the fact that emissions fell in 2015 while the U.S. economy expanded thanks to increased use of cleaner fuels like natural gas and wind.

These revelations are not the first controversy to hit the company. An earlier settlement deal reached with the New York attorney general had Peabody admit to misleading investors about the potential impact of climate change on its business. However, the court case did little to increase the transparency of its climate denial operations. Fortunately, the sharp drop in coal prices due to competition from cheaper, cleaner resources did more to expose Peabody’s support for climate denial than any lawsuit.

After failing to foresee or compete with cheap natural gas and renewables, Peabody’s management team’s strategy of ignoring the writing on the wall has cost shareholders greatly. Even if they thought a business model that relies on sticking everyone’s heads in the sand was a good way to keep renewables down (it wasn’t), Peabody’s systematic climate change denial efforts were never going to save it from cheap natural gas. It’s hard to guess what they were thinking, if they were thinking at all, but Peabody executives have a lot to answer for.

Wyoming’s Transition from Coal to Wind – 6/20/16

Wind power is gaining traction in the biggest coal-producer of the United States, Wyoming.

The state’s geography, with its vast plains and prairies, gives Wyoming one of the highest wind power potentials of any state with the only major drawback being a lack of transmission infrastructure to connect far flung population centers. Yet, unlike other states in the Great Plains region that have seen a boom in wind farm construction as associated costs have plummeted, Wyoming has been slow to add new capacity.

In 2015, Wyoming added a relatively inconsequential amount of wind power to its grids compared with states like Oklahoma and Kansas. Wyoming’s government is partly to blame for the lackluster interest in tapping the resource since Wyoming’s regulatory environment has so far been hostile to renewables and it is the only state in the U.S. to tax wind power. Solar City’s exodus from Nevada following some unfavorable legislative changes is good example of how quickly investment can dry up if developers see an unfriendly government is in charge.

by state

But if uncertainty about future regulation can kill investment in renewables, the same type of uncertainty can kill investment even faster when it comes to coal. Seeing as it doesn’t merit it’s own label on the chart, it is clear that new coal power plants aren’t being built anymore. Be it because of the Clean Power Plan or rulings by the Supreme Court in favor of tighter regulation or the international Paris agreement on climate change or the Department of the Interior has already declared a halt on new coal mining on public lands, coal power is largely dead in the water.

Some officials and coal interests in Wyoming may have fooled themselves into thinking that stifling wind and ignoring climate change could get coal to recover, but those views are fading as coal use continues to decline. Their efforts are more likely to doom an energy rich state to importing neighboring states’ leftover electricity than revive coal. Natural gas is already surpassing coal as the main source of electricity in the U.S. and falling costs of solar and wind farms have made coal investment a losing bet in the long-run. The move from coal is painful, but inevitable so long as it has competition from cheaper, cleaner alternatives.

Although the move away from coal makes sense economically and ecologically, the thousands of coal workers who will lose their jobs are going to find little solace in a cleaner, stronger economy if they don’t have a place in it. New wind jobs will replace only a fraction of the coal jobs lost. Unfortunately, putting up turbines simply doesn’t have the same labor intensity of constantly mining, transporting, and burning fossilized carbon. That said technological advances are almost always accompanied by job loss. And the loss of farm jobs made obsolete by tractors did nothing to stop their usage in the end.

Wyoming’s Republican governor, Matt Mead, an outspoken opponent climate change related regulation has admitted to seeing economic opportunity in wind power.

“We’ve been a dig-and-ship state, exporting energy to the rest of the country,” Mr. Mead said in a recent interview. “With the advances in wind turbines, why shouldn’t we be leading that at the University of Wyoming? Why don’t we do more to bring wind manufacturing to the state?”

More and more Republican politicians and donors like the governor are supporting renewables. In fact, Philip Anschutz, a Colorado billionaire and major Republican donor, is one of the major benefactors of Wyoming’s transition to wind power. The Anschutz Corporation’s Carbon County wind farm, when completed, will be the largest wind power producer in North America, and a complementary project the TransWest Express, a 730-mile power line, is set to take Wyoming’s excess output to electricity hungry Las Vegas and California. The scale of the project is estimated to be large enough to make wind as cheap, if not cheaper, than coal power.

Costs of Emissions Cuts – 6/7/16

Since the world’s top officials have already signed an agreement to fight emissions and climate change, it is clear that most would be open to enacting policies to do so. Yet, the costs of sustainable, long-term changes are unclear to the economists advising policymakers, what is apparent is that the short-term emissions targets will be easier to reach than the long-term targets.

“There’s an optical illusion right now, which is that short-term planning leads to low-hanging fruit but not to the kind of strategy that we need to achieve deep decarbonization by 2050,” said Columbia University economist Jeffrey Sachs.

Still, any scientist with a shred of credibility would agree that the risk of catastrophic flooding and heat waves rises significantly with each degree increase in global temperatures.

