The Earth is full

7 09 2017

Advertisements




And the oil rout continues unabated..

26 02 2017

Paul Gilding, whose work I generally admire, has published a new item on his blog after quite some time off. “It’s time to make the call – fossil fuels are finished. The rest is detail.” Sounds good, until you read the ‘detail’. Paul is still convinced that it’s renewable energy that will sink the fossil fuel industry. He writes…..:

The detail is interesting and important, as I expand on below. But unless we recognise the central proposition: that the fossil fuel age is coming to an end, and within 15 to 30 years – not 50 to 100 – we risk making serious and damaging mistakes in climate and economic policy, in investment strategy and in geopolitics and defence.

Except the fossil fuel age may be coming to an end within five years.. not 15 to 30.

The new emerging energy system of renewables and storage is a “technology” business, more akin to information and communications technology, where prices keep falling, quality keeps rising, change is rapid and market disruption is normal and constant. There is a familiar process that unfolds in markets with technology driven disruptions. I expand on that here in a 2012 piece I wrote in a contribution to Jorgen Randers book “2052 – A Global Forecast” (arguing the inevitability of the point we have now arrived at).

This shift to a “technology” has many implications for energy but the most profound one is very simple. As a technology, more demand for renewables means lower prices and higher quality constantly evolving for a long time to come. The resources they compete with – coal, oil and gas – follow a different pattern. If demand kept increasing, prices would go up because the newer reserves cost more to develop, such as deep sea oil. They may get cheaper through market shifts, as they have recently, but they can’t keep getting cheaper and they can never get any better.

In that context, consider this. Renewables are today on the verge of being price competitive with fossil fuels – and already are in many situations. So in 10 years, maybe just 5, it is a no-brainer that renewables will be significantly cheaper than fossil fuels in most places and will then just keep getting cheaper. And better.

With which economy Paul….? Come the next oil crisis, the economy will simply grind to a halt. Paul is also keen on electric cars….

Within a decade, electric cars will be more reliable, cheaper to own and more fun to drive than oil driven cars. Then it will just be a matter of turning over the fleet. Oil companies will then have their Kodak moment. Coal will already be largely gone, replaced by renewables.

When the economy crashes, no one will have any money to buy electric cars. It’s that simple….. Peak Debt is only just starting to make its presence felt…:

The carnage continues in the U.S. major oil industry as they sink further and further in the RED.  The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures.  The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year.

Unfortunately, the majority of financial analysts at CNBC, Bloomberg or Fox Business have no clue just how bad the situation will become for the United States as its energy sector continues to disintegrate.  While the Federal Government could step in and bail out BIG OIL with printed money, they cannot print barrels of oil.

Watch closely as the Thermodynamic Oil Collapse will start to pick up speed over the next five years.

According to the most recently released financial reports, the top three U.S. oil companies combined net income was the worst ever.  The results can be seen in the chart below:

Can the news on the collapse of the oil industry worsen…..? You bet……

According to James Burgess,

A total of 351,410 jobs have been slashed by oil and gas production companies worldwide, with the oilfield services sector bearing much of this burden, according to a new report released this week.

The report, based on statistical analysis by Houston-based Graves & Co., puts the number of jobs lost in the oilfield services sector at 152,015 now—or 43.2 percent of the global total since oil prices began to slump in mid-2014.

And then there are the bankruptcies……

A report published earlier this month by Haynes and Boone found that ninety gas and oil producers in the United States (US) and Canada have filed for bankruptcy from 3 January, 2015 to 1 August, 2016.

Approximately US$66.5 billion in aggregate debt has been declared in dozens of bankruptcy cases including Chapter 7, Chapter 11 and Chapter 15, based on the analysis from the international corporate law firm.

Texas leads the number of bankruptcy filings with 44 during the time period measured by Haynes and Boone, and also has the largest number of debt declared in courts with around US$29.5 billion.

