Decline And Fall Of The CO2 Crisis

By: Andrew_McKillop

Time Was
The 2009 Copenhagen conference was with no possible doubt the high point. Over 130 Heads of State flew into the Danish capital in their low-carbon presidential planes although some came by motorcade or presidential train to worry in public about “climate catastrophe” and bicker about who pays what.. Outside the venue hundreds of Climate Crazies, paid by somebody, danced round with paint on their faces in gay printed T-shirts to dramatise the urgency of the situation. They said that “Al Gore's 350ppm” must be fixed and set as the global limit for CO2 levels, and become the maximum-ever limit for CO2 in the atmosphere – that is 0.035%. In the geological past, without a single coal-fired power plant (or any humans including Al Gore) on the planet CO2 levels sometimes exceeded 1000ppm.

The planet handled the problem, even if it took time, for example at the start of the break-up of the Pangea supercontinent in the early Jurassic, about 225 million years ago. Reasons why CO2 levels had bulged are not known for sure, but adjustment probably took “only” about 1 – 3 million years.

Coming nearer to the present, whether or not the Earth's temperature recovery from the last glacial era, a recovery that started about 10 000 years ago, is responsible for today's occasional fillips of average temperatures is a question, in the USA, which now concerns high-priced lawyers, the ACLU, and over 25 media and reporters' unions and associations, as well as a string of major news providers including Bloomberg, USA Today, Time, The Washington Post, the LA Times and others. Their focus is the Mann versus Steyn law case and whether climate scientist Michael Mann fudged his famous “Hockey stick” diagram purporting to show world average temperatures running out of control as CO2 rises. As of present, things are running against Mann as the law case proceeds.

Much later on from the Jurassic, the last ice age and Copenhagen, in his second and last term in office, president Barack Obama is still seeking to mobilize the US nation behind his grand plan to fight climate change by slashing carbon pollution at home, while prodding other countries to follow the US and EU28 lead. One problem is that while US emissions have been falling, due to cheap natural gas for power plants, de-industrialization and a stagnant economy, the EU28 countries despite their more-stagnant-than US economies are emitting more CO2, due to high-priced natural gas for power plants being replaced by cheap black coal. Energy economics, you know!

Bowing Out
Japan, Canada and Australia have formally bowed out of the “global struggle” to limit the slight warming of the Earth's atmosphere that lasted about 20 years and stopped by year 2000-2003. Japan, Canada and Australia now formally reject taxing carbon fuels to cut CO2 emissions. Obama's “climate allies and partners” are shrinking.

In the US, its (excuse the joke) carbon copy of the EU28 energy transition plan that was voted by the European parliament in Dec 2008, features the outlawing of coal-fired power plants. One key part of the US strategy was to stop using public money to finance or aid the construction of coal power plants both inside the US and abroad.

By end-2013, momentum had stalled with the Obama administration's plan. Its effort to create a “global domino effect" that would choke off public financing for coal projects from lending institutions worldwide received, at best, uncertain international support. Some key lenders, even the World Bank (although it is terse with public statements on the subject) continue financing coal projects, and the US Ex-Im Bank which finances trade-related and industrial projects in low income countries, and elsewhere, has put its own “coal ban” on hold.

In the past year, Japan has approved funding of three major coal-fired plants in energy-starved developing and emerging countries. Germany, despite its vaunted Energiewende low carbon energy plan, for Germany, continues to support coal projects in several developing countries..

Observers say that the new development bank being formed by the BRICS group of emerging markets - Brazil, Russia, India, China and South Africa – will also be very unlikely to follow Obama's strictures on banning coal projects, when the new fund launches in two years time..If countries move away from coal as a fuel source, they are likely to do so for reasons other than a lack of public funding. Coal prices would have to rise by a massive amount, and there is no prospect of that.

In 2012, according to the World Resources Institute, almost 1 200 new coal-fired power plants had been proposed worldwide, with China, India and Pakistan accounting for the majority of projects.

