Fuel for thought May–late June 2016: UK Brexit (All dates refer to 2016 unless stated otherwise)

Geopolitical context

The EU ‘Five Presidents’ Report of 2005 saw as its goal the economic, monetary and political union by 2025, and as near-term project the creation of a Eurozone treasury. (Letter from Harvard University Financial Times 6 May)

Science

Increases in carbon uptake by southeast US forests in response to tropical cyclone activity alone exceed carbon emissions by American vehicles each year. (Anthony Watts WUWT 2 May)

Emissions

Eurostat estimates that in 2015 CO₂ emissions from fossil fuel combustion increased by 0.7% in the EU. (European Commission/GWPF 3 May)

Finance

According to Vox Energy and Environment, a carbon tax will save the world, but at the moment such a tax varies from $130 on transport and heating oil in Sweden, to $53 in Norway$27 in UK (carbon price floor); $15 in France to almost nothing in Poland and Mexico; the EU ETS is values as $8 per tonne of CO₂ emitted. (28 April/Judith Curry 2 May)

Policy

The Global Warming Policy Foundation director said the decision by the British people to leave the EU would have significant and long-term implications for energy and climate policies. Carbon prices in the EU’s emissions trading market plunged 17% in the wake of the Brexit referendum result. (Graham Lloyd, The Australian, 27 June)

Technology

Goggle, Ford and other companies are planning the future of the driverless car promising greater safety. Fifty-four million of such car are to be on roads in 2035, say some. (FT Big read 4 May)

Carbon fuels and nuclear

By mid-June, before the In/Out EU election in UK, oil prices remained below $50 but rose to $50.47 on 21 June). (FT 18/19 June)

Ignoring climate change?

The number of big investors ignoring climate change risk increased last year despite a stark warning from Bank of England Governor Mark Carney’s about the potential for ‘huge’ losses from a sudden shift in regulation designed to curb global warming and fossil fuels. Almost half of the world’s top 500 investors are failing to act on climate change – an increase of 6% 236 in 2014, according to a report Monday by the Asset Owners Disclosure Project, which surveys global companies on their climate change risk and management. (Jessica Shankleman, Bloomberg, 1 May)

More calls for ‘responsible’ investment

Responsible investing, according to a Report attacks hypocrisy about CEO pay (which ranges from $156.1 m to $33.3 for one year), as disclosed. Responsible Investing also promotes efforts to ditch coal stocks and pays attention to ‘governance issues’ such as the vehicle emissions scandal, not enough women in the boardroom, and last, exploited workers who are seen as ‘investment’ risks. No mention of taxes … Anti-coal protestors from the Philippines are pictured and the whole divestment agitation is compared to the anti-apartheid movement by the CEO of the Carbon Tracker Initiative, ‘a foundation that monitors carbon (!!) emissions globally’ who admits that coal is a pygmy compared to oil and gases and rejoices that Peabody (coal miner) went bankrupt. An advertisement praises the rise of sustainable investment, which claims to manage $4.73 trillion assets as of end June 2016. (FTfm 9 May)

Energy and debt linked

Both energy and debt have characteristics that are close to ‘magic’ with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products. The reason why debt is important is because energy products enable the creation of many kinds of capital goods, and these goods are often bought with debt … The reason debt is needed is because while energy products can indeed produce a large ‘energy profit’, this energy profit is spread over many years in the future. In order to actually be able to obtain the benefit of this energy profit in a timeframe where the economy can use it, the financial system needs to bring forward some or all of the energy profit to an earlier timeframe. It is only when businesses can do this, that they have money to pay workers. This time shifting also allows businesses to earn a financial profit themselves. Governments indirectly benefit as well, because they can then tax the higher wages of workers and businesses, so that governmental services can be provided, including paved roads and good schools. (Oilprice.com 6 May)

Energy crisis in Tasmania

In August 2012 Australia imposed a carbon tax on fossil fuel generation, and almost immediately Hydro Tasmania took advantage by shipping large quantities of cheap hydropower to the mainland via the 500 MW Basslink interconnector. But the shipments combined with a lack of rainfall in 2015 depleted the volume of water stored behind Tasmania’s dams – and then the interconnector failed and Tasmania had to purchase diesel generators and reactivate its only gas-fired plant to avoid power shortages – a classic example of how misguided government attempts to decarbonize electricity generation can seriously distort an electricity market. (Eaun Mearns/Roger Andres Energy Matters 6 May)

Chinese solar group teetering on bankruptcy

Yingli Green Energy Holding Co., once the world’s biggest solar manufacturer, plunged the most in more than seven months after signalling it may be teetering towards bankruptcy. Yingli declined 21% to $3.60 at the close in New York, the most since Sept 29. That followed an 8.1% drop after the Chinese solar company acknowledged ‘substantial doubt as to its ability to continue as a going concern’. ‘It looks like they are not getting bailed out and they will need to file for bankruptcy’, said an analyst at Axiom Capital Management. (Joe Ryan, Bloomberg, 2 May/GWPF)

The greening of Total

Total already owns a US solar-cell business Sunpower, and then bought Saft, a battery company. Total is considered sincere about its aim to diversify into renewables. It makes or good copy, learnt from BP (which later sold off its solar business when it needed money) and solar/wind and batteries go together. Saft may not produce batteries for Sunpower and neither will boost Total’s profits, said Lex. One-fifth of its assets, according to CEO should be invested in the low carbon business within o years part of ‘a radical reshaping of the group’ but admits that it will remain primarily an oil and gas company for decades to come with emphasis on gas. Yet in 2011 it acquired SunPower, one of the largest US solar companies.

NB: Total also bought the Australian energy company Oil Search hoping for savings arising from the acquisition of its Papua–New Guinea LNG project. ‘Total is the clear winner’. (Lex FT 21/22 May)

Quantify uncertainty

‘My concerns about the consensus seeking process used by the IPCC have been articulated in many previous posts. I have argued that the biases introduced into the science and policy process by the politicized UNFCCC and IPCC consensus seeking approach are promoting mutually assured delusion. Nature Climate Change has published what I regard to be a very important paper: Expert judgement and uncertainty quantification for climate change, by Michael Oppenheimer, Christopher Little, Roger M. Cooke’. (Nature climate/journal/v6/n5/ncllimate/2959=s; Judith Curry, May 2016 where she quotes Willy Aspinall from her blog of June 2015: ‘Any attempt to impose agreement will ‘promote confusion between consensus and certainty.’ The goal should be to quantify uncertainty, not to remove it from the decision process.

Abstract

Expert judgement is an unavoidable element of the process-based numerical models used for climate change projections, and the statistical approaches used to characterize uncertainty across model ensembles. Here, we highlight the need for formalized approaches to unifying numerical modelling with expert judgement in order to facilitate characterization of uncertainty in a reproducible, consistent and transparent fashion. As an example, we use probabilistic inversion, a well-established technique used in many other applications outside of climate change, to fuse two recent analyses of twenty-first century Antarctic ice loss. Probabilistic inversion is but one of many possible approaches to formalizing the role of expert judgement, and the Antarctic ice sheet is only one possible climate-related application. We recommend indicators or signposts that characterize successful science-based uncertainty quantification. D

NB. An interesting study from Pat Michaels and David Wojick argues that computer modelling plays an important role in all of the sciences, but there can be too much of a good thing. A simple semantic analysis indicates that climate science has become dominated by modelling. This is a bad. (WUWT 19 May)

From urban to national heat island: The effect of anthropogenic heat considerable

A study published in the open access journal Earth’s Future investigates the urban heat island effect (UHIE) on a national scale. It compared the national energy consumption (which is converted to heat) to average national temperatures for the U.K. and Japan. Strong correlations are found between energy consumption and temperatures above or below global background levels. In the U.K. for example, temperatures correlate to energy consumption with r2 = 0.89, which is very much greater than the correlation to the CMIP5 climate models used in the last IPCC report of only r2 = 0.10. The abstract says ‘It is clear that the fluctuation in [temperature] are better explained by energy consumption than by present climate models’. (CliSci # 233 22 June)

New ideas welcome

In a new Open Access paper in the Journal of Earth Science & Climate Change, Arthur Viterito presents his ‘Correlation of seismic activity and recent Global Warming’ as a causal factor, so far rejected, resp. ignored, by both the IPCC and the sceptics’ NIPCC. Using a blended satellite temperature record (‘BELTT’) over a (consequently) too short time interval, he highlights a ‘slow rise’ over the first 18 years, a jump (representing the Niño of that year), which sets off a higher ‘slowly rising’ level for the next 18 years to 2015. It is not quite the way we would read it, but – granted – the 1998 El Niño was a major event, the real nature of which is still under discussion … There is agreement among some of us that magmatic events (possibly connected to the earth’ core, with or without solar system resonance) may play an important role in the globe’s crustal and oceanic behaviour and – hence – in forces that cause changes in the earth’ climate. It is easy to dismiss a paper such as this, based as it is on sparse data, but it contains important ideas on which to build. There is yet a lot of work to be done. (From Albert Jacobs 14 May)

NB: This paper had been offered to E&E but given current delays and peer issues, the author was encouraged to go elsewhere. I am glad the paper can now be widely read.

