A report on risk of inaction unlikely to change those still in denial

The messenger of the news is sometimes as important as the message, if not more so. In that context, former New York City mayor Michael Bloomberg, former US Treasury Secretary Henry Paulson and former hedge fund manager and environmental activist Thomas Steyer were to tell you that ignoring climate change is risky business would you take note? What if former Secretary of State George Shultz, former Treasury Secretary Robert Rubin, former US Senator Olympia Snowe and a few other luminaries were of the same opinion? Would it make a difference? That, in a nutshell, is the advice offered in Risky business: The economic risks of climate change in the US, a report released in June 2014, incidentally around the time the Environmental Protection Agency (EPA) unveiled its proposals for reducing US greenhouse gas emissions 30% from 2005 levels by 2030, extensively covered in July issue of this newsletter.

The slick report, more like a marketing brochure than an assessment of climate risks, is nevertheless serious in both tone and content. It focuses primarily on the damage the American economy could sustain from unabated climate change. At a press conference to launch the report’s release, Bloomberg said, “It makes the true costs for inaction on climate change frighteningly clear.” While avoiding specific recommendations, the report is clearly targeted at American business, and by extension all big business, encouraging its bosses to lead in mitigating climate change. Moreover, it urges business leaders and the public to pressure the national government into crafting a coherent public policy around the issue – something that has been sorely missing except for EPA’s recent effort to slightly curb US GHG emissions over time. “American business needs to lead in this area,” Paulson said at the same press conference.

While the report focuses primarily on the most likely climate change scenarios to occur, it also examines the less likely but extremely high-risk scenarios, something the authors emphasized that businesses and individuals naturally do, for example, when they purchase fire or flood insurance. Would it make a difference? Probably not. Oil majors and other large enterprises with massive carbon footprint appear reluctant to take climate risks seriously since it undermines their business culture, their core values, and their bread and butter. In early July, The Carbon Tracker Initiative (CTI) and Energy Transition Advisors (ETA) released a report that suggests up to $77 billion worth of Royal Dutch Shell’s investments in new fossil fuel projects could be stranded if new climate change policies begin to be introduced, as some observers believe is inevitable. Exxon, Chevron, BP and other oil and gas majors as well as coal, mining and utility companies may be equally vulnerable. CTI and ETA were responding to a self-serving statement released by Shell on 16 May 2014 that dismissed the risks associated with climate change as having any significant impact on its business or value of its assets, as reported in the May 2014 issue of this newsletter. Obama’s carbon legacy?

Referring to Shell’s response, in a press release on 9 July 2014, Anthony Hobley, CEO of CTI, said (parentheses added): “With this combative stance, Shell has missed an opportunity to explain to its shareholders how its capital expenditure plans are resilient to the impending energy transition. Acknowledging the seriousness of the climate challenge (as Shell has done) whilst at the same time asserting no effective action will be taken until the end of the century (as Shell has indicated) is as classic a case of Orwellian double think as you are likely to find.” The statement and supporting documents were in response to a press release by Shell in May to diffuse shareholder concerns on the issue of stranded fossil fuel assets. Black, brown & green states of America

In its statement, Shell dismissed the possibility that it’s proven oil or gas reserves would become stranded as a result of climate change regulation, stating that fossil fuels would continue to play a key role in global energy to 2050 and beyond. According to CTI and ETA, Shell’s conclusions rest on a serve serving argument that says that over the coming decades the world will continue to consume more fossil fuels; therefore fossil fuels will have to be produced by the likes of Shell; therefore existing fossil fuel reserves, certainly Shell’s reserves, will not be stranded – a circular argument that may not pass the test of time. While Shell acknowledges the need for urgent action on climate change, it also states that the world will fail to meet the internationally agreed global warming target of 2°C – a classic example of Orwellian double-think, according to Hobley.

Published Originally in EEnergy Informer The International Energy Newsletter August 2014 Issue.