COP26 Week 2 – Turning Point or Failure?

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COP26 Week 2 – Turning Point or Failure?

The purpose of COP26 was to formulate initiatives that would decelerate global warming and make the politicians feel good about themselves. But the activists were never going to buy the ‘blah’. Welcome to the climate culture war, writes Victor Hill.

We want zero CO2 – NOW!

It was on day six that Greta Thunberg told a rally of catastrophising millennials that the COP26 conference had already failed. That was predictable. The only outcome that would have appeased them would have been the immediate total shutdown of the oil industry – a move that would have plunged the planet into economic chaos.

More cautiously, former US president Barack Obama told an adoring audience on Monday that: “We are nowhere near where we need to be at”. The paper factory was churning out initiatives, but the activists were not impressed…

The mood of the second week was dourer than that prevailing in the first. The US refused to sign up to a deal to end the sale of petrol and diesel-powered cars. Germany demurred on various initiatives because it is still in a state of political paralysis. Chinese delegates were said to be standoffish.

A few days later the Climate Action Tracker (CAT) – a widely respected modelling agency − predicted that the world is heading for an increase in temperature of 2.4 Celsius by 2100. CAT publishes an annual report which is taken seriously by climate specialists. It calculates that by 2030, greenhouse-gas emissions will still be twice as high as the level necessary for keeping the temperature rise since 1800 to below 1.5 Celsius. CAT talks about “Glasgow’s credibility gap”. Even Antonio Guterres, the UN Secretary General, said early this morning that COP26 “would probably not achieve its goal”. So, if the criteria for COP26’s success was “One point five and stay alive”, it has probably failed.

On Wednesday evening, we learnt that China and the US, which together account for nearly half of global CO2 emissions, had struck a bilateral deal to “enhance ambition” on climate change by cutting emissions this decade. China also committed for the first time to restrict emissions from methane. While this joint declaration received a ripple of polite applause, precisely what it amounts to is unclear.

Presidents Biden and Xi are due to hold a virtual meeting which could take place as early as next week – and no doubt this topic will come up. China’s top climate negotiator Xie Zhenhua told reporters that on climate change “there is more agreement between China and US than divergence”. The US climate envoy, John Kerry, echoed that sentiment. It’s gratifying that those two have established such cordial relations but what that means for global warming is uncertain.

Separately, six big automotive players including Ford and Mercedes, and 30 national governments agreed to phase out the sale of petrol and diesel-powered cars worldwide by 2040. But several of the world’s biggest car manufacturers, including Toyota, Volkswagen and Nissan-Renault, did not join the pledge, which is not legally binding anyway. The governments of the US, China and Japan abstained.

In the final days there was an argument about coal. The draft final communiqué was issued at 7:13am today but delegates may continue to toil through Friday night into the weekend on the final version. The prevailing view in mainstream media is that it lacks ambition – and ‘teeth’, though Lord Stern, a veteran climate guru, opined on the BBC R4 Today Programme that it was better than hoped a few days ago. The talk is of a more ambitious agenda at COP27 next year in Cairo. Perhaps that will be the one – or maybe the one after that.

For Boris Johnson it would have been hugs all round if the world had committed to substantially lower emissions by 2030. But that outcome was always going to be elusive. The new word that comes up again and again to describe the climate jamboree is “greenwash”.

Coal smoke

If only COP26 could have produced a deliberative moratorium on all coal-fired power stations. But that would have required the say-so of China and India. China burnt 82.3 exajoules of coal last year and India another 17.6 exajoules. (An exajoule is one joule, a unit of energy, times 10 to the power of 18). The US burnt 9.2 exajoules of coal and the humble UK just 0.19 exajoules – about one tenth of one percent of the global total.

Overall, coal consumption is still rising. And so is oil consumption, after a pronounced downturn. In late October, worldwide oil consumption regained the 100 million barrels a day mark for the first time since the start of the pandemic. So, mankind, collectively, is still mind-bogglingly dependent on fossil fuels.