Periodicities in solar variability and climate change

Javier writes an interesting article about various solar cycle and climate change. He discusses the 87-year Gleissberg, the 208-year deVries, the 980-year Eddy (or millennium) and the 2300-year Hallstatt or Bray cycle. The solar cycles are defined by cosmogenic isotopes generated by GCR in the atmosphere, mainly 14C and 10Be. The Eddy cycle corresponds clearly with the Bond series of iceberg rafted debris deposited on the ocean floor. The author proposed a simple solar model that relates the cycles. The Bray cycle acts through changes in the de Vries cycle. The longer solar cycles are the most significant for climate. Javier estimates that the natural warming over the last 66 years (from 1950) in the northern hemisphere was about 0.15°C. Javier believes the variations in the solar spectrum cause an atmospheric effect in the stratosphere that propagates downward to the troposphere. The model projects that solar activity of the 21st century should be similar to the solar activity during the second half of the 20th century. Solar variability must have a much bigger influence on climate than that recognized by the IPCC, therefore greenhouse gas warming is also less and not dangerous. (Friends of Science CliSci # 231, 30 May)

El Niño impacts global temperatures for hundreds of years

According to research from the Australian National University, even past El Niño oscillations in the Pacific Ocean may have amplified global climate fluctuations for hundreds of years at a time. The team uncovered century-scale patterns in Pacific rainfall and temperature, and linked them with global climate changes in the past 2000 years. The northern hemisphere warming and droughts between the years 950 and 1250 corresponded to an El Niño-like state in the Pacific, which switched to a La Niña-like pattern during a cold period between 1350 and 1900 … ‘Our work is a significant piece in the grand puzzle. The tropics are a complicated, yet incredibly important region to global climate and it’s been great to untangle what’s happening’, said a PhD student at the ANU Research School of Earth Sciences. ‘The current models struggle to reflect century-scale changes in the El Niño Southern Oscillation (ENSO) … We’ve shown ENSO is an important part of the climate system that has influenced global temperatures and rainfall over the past millennium’. The team measured trace elements and stable isotopes in stalagmites from the Indonesian island of Flores to reconstruct ancient rainfall, and compared it with records from East Asia and the central-eastern equatorial Pacific. (WUWT 9 June)

El Nino: No effect on global warming

The claims of ‘record’ global temperatures in association with a strong El Nino are misleading. In an El Nino the trade winds falter, the doldrums expand latitudinally and wave driven mixing ceases over large areas of the tropical ocean. In such conditions the top 1–2 m of ocean warms by several degrees. This extra warm layer can form or reform in a few days of calm and disappear overnight when the wind picks up. SST records from the days of sail are too few and scattered to derive reasonable global estimates. The later cooling water intake temperatures from ships come from below this warm surface layer. Satellite monitoring of SST is excellent for this purpose but the period of good comprehensive data is too recent to determine whether the 1998 and 2016 El Ninos were unprecedented or not. Historical records and at least one proxy study from the Line Islands indicate the occurrence of equally, or even stronger El Ninos over the past several centuries. The SST warming which is involved in an El Nino is only a short term effect in a particular region. Although it does have various flow-on effects elsewhere, it is not an indication of ‘global’ warming but is only the temporary surface effect of a hiatus in mixing. (Walter Starck 25 May)

Signs of a significant long-term shift in temperatures from warm to cold

Vencoreweather is reporting that the North Atlantic Ocean has significantly cooled over the last few years as indicated by both the heat content down to 700 m and the Atlantic Multi-decadal Oscillation. The NA ocean heat content increased sharply from 1990 to 2005 and has declined equally sharply since early 2007. The AMO is an index of sea surface temperature. The cycle length is 60–68 years. The long-range forecast for the 2016–2017 winter from a Japanese forecasting agency shows much colder than normal water temperatures in the NA Ocean. This will likely result in increasing northern sea ice extent and will significantly impact North American and European temperatures. (Friends of Science CliSci # 229, 5 May)

Saving the Gt Barrier Reef: No problem or engineering a super coral?

There is growing scientific conflict over bleaching on the Great Barrier Reef. Picture: Tourism Queensland. Activist scientists and lobby groups have distorted surveys, maps and data to misrepresent the extent and impact of coral bleaching on the Great Barrier Reef, according to the chairman of the Great Barrier Reef Marine Park Authority. A full survey of the reef released by the authority and the Australian Institute of Marine Science said 75% of the reef would escape unscathed. The vast bulk of bleaching damage was confined to the far northern section off Cape York, which had the best prospect of recovery due to the lack of onshore development and high water quality. (WUWT/The Australian 4 June)

Geologist challenges Lord Stern in FT

In a carefully worded letter expressing disagreement with the ‘alarmism’ of Nicholas Stern (who had admonished oil companies for using an unsustainable (!) business model’) Dr M F Ridd pointed out that that the science underpinning the oil companies is geology rather than business. Geology shows that ‘over time, the earth’s climate has warmed and cooled repeatedly’, that the present warming is not unique and that current CO₂ levels were reached several times in the past. Oil companies have vested interests but also rely on the science of geology. (Letter FT 11/12 June)

Science in crisis

In The Guardian last week, Jerome Ravetz, one of the world’s leading philosophers of science, reviewed what he and many others describe as ‘the crisis in science’. Ravetz, who has been warning of the emerging internal conflicts in science for decades, sees the crisis is spreading to the general public … Present reality is that science is on the verge of a nervous breakdown. That’s the not-so-tongue-in-cheek message in Science on the Verge, a new book by European scientist Andrea Saltelli and seven other contributors. Science on the Verge is a 200-page indictment of what to the lay reader appears to be a monumental deterioration across all fields, from climate science to health research to economics. The mere idea that ‘most published research results are false’ should be cause for alarm. But it is worse than that. Just about everything we take for granted in modern science, from the use of big data to computer models of major parts of our social, economic and natural environment and on to the often absurd uses of statistical methods [tends to] fish for predetermined conclusions. (Financial Post/GWPF 14 June)

The greening earth: The net benefit

A paper in the magazine Nature Climate Change reinforces the studies produced by the Non-governmental International Panel on Climate Change (NIPCC) that humans adding CO₂ is a net benefit to the environment and to humanity. Plants are flourishing and the overall environment is becoming more robust. The new study was based on satellite photos taken by NASA that show higher rates of photosynthesis are occurring. CO₂ is a main source of fuel for plants, thus for all life on Earth. The composite photos show all parts of the US are greening – benefiting from increased CO₂. Yet, the US Global Change Research Program of which NASA and NOAA are a part, continues to calculate a social cost of carbon dioxide (SCC), without regard to the benefits – truly a dysfunctional enterprise. See Challenging the Orthodoxy – NIPCC, particularly Climate Change Reconsidered II: Biological Impacts and links under Social Benefits of Carbon. (WUWT, The Week That Was, 30 April 2016, www.SEPP.org and the Environmental Policy Project) The Week That Was: 2016-04-30 (30 April 2016, Ken Haapala, President, Science and Environmental Policy Project 1 May)

Parched earth policy – Drought, heat wave and conflict

The Global Warming Policy Foundation has published a report by Andrew Montford (author of The Hockey Stick Illusion) that examines the credibility of claims that global warming will increase risks of drought, heat wave-related deaths and conflicts. Short droughts in the late 20th century in the UK were dwarfed by decades-long droughts in the previous century. Globally there has been declining drought trend since 1982. Despite little or no evidence, the media and some scientists linked climate change to drought. This led to Australia spending billions of dollars on desalination plants which were mostly mothballed. The IPCC predicted dry regions will get dryer based on climate models despite that observations show the opposite. The IPCC claims that ‘the health impact on health of more frequent heat extremes greatly outweigh benefits of fewer cold days’, but many studies do not support or contradict that claim. (GWPF Briefing, 21 2016)

The world grapples

UN climate chief Christiana Figueres stated that Australia must stop mining coal. Speaking at a conference in Melbourne she drew a parallel between Australia and the oil kingdom of Saudi Arabia as countries that would need to diversify their economies as the world grapples with global warming … ultimately Australia would have to move away from coal for environmental reasons and changes in global economic patterns. She said nobody was saying this would have to happen overnight, but the transition should be orderly, gradual and progressive. ‘The science is very clear, there is no space for any new coal’, she said. (Eris Worrall WUWT 7 May)

Russia stands apart

Russia set itself at odds with a drive by China and the United States for rapid ratification of a global agreement to slow climate change when a senior official said on Wednesday that Moscow first wanted a clear set of rules. Top greenhouse gas emitters China and the United States say they plan to join the Paris Agreement this year and almost all other nations say they will ratify as rapidly as possible – before the rules are in place. But Russia, the number three greenhouse gas emitter, questioned the plan in a rare sign of disagreement about implementation. (Aoyle, Reuters 27 May)

A cosy blanket: Mission innovation and the breakthrough energy coalition

World minsters recently met in San Francisco, and according to one UK participant, changed everything and nothing. They met and discussed two initiatives: Mission Innovation and the Breakthrough Energy Coalition. Selected comments by Grantham Institute, Imperial College London, Head of Policy and Translation are cited below:

‘But what of Mission Innovation? Launched last year, this is a specific pledge by 20 countries to double their spending on R&D in the coming five years, specifically covering low-carbon energy. This group of ministers represent over 80% of all government contributions to clean energy R&D. They took advantage of some overlap in membership with the CEM to meet up for the first time last week and agree what their mission really constitutes … Mission Innovation will focus on investing in technology start-ups at their earliest steps of development – taking ideas from the very first stages through to initial modifications and improvements and taking them towards early pilots. This sits well with the Ministerial’s focus on supporting deployment, raising awareness of new technologies and facilitating market uptake … Nestled up alongside these two efforts, the private-sector Breakthrough Energy coalition will invest to develop technologies that are at an early stage, helping them to reduce costs and prepare products to be rolled out on a large scale. Such investment completes the cosy blanket covering all stages of clean energy innovation, alongside the R&D funding from Mission Innovation and the CEM support for deployment and policy expertise … So now I see that the meetings last week in San Francisco were exciting because they brought these three groups together, complementary organizations with a common goal, each pushing at different parts in the innovation chain. These coordinated initiatives give the ground for hope. As my colleague noted in his blog at the end of last year: “getting renewables to the point where they can compete with coal – without government support – is not a matter of either funding RD&D or funding deployment and market expansion activities. We need the right balance of both. Innovation is a complex challenge, and different technologies benefit from different combinations of public RD&D and public deployment support at different times”. Where we are still lacking is in the detail of the Mission Innovation activities, which nobody has yet defined, and the events last week didn’t offer the clarity that I had hoped for … countries committed to doubling their R&D spend in energy will define their priorities individually’. (From a participants report to Grantham Institute, Imperial College London 7 June)

IPCC politics: Lest we forget

Excerpt from a cfact.org paper by Ron Arnold asserts: ‘We know that the IPCC Summary for Policymakers (SPM) does not always reflect what is actually in the scientific chapters. But evidence is now emerging that the US State Department has attempted to influence what was written in both the SPM and chapters’. He argues that:

‘U.S. political intervention in climate science has corrupted the outcome. The new emergence of an old 1995 document from the U.S. State Department to the United Nations Intergovernmental Panel on Climate Change confirms those suspicions, or at least gives the allegation credence enough to ask questions.’ For the USA he could conclude: ‘It’s troubling that a FOIA lawsuit came up empty – “no such correspondence in our files” – when the old 1995 document was requested from the U.S. State Department late last year. This raises a certain ironic question: If I have a copy of your document, how come you don’t? “State’s response is also somewhat unbelievable because the document that fell into my hands showed State’s date-stamp, the signature of a State Department official and the names of persons still living – along with 30 pages of detailed instructions on how to change the IPCC’s science document and the summary for policymakers.” I am not at all surprised. The document itself consists of a three-page cover letter to Sir John Houghton (whom Sonja B-C interviewed in UK in 1992), head of IPCC Working Group I (Science), from Day Mount, Deputy Assistant Secretary, Acting, Environment and Development, United States Department of State, along with the thirty-page instruction set with line-by-line “suggestions,” written by scientist Robert Watson and others.