US officials continue claiming the Obama plan to limit public support for coal has had a global impact, with the World Bank, the European Investment Bank, the UK, Netherlands and the Nordic countries joining the effort over the past year. The Obama strategy is to persuade other countries to change their export credit policies "to help level the playing field for US energy [equipment] exporters and bring other countries' financing practices in line with their climate change policies," according to Treasury spokeswoman Holly Shulman in a recent Reuters interview.

Never Realistic

Scott Morris, a former Treasury official for development finance recently told US newswires that the rapid change in carbon-related overseas project financing that the United States had hoped for was never realistic. Now a senior associate of the Washington think tank Center for Global Development, he says that “being pure on climate”, or any other issue in the face of domestic and international commercial and economic interests is not realistic,

The US Ex-Im Bank has suspended its internal ban on coal plant financing until September this year and is considering US government funding for a massive coal mine in Jharkhand, India.

Japan's overseas development bank, the JBIC, is the world's biggest public investor in coal projects and is very likely to help India with coal projects, if the US and European countries pass. From 2007 to 2013, Japan invested $19.7 billion in coal projects overseas, according to the Natural Resources Defense Council, a US environmental group.

In the specific case of the Jharkand project, Indian planners claim this can deliver coal at a price in US dollars far below $100 per ton. At $75 per ton, for example, this will price the coal energy at around $15 per barrel equivalent – but India pays world prices for LNG imports, for example from Qatar at more than $12 per million BTU or $67 per barrel equivalent. Other Asian importers of LNG pay as much as $15 - $18 per million BTU pricing this gas at up to $104 per barrel equivalent.

The 2011 Fukushima nuclear disaster prompted Japan's government to rely more on coal and helped lever a more rational attitude to coal-fired plants and technology in developing countries. Germany has firmly rejected any compliance with Obama's plan for choking off international funding to coal-fired power in developing countries.  As a world leader in “clean coal” low emission coal-fired plants Germany is expected to publish a review of its policy on funding coal plants this October but the German Ministry for Economic Cooperation and Development has declined to provide any more details. Germany's state development bank, KFW, has said that its support for coal power is dwarfed by its investments in environment protection, but it continues to support coal energy to give access to affordable energy in countries that cannot quickly move away from fossil fuels.

Getting Realistic

Several environment and development NGOs, including uber-correct low-carbon Greenpeace have been forced to backtrack on the issue. In Greenpeace's case it says that the “actual reality of investing in coal plants [in developing countries] today” and the near-certainty that the BRICS countries and their development funding bank will not apply restrictions on coal mining and power project funding makes it obligatory to face reality.

When Obama made his political pitch to stop US funding of coal projects overseas, and accelerate the shut-down of coal power plants in the US, at a Georgetown University speech in June 2013, he said he was “Calling for an end to public financing for new coal plants overseas unless they use carbon-capture technologies, or there's no other viable way for the poorest countries to generate electricity" he ignored not only coal politics but also the energy economics of the issue. Germany's Environment Ministry, which is hard to criticize for it commitment to the environment, notes that German producers of clean coal power plants, like Siemens, can achieve extreme low emissions – but this isn't cheap.

US investment in clean coal research and development has stalled for reasons including its high cost and the unworkable logistics of transporting and storing power plant emissions in underground “carbon sinks”. Large-scale carbon capture and storage in low income countries is fantastically unrealistic, as a large number of US Congress members have recently said. From early July, Congressional debate on reauthorizing the US Ex-Im Bank has become “one of the most important Republican fights in years” according to Vox.com, August 14, 2014, The Ex-Im Bank's lead role in “prodding” developing countries to stop using coal, or buy undeveloped and high-priced US carbon capture technology, is now a major political issue in the US. Some Republicans say the Ex-Im Bank should be shut down.

Obama vaunts the USA's ability to emit less CO2, but this is exclusively due to cheap shale gas, de-industrialization and a stagnant economy – for which his administration is also responsible. The facts are clear, but Obama doesn't want to know. Outside the US in many low-income countries, coal is sometimes the only rapid and economic option for increasing power supply.

In other words energy economics rules and Obama will accept yet another defeat for his unworkable policies, but in his in his second and last term, does this matter?

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2014 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.