Forty-two energy companies filed bankruptcy in 2015 and declared approximately US$17.85 billion in defaulted debt. The costliest bankruptcy filing last year occurred in September when Samson Resources filed for Chapter 11 protection with an accumulated debt of roughly US$4.2 billion.

Then we have Saudi Arabia’s decision to cut production to manipulate the price of oil upwards. So far, it appears to have reached a ceiling of $58 a barrel, a 16 to 36 percent increase over the plateau it had been on for months last year. But this has also come at a cost.

The world hasn’t really caught on yet, but OPEC is in serious trouble.  Last year, OPEC’s net oil export revenues collapsed.  How bad?  Well, how about 65% since the oil price peaked in 2012.  To offset falling oil prices and revenues, OPEC nations have resorted to liquidating some of their foreign exchange reserves.

The largest OPEC oil producer and exporter, Saudi Arabia, has seen its Foreign Currency reserves plummet over the past two years… and the liquidation continues.  For example, Saudi Arabia’s foreign exchange reserves declined another $2 billion in December 2016 (source: Trading Economics).

Now, why would Saudi Arabia need to liquidate another $2 billion of its foreign exchange reserves after the price of a barrel of Brent crude jumped to $53.3 in December, up from $44.7 in November??  That was a 13% surge in the price of Brent crude in one month.  Which means, even at $53 a barrel, Saudi Arabia is still hemorrhaging.

Before I get into how bad things are becoming in Saudi Arabia, let’s take a look at the collapse of OPEC net oil export revenues:

The mighty OPEC oil producers enjoyed a healthy $951 billion in net oil export revenues in 2012.  However, this continued to decline along with the rapidly falling oil price and reached a low of $334 billion in 2016.  As I mentioned before, this was a 65% collapse in OPEC oil revenues in just four years.

Last time OPEC’s net oil export revenues were this low was in 2004.  Then, OPEC oil revenues were $370 billion at an average Brent crude price of $38.3.  Compare that to $334 billion in oil revenues in 2016 at an average Brent crude price of $43.5 a barrel…….

This huge decline in OPEC oil revenues gutted these countries foreign exchange reserves.  Which means, the falling EROI- Energy Returned On Investment is taking a toll on the OPEC oil exporting countries bottom line.  A perfect example of this is taking place in Saudi Arabia.

Saudi Arabia was building its foreign exchange reserves for years until the price of oil collapsed, starting in 2014.  At its peak, Saudi Arabia held $797 billion in foreign currency reserves:

(note: figures shown in SAR- Saudi Arabia Riyal currency)

In just two and a half years, Saudi Arabia’s currency reserves have declined a staggering 27%, or roughly $258 billion (U.S. Dollars) to $538 billion currently.  Even more surprising, Saudi Arabia’s foreign currency reserves continue to collapse as the oil price rose towards the end of 2016:

The BLUE BARS represent Saudi Arabia’s foreign exchange reserves and the prices on the top show the average monthly Brent crude price.  In January 2016, Brent crude oil was $30.7 a barrel.  However, as the oil price continued to increase (yes, some months it declined a bit), Saudi’s currency reserves continued to fall.

This problem is getting bad enough that for the first time ever, the Saudi government has, shock horror,  started taxing its people….

Tax-free living will soon be a thing of the past for Saudis after its cabinet on Monday approved an IMF-backed value-added tax to be imposed across the Gulf following an oil slump.

A 5% levy will apply to certain goods following an agreement with the six-member Gulf Cooperation Council in June last year.

Residents of the energy-rich region had long enjoyed a tax-free and heavily subsidised existence but the collapse in crude prices since 2014 sparked cutbacks and a search for new revenue.

How long before Saudi Arabia becomes the next Syria is anyone’s guess, but I do not see any economic scenario conducive to Paul Gilding’s “Great Disruption”. The great disruption will not be the energy take over by renewables, it will be the end of freely available energy slaves supplied by fossil fuels. I believe Paul has moved to Tasmania, in fact not very far from here….. I hope he’s started digging his garden.