See http://www.cfact.org/2016/04/09/how-corrupt-is-government-climate-science/

Paris and India

While the U.S. side insisted that Mr Modi and the President agreed that both countries would ratify the climate treaty within the current year – 2016 – Indian officials said this was not the case. (Varghese K George, The Hindu, 8 June 2016)

A recommendation from the World Energy Council

What should energy policy should look like to make a global energy transition possible? Read Joan MacNaughton, Executive Chair of the World Energy Trilemma report of the World Energy Council in Energy Post, 10 June), ‘an important document’ which the editor of ER recommends to all energy policymakers. Policy (not the ‘market’) is key, MacNaughton argues.

Democracy and climate change: Adaptation more likely

Of course, the outstanding question is whether the agreement will actually be implemented. As its critics are quick to point out, the Paris climate pact is a ‘soft law’ that lacks the legal clout to impose sanctions and penalties, but rather attempts to change behaviour through norm-building and consensus. And past attempts by individual nations to control greenhouse gas emissions have produced scant results … Pointing to the susceptibility of democratic governments to interest groups that have an economic stake in maintaining the status quo, environmental ethicist Dale Jamieson questions whether democracy is up to the challenge of climate change at all. Dale Jamieson questions whether democracy is up to the challenge of climate change at all. Scientist James Lovelock is similarly pessimistic, noting that human inertia is so great that, barring a catastrophic event, the best democratic governments can do is to adapt to climate change, i.e. building sea walls around vulnerable cities. Lovelock argues that, to make the hard decisions needed to deal effectively with climate change, it may be eventually be necessary to put democracy on hold, opting instead for some kind of environmental authoritarianism. But is it really necessary to choose between democracy and saving the planet? A comprehensive review of various countries’ progress towards environmental sustainability suggests otherwise. In fact, the case against democracy as a vehicle for environmental sustainability may be grossly overstated, based less on the actions of the world’s democracies as a whole than on the failures of a conspicuous few. (From Guest essay by Eric Worrall WUWT 2 June) (Read more from: http://foreignpolicy.com/2016/06/01/democracy-is-the-answer-to-climate-change/

EU Policy

Europe is at a loss on how to engage the energy consumer. That became clear at debates during the EU Sustainable Energy Week in Brussels this week. (EP 20 June) Energy Post

A Pan-European electricity market?

Europe is progressing towards an integrated, interconnected pan-European electricity market. However, writes Philip Baker of the Regulatory Assistance Project (RAP), the governance and regulatory arrangements that the EU has established to support this process are inadequate to the task. They are more focused on preserving the sovereignty of national TSO and regulators than addressing the wider interests of the market. According to Baker, the EU needs to create genuine regional markets with regional regulators and system operators similar to the Regional Transmission Organizations in North America. (By David Thorpe EP 29 April)

Climate change endangers European security but … 

Europe’s security rests on its neighbours’ long-term stability. However, as the immediate political debate focuses on short-term crises, long-term priorities risk being ignored. European leaders need to better understand the interlinkages between climate change and security, as well as the full economic and security value of future-oriented investment. The first step could be to put a new approach to energy and climate change in line with the Paris Agreement at the heart of the new European Global Strategy. Five years ago, as the Arab Spring sparked the streets of Tunis and Cairo, European leaders hoped that a new phase of democracy and political reforms across the Middle East and North Africa (MENA) region would begin. They could hardly have imagined [but should have] that popular and largely non-violent demonstrations would be followed by the degree of instability Europe faces today: civil wars in Syria and Yemen, the rise of the self-declared Islamic State of Iraq and the Levant, authoritarian rulers in Egypt and Turkey, the collapse of the central government in Libya and the tremendous wave of migrants landing regularly on the shores of Europe. Since then, the mood of European leaders towards the MENA region has moved towards a more defensive stance. (Excerpt from L. Bergamaschi, a Policy Advisor in E3G’s London office, where he works on European energy infrastructure and EU external policy in the context of the energy transition. (EurActiv.com, 9 May)

Biofuel troubles

EU laws requiring member states to use ‘at least 10%’ renewable energy in transport will be scrapped after 2020, the European Commission confirmed, hoping to set aside a protracted controversy surrounding the environmental damage caused by biofuels … The current directive, adopted in 2008, requires each EU member state to have ‘at least 10%’ renewable energy used in transport by 2020 – including from biofuels and other sources like green electricity. The commission confirmed a decision by EU leaders in October 2014 to have only one target for renewable energies across the 28 EU member states that ‘will not be translated into nationally binding targets’ … ‘The continuation of the sub-target for the transport sector is something that has not been accepted and will not be continued in our proposal at the end of this year’, she told the event, organized by a Finnish firm producing biodiesel from wood-based biomass. (Frédéric Simon, EurActiv.com, 4 May)

NB: The European Union has scrapped post 2020 biofuel targets, thanks to pressure from green groups concerned about environmental damage. (WUWT 6 May)

The Southern Gas Corridor construction begins

Official construction has started an important link to the $45bn mega-project to supply natural gas from the Caspian Sea to Europe – to reduce reliance on Russian supplies. The new link – the Trans-Adriatic pipeline which will carry gas 870 km across Greece, Albania and the Adriatic Sea coming ashore in southern Italy and connecting to Tanap – the Tran-Anatolian pipeline. Another interconnectors is planned from Greece to Bulgaria. This is to compete with Nord Stream 2 pipeline preferred by Russia which runs under the Baltic. Last year Russia and Greece agreed to build the Southern European pipeline which claims to make Greece a regional hub and strengthen ties with Albania. The politics are complex and part of foreign policy of several countries. There is also a South-European pipeline plan, from Northern Greece to Southern Italy and involving, potentially, Gazprom as developer. This is to be discussed with Putin in near future. The Yamal–Europe pipeline from western Siberia could also be affected as it involves Ukraine which Russia may want to bypass. (FT 18 May)

More trouble with pipelines and Gazprom

On 2 March FT had reported a scathing attack from within EU Parliament by the European People’s Party (centre right) on $11 m Nord Stream because it would increase dependency on Gazprom and hence reduce EU Security. (FT 2 May)

The role of LNG in the EU

A preview of The Future of Natural Gas has one chapter on LNG in the EU’s energy security strategy: ‘A common but logically flawed approach equates security of supply with lesser dependence on imports. In fact, a small internal gas market cannot easily support multiple suppliers, especially if imports are received by long-distance pipeline; small markets hence more easily end up being dependent on a single supplier. LNG to some extent may allow for sufficient diversification also for smaller import volumes, because LNG cargos can be redirected’. (EER 26 May)

A single copper plate?

One of the goals of the Energy Union is – presumably – one day to have the EU electricity system functioning as a ‘single copper plate’. At this moment, the EU is integrating markets gradually, by developing EU-wide Network Codes, and setting up so-called regional security coordination service providers (RSCSPs). But according to a consultant with the well-known Regulatory Assistance Project (RAP), the RSCSPs are a less than perfect solution. He points out they will have no executive powers and their activities will be restricted to providing planning services to national transmission system operators (TSOs). He advocates creating genuine ‘regional transmission system organisations’, as they have in the United States, and ultimately a European System Operator. (EP 29 May)

Crunch time in energy debate – Energy post to assist with app

Its crunch time in the European energy debate. The Energy Union will have to start delivering this year. The Paris Agreement needs to be ratified. More than anything else these two great projects will decide Europe’s energy future. Energy is one of the topics on which disagreement runs deep. Within and among member states there are sharp differences of opinion on issues such as the role of nuclear power, renewable energy targets, the role of natural gas, coal and carbon capture and storage (CCS), relations with Russia, carbon pricing and reform of the Emission Trading System (ETS), integration of networks, infrastructure investment, market designs and capacity schemes. As Energy Post, we can’t solve these disagreements. But we can support the debate in a crucial way: by supplying the underlying climate and energy facts – and making them accessible in an easy-to-use format. With Shell Energy Post has developed the EUenergy App to do just that. This shows the essential EU energy and climate facts at the swipe of a finger. It provides all crucial statistics per country and for the EU as a whole, from 1990 to now, all based on independent, mainly Eurostat data. (EP 31 May)

The energy union: Facing dissent, fiddling the figures and profound difficulties

The European Commission, reeling from internal dissensions, is allowing itself to be held hostage by a small group of climate laggards (notably Poland), wrote two experts from the climate science and policy institute Climate Analytics. But if Brussels can’t get its act together on climate policy, then ambitious Member States should take matters into their own hands: they should forge a ‘coalition of the willing’ to take up the climate banner, they argue. Not just because of the climate: Europe also needs the economic push that the energy transition can give. Who will take up the challenge? (See http://www.energypost.eu/europe-needs-coalition-willing-rescue-global-leadership-fight-climate-change/)

The role of the ECB: Saving the Eurozone by clearing the last hurdle to OMT

According to Germany’s highest court the European Central Banks’s independence means that there was a ‘noticeable reduction in democratic legitimacy for its action’, which the court nevertheless tolerated as the Central Bank’s most important and controversial weapon to fight the financial crisis, i.e. its Outright Monetary Transaction Programme (OMT). This crisis that ‘should have led to a particularly restrictive interpretation and to a particularly strict judicial review of the EGB mandate’. The decision was made a day before the Brexit/Remain vote in UK and de facto legitimized the much disputed action of the Bank in saving the Eurozone. This involved buying short-term sovereign debt of troubled Eurozone economies in potentially unlimited quantities to combat a market panic. [And Germany would pay!] This also weaken legal challenges against the ECB’s quantitative easing programme under which the ECB buys Euro 80bn of mostly government bonds each month to steer inflation to just under 2%. A clever judgement almost a direct contradiction to what the ECB said. The bank has now been told what it must do to follow OMT. In 2014 the same court had refused to pass judgement on the legitimacy of OMT; now it says that the EU (not the Bank) has to respect the principles of democracy and sovereignty of the people affected. Not a good day for democracy was one German comment who accused the Court of lacking the courage to oppose the Bank which support the judgement in editorial because the bank has to move swiftly and with certainty, where normal (democratic) policy-making is too slow. (FT 22 June)

Central Asian pipeline interests: Kazakhstan and more

An ‘expert-Advisor at the Centre for Strategic Studies under the President of the Republic of Azerbaijan, outlines Georgia’s considerations in diversifying its gas supply and the consequences for the regional energy map. His dense description offers useful background for anyone interested in the geopolitics of gas pipelines in that region’. (From an announcement by EUCERS, the European Centre for Energy and Resource Security 9 June)

Is USA braking own law?

