The big question in the race to net zero this week is not whither COP (although William Nordhaus has views – see below), or whether it can get any hotter in California (sure it can). It’s what the oil industry is going to do with all its money.
Oil prices slipped yesterday as traders worried about global growth but the trend is UP after last year’s Covid slump. Crude prices doubled in the second quarter of the year as lockdowns were eased in the rich north and demand roared back. The oil majors and national oil companies are now fielding revenues of about $7 billion a day. This gives them a choice – between spending the windfall on looking for more oil, or transitioning to renewables.
A lot’s at stake. Last week bp published its closely-studied annual statistical review of world energy for 2020. Almost all its findings were anomalous because of Covid, but two would stand out in any year:
- Solar capacity grew by 20 per cent and wind capacity nearly doubled in 2020 even as overall energy consumption fell by 4.5 per cent because of the pandemic.
- Renewables growth was especially steep in China, which accounted for two thirds of all new wind power and more than a third of all new solar.
On balance this is good. Sustained steep growth in renewables is exactly what the planet needs. But there are three important caveats.
- China’s dominant performance in wind and solar will undermine the rest of the world’s authority to lecture it on coal at COP, and China remains the world’s biggest coal consumer by a staggering 450 per cent margin.
- For net zero purposes, cutting fossil fuel use is as important as building more renewable capacity. The catastrophe of Covid cut CO2 emissions by 6.3 per cent last year, but average emissions will have to go on falling at the same average rate for 30 years to give the world a chance of keeping warming under 2 degrees C.
- And that is not what’s happening. On the contrary, global oil demand is forecast to bounce right back up to 2019 levels by next year.
So which is it to be for the oilers? Spend on exploiting new reserves, or on transitioning away from them? Their argument is that they have to do the former to fund the latter without undue disruption. The counter-argument is that disruption is precisely what the world needs now.
In fairness, the majors’ balance of investment between hydrocarbons and “low carbon” is changing, at least in Europe. It ranges from 65 / 35 per cent at Equinor to 85 / 15 per cent at Shell. (In the US Chevron and Exxon proceed as if nothing needs to change, at 98 / 2 and 97 / 3 respectively.)
But it is always salutary to study bp’s graph of global primary energy consumption. For all the excitement about the falling cost and rising scale of renewables, they are still represented by a frighteningly thin slice of the bigger picture, in which for some reason oil is depicted with the colour green. Robert Rapier of Forbes has performed a public service by using more realistic colours for the same data. Here’s our version:
Science and Tech
The world’s biggest wind turbine company has found a customer for the world’s biggest wind turbine. It’s just incredibly big. Each blade is 115 metres long – the length of the entire flat part of Wembley stadium, including both goals and the space behind them. Three of them are attached to a truck-sized generator on a 150-metre tower that would dwarf the London Eye. The airspace swept by these blades is measured in hectares (4.3). The whole package is made by Denmark’s Vestas Wind Systems A/S and will be erected off the Baltic coast by a Baden-Wurttemberg utility. In a decent breeze one of these can power 18,000 homes without a whiff of anything.
Nordhaus on COP
We’ve reached the end of the road with COP: so says Nobel prize winning economist William Nordhaus. “It is a painful, painful realisation, but I think we need to face it: Our international climate policy, the approach we are taking, is at a dead end.” That’s what he told G20 leaders in his keynote address at their climate conference in Venice on Sunday. His view, which he outlined in an essay in Foreign Affairs last year, is that we’ve tried the COP process 25 times already – and every time it has failed to produce a binding, international agreement on climate change. Trying it a 26th time seems a fool’s errand. What he proposes instead is a “climate club”. Here’s the idea: A group of countries sign up to the climate club, with strict rules on carbon emissions for imports. All of them agree to impose tariffs on non-participating countries who don’t agree to meet their emissions criteria. The theory is that to be competitive in global trade, other countries will be forced to toe the line. Whether or not anyone joins the club, he has a point about COP.
Engagement and activism
If not now, when? What the UK government is saying to justify reopening the economy in defiance of the delta variant applies better to the need for responsible citizens to say enough already with our wreckage of the biosphere. If we don’t collectively act now to slow the drying of whole continents and the burning of whole ecosystems, when will we? Rebecca Solnit has written a powerful piece for the Guardian inspired (if that’s the word) by the drip-feed of dreadful news from an overheated American West but also by floating down a still-undammed section of the Green River in southern Utah. “We need a new word for that feeling for nature that is love and wonder mingled with dread and sorrow,” she writes. Read it.
Taxing jet fuel
Spare a thought for Michael O’Leary. If the European Commission has the courage of its convictions his business model is about to get a right hook. The EC is squaring up at last to tax jet fuel, whose untaxed status is one of the main reasons low-cost airlines like Ryanair can afford to exist. The tax, if approved by the European Parliament, will only apply to intra-European flights that don’t use the kind of sustainable aviation fuel some companies believe they can start to produce at scale. But that would still be a lot of flights. Brace for a new generation of nimby-ish arguments about new high-speed railway lines.
Thanks for reading.
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