Stuff about energy to listen to…

5 01 2015

Following that outrageous article about solar’s ERoEI of 50:1, along comes this piece that has Paul Gilding frothing at the mouth…

http://mpegmedia.abc.net.au/rn/podcast/2015/01/ssw_20150103_1209.mp3

And for an antidote, if you haven’t read any of Zehner’s work, you can listen to him here, but I warn you he’s just repeating what I published last year….

http://www.ecoshock.info/2014/12/green-illusions-ozzie-zehner.html





Carbon bubble toil and trouble

27 03 2014

There has been of late quite a few articles on the blogosphere about the potential for a Carbon bubble.  A bubble about to burst.  That this will occur is utterly undeniable, but the outcomes featured by different writers are a bit off the mark in my opinion……

First, let me start with Paul Gilding.  I have a lot of time for Paul.  I’ve even published some of his writings here; but his optimism often leaves me flabbergasted…….

In Carbon Crash Solar Dawn, published in Cockatoo Chronicles 

I think it’s time to call it. Renewables and associated storage, transport and digital technologies are so rapidly disrupting whole industries’ business models they are pushing the fossil fuel industry towards inevitable collapse.

Some of you will struggle with that statement. Most people accept the idea that fossil fuels are all powerful – that the industry controls governments and it will take many decades to force them out of our economy. Fortunately, the fossil fuel industry suffers the same delusion.

gilding

Paul Gilding

I don’t think the oil industry is under any such delusion.  Unable to make a profit with oil floundering around $100 a barrel, a price the market forces on them to accept, that industry is taking to selling its assets to prop up its bottom line, even borrowing money to pay shareholders’ dividends….

The only idea I struggle with Paul, is that “renewables, electric cars and associated technologies build the momentum needed to make their takeover unstoppable“.

Take here in Australia for instance; the coal fired power lobby has twisted the politicians’ arms (I don’t think much twisting was required either…) to thwart any further growth in the development of renewables.  In Queensland where I still live, the Newman government has indicated that the paltry 8c feed in tariff that the poor beggars who installed PVs on their roofs after the frankly overgenerous 44c feed in tariff was terminated, will become a zero FiT after July 1.  We who are on the overgenerous 44c FiT are ‘safe’ (until TSHTF that is – then all bets are off), because we are on a contract that lasts until 2028….. but everyone else misses out.  Why are they doing this?  It’s all explained very well here on The Conversation, but basically it’s to protect the dinosaur industries’ shareholders.  There’s no way they are borrowing to pay their shareholders like Shell had to do….  Money rules, and f*** you the consumer.

Paul also further writes:

I think it’s important to always start with a reminder of the underlying context. As I argued in my book The Great Disruption, dramatic economic change is not a choice we get to make it, but an inevitable result of physical science. This is because business as usual, with results like ever increasing resource constraint or a global temperature increase of 4 degrees or more, would trigger economic and social collapse. So the only realistic outcomes are such a collapse or an economic transformation that prevents it, with timing the only big unknown. I argued transformation was far more likely and, to my delight, that’s what we see emerging around us today – even faster than I expected.

In parallel, we are also seeing the physical impacts of climate change and resource constraint accelerating. This is triggering physical, economic and geopolitical responses – from melting arctic ice and spiking food prices to the Arab Spring and the war in Syria. (See here for further on that.) The goods news in this growing hard evidence is that the risk of collapse is being acknowledged by more mainstream analysts. Examples include this commentary by investment legend Jeremy Grantham and a recent NASA funded study explained here by Nafeez Ahmed. So the underlying driver – if we don’t change in a good way, we’ll change in a very bad way – is gathering acceptance.

Hang on……..  is he saying the Arab Spring is about people demanding “renewables, electric cars and associated technologies”?  Because collapse is exactly what is happening in Egypt and Syria.  Collapse does not begin in boardrooms, it begins in the streets when people run out of food, water, and petrol….