State Department spokesman John Kirby announced that the Obama administration plans to circumvent U.S. law in order to advance its climate agenda. This should come as no surprise, as the president has already circumvented the Constitution through not submitting what is clearly an international climate change treaty to the Senate. U.S. funding for the United Nations Framework Convention on Climate Change should now be prohibited since the Palestinian Authority has signed on as a party to the treaty – and the U.S. does not recognize Palestinian claims of statehood. Under U.S. law, this should trigger a funding prohibition enacted in 1994: that ‘The United States shall not make any voluntary or assessed contribution: (1) to any affiliated organization of the United Nations which grants full membership as a state to any organization or group that does not have the internationally recognized attributes of statehood, or (2) to the United Nations, if the United Nations grants full membership as a state in the United Nations to any organization or group that does not have the internationally recognized attributes of statehood, during any period in which such membership is effective. (Adopted as Public Law 103-236 in 1994.)’ (Selected from Daily Signal 26 April/in Judith Curry 2 May)

Green attacks on oil companies spreads to USA

So far Big Oil in America seems to have had an easier time than BP and Shell, largely for legal reasons, but ExxonMobil and Chevron are now under attack from a Californian pension fund and the green lobby who demand that they outline risks to their investors ‘thanks to more stringent – than expected – climate change policies’ agreed in Paris. The oil companies in Europe have had a harder time. Shell has had to reveal how stringent climate-change polities would affect their investment portfolios. Board rooms are allegedly more difficult to challenge in America. A battle is under way Total has won full approval by greens because of its plan for a Paris consistent energy mix, yet it is going ahead with plans to drill for gas in the Russian Arctic. (Economist 21 May)

Trump promises to renegotiate on climate and much more

Republican presidential contender Donald Trump said on Tuesday he would renegotiate America’s role in the U.N. global climate accord, spelling potential doom for an agreement many view as a last chance to turn the tide on global warming. A pull-out by the world’s second biggest carbon-emitting country would hobble the deal reached in Paris last December by nearly 200 nations, who for the first time in more than two decades found a common vision for curbing greenhouse gas emissions. ‘I will be looking at that very, very seriously, and at a minimum I will be renegotiating those agreements, at a minimum. And at a maximum I may do something else’, the New York real estate mogul said in an interview with Reuters. ‘But those agreements are one-sided agreements and they are bad for the United States’. (E. Flitter and S Holland, Reuters, 17 May)

NB: Bernie Sanders, however, wants to combat climate change ‘aggressively’ with a carbon tax on emissions, something not mentioned by Clinton. (Time 6 June)

Report 4800: Climate Change Adaptation (updated for 2016)

This report ‘focuses on the U.S. climate change adaptation industry and prospects for global growth’. The U.S. climate change adaptation industry is still emerging, led by consulting & engineering firms doing assessment, risk science, modelling and planning work. CCBJ’s assessment of climate change adaptation markets identifies funded projects in a variety of regions conducted by government agencies, non-profits, universities as well as a few well-placed consulting & engineering firms. This 237-page report maps out the Climate Change Adaptation Industry with market forecasts, and profiles of existing projects and companies engaged in the practice. The table of Content lists the numerous companies whose practice areas are profiled. (EBI Inc. 13 May)

The social cost of methane?

On June 3 EPA issued more rules: Methane emission standards for new and modified oil and natural gas drilling, fracking, pipeline and other operations… The agency justifies these new job-killing rules by citing something it calls the ‘social cost of methane,’ which is patterned after its equally arbitrary, speculative, infinitely malleable ‘social cost of carbon’, needed, EPA insists, to prevent dangerous manmade global warming and climate change, which it claims are driven by these two trace gases … Methane is a tiny 0.00017% of the atmosphere, the equivalent of $1.70 out of $1 million … and the United States accounts for a mere 9% of the world’s total manmade methane … – … That means US oil and gas account for less than 3% of global manmade methane emissions … EPA is once again pushing rules that won’t have any meaningful impact on global temperature as a ruse to hobble an efficient source of power to clear the path for inefficient, highly subsidized ‘renewables’. (Excerpt Craig Rucker cfact.org 13 June)

White House effort to tighten fracking fails

An attempt by the Obama administration to tighten fracking rules on public land have suffered ‘another blow’ and was cheered by the oil industry. The court ruled that Congress had not delegated the necessary powers to the Department of the Interior. Opponents now hope that Clinton will reverse this. 100,000 oil and gas wells have been drilled on federal land affected by this judgement. Eleven per cent of natural gas and 5% of oil are obtained by fracking. (FT 23 June)

Victory claimed over OPEC

Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency. That shale giants Hess Corp, Apache Corp and more than 25 other companies have beaten back OPEC’s attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared. OPEC and Saudi Arabia ‘thought that there would be major capitulation and damage to U.S. shale producers as a result of the deep downturn’, said a leadership consultant … who works with shale executives. ‘But what happened was that it actually created a new paradigm among U.S. producers to transform their businesses’. (E. Scheyder and T. Wade, Reuters, 20 June)

Who claims victory in climate wars?

Thirteen Science, Space, and Technology Committee Republicans sent letters to 17 state attorneys general and eight environmental activist organizations. The letters request documents related to the groups’ coordinated efforts to deprive companies, nonprofit organizations, scientists and scholars of their First Amendment rights and their ability to fund and conduct scientific research free from intimidation and threats of prosecution. Americans are entitled to express their views on matters of science and public policy even if certain groups disagree. (WUWT 19 May)

Why persuading republicans does not work

‘On highly polarized issues like climate change, however, communicating across the aisle may be more difficult than simply finding the right message … As climate change has become an increasingly partisan issue in American politics, this means that convincing Republicans to reject the party line of climate skepticism may be easier said than done. In my recent paper in Environmental Politics, I show the results from a study examining how Republican (and Republican-leaning independent) individuals react when exposed to persuasive information on climate change. I find that after these individuals are faced with messages that go against their party line on climate change, they further oppose governmental action on the issue, become less willing to take personal action, and, from a psychological perspective, become even surer of their distaste for climate change … In fact, treating Republicans with persuasive information made them more resistant to climate action regardless of the content or sourcing of that information … They also became more certain of their negative opinions on the issue, displaying significantly lower attitudinal ambivalence compared to the control group. What’s more, all of these treatment effects doubled to trippled in size for respondents who reported high personal interest in politics, all statistically significant outcomes. These highly politically interested individuals make up roughly one-third of Republicans in the sample and in the United States. These are interesting results, though perhaps not unexpected given knowledge of American climate change politics’. (Excerpt Real Climate 7 June)

Why is Boston mayor heading to China?

‘Boston Mayor Marty Walsh is heading to China to talk about the challenge that climate change poses to urban areas’. The challenge that climate change poses to Boston, Massachusetts is reflected in the official climate data reported by the NOAA National Climatic Data Center Climate at a Glance website at www.ncdc.noaa.gov/cag/ indicating that:

Meteorological winter temperatures in Boston, Massachusetts have trended downward at a rate of 0.1°F per decade during the 30 winters from 1986 to 2015.

Meteorological winter temperatures in Boston, Massachusetts have trended downward at increasing downward rates during the 30 winters from 1986 to 2015, as indicated by the official climate data reported by the NOAA National Climatic Data Center above, even as the atmospheric CO₂ concentrations continued to increase. (Ken Schlichte 5 June)

IMF warns America

Four factors, according to IMF economist, threaten the US: declining labour participation rate (unemployment), falling productivity, increasing polarization in income distribution and a high share of the population living in poverty. (FT 23 June)

Alberta’s new carbon tax law

On 24 May Alberta’s NDP government unveiled Bill 20, the Climate Leadership Act, to take effect next 1 January. As the Rebel Media article notes, despite the act’s name there are no environmental studies showing what effect its implementation will have on the world’s climate. Some statistics about terms appearing in the bill: ‘levy’ 260 times, ‘tax’ 55 times, ‘warrant’ 15 times, ‘search’ 8 times, ‘seize’ 3 times, ‘prison’ or ‘imprisonment’ 15 times, ‘fine’ 19 times, ‘jobs’ 0 times. In short, the bill’s all about collection and enforcement, not climate. While the government claims a typical Alberta family will pay $70–$105/year more for consumer goods and services, the opposition calculates that it will be closer to $1,000/year. It also questions the lack of benchmarks to measure the success of the act. (Ian Cameron 6 June)