China will continue to open coal-powered stations over the next few years but indicated that the use of coal will be reduced from 2026 onwards. Only thereafter is there any prospect of Chinese emissions reducing.

Whither the oil majors?

In the UK, oil majors such as BP and Shell are two of the must-have stocks that retail investors feel impelled to hold in their ISAs and that institutional investors seek for their dividend yield. Indeed, the FTSE 100 is still dominated by now unfashionable oil, commodities and mining stocks – the principal reason why it has underperformed the New York markets.

A Shell spokesperson said recently that oil extraction was expected to contract by 1-2 percent per year until 2030. And BP expects oil production to contract by 40 percent by 2030. So, the oil majors know two things.

The first is that their core product will continue to be needed for quite some time – there will be plenty of petrol and diesel-powered cars on the road after 2030 when the sale of new ICE-powered cars will be banned. And there will probably still be ICE-powered vehicles on the roads of developing countries until well into the second half of the 21st century.

The second is that, over the long term, the industry will endure a graceful decline. They are of course aware of this – which is why they style themselves as “energy” companies with photos of windmills on the covers of their annual reports.

But this week it became clear that the oil majors are going to transform themselves over the next 10-15 years, into hydrogen majors. This is in fact the theme of a billboard campaign which appeared this week on UK railway-station platforms, put out by Australia’s Fortescue Metals Group which is controlled by mining magnate Dr Andrew Forrest. On 10 October, Fortescue announced that it plans to build the world’s largest electrolyser in Queensland which will generate green hydrogen. Fortescue Future Industries aims to produce 15 million tonnes of the stuff every year by 2030.

Hydrogen is the technology with the most ecological promise – yet the UK government has barely started to invest in it. There have even been rumours in recent weeks that there is resistance to the hydrogen economy in ‘deep’ Whitehall. Hydrogen can either be used to drive electric fuel cells – now a tried-and-tested technology − not least on London’s buses. Or it can be used to drive hydrogen-powered internal-combustion engines – something that JCB (the UK digger giant owned by the Bamford family) has been working on. Such hydrogen engines will dispense with the need for a heavy and expensive battery.

A new partnership between Wrightbus, which is owned by Jo Bamford, son of JCB chief Lord Bamford, and Ineos, the petrochemical giant controlled by Sir Jim Ratcliffe, will produce and distribute hydrogen for use by heavy-duty vehicles. Sir Jim calls hydrogen “the dream fuel”. Ineos will invest €2bn in new green hydrogen plants in Norway, Germany and Belgium over the next 10 years.

Some ‘armchair engineers’ will tell you that it is inefficient to generate electricity (preferably via renewables such as windmill) and then use it to generate hydrogen via electrolysis; and then use the hydrogen to power fuel cells that generate electricity, the only waste product being water. But that misses the point that hydrogen – a gas – is relatively easy and inexpensive to store, whereas storing electricity in batteries is problematic, short-lived and expensive.

In fact, hydrogen is even more versatile since, once generated, it can be combined with nitrogen to form liquid ammonia. This is a stable (though toxic) compound that can then be shipped in supertankers over long distances. The ammonia can then be turned back into its component gases when it reaches its destination – hydrogen for energy and nitrogen for fertilisers. I admit: the prospect of an ammonia spill in the oceans is an appalling one − possibly even worse than an oil spill. But I suspect that smart marine engineers are already working on this.

It’s not as if renewables per se have produced stellar returns for investors. Wind-turbine operators offer a mixed picture. Some of the smaller players, especially energy consultancies such as eEnergy, have done well – and many more specialist advisors will prosper. Water and waste-management businesses are also doing well. The Pictet Water Fund has risen appreciably this year.

The oil majors were out in force in Glasgow. One report suggested that there were more oil potentates in Glasgow than climate scientists. Perhaps that is evidence of how determined they are to survive the carbon transition. IBM started out making clerical equipment and then typewriters. It got into computing quite late, but it is still with us. I suspect the successors of the “Seven Sisters” will still be extant at the end of this century.