And where is the debt problem mentioned in this “dramatic economic change“?  How exactly will the “renewables, electric cars and associated technologies” be paid for?  More growth?  Has he never heard the saying “the best way to get out of a hole is by not digging any deeper”?

Over at Nature Climate Change, I found this too……

…major players in the financial markets are becoming increasingly uneasy about the extent of the impact of future climate policies on power companies. A supposition — fostered by the Carbon Tracker Initiative — is that fossil fuels may be nowhere near as profitable in the future as they have been so far. This is not simply because the costs of prospecting and drilling for oil, for example, are increasing, or that the fossil fuel resources that give the oil, coal and natural gas companies their value are about to run out — they are not. The problem is more that a large portion — perhaps as much as 80 per cent — of these reserves will have to be left untouched if society has any chance of limiting global temperature rise to 2 °C this century.

So, pray tell, what will we build the new energy system with…?  Let me remind you of just how many resources it takes to build wind turbines… or a solar thermal power plant

Paul ends his article with:

So, as I see it, the game is up for fossil fuels. Their decline is well underway and it won’t be a gentle one. Of course they won’t just be gone in few years but once the market and policy makers understand what’s happening, it will become self-reinforcing and accelerate rapidly. Markets come into their own in situations like this. They rarely initiate change, but once they’re racing down the hill, it’s time to jump on board or get out of the way. It’s an ugly and brutal process for those involved, but it gets the job done quickly.

When that occurs, we may find that those forecasts by myself and others like Tony Seba from Stanford University, that the oil, coal and gas companies will be all but obsolete by 2030, might turn out to be conservative after all. Interesting times indeed.

Yes, it is game over.  But not for the fossil fuel industries alone.  When they go down, everyone goes down.  Even the central bankers, to whom the global debt which has soared more than 40 percent to $100 trillion since the first signs of the financial crisis, will go down….. why do so few people see the big picture…….?  For someone who claims to understand the “inevitable result of physical science” as the driver of economic change, Paul truly puzzles me.





The latest sport: Charting Collapseniks

10 02 2014

It appears I am far from the only “End of Civilisation as we know it” blogger to be fascinated by other bloggers’ positions on how the Matrix will affect “Civilisation as we know it”…..  It seems that David Holmgren’s shift in strategy from peaceful change by calling for restraint on overconsumption and gradual adoption of the degrowth economic paradigm to ‘Terra-ism’ by calling for “Crash on Demand” – or a strategic decoupling by masses of youth (and elders) from the economic system that is crashing the planet’s ecological equilibrium by simply walking away….  has thrown the cat in among the pigeons.  Are we no allowed a change of heart?

Another interesting side of this debate has been the way I have discovered (or rather been pointed to) Collapseniks I wasn’t aware of.  Like David Cohen… which means I now have a whole lot more reading to do.  How many of us are there?  All the high profile ones are mentioned in this interesting analysis by Albert Bates, another newcomer to my list that I was led to by my friend Kate from Tasmania.  And just to prove we can’t all know them all, nor even think about all of them, quite a few did not make the list (I don’t count – with just 300 followers, I’m hardly ‘high profile’!)  Like Dave Pollard, John Michael Greer gets a mention, but is not on the chart, XRayMike misses out, as do Ran Prieur and Paul Gilding.Collapsenik

Pollard, one of my favourites, left a comment at ‘The Great Change’…:

Thanks Albert. This is somewhat along the lines of a chart I posted last year reviewing David Graeber’s book, which is a bit more complex.

I would say the right side of the chart should be “Active Resistance” not “Violent Revolution”. In the lower right quadrant, that active resistance is holding actions, done to lessen but not with any hope of preventing collapse. With that clarification, I’d put James Hansen, Nicole Foss and Naomi Klein in the lower right, and shift Lovelock in the lower left. Those above the line are not Collapsniks but what I have called Salvationists.