Ontario’s rude awakening from its California carbon dreams

The Ontario government has its eyes set on $1.9 billion/year in revenue after it joins the California–Quebec cap-and-trade auction scheme in 2017. However, it may have got a bit of a wake-up call when, at the latest quarterly auction of permits by California and Quebec, only 11% of the permits were bought, leaving holes in the revenue plans for both governments. California received only a fraction of the expected $US500 million, and Quebec, anticipating $200 million may see only $20 million. The California–Quebec market appears to have a massive surplus of previously issued emissions permits that trade on an open market at below the official floor price of $US12.73/t set by the California Air Resources Board. The scheme is facing a court challenge on the constitutionality of the cap-and-trade system. If the court rules it’s a tax, it will be deemed illegal. Also, the California system is set to expire in 2020, unless renewed, likely under a new set rules and targets, causing more uncertainty for the market. (Ian Cameron 6 June)

Canada’s three northern premiers reject carbon pricing

In recent months, Saskatchewan Premier Brad Wall has seemed to be the lone voice speaking out against a national carbon price in Canada. But, he’s not. Canada’s three territorial premiers have banded together against a carbon tax for the North, arguing that carbon pricing would have an unfair impact on fragile northern economies. The high cost of northern living is the reason most commonly used by the territories’ leaders to argue that a carbon tax wouldn’t work for the North. But it’s not the only one. The premiers say the territories already pay a price on carbon, since they import heavily from British Columbia, Alberta, Quebec and Ontario, which already have or will soon have carbon pricing. (Tyee News, Canada 25 May)

UK Policy

The EU destroyed a once healthy energy market. The British market is now a patronage driven disaster, where everyone demands special treatment. (E. Worral WUWT 31 May)

The UK energy plan 2015–2020 and reality

By 2030 around one in seven UK homes will be heated using low carbon sources of energy’ and the majority of cars will be electric. (UK Committee on Climate Change – its advice to government. The whole country will be powered by low carbon sources of electricity, with emissions below 100 gns CO₂/KWh cf 450 today. (Energy World January 2016)

FT responses to voters advising government to ‘Leave the EU’ (25/26 June)

(The UK) now ‘threatens to undermine the globalised Economy it fought to create. Germany and France fear for the survival of the “European project”’. (G. Rachman)

The EU is to blame

Too much electricity in the summer and too little in the winter. Fifty-year-old coal plants being paid tens of millions of pounds to stay on because replacements aren’t being built. Electricity prices more than double those in the US. Panic measures to buy in more and more foreign electricity. These acute failures in British energy policy go to the heart of the EU referendum debate. How can a country once heralded for its energy market liberalization, its balanced electricity generating grid and comparatively low prices face such a crisis? What has gone wrong and why? (Pro-Brexit argument by Daily Telegraph 20 June)

NB: The UK energy regulator CMA (competition and market authority) dropped charges against the big 6 electricity companies for overcharging. They were ready to challenge government in court. (FT 20 June)

A United States of Europe – Not a new idea

Already Victor Hugo talked of a United States of Europe in 1849. A European Army was first proposed in 1950 because, according to US view: ‘if Germany was restored without European integration, there would be a German attempt to dominate’. ‘Under Delores with strengthening and deepening as default position … the founding myth of an ever-closer union run from Brussels by a powerful bureaucracy was treated as inevitable but by critics as conspiracy … Yet after more than 60 years of integration, nation–states persist, stubborn and seemingly immovable … Germany balks at a “transfer union” … will Germany pay up? Since late 1980’s Europe has entered people’s lives [and energy supply!] Other Europes are possible.’ (From essay on Europe, Economist 18 June)

The UK ‘climate establishment’ protests

There recently arrived on the desk of the editor of The Times an extraordinary three-page letter, signed by 13 members of the House of Lords. They informed him in no uncertain terms that, if he wished to save his paper’s reputation, he must stop printing articles which don’t accord with the official orthodoxy on climate change. Headed by Lord Krebs, its signatories read like a check-list of our ‘climate establishment’. ‘The letter was a perfect case-study in “groupthink”’. Four are members of the supposedly ‘independent’ Committee on Climate Change, including its chairman Lord Deben (aka John Gummer). Others included Lord (Nicholas) Stein and Lord Oxburgh, chair of the inquiry set up by East Anglia University which cleared its Climatic Research Unit of any impression of scientific wrongdoing given by the Climategate emails. Although these signatories are all fully committed ‘climate alarmists’, none is in any way a climate scientist, and several have declared financial interests in ‘renewables’ and ‘low-carbon’ energy. The gist of their letter, written in consultation with Richard Black, the former BBC environmental reporter who now runs an ultra-green propaganda unit. (Excerpt Telegraph/PH 1 May)

NB: According to a letter received from the Government, Paul Homewood, having pointed out that the UK had promised to cut more CO₂ than other members, was told by a Lord Bourne that: ‘The UK fought hard to secure an EU target of an at least 40% reduction in domestic emissions by 2030, winning support of all other EU Member States … This keeps the door open for the EU to raise the level of its target in the future, in line with the regular reviews of global ambition agreed in Paris’. (PH 3 June)

Elites knows how to enrich themselves

Paul Homewood ran a post about the Sheringham Shoal offshore wind farm, showing how more than two thirds of their revenue came from ROC subsidies. Booker takes this as a starting point for a hard hitting piece on wind power in today’s Telegraph: ‘Eleven miles off the Norfolk coast 88 giant wind turbines rise 446 ft above the sea, taller than the spire of Salisbury Cathedral. This is the Sheringham Shoal windfarm, built at a cost of £1 billion by the Norwegian state, which has just published its accounts for 2015. Last year it earned its owners £140 million, all paid for through our electricity bills. But more than two thirds of this – nearly £100 million – came through subsidies. In return for which we got, intermittently, only a comparatively tiny amount of power, averaging just 113 megawatts. This is barely a 20th of the 2,000 MW available whenever needed, at less than a third of the price, from the German-owned gas-fired power station in Pembroke, Wales, which cost the same money to build four years ago. So much tax does the Government now wish to impose on gas-fired electricity, because it comes from fossil-fuels, that we are unlikely to get any more Pembrokes. Offshore wind, in which we “lead the world”, is now the absolute centrepiece of the Government’s energy policy. The 26 offshore windfarms already built are almost all foreign-owned, led by the Norwegians and the Danes, so that virtually all their profits end up abroad’. (C. Booker, Telegraph 21 May)

The attractions of low carbon

The companies making fortunes from the world’s most generous ‘low carbon’ subsidies may largely be foreign-owned. But at least some of the crumbs from that lavishly spread table are staying in good old British hands. But a few Britons are doing well out of this multi-billion-pound bonanza – led by four former ministers of the Department for Energy and Climate Change (DECC) who helped to shape this policy. No sooner, for instance, had Charles Hendry stepped down as minister of state for energy and climate change in 2012 than he became chairman of Forewind, another largely Norwegian-owned firm, given permission by the DECC last year to build the world’s largest offshore windfarm over hundreds of square miles of the Dogger Bank. Hendry succeeded Lord Deben (aka John Gummer), who had to stand down when David Cameron appointed him to chair the supposedly ‘independent’ Climate Change Committee, the group of climate alarmists which advises the Government on its energy policy. (C. Booker Telegraph 21 May)

The fifth carbon budget – Delay or speed up?

We, the undersigned, urge you to delay setting the Fifth Carbon Budget until EU member states have concluded their negotiations over CO₂ targets for 2030. If the UK unilaterally commits to a 57% reduction before these negotiations are complete we would simply reduce the burden to be shared out among other member states. Our extra effort would result in no extra reduction in CO₂ emissions across Europe as a whole – just a higher burden on British business and a lower burden on our competitors. (Letter by 15 MPs To Amber Rudd, Secretary of State, 12 May)

Booker’s report on the fifth carbon budget

Energy journalist Christopher Booker’s reports on the Fifth Carbon Budget called it ‘insane’. The act would down Britain’s energy policy for 12 years ahead. Not only will this be disastrous in itself. It will put us at an appalling competitive disadvantage with our EU partners. And it will make a complete mockery of pledges made by both the Chancellor, George Osborne, and our Energy and Climate Change Secretary, Amber Rudd. The Fifth Carbon Budget was published last year by that very odd body, the Climate Change Committee, set up by the Climate Change Act to advise the Government on how to meet the Act’s target that, by 2050, Britain must slash its ‘carbon emissions’ by 80% on their 1990 level. Although few members of this supposedly ‘independent’ committee, headed by Lord Deben (aka John Gummer), are experts in either climate science or energy, all are dedicated climate alarmists.

What their latest ‘carbon budget’ proposes is that, to meet the Act’s 80% target, between 2028 and 2033 Britain must raise its emissions cuts to a staggering 57%. Yet this is at a time when other EU countries are at odds over whether they can agree on a much lower target of just 40% by 2030, let alone whether this would be legally binding. It talks of how 60% of our cars should by then be electric (currently these are barely half a per cent of new cars sold). We must look forward to abandoning use of gas for heating and cooking (currently supplying 90%). As, within five years, we are due to stop using the coal that until recently supplied more than a third of our electricity (easily the cheapest way to make it), we must nevertheless double our electricity consumption, for cooking, heating and transport. And most of this will come from a huge expansion in ‘renewables’ and new nuclear plants: only one of which is yet in the pipeline, already billed to be the most expensive power station in the world and which we were told last week will not be on stream until 2026.