Politicians in power are beginning to act as though such disasters are possible and need to be avoided. For the U.S. in particular, the Obama administration committed to cutting U.S. greenhouse-gas emissions 26%-28% by 2025 based on 2005 levels with a less definite suggestion that the U.S. could cut emissions 80% by 2050.

Modeling conducted by Resources for the Future, an independent think-tank, shows that a carbon tax could achieve the 2025 target with only a small impact on the U.S. economy. A $45-per-ton tax of carbon dioxide would make households worse off in 2030 by an amount equal to an imperceptible 0.45% – 0.79% of household spending. Their findings show the price of electricity would rise 15% and gasoline prices would go up slightly less than 8% over the course of 14 years while achieving over 75% of the 26% to 28% emissions target. The Clean Power Plan may force states to use such a carbon tax as a means to meet mandated emissions cuts.

An 80% reduction goal by 2050 could hurt much more. Of course, many factors, such as advances in technology (electric cars, self-driving cars, falling renewable energy costs), are difficult to account for in analysis. Most attempts to predict the state of the world beyond 2030 will be pure speculation so the following numbers should be taken with a grain of salt.

A simulation from the think-tank using six different models suggests the world could meet those emissions targets if every country applied a carbon tax of $60 per ton by 2050 with a resulting reduction in economic output of 5% to 10%. The only long-term models without significant economic costs attached to greenhouse-gas cuts were those assuming the implementation of negative emissions technology that would remove greenhouse gases. Sadly, negative emissions technology does not yet exist in a form viable for meaningful usage.

“To believe you can stabilize emissions at concentrations that would be protective of a two-degree target, means you can believe you can suck carbon dioxide out of the atmosphere at a cost the general population of the world will accept,” said Mr. Kopp, of Resources for the Future. “These are science-fiction sort of problems.”

Again, technological “revolutions” could make deep carbon reductions possible. It would hardly be surprising to see emissions fall once people start buying electric cars en masse or once utilities switch to less carbon intensive fuels like natural gas or renewables.

Analysis by Bloomberg New Energy Finance illustrates how close we may be to widespread adoption of electric vehicles. It seems safe to assume that more electric vehicle use would mean less oil use, but that wouldn’t mean much for emissions if that electricity came from dirty coal power plants.

rise of electric cars

Fortunately, Bloomberg data shows that solar and wind are growing at an astoundingly fast rate compared to fossil fuels.

Screenshot 2016-06-01 at 12.25.21 PM

And even the conservative estimates provided by the EIA show natural gas, a substantially cleaner burning fossil fuel, and renewables, primarily zero-emissions technologies like wind and solar, replacing coal as the primary source of electricity for Americans.

EIA energy projections

An optimist might say that the combination of lower power sector and transportation sector emissions could change entirely the equations for long-term costs of emissions cuts. Though a carbon tax would still be necessary to reach the 80% cut target, the size of the tax and the pain passed down via prices to American consumers would shrink quite a bit.

World CO2 emissions – 6/3/16

energy OECD

In spite of a decrease in the carbon intensity (CO2 per unit of energy) of the global energy supply, global energy-related carbon dioxide (CO2) emissions are projected to increase by one-third between 2012 and 2040 in the EIA’s International Energy Outlook 2016 (IEO2016) Reference case.

Many countries agreed to emissions reduction goals at the Paris Climate Talks with approaches to meet the goals including absolute reductions, reductions from business-as-usual cases, reductions in intensity, peaking targets, and specific policy actions. The variety of approaches combined with data limitations led the EIA to aggregates countries into 16 world regions, as well as OECD and non-OECD countries, rather than attempt individual nation modeling.

As shown below, the lion’s share of emissions has shifted away from the 34 current OECD member countries to non-OECD countries due to economic growth and increased energy use. The trend is expected to continue through 2040 as CO2 emissions from OECD members remain steady relative to non-members.

share energy co2

Global carbon intensity is projected to decrease by 0.4% annually, which is an improvement over the historical average of 0.3% between 1850 to 2008.

projected co2 intensity changes

The projected lowering of intensity is accounted for by a shift from high carbon intensity coal toward the use of renewable energy and natural gas.

The actual consumption of fossil fuels is projected increase albeit at a slower rate than the increase in consumption of renewable energy. In 2012, fossil fuels accounted for 84% of worldwide energy consumption.

fuel cons and co2 changes

It is important to remember that the EIA projections do not take into account technological changes that could be considered “revolutionary”. The introduction of electric vehicles alone is likely to make the forecasts given above obsolete since they will undoubtedly change the share of emissions. Incentives, competition, and rapid acceleration of timelines are likely to speed up what is already certain to be a disruptive technological change as falling costs and greater availability allow more consumers to choose less carbon intensive transportation options. As the world is today, higher individual incomes give OECD consumers the luxury of buying such vehicles sooner than non-OECD consumers, but by 2040 we are likely to see emissions from the transportation drop in all nations as electric vehicle use becomes more widespread. In the U.S., which produces about 17% of the world’s total CO2 emissions, transportation accounts for about a quarter of emissions so the effects of switching to less carbon intensive fuels for cars would be significant.