I’d sometimes put myself close to the lower right corner (when I’m angry) and sometimes in the lower left corner (when I’m more at peace with the inevitability of collapse). With time, ‘gravity’ will, I think, move everyone down in your chart until it only has one dimension left.

At any rate, Albert Bates has come up with the chart above, to which I have cheekily added my own name…  Where do you the reader stand?  Does it matter..?

Bates readily admits himself that “the map is not the territory, and this is especially true of mind maps. I am just an impulsive doodler.”  I personally would have put Guy McPherson in the extreme right hand bottom corner, and when trying to place myself even struggled with the fact deep down I am a Green Anarchist.

The other thing I could not help thinking about is how little impact any of us, even the widely read names like Heinberg and Kunstler, Foss and McKibben, and even Chris Martenson have had on the masses.  we read each other’s work, maybe, but in the end, the sheeples are still heading for the cliff at, if anything, an accelerating rate.  You only need to see the way they voted at the recent by-election in the Federal seat of Griffith formerly held by past Prime Minister Kevin Rudd….  If you can stand it, here’s a video of what the candidates had to say..

As usual, the two main contenders repeated the same old boring party lines and platitudes.  And as often happens with by-elections, the field of candidates was a football team’s worth of independents and radical parties, and I have to say I was really impressed with more than one of them…..  there is NO WAY I would have (or could have) voted  for either of the two main parties (I haven’t done so since voting for Gough Whitlam in the 1970’s!).

The Greens got 10% of the vote……  and ALL the other small parties combined garnered 7.4% of the vote between them….  all eight of them, averaging under 1% each.  If that doesn’t demonstrate the electorate’s lack of imagination, I don’t know what does.  What a missed opportunity to vote for the Pirate Party, or the Stable Population Party, or either of the two independents……  anybody but the laborals…..  I don’t know who said it, but if voting made a difference, they’d make it illegal.





Let’s talk about Bushfires, Climate Change and Coal

22 10 2013

Another guest post from Paul Gilding…..

Originally published at Cockatoo Chronicles

October 22

Paul Gilding

Paul Gilding

It’s easy to understand why there’s widespread support for politicians and others who argue we shouldn’t talk about climate change in the middle of a bushfire emergency.

When you’re fighting to keep your house, grieving over the loss of a loved one or putting your life on the line to protect others lives and property, people talking about climate policy or how these kinds of events will become more common and more severe is very uncomfortable.

This very human response should be understood and people who are suffering loss, or fear of it, should be treated with sensitivity. That’s an argument about how we talk about it, but certainly not a reason to avoid doing so. This is actually the perfect time to talk about climate change and about climate policy – it couldn’t really be better.

People don’t like talking about uncomfortable things.  It makes us feel, well, uncomfortable. The thought that major bushfire emergencies in spring could become more common, with people dying and houses and communities being destroyed is very uncomfortable. The fact that we in Australia are making a disproportionately large contribution to the problem by polluting more per capita than any other developed country and now plan a massive expansion in our coal exports which, when burnt, will make climate impacts worse around the world, is particularly uncomfortable. But it’s still true.

That’s why, right now, in the middle of a scary, hard to control bushfire emergency that threatens homes and lives is exactly when we should talk about it.  Right now, while we’re paying attention to the reality of our pollution’s results, rather than thinking about it as some long-term global risk we can emotionally detach from. Right now, while we’re facing climate change for what it is – an expensive, disruptive, dangerous risk to our quality of life. A risk that we are actively contributing to making worse.

Members of Tony Abbott’s new conservative government, including Cabinet ministers, have been strident in their attacks on those who raise this connection. This is unsurprising given they have a lot to lose if people accept it.