So this amazing ragbag of proposals, based entirely on wishful thinking, will next month become the law of the land, to put us ‘ahead of the world’: at a time when the rest of the EU will still not have agreed its target of 40%. Yet this flies in the face of both Osborne’s pledge to the 2011 Tory conference that ‘we’re going to cut our carbon emissions no slower but also no faster than our fellow countries in Europe’, and that of Ms Rudd in a speech last July, in claiming that ‘we have to travel in step with what is happening in the rest of the world’. This is why 15 MPs, including three former Cabinet ministers, have now written to Ms Rudd asking her to delay ‘setting the Fifth Carbon Budget’ until the EU has concluded an agreement on its own target. Otherwise, they warn, this will not only put us at a severe competitive disadvantage, but other countries could even use our grossly disproportionate contribution to the EU’s general total as an excuse for contributing much less themselves. If Rudd does not ask MPs to delay, they will merely be bringing us even nearer to a catastrophe the dimensions of which few in Britain have yet woken up to. (From Telegraph 14 May)

NB: The government is not legally compelled to take the CCC’s advice, or to set the Fifth Carbon Budget in stone. (PH 14 May)

Renewable problems

Subsidies for renewables are likely to exceed budget by £600 m in 2017/18. Overlapping subsidy regimes, early launch of the capacity market and policy exemptions for heavy industry will put pressure on consumers up to 2021, says Cornwall Energy. The Scottish government also consulted on indirect cost of renewables: Devolved control in Scotland has necessitated separate consultation on UK government proposals to exempt energy-intensive industries from the indirect costs of renewable generation. Proposals to trim agricultural and local pollution data could undermine UK climate ambitions and erode environmental enforcement. A £2bn windfarm deal in Scotland collapses after cancellation of subsidy deal with chilling effect on UK offshore wind industry. Impact on birdlife was another issue before the court, with the Low carbon Contract Company disputing the validity of the judgement. The Scottish government said it was disappointed that the ‘contract for difference’ subsidy was cancelled. (FT 13 May)

NB: The government’s legislative programme for the next year makes little mention of the environment. (ENDS Report 24 May)

The tale of Charles Hendry and the Tidal Lagoons Project in Wales

An Independent Review of Tidal Lagoons project in Wales will be led by industry expert Charles Hendry, supported by a team of seconded civil servants. Hendry, a former energy minister is … also President of the British Institute of Energy Economics, chair of the Forewind Consortium from 2013–2015, and Commissioner of the UK Pavilion at the Future Energy Expo in Kazakhstan 2017. The review will assess the strategic case for tidal lagoons and whether they could play a cost effective role as part of the UK energy mix … Its findings are expected to be announced in the Autumn.

NB: The developer of the ‘ground-breaking tidal lagoon power project in Swansea Bay has since cancelled the contract with a Chinese state owned company to build the seawall, hoping for a cheaper solution. A six months review of the whole scheme is under way, and backers want to build more such schemes in UK. If Hinkley fails … (FT 26 May)

Redefining ‘subsidy’ – UK energy policy mess continues

Last year the Conservative party promised in its manifesto to end any new public subsidy for onshore wind. The Renewable Obligation has already been closed to new onshore wind generators, except those which had already received planning permission. The Government has also indicated that onshore wind would be excluded from any future Contracts for Difference rounds (CfDs), but here it starts to get messy. There have been suggestions from the Energy Minister, that the definition of subsidy may be redefined to allow the CfDs to continue, on the basis that onshore wind is no dearer than other alternatives such as gas. This proposal appears to have originated from Renewable UK, the industry’s lobby group, in collaboration with Policy Exchange, who prepared an analysis paper, ‘Powering Up: The future of onshore wind in the UK’. Renewable UK’s Chief Exec, Hugh McNeal referred to this concept in his interview with the Telegraph yesterday: … Current wholesale electricity prices are too low to spur investment in any new form of power generation, so the Government has already had to make subsidies available to new gas plants. If financial support required by onshore wind is less than that required by gas, the industry argues it should no longer be regarded as ‘subsidy’. ‘We are now the cheapest form of new generation in Britain’, Mr McNeal said. ‘If plants can be built in places where people don’t object to them and if, as a result of that, over their whole lifetime the net impact on consumers against the alternatives is beneficial, I need to persuade people we should be doing that’. So, is it really true that onshore wind is cheaper than CCGT? A Policy Exchange paper published last August and argued that it is not. (PH 7 June)

When will the ‘goldrush’ end?

Even the Department for Energy and Climate Change has realized that the UK has not got much of a bargain for all the billions we have been pouring into solar energy. Despite the subsidies, which make it more than twice as expensive to the rest of us than power from fossil fuels, solar still contributes only a derisory 1.2% of UK electricity. Glowing picture of our solar future painted by the BBC turns out to be as far from sunny as could be. So out of control has this gold rush become that last year our announced that these subsidies were to be slashed: particularly to all those blue panels which now decorate more than 800,000 British roofs, giving those who live under them free hot baths, plus a handsome pay back for any surplus they contribute to the grid. Even this cutback, DECC estimates, could result in up to 18,700 jobs being lost in those firms cashing in on the subsidy bonanza by installing them. (Opinion, Telegraph 4 June)

More coal used than in 2014

In the words of Amber Rudd, the British Government Energy Secretary: ‘The second phase of modern energy policy began when Tony Blair signed the Renewable Energy Target in 2007 … We now have an electricity system where no form of power generation, not even gas-fired power stations, can be built without government intervention. And a legacy of ageing, often unreliable plant’. Perversely, even with the huge growth in renewables, our dependence on coal, the dirtiest fossil fuel, hasn’t been reduced. Indeed a higher proportion of our electricity came from coal in 2014 than in 1999. (E. Worral, WUWT 31 May)

NB: Jim Skea, Professor of Sustainable Energy and current President of the UK Energy Institute, saw no future for CCS has in UK but hoped that it might yet resolve the ‘climate/fossil fuel conundrum in other parts of the world’. (Energy World January)

UK climate champion of EU?

‘The UK’s target to reduce greenhouse gas emissions is significantly more ambitious than that required under current European rules. The EU’s pledge at last year’s Paris conference was modest enough that Britain had already effectively promised to cut emissions “at twice the rate of the EU as a whole”. Given the privileged access that big energy and fossil fuel companies had to the EU’s top climate policy decision makers in the run-up to the Paris gathering, we shouldn’t be surprised by the underwhelming commitment. Should the UK vote to remain, its generous contribution towards Europe’s emissions pledge merely takes the pressure off other member states, resulting in no net global benefit. It’s a point raised in the Commons report itself’. (Steffen Böhm, in EP 10 June)

Fracking at last?

The first fracking operation in England since a ban was lifted in 2012 has been approved at a site close to the North York Moors National Park. Yorkshire now has the chance to be at the centre of Europe’s new fracking industry. The developers of both proposals have promised that the respective projects would bring substantial economic benefits to the wider area. (David Rhodes, BBC News, 25 May)

Brexit and energy – The UKIP perspective

Energy is a key argument for Brexit. Current energy policies, dictated by Brussels, are closing down proven, reliable and cost-effective coal capacity, and replacing it with expensive, unreliable and intermittent renewables, which impose massive hidden costs and inefficiencies on the system. Leaving the EU is a necessary condition for creating a rational energy policy, but it is not a sufficient condition. We should recall that all but five of our Westminster MPs voted for the absurd and massively costly Climate Change Act in 2008. So we also need a change of heart in the House of Commons … Current EU/UK energy policy has driven up energy costs. It’s caused plant closures and job losses in many industries – not just in steel at Port Talbot. It’s forcing major industries to move offshore to more favourable – and more rational – jurisdictions, taking their jobs and investment with them. The Remain Camp has no answers to these questions … But current policies are also threatening the most almighty energy shortage in the UK. The Institute of Mechanical Engineers (not normally given to scaremongering) warns of a huge shortfall in electricity supplies as we are forced to close coal-fired power stations by the EU’s Large Combustion Plant Directive, and to close ageing nuclear plants.… The supermarket chain Sainsbury’s is actually building its own power stations so that it can guarantee electricity supply during black-outs. They can already power ten supermarkets themselves, with further capacity to follow. (Roger Helmer 11 May)

Worrying developments?

According to the Institute of German Business (IW) the cost of Germany’s once highly touted ‘Energiewende’ (transition to green energy) will soar to a whopping €31 billion ($35 billion) in 2016 alone, thus further burdening the already ailing German consumer. The Energiewende is morphing into a central planning folly of the scale matched only by the Venezuelan Chavez communists. (Pierre Gosselin, No Tricks Zone, 3 May)

The troubles of Eon and RWE

Shares in Eon fell by 5% after it said it might have to raise capital to pay for its share of the costs of storing Germany’s nuclear waste. The nuclear issue is just one of several weighing on Eon’s stock, hit by the shift to renewables. Transformation was now the objective. (FT May 12)

Eon and its new offshoot Uniper have ‘businesses with negative momentum’. Eon and RWE must overhaul their operations as the switch to renewables takes a heavy toll. Both say that what has happened went beyond our worst case scenario. Germany has become an ‘incubator for changes that are taking hold across the industrialised world’, all related to the Paris A agreement and Global warming fears. Coal and gas have both been squeezed out of German power sector. In April government appointed commission ruled that Germany’s four nuclear generators should pay euro 23.3bn to cover costs of storage nuclear waste. RWE vowed to fight the proposal. Moody downgraded its credit rating last week. A lot of uncertainty remains. The main problem: they do not have the political support from the state enjoyed by European rivals such as EDF and Engie. (Guy Chazan, FT 19 May).

The German problem with renewables

Whenever fluctuating generation from all renewables and estimates at 91.8 GW exceeds grid demand, this is redirected to local utilities, hydroelectric storage plants and to exports. Not everyone is pleased. Routing costs have been estimated at €500 million for 2015 by the grid operator. Forty-two per cent of fossil of coal and lignite need to be phased out ‘if Germany is to realise its ambitious climate protection goals, even if coal prices were to be to € 40 per tonne, this would not be achievable, says a pressure group supporting the Energiewende. RWE would be most affected. Germany would have to double its current renewable energy commitment just to make RWE carbon-free while also phasing out nuclear power’. Without any nuclear, more than three-quarters of Germany’s energy will come from fossil fuels. (J Michel, Acid News 2 May)

ExxonMobil to research CCS

ExxonMobil surprised by funding a research project with Fuel Cell Energy into a potentially revolutionary technology for capturing CO₂ emissions and using fuel cells to generate electricity from chemical reactions. The idea is to strip CO₂ from flue gases at very low cost creating a gas stream that is easy to capture … The known processes consume up to 30% of the power generated by coal-fired plant, less for gas fired plant, but still making them uneconomic. The new technology would use fuel cells to generate electricity chemically, using the exhaust from coal plant and natural gas that are fed into a fuel cell to create CO₂ that generated powers as well as CO₂ for easy capture, but it is still early days. (FT 6 May)

Tesla doubted but China hopes

China wants to become the world’s leading producer of electric cars, but domestic demand remains low China wants to regulate and reduce vehicle emissions because of widespread air pollution in cities. (FT 2 May) It hopes to keep the economy growing by massive investments into transport in next 3 years – the dangers: white elephants, overcapacity and debt. (But ‘China wakes to debt danger’, FT 12 May)

Solar power from space – Is SBSP the future?