Energy Future – 5/31/16

The U.S. Energy Information Administration recently released its International Energy Outlook 2016 (IEO2016) meant to project major changes in energy consumption. For the world’s energy future, the report predicts that world energy consumption will grow by 48% between 2012 and 2040 with non-OECD Asia, including China and India, accounting for more than half of the world’s total increase in energy consumption.

Renewables and nuclear power are forecast to be the fastest-growing energy sources at averages of 2.6% and 2.3% per year respectively through 2040. Natural gas is expected to be the fastest-growing fossil fuel with global consumption increasing by 1.9% per year thanks to supplies of tight gas and shale gas made more accessible by the fracking boom in the U.S.

The report cites concerns about energy security, pollution, climate change, and future high oil prices as reasons for the expanded use of renewable and nuclear power. Another reason they could have included is the falling cost of actual hardware involved in solar and wind power generation as costs have plummeted leading to massive shifts in capital towards renewables.

Screenshot 2016-06-01 at 12.25.21 PM

Or the rise of Tesla as both a purveyor of electric vehicles and relatively cheap energy storage options, both disruptive technologies. In fact, the liquid fossil fuel share of world marketed energy consumption is projected to fall from 33% in 2012 to 30% in 2040 even with the EIA conservatively ignoring new technologies. The EIA likely wanted to avoid addressing the elephant in the room that is electric vehicles. Electric cars will inevitably eat into revenues for oil companies given that a large majority of crude goes to the transportation sector.

rise of electric cars

The world’s slowest-growing energy source is coal. One of the dirtiest and most easily replaced fuels, coal consumption is expected to grow by only 0.6% per year through 2040. China currently consumes almost half of the world’s coal production, but a slowing economy, a shift to a consumer spending economy, air pollution, and commitments to reduce CO2 emissions are listed as reasons why Chinese coal demand will eventually decline.

The IEO2016 was based largely on analysis done before the release of the Clean Power Plan (CPP) which is expected to significant reduce U.S. coal consumption and increases in U.S. renewable consumption compared with the Reference case projection. More information how the CPP could affect U.S. energy consumption can be found in the EIA’s analysis of the preliminary CPP rule.

World energy consumption

Compared to its outlook for the U.S.:

EIA energy projections

Green Energy News From Abroad – 5/27/16

In green energy news from abroad, a report warning about stranded asset risks associated with Japanese investment in coal and Norway’s sovereign wealth fund on track to divest heavily from coal-related holdings.

In Japan, utilities and other companies are pushing ahead with new investments in coal-power plants in spite of the risk of creating $57 billion of stranded assets amid shifts in energy policy and the economics of power generation, according to a study by Oxford University’s Smith School of Enterprise and the Environment.

The study claims that the amount of coal-fired generating capacity planned or under construction in Japan exceeds the capacity required to replace the nation’s retiring fleet by 191%.

“This may result in overcapacity and, combined with competition from other forms of generation capacity with lower marginal costs, lead to significant asset stranding of coal generation assets,” the authors said in the report titled Stranded Assets and Thermal Coal in Japan.

To put into context how odd Japan’s reliance on coal is, we can look at planned capacity additions for the United States.

Screenshot 2016-03-06 at 10.58.06 AM

For the U.S., no significant coal capacity is planned for 2016. Instead, solar, natural gas, and wind are scheduled to make up the bulk of new generating capacity additions.

Unlike most developed nations, Japan has continued to rely on coal power in the wake of the 2011 Fukushima nuclear disaster while pushing the development of “clean coal” and carbon capture technologies.

“Stranded coal assets would affect utility returns for investors; impair the ability of utilities to service outstanding debt obligations; and create stranded assets that have to be absorbed by taxpayers and ratepayers,” the authors said in the report.

In Scandinavia, Norway’s sovereign wealth fund may soon step up divestments of coal companies and other fossil fuels.

A majority of parties in Norway’s parliament are pushing for new guidelines that would prevent the fund from owning companies deriving than 30% revenues from thermal coal, according to a group lawmakers including opposition Labor, Norway’s biggest party.

The world’s biggest wealth fund, worth over $800 billion, has excluded more than 50 companies since February thanks to a ban agreed upon in 2015. It plans to announce more divestments later this year.

coal stocks falling

The fund is one of the biggest investors to restrict coal-related holdings amid escalating international efforts to limit global warming.

Torstein Tvedt Solberg, who represents Labor on the Finance Committee, said they’re satisfied also with the financial implications of the ban on coal.

“We’ve made money by not being so heavily invested in coal,” he said. “As opposed to tobacco, our divestment from coal is a success when you look at the bottom line. The companies we’ve exited have plunged in stock value.”

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