Of course no one can blame the government for these bushfires nor draw a direct causal relationship between any particular fires and climate change. But this is one of NSW’s worst bushfire emergencies, referred to by state fire fighters as “unparalleled” given the season, with a state of emergency declaration allowing authorities to forcibly remove people, cut electricity and water supplies, and demolish buildings. Sure, we’ve always have bad fires but with one this big, in the middle of spring and coming after Australia’s hottest ever September, you would, to use a great Australian phrase, have to be a “flaming drongo” (complete idiot) not to be wondering about the connection. Especially given the science is so clear.

That’s why Tony Abbott’s government doesn’t want us to talk about it. Everyone knows the new government is resisting action on climate change. But politicians here can’t say that. Unlike America, where climate denial is a badge of pride for conservatives, in Australia they have to take a subtler line. The Australian public accepts climate science and believes the world should act. So our conservative politicians have to say they accept the climate science (even when they don’t) then argue that Australia should act slowly and cautiously and not before the world does – in other words say the right things but don’t take much action. Well, except to dig up and sell as much coal as we can before the world wakes up to our game.

That’s why linking climate and fires is scary territory for conservative politicians. It’s hard to overstate how iconic and powerful bushfires are in the Australian psyche. They bring out the best in us. Courageous, mostly volunteer fire-fighters risk their lives to protect others and are correctly seen as heroes. The tragedy of fires brings communities together and we open our hearts and wallets to those affected in these all too regular fire events that symbolise summer. So connecting politics to this iconic Australian symbol is both dangerous and alluring. Observe for example the conservative shock–jock Neil Mitchel who, while attacking those who link fires and climate change this week tried to side with the heroes, saying “This is one of those times we pull together and when the Australian spirit famously shines through….. I remember the spirit that builds around times like this. It is magnificently Australian.”

So let’s be clear, the resistance from conservative politicians and commentators to linking climate change and fires is not just driven by compassion for those suffering loss. It is the manipulative politics they’re accusing others of. As the old quote goes “Hell hath no fury like a vested interest disguised as a moral principle.” If the public learns to relate natural disasters that go to the heart of the Australian psyche, like fire, drought and flood, to climate change – those who resist strong climate policy will be in serious trouble. So will their policies promoting the massive expansion of coal mining.

But perhaps the most important reason for talking about climate change and bushfires is so we end our denial of what’s to come.  Mega fires in spring, as we’re facing this week, are indicative of the future we face and we have some important choices to make.

Firstly, we must decide to get ready for a lot more angry summers – these are now inevitable. They’re going to be tragic, expensive and disruptive and the sooner we get our heads around that the better of we’ll be. Given what’s coming we should all be running raffles and fundraising BBQ’s for our volunteer fire fighters. We’re going to need them to be well resourced, appreciated and numerous. And we’re going to have to think differently and creatively about how we reduce the risk, as well argued by Professor Peter Bowman from the University of Tasmania.

Secondly we have to decide what side of history we want to be on in Australia. Are we going to be the country that that sold the coal that helped drive the climate into chaos or the ones who woke up in time and changed our ways. That’s the conversation we need to have and the middle of bushfire emergency is the ideal time to have it.

So let’s talk.





How anti-coal campaigners are protecting Australia’s economy

10 05 2013

This is a guest post from Paul Gilding who kindly gave me permission to republish his excellent article……

Paul Gilding

Paul Gilding

Irony doesn’t get any better than this. Environmentalists and farmers fighting the expansion of coal mining and coal seam gas across Australia are protecting the economy. If they are successful in slowing down or reversing these sectors in Australia, future governments will be spared an economic mess, Australian workers will have much improved employment prospects and our big banks will be spared major losses.

 
That’s because, while not their intention, such campaigns are the only thing likely to moderate the rude economic awakening we face when the global carbon bubble bursts and the fossil fuel industries start their inevitable and terminal decline.  While the world economy will be impacted Australia is particularly exposed and with the active support of our governments and financial institutions, coal and gas companies are doing their best to increase this exposure.