How do we make solar power reliable? The problems which make solar power unreliable are mainly related to weather – clouds, rain, snow, winter, poor air quality, anything which interrupts the flow of light reaching the collector. The solution is to put the solar panels beyond the reach of all these problems – by putting them into orbit. Launching solar panels into orbit might sound farfetched, but it is being seriously considered by a number of national space programmes. Space-based solar power (SBSP) is the concept of collecting solar power in space (using an ‘SPS’, that is, a ‘solar-power satellite’ or a ‘satellite power system’) for use on Earth. It has been in research since the early 1970s. SBSP would differ from current solar collection methods in that the means used to collect energy would reside on an orbiting satellite instead of on Earth’s surface. Some projected benefits of such a system are a higher collection rate and a longer collection period due to the lack of a diffusing atmosphere and night time in space. Part of the solar energy (55–60%) is lost on its way through the atmosphere by the effects of reflection and absorption. Space-based solar power systems convert sunlight to microwaves outside the atmosphere, avoiding these losses, and the downtime (and cosine losses, for fixed flat-plate collectors) due to the Earth’s rotation. Besides the cost of implementing such a system, SBSP also introduces several new hurdles, primarily the problem of transmitting energy from orbit to Earth’s surface for use. Since wires extending from Earth’s surface to an orbiting satellite are neither practical nor feasible with current technology, SBSP designs generally include the use of some manner of wireless power transmission. The collecting satellite would convert solar energy into electrical energy on board, powering a microwave transmitter or laser emitter, and focus its beam towards a collector (rectenna) on Earth’s surface. Radiation and micrometeoroid damage could also become concerns for SBSP. SBSP is considered a form of sustainable or green energy, renewable energy, and is occasionally considered among climate engineering proposals. It is attractive to those seeking large-scale solutions to anthropogenic climate change or fossil fuel depletion (such as peak oil). (Excerpt WUWT 31 May)

NB: SBSP is being actively pursued in Japan and China.

Efforts to reduce CO2 ‘Madness’

As part of an open discussion on the critical issue of energy, sustainability and climate change, MRS Energy & Sustainability—A Review Journal (MRS E&S) has published a paper in which Cambridge (UK) engineering professor M.J. Kelly argues that it is time to review the current efforts to reduce carbon emissions, some of which ‘represent total madness’. In his peer-reviewed article, Lessons from technology development for energy and sustainability, Kelly considers the lessons from global decarbonization projects, and concludes that all combined actions to reduce carbon emissions so far will not achieve a serious reduction. In some cases, these efforts will actually make matters worse. (Cambridge University Press, 23 May 2016/GWPF 27 May)

More green power to EU and world?

Between 2013 and 2014 the contribution from wind/solar/bio to global energy supply increased from 1.2 to 1.4%. They don’t know total final energy consumption figures for 2015, but their data does suggest that this percentage may have increased to about 1.6% last year. This is what the BBC calls ‘surging’!) (PH 6 June)

Green power for South America?

The new government in Argentina wants to generate a fifth of its power from renewables by 2025; it is afraid of ‘missing the boat’. This could make-up for the failed investment hopes in the Vaca Muerta shale formation project in Patagonia which failed to take off because of the low oil price. The World Bank, however, is interested in providing the finance for renewables through its private sector arm. The person in charge of investment hopes to make Pampa Energy – bought from the local branch of Petrobras and now the second largest energy company in Argentina. Mexico and Chie have already doubled their investment in renewables. (FT 10 June)

Wind power in Denmark in trouble?

As everywhere else, power prices matter to consumers in the same way votes matter to politicians. The mounting anger of the former has forced a panicked retreat by the latter: Denmark’s Climate and Energy Minister Lilleholt has slashed support for offshore wind projects in an effort to cut billions of Danish kroner from the cost to power consumers of being forced to perpetually subsidize wind power. After more than 40 years of promising to stand on its own 2 ft, the Danish wind industry is still wholly dependent on massive subsidies to survive. Some are demanding an end to the electricity tax that retail customers pay to fund them (referred to as the Public Service Obligation – ‘PSO’). Adding to the Dane’s lament about crippling power bills is the fact that they are surrounded by thousands of these things, which drive their neighbours to despair … , their ‘destructive, low-frequency noise’. Thousands of angry wind farm neighbours and runaway power bills make for a politically toxic cocktail. (PH 2 May)

Self-sufficiency for all?

Energy journalist Tessel Renzenbrink explores ‘how the growing market for PV installations and home storage will affect the electricity grid. If those who can afford energy self-sufficiency defect from the grid, a declining number of those who can’t will have to shoulder the costs of maintaining the grid. Can we attain energy equality? Or will we be able to tell where the wealthy live from the way their brightly lit neighbourhoods stand out in a sea of blackout-pestered communities?’ (EER 9 June)

More wind for Taiwan

Managing Director at Smartec Scientific welcomed ZephITR Lidar to Taiwan, to deliver this lidar workshop. The issue was ‘a milestone in Taiwan’s use of wind lidar for wind farm assessment, especially in the offshore wind farm market. ZephIR, represented by Matt Smith today, has a great deal of knowledge in the Lidar market and our workshop will provide invaluable information on further working with Lidars, how to achieve more accurate Annual Energy Predictions and how to get the most out of wind farm measurements’. (Alex Woodward 8 June)

How power attractive is solar power to India?

‘At the 2015 UN Climate summit in Paris (COP21), Prime Minister Modi committed India to dramatically increasing its deployment of solar power to 100 GW by 2022. This study assesses the feasibility of this ambition and the opportunities it presents, reaching three important conclusions. First, for solar power to succeed, it will also need to deliver an array of domestic co-benefits—from improving power reliability and access to electricity to cutting air pollution and energy imports—thereby building significant political support and investment to dramatically ramp up solar deployment. Second, three very different segments of the solar industry—utility-scale, distributed, and off-grid solar—will be required to deliver both climate results and domestic co-benefits to India. Third, the Indian national and state governments, with the support of countries and institutions around the world, can advance the development of these diverse segments of solar by pursuing four building blocks of a successful solar strategy: reform the utility sector; harmonize federal and state policies; secure substantial and cost-effective financing; and foster the diffusion of technology and standards from abroad’. (From abstract of paper given at Grantham Institute, Imperial College London by Dr G. Shrimali, 7 June)

The costs of decarbonization

Friends of Science Society’s new report ‘Why Renewable Energy Cannot Replace Fossil Fuels by 2050’ demonstrates that moving to a ‘low-carbon’ society is nigh impossible without the vast use of fossil fuels, bringing into question the climate change risk claims of the Grantham ‘Task Force on Climate-Related Financial Disclosures’. New research of the social cost of carbon suggests the net costs may even be net beneficial when properly calculated. ‘Friends of Science Society is challenging the climate change risk report by Grantham Research Institute submitted to the ‘Task Force on Climate-related Financial Disclosures’ report of June 6, 2016 with their new report’ by Robert Lyman, energy economist. ‘Why Renewable Energy …’ may shock the assumptions of many green investors who do not appreciate the interwoven nature of hydrocarbons or the scale of change. (Friends of Science PRWEB, 9 June) (http://www.prweb.com/releases/2016/06/prweb13475799.htm)

A new technological solution: Steam and power

Turboden has launched a new technological solution with Bono Sistemi, technical partner of the project: Steam & Power (ST&P) ORC system, which allows the production of electricity and a valuable high temperature heat carrier, such as steam, directly exploitable in manufacturing processes … Turboden is a group company of Mitsubishi Heavy Industries, leader in Organic Rankine Cycle (ORC) technology for distributed power generation from renewable sources and waste heat. Bono Sistemi, part of Cannon Group, is worldwide leader in production of industrial boilers for standard and special applications. The innovative principle of Steam & Power ORC is the temperature level of the cycle, allowing the cogeneration of electricity and medium pressure steam with a very high overall energy efficiency. (Turboden Brescia, 14 June)

ExxonMobil going green?

ExxonMobil and ENER-G Launch Energy Efficiency Guide to Help Wind Turbine Operators Optimise Performance. The Free guide is to help wind turbine operators save on energy costs. Advice shows how to reduce operating costs and energy bills by as much as 20%. Mobil™ lubricants offer potential energy efficiency improvements of up to 3.6%. (Ross Brown 14 June)

The Walkie-Talkie building in London

The Clean Energy Building in the City notorious for melting cars by focusing sunlight claims to be environment friendly because of a £4 million fuels cell system in its basement The owner hopes to comply with the Paris agreement and boast of a 25% cut in its energy consumption. Land securities as well as Dell and Enel have signed up to ‘the so-called science based goals’ that meet the Paris agreement from December last year. (FT 17 June)

BP’s world energy outlook 2016

According to newly published BP Energy Review the highlight is the sluggish growth in energy consumption, which has only increased by 0.9% year on year. Primary energy consumption has risen by 127 Mtoe, of which fossil fuels and renewables (excl. hydro) have contributed 61 and 48 Mtoe, respectively. Coal consumption has fallen slightly by 72 Mtoe (2%), offset by increases of 80 (2%) and 54 Mtoe (2%) for oil and gas respectively and the share of renewables (excl. hydro) in the total energy mix has increased barely increased, from 2.4 to 2.8%. As a result of this and the slight fall in the share of coal, emissions of CO₂ have risen by only 0.1%, slightly less than the rate of energy consumption. (PH 9 June)

April–June 2016 – Output surge soon ends

In addition to the huge, if temporary, losses from Canada, supplies seem to be falling in multiple places around the globe. U.S. oil production is down 800,000 barrels per day from its April 2015 peak. Venezuela lost 188,000 barrels per day in the first quarter due to aging oilfields and an economic crisis. Latin America on the whole lost 441,000 barrels per day in the first quarter. (admin@oilprice.com 6 May)