Rolls Royce rising

I have written numerous times here about the potential for relatively inexpensive small modular (nuclear) reactors (SMRs) to revolutionise our energy grid. Rolls Royce has emerged as a leader in this field with a design that can be built in a factory and then deployed onsite at a cost of about one tenth of a conventional nuclear-power station.

Well, this week there was some very encouraging news. It was announced that private investors and the UK government are backing Rolls Royce to explore the development of up to 16 small nuclear plants to the tune of £415m. Private investors will supply £195m and the UK government £210m. Ironically, some of the private funding is coming from France. The Perrodo family, which owns the oil company Perenco, will back BNF Resources Ltd, one of two investment vehicles in play.

If the rollout of SMRs widescale is to be accepted, then there needs to be an adult conversation about the disposal of nuclear waste. Rolls Royce aims to be building two SMR installations in the UK each year by the 2030s, each able to generate 440 megawatts of power – that’s enough to power a city such as Sheffield. Each SMR would deliver about one seventh of the power generated at Hinkley Point C, while at about one twelfth of the cost, and using less land to boot. Construction of such SMR installations will probably be financed by institutional investors.

Shares in Rolls Royce rose by about five percent on the announcement but have since eased.

The rise of the anti-catastrophists

A body of opinion is emerging which regards the perennial catastrophising of the climate ‘kamikazes’ as itself a major problem. In an interview with the New York Times this week the Israeli sage, Yuval Noah Harari, said: “We need to stay away from the apocalyptic thinking that it’s too late and the world is ending and move toward a more practical thing: two percent of the budget [on green technology]”.

Broadly, the anti-catastrophists fall into two groups. On the one hand, there are those who argue that even if a rise in global temperatures of two degrees plus would cause huge challenges, it would be manageable given mitigation strategies. The government of Madagascar – a country afflicted by what has been termed “the first climate famine” – is encouraging farmers to plant crops that are less water-intensive. And on the other hand, there are those, like Mr Harari, who say that the climate problem is realistically solvable given sufficient investment in technology.

The first group point out that since plants thrive on carbon dioxide, an increase in atmospheric CO2 will boost crop yields at temperate latitudes. Trees, planted in reforestation drives, will grow more rapidly. Added to new agricultural technology such as vertical farming and lab-cultivated meat, we should have no problem feeding ourselves on a warmer planet. Those who call for “zero carbon” should remember that without a critical level of CO2 in the atmosphere (around 160-180 parts per million) there could be no photosynthesis, thus all plant life would die.

The human race has survived dramatic climate change in the past. What is now the North Sea was a habitable fertile lowland (called Doggerlandi by the specialists) where our hunter-gatherer ancestors thrived. When the glaciers of northern Europe melted around 12,000 years ago, they were forced onto higher ground. That was a cataclysm – but they survived it.

Human civilisation has evolved over the last 10,000 years during a window of, geologically speaking, remarkably stable, climatic conditions. Settled agriculture emerged in the Near East about 5-6,000 years ago and within another thousand years the first urban settlements were formed. Out of these came written script and mathematics. And so, our extraordinary cultural and material progress began. These benign climatic conditions were never going to continue indefinitely; so, arguably, mankind would have faced a climate crisis at some point, fossil fuels or not. For all we know, had we not embarked on the course of human civilisation our species might be extinct by now.

Ordinary wage-earners who are more concerned about how they are going to pay the gas bill this winter have little truck with the catastrophists. But their voices are likely to be shouted down by those who have adopted ultra-decarbonisation as a kind of post-deistic religion, cult or at least as a manifesto of despair.

The argument now is not between those who advance climate science and those who deny it: it is between those who foresee imminent apocalypse and those who doubt that we are all about to die.

Listed companies cited in this article which merit further investigation:

  • Shell (LON:RDS)
  • BP (LON:BP)
  • Fortescue Metals Group (AX:FMG)
  • eEnergy Group PLC (LON:EAAS)
  • Pictet Water Fund (LU0104884860:EUR)

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