 
Fortunately for Australia’s economics prospects, these campaigns are amongst the most strategic and effective ones we’ve seen from the NGO community for many years.  Unlike traditional environmental campaigns that tend to raise an issue and demand government intervene, these campaigns are displaying a more sophisticated approach, taking on the industry with a clear view of how markets work. They recognise that government will not be an ally in this case, with both major parties showing overwhelming support for the expansion of Australia’s fossil fuel dependency.  So they are instead going direct to the market, targeting each development with legal and other delay tactics, attacking the reputation of lenders and suggesting investors think again about financial risk.

 
The campaign in Australia will be given a major boost in coming months when one of the United States most effective climate campaigners, Bill McKibben visit’s Australia. McKibben’s 350.org has been credited with revitalising the grass roots climate efforts in the US with his divestment campaign arguing that fossil fuel investments are immoral as well a poor investment choice.

 
Pensions funds in Australia, the major owners of fossil fuel assets, are not likely to respond to the moral argument but they will take notice of delays and risks to new projects. And they’re not likely to miss the growing mainstream market interest in the carbon bubble, with the argument starting to land as a material risk.  Investors don’t pay much attention to anti-coal campaigners in developing their investment strategy, but they start to listen when analysts like Citi Group and HSBC raise concerns. HSBC argued recently that some of the world’s oil and as majors could lose 40 – 60% of their market cap if the carbon bubble scenario plays out.

 
I have been arguing that there’s a global financial risk in the carbon bubble for many years, as have many others such as the folks at Carbon Tracker in the UK. A few years ago, these concerns were dismissed as very long term in impact. But with economists like Sir Nicholas Stern and investors like Jeremy Grantham at GMO now coming on board, seeing this as a systemic financial risk, the game is changing.

 
Why the shift?

 
Previously these concerns were analysed with the assumption that a global agreement on climate change would be the key driver of market shift on climate. The conclusion was therefore that no government action = no carbon investment risk. But in the last few years the dramatic price drops in solar and the severe disruption to the coal fired utility business model created by the boom in rooftop solar, have put carbon risk into a very different context.  The markets now have a very real and live example of how shifts can occur unexpectedly in carbon exposed sectors, with great destruction of value for companies that aren’t prepared. They are also seeing the opportunities in the upside, with companies in the rooftop solar installation space going to very successful IPOs. Investment shifting from coal to solar is no longer a theory but a live trend that will accelerate.

 
So if this is all so clear, why are Australia’s governments and major banks acting with such disregard for the economic risks involved in increasing Australia’s exposure to the carbon bubble? It’s the same reason bubble’s tend to burst rather than deflate, and is well argued by the legendary investor Jeremy Grantham, whose status comes from not just having $100 billion under management, but also his success in forecasting so many of the major investment bubbles of the past four decades. He says it simply “aversion to bad news”. He continues: “The investment business has taught me – increasingly as the years have passed – that people, especially investors, prefer good news and wishful thinking to bad news; and that there are always vested interests to offer facile, optimistic alternatives to the bad news.”

 
Politicians and investors who are benefiting from the carbon bubble are not going to be the ones who help it come to calm end.  They simply don’t want to see it, for the reasons Grantham explains. This will not change and so we shouldn’t expect it to. That’s why bubbles burst and it’s why this one will.

 
This brings me back to the importance of the environmental campaigners protecting Australia’s economy. While I believe it is inevitable the bubble will burst, the smaller it is when it does so, the better off the economy will be. The less stranded infrastructure we have built, the fewer mines that have to close and the less miners lose their jobs, the less risky the broader economic impact.

 
So while I wouldn’t normally recommend taking financial recommendations from an environmental NGO, I think the CEO of The Climate Institute John Connor provides some pretty sound advice to investors: “Investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming.”It’s time for investors, particularly our pension funds, to wake up. Maybe the best way they can secure our retirement savings is take some money out of coal investments and send it to climate campaigners!

Originally published here

http://paulgilding.com/cockatoo-chronicles/cc20130509-anti-coal-protects-economy.html