IEA: Oil prices – The worst over

The International Energy Agency believes that the worst is over for oil prices. Provided that the global economy fares well, oil prices should continue their upward trajectory, although in fits and starts. ‘It may well be the case … , we will see the price direction is rather upwards than downwards’, the IEA’s Executive Director told reporters on the sidelines of the G7 energy ministers’ meeting … At the same time, the IEA has consistently warned that today’s cutbacks in investment could set the markets up for a shortage several years from now. Birol and the IEA have cautioned the industry not to slash investment too much. ‘What we would like to see is, after a big decline in 2015 and 2016, there will be a rebound in investments (in 2017), and bringing these to the level of $600 billion once again.’ (Oilprice.com 3 May)

cf. 21 June: Crude $ 49.58 ab; Brent $ 50.47; Natural Gas $ 2.67 (FT)

Oil supply falls

Oil supply outages are at their highest levels since 2011. In May 3.6 million barrels per day (mb/d) were knocked offline. Canada saw around 1 mb/d disrupted from wildfires. Nigeria has lost over 1 mb/d because of sabotage from the Niger Delta Avengers. Bad weather in Iraq disrupted 50,000 barrels per day. Canada’s production should start to come back online, but the disruptions elsewhere, particularly in Libya and Nigeria, seem less likely to return. And, the outage of more than 3 mb/d may have pushed the global surplus into deficit, although estimates vary. (Oilprice.com 14 June)

Key oil and gas data

Key data from the oil and gas industry shows that both the ongoing decline in U.S. oil production and decreasing crude stockpiles have bumped up oil prices, whereas U.S. average gasoline prices continue to inch up. Brent crude briefly touching $50 per barrel on May 26 before falling back again. Supply outages continue to tighten the market in Canada and Nigeria. But the catalyst for price gains this week came from the EIA, which reported a surprisingly strong drawdown in crude oil stocks – down 4.2 million barrels – which beat estimates. (Oilprice.com 27 May)

A great future for gas – The transition fuel?

The environmental credentials of natural gas build on its potential to improve local air quality, its higher efficiency in power generation compared to oil and coal, lower greenhouse gas (GHG) emissions relative to other fossil fuels, and suitability for partnering with renewables as a back-up fuel. (EER 19 May)

A Brazilian tragedy

Brazil’s state-run Petrobras has concluded the sale of $1.38 billion in assets in Argentina and Chile. This includes its 67.2% stake in Petrobras Argentina to Argentina’s Pampa Energía for $892 million. It also sold all of Petrobras Chile Distribución to Southern Cross Group for about $490 million. The company is targeting a total of $14.4 billion in divestments by the end of this year. The Argentina and Chile sales are the first to be concluded so far. Petrobras posted record losses of $9.6 billion last year, up from $7.2 billion in 2014. (Oilprice.Intel 6 May)

Iranian hopes

National Iranian Oil Company and Austrian OMV have signed a memorandum of understanding for the evaluation of fields for development in the western Iranian region of Zagros. Iranian authorities have also said that BP Plc will open offices in Iran this summer. (OilPrice.Intel 6 May)

Nigeria’s problems worsen

In the Niger Delta, the 2009 amnesty is all but irrelevant. For the most part, it bought out the militants and gave them a piece of the oil corruption pie that has long characterized Nigeria. But now there is a new government at the helm, and it’s focusing on those corrupt actors from the previous government and the militants that it absorbed. But new militant groups are emerging, as they say, to pick up where the traitorous militants left off. The most high-profile of these groups is the newly formed Niger Delta Avengers, who have targeted a pipeline and export terminal recently, and then this week blew up a Chevron oil platform. Make no mistake about it – this is the revival of Niger Delta militancy. (OilPrice.Intel 6 May)

Libya’s – Absence of governance and two oil companies

Libya is facing an intensified threat to its oil as east and west continues in a standoff over control of the country’s oil wealth following the east’s thwarted attempt at unilaterally exporting. There is now talk that Libya’s production could fall by 120,000 barrels per day as this battle intensifies. The problem here is that the West has taken the stance that the Unity government (the Government of National Accord) is the only way out of the chaos. It hasn’t been approached very adeptly, however. The GNA showed up in Tripoli and got help from armed factions that the internationally recognized government (until recently) finds a bit intimidating. The eastern government in Benghazi is now concerned that it will be sidelined …; hence the attempt to export oil unilaterally and gain some leverage … While it’s the Tripoli-based National Oil Company that has run things since Gaddafi’s fall in 2011, if the newly established Benghazi National Oil Company manages to makes its own oil money, it will indicate that it can survive on its own, and this would be a break-up of the country and a full-fledged civil war, which ISIS would absolutely love. The eastern government will not sign off on the GNA at this point – at least not until they are sure they can’t gain enough leverage to get back into the game. (Global Energy Advisor 6 May)

Venezuela’s meltdown

Venezuela’s economy continues to meltdown, and shortages are piling up. The only bright spot for the country is an oil deal that the government reached with China, which provides Venezuela with some ‘oxygen’. The terms on some of the $50 billion in loans owed to China have been improved, the government says, although details were not provided. Venezuela’s government declared a state of emergency on Friday, as looting, unrest, and shortages spread across the country. (Oilprice.com 18 May)

And China’s unselfish assistance?

China is recasting its loans to assist Venezuela … offering ‘looser conditions and renegotiated debt. Venezuela is facing the worst crisis in its 2000 year history collapsing oil price, political deadlock and collapsing economy’. (FT 20 June)

China is lending Russia $12bn to develop the Yamal LNG venture in the Arctic, one of the largest financial deals in Russia’s corporate history and the China’s second financial commitment to the project. In March Russia’s largest independent gas producer and the main shareholder in the Yamal project Novatek sold a 9.9% stake to China’s Silk Road Fund – ‘a break through’ for it and the Kremlin. Similar projects elsewhere have no so far succeeded, e.g. off Western Australia. So far, however, China has been slow taking advantage of opportunities offered by Western sanctions. Lack of experience may be one reason. (N Buckley, FT 12 May)

The relationship between oil prices and costs in the upstream industry

Exploration and production (E&P) costs in the oil and gas industry have increased by some 100% between 2000 and 2012. The higher cost of hydrocarbons production has previously been put forward in much of the economic literature as one of the primary reasons for structurally higher oil prices. However, the recent dramatic decline in the price of oil (the price of Brent fell by over 50% between mid-July 2014 and early 2015) disproved the popular argument that oil prices could not fall because of high costs. These developments raise two important questions relevant to the current oil price environment: What is the true relationship between the price of oil and the cost of production per barrel? And, what are the implications for the oil industry of the current price and cost environment? For a discussion see Newsletter of EUCERS – European Centre for Energy and Resource Security. (9 June)

Wildfires and Canada’s approves Pacific pipeline expansion

TransCanada received the last two necessary permits to construct a natural gas pipeline that would connect Alberta gas to Canada’s Pacific Coast, a conduit that would allow gas to be exported abroad. The pipeline network is expected to cost $13 billion, but the company is expected to make a final investment decision by the end of the year. Canada’s proposed LNG export terminals face substantial questions about their economic viability, however, as LNG markets are in a state of oversupply. (OilPrice Intel 6 May)

Fracking concern in USA

Local fracking bans in two Colorado cities have been overturned by the state’s Supreme Court in a victory for the industry. The Court ruled unanimously against the city of Longmont’s hydraulic fracturing ban and the moratorium in Fort Collins. In Fort Collins, voters had supported the five-year fracking ban put in place in 2013, while in Longmont, the ban was voted into place in 2012. (OilPrice Intel 6 May)

Saudi oil news and more

As Saudi Arabia is now scrambling to generate any incremental cash, it too will be caught in the deflationary spiral of excess production as it will have no choice but to outsell its competitors, especially those rushing to grab Chinese market share such as Russia, as it seeks to make up with volume what it has lost due to lower prices. It also means that any hopes of a production freeze by Saudi Arabia – and thus OPEC – are hereby snuffed for the indefinite future. (Oilprice.com 6 May)

The context must be remembered

Arab states (and close neighbours) are suffering a crisis of legitimacy. They have never got over the fall of the Ottoman Empire. After Sykes-Picot agreement and its many unintended consequences, a new Arab history is being written in blood with deep grievances against colonial tradition. And wars against Israel in 1948, 1956, 1967 and 1973 and Israel’s invitation of Lebanon in 1982 A ‘peace process’ with Israel has only produced an ‘unhappy archipelago of autonomous areas in Israeli occupied West Bank and Gaza Strip’. Only the oil monarchies could build glittering cities, most Arab economies could not deliver lasting prosperity. A local chieftain from Nejd backed by Britain and his Wahhabi religious zealots founded Saudi Arabia. There are five strands of Muslim politics with one doctrine (Shia in Iran) holding that supreme political leadership should be exercised by a senior Shia Islamic scholar. (Economist Special Report: The Arab World 14 May)

Is $60 around the corner?

Bloomberg reports that speculators shorting crude oil have been squeezed out of the market, and short bets have fallen to their lowest levels in almost a year. The shift in trades reflects more and more confidence that oil will not fall back down, at least not to the depths seen earlier this year. Also, several banks, including Standard Chartered Plc and SEB Bank have come out and said that oil will hit $60 before the end of the year. UAE’s economic minister said that he could see oil hitting that threshold by summertime. The Wall Street Journal found that the array of investment banks polled raised their price targets for Brent crude in 2016 by $2 on average in May compared to the previous month’s forecasts. Not everyone is so bullish, however. Some analysts attribute the recent price gains simply to the supply disruptions in Canada and Nigeria, outages that were always going to be temporary (at least in the case of Canada). (Oilprice.com 31 May)

OPEC’s June meeting fails

OPEC officials are arriving in Vienna for the start of their semi-annual meeting. After the inability to set a production target in December 2015, plus the collapse of the Doha production freeze deal in April, few expect any result to emerge from the discussions …Moreover, the sharp gains in oil prices over the past few months have reduced the urgency to act. Although many OPEC members are still hurting terribly from oil prices that remain at less than half of their 2014 peak, prices are trending in the right direction. OPEC’s strongest member, Saudi Arabia, was highly unlikely to change strategies even when crude was $30 or $40 – now that it has moved up to $50,… Moreover, Saudi Arabia’s economic overhaul has made domestic economic and political objectives a much higher priority than cooperation with OPEC. (Oilprice.com 31 May)