Climate and Investors: Eyes Wide Shut?

Size: px
Start display at page:

Download "Climate and Investors: Eyes Wide Shut?"

Transcription

1 Climate and Investors: Eyes Wide Shut? Mark Jaccard School of Resource and Environmental Management Simon Fraser University November, 2012 Energy and Materials Research Group Simon Fraser University Nov/2012 1

2 Investing under climate policy uncertainty The safest investment strategy for 1, 5, 10 year horizon is to bet on carbon polluting industries coal, oil, natural gas. High probability governments will not significantly price or regulate carbon pollution in this horizon. If prices or regulations are implemented, they will develop slowly and industries facing costs will be compensated anyway. Investments in non-polluting alternatives will yield lower than average returns; they are also much riskier because they depend on political whim. Investors know all of this, but don t say it in polite company. Nov/2012 2

3 Global consequence of the carbon pollution investment strategy Limiting temperature change to 2 C is virtually impossible. International Energy Agency and other independent sources show we are on a path to 6 C. This temperature estimate assumes no tipping points that trigger runaway warming highly unlikely. Nov/2012 3

4 Today Current path Tipping point Nov/2012 4

5 Past sea level vs temperature Long-term effect Source: Archer Feb/2012 Jaccard-Simon Fraser University 5

6 Current world energy path CO2-free =15% Microchip Renewable Nuclear Next 50 years? Primary Energy (EJ) Steam engine Electric motor Gasoline engine Vacuum tube Commercial aviation Television Nuclear energy Gas Oil Coal CO2 emitting = 85% 0 Biomass Nov/2012 6

7 What must happen to avoid disaster: global emissions Annual Global Emissions (billion metric tons CO2 equivalent) Decline in this decade 2015 Current emissions path Emissions path for 50/50 chance of not exceeding 2 C % drop by 2050 Nov/2012 7

8 What must happen: global energy Only possible if all energy investment is CO2-free from today 50% reduction from growing system requires 80% CO2-free globally 15% in % in % in 2050 CO2-free energy share = biomass + other renewables + nuclear + fossil fuels with CCS Nov/2012 8

9 What must happen: energy technologies and fuels Electricity generation - 90% CO2-free by 2050 (renewables, fossil fuels with carbon capture and storage, nuclear). Buildings - 85% CO2-free by 2050 (heat pumps, passive solar, biofuels, photovoltaics, solar hot water) Vehicles - 80% CO2-free by 2050 (electric, biofuel, hydrogen) Nov/2012 9

10 What must happen: oil sands Oil sands with global CO2 falling only 35% by 2050 Chan et al, MIT Nov/

11 10 9 Canadian tar sands projects (existing and planned) versus IEA forecast for global demand for oil from Canadian tar sands in 2035 Past sea level vs temperature Demand in 2035: 2⁰ C warming scenario Canadian tar sands (millions of barrels/day) Demand in 2035: 4⁰ C warming scenario Demand in 2035: 6⁰ C warming scenario 2012: Projects announced 2012: Under regulatory review 2012: Fully approved 2012: Under construction production 2012 Source: IEA Archer Current Policies: 6⁰ IEA New Policies: 4⁰C IEA Low Carbon (450 Nov/2012 C warming warming ppm): 2⁰C warming 11

12 Past sea level vs temperature Source: CERI Nov/

13 Social responsibility or self-interest? Investors know all this if they want. The Economist magazine regularly provides this evidence. The International Energy Agency is mainstream. MIT s researchers are world-class. Most investors say that decisions in business and public policy should be based on science with respect to environmental impacts and risks. The Economist says, We know we need to rapidly reduce carbon pollution and the only effective way is to regulate or price it. However,... It is difficult to get a man to understand something, when his income depends on his not understanding it. Upton Sinclair Nov/

14 The usual responses Investors who benefit from carbon pollution promote misinformation about science or convince themselves and others that their polluting project is somehow justified. This prevents effective policies. Investors who don t benefit directly self-delude that their corporate social responsibility is making a difference. This prevents effective policies. Investors who would benefit from aggressive climate policies may call for these policies, but often tell politicians that their alternative to fossil fuels is almost competitive. This prevents effective policies. Nov/

15 Moving outside your comfort zone Most likely humanity will stay on the 6 C path. With one or two more decades of carbon polluting investment, we are locked in. If investors care about something other than self-enrichment at the expense of our children, they have to act differently, leave their comfort zone. Truly ethical investors would divest completely of all fossil fuel companies (except those aggressively doing carbon capture and storage), which means lower returns. Truly ethical investors would allocate major funds to educate the public on climate risk and necessary climate policy now. Truly ethical investors would collectively and individually play a major role in promotion and support of politicians willing to risk effective climate policy which is extremely difficult. Nov/

16 You leave your comfort zone: but you might make new friends You? Daryl Hannah Oct/