How anti-coal campaigners are protecting Australia’s economy

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  • Irony doesn’t get any better than this. Environmentalists and farmers fighting the expansion of coal mining and coal seam gas across Australia are protecting the economy. If they are successful in slowing down or reversing these sectors in Australia, future governments will be spared an economic mess, Australian workers will have much improved employment prospects and our big banks will be spared major losses.
  • That’s because, while not their intention, such campaigns are the only thing likely to moderate the rude economic awakening we face when the global carbon bubble bursts and the fossil fuel industries start their inevitable and terminal decline.  While the world economy will be impacted Australia is particularly exposed and with the active support of our governments and financial institutions, coal and gas companies are doing their best to increase this exposure.
  • Fortunately for Australia’s economics prospects, these campaigns are amongst the most strategic and effective ones we’ve seen from the NGO community for many years.  Unlike traditional environmental campaigns that tend to raise an issue and demand government intervene, these campaigns are displaying a more sophisticated approach, taking on the industry with a clear view of how markets work. They recognise that government will not be an ally in this case, with both major parties showing overwhelming support for the expansion of Australia’s fossil fuel dependency.  So they are instead going direct to the market, targeting each development with legal and other delay tactics, attacking the reputation of lenders and suggesting investors think again about financial risk.
  • The campaign in Australia will be given a major boost in coming months when one of the United States most effective climate campaigners, Bill McKibben visit’s Australia. McKibben’s 350.org has been credited with revitalising the grass roots climate efforts in the US with his divestment campaign arguing that fossil fuel investments are immoral as well a poor investment choice.
  • Pensions funds in Australia, the major owners of fossil fuel assets, are not likely to respond to the moral argument but they will take notice of delays and risks to new projects. And they’re not likely to miss the growing mainstream market interest in the carbon bubble, with the argument starting to land as a material risk.  Investors don’t pay much attention to anti-coal campaigners in developing their investment strategy, but they start to listen when analysts like Citi Group and HSBC raise concerns. HSBC argued recently that some of the world’s oil and as majors could lose 40 – 60% of their market cap if the carbon bubble scenario plays out.
  • I have been arguing that there’s a global financial risk in the carbon bubble for many years, as have many others such as the folks at Carbon Tracker in the UK. A few years ago, these concerns were dismissed as very long term in impact. But with economists like Sir Nicholas Stern and investors like Jeremy Grantham at GMO now coming on board, seeing this as a systemic financial risk, the game is changing.
  • Why the shift?
  • Previously these concerns were analysed with the assumption that a global agreement on climate change would be the key driver of market shift on climate. The conclusion was therefore that no government action = no carbon investment risk. But in the last few years the dramatic price drops in solar and the severe disruption to the coal fired utility business model created by the boom in rooftop solar, have put carbon risk into a very different context.  The markets now have a very real and live example of how shifts can occur unexpectedly in carbon exposed sectors, with great destruction of value for companies that aren’t prepared. They are also seeing the opportunities in the upside, with companies in the rooftop solar installation space going to very successful IPOs. Investment shifting from coal to solar is no longer a theory but a live trend that will accelerate.
  • So if this is all so clear, why are Australia’s governments and major banks acting with such disregard for the economic risks involved in increasing Australia’s exposure to the carbon bubble? It’s the same reason bubble’s tend to burst rather than deflate, and is well argued by the legendary investor Jeremy Grantham, whose status comes from not just having $100 billion under management, but also his success in forecasting so many of the major investment bubbles of the past four decades. He says it simply “aversion to bad news”. He continues: “The investment business has taught me – increasingly as the years have passed – that people, especially investors, prefer good news and wishful thinking to bad news; and that there are always vested interests to offer facile, optimistic alternatives to the bad news.”
  • Politicians and investors who are benefitting from the carbon bubble are not going to be the ones who help it come to calm end.  They simply don’t want to see it, for the reasons Grantham explains. This will not change and so we shouldn’t expect it to. That’s why bubbles burst and it’s why this one will.
  • This brings me back to the importance of the environmental campaigners protecting Australia’s economy. While I believe it is inevitable the bubble will burst, the smaller it is when it does so, the better off the economy will be. The less stranded infrastructure we have built, the fewer mines that have to close and the less miners lose their jobs, the less risky the broader economic impact.
  • So while I wouldn’t normally recommend taking financial recommendations from an environmental NGO, I think the CEO of The Climate Institute John Connor provides some pretty sound advice to investors: “Investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming.”It’s time for investors, particularly our pension funds, to wake up. Maybe the best way they can secure our retirement savings is take some money out of coal investments and send it to climate campaigners!

24 thoughts on “How anti-coal campaigners are protecting Australia’s economy

  1. Ted nderson

    an interesting view but needs to be supported by advanced technologies in solar collection and storage to be a serious contender to coal.Alan Jones claimed on radio yesterday that some eminent scientific group in the states now has proof that co2 is not causing climate change in fact co2 is protecting the earth.If the strategy is to confuse the masses its working well

  2. Eeon Macaulay

    The Australian Government is failing its continuants by not having real policies to change energy generators away from coal . We have a hang up about Nuclear, but we can develop safe systems if we tried. I have read about Bill Mckibben’s 350.org.
    350 ppm CO2 is the recognised upper limit after which serious damage occurs. A recent article in the LA Times states that the world is about to pass 400ppm and that a new target should be 450ppm. When this is reached do we then up the target again. Perhaps only a real CO2 crisis will galvanise world-wide action.

    http://www.latimes.com/news/science/sciencenow/la-sci-sn-greenhouse-gas–earth-20130430,0,119469.story

    The Government think tank the national Sustainability Council has just released its first report “Sustainable Australia Report 2013″ pointing out all of the dangers we now face . Hopefully Policy may follow but I am not holding my breath – to many vested interests to pander to.

    http://www.environment.gov.au/sustainability/measuring/publications/sustainable-australia-report-2013.html

  3. Jonathan Evelegh

    Boiled down, the problem is vested interests with only very short term profit taking. They simply are not considering the long-term possibilities (and problems) — because they will have already made their money. It is a failure of government (and the overall “free market” capitalist economy) that this kind of thinking carries the day. Paul’s insights into alternative economic trends are encouraging. However, one can only hope that he is right and that the investors he writes about will put their money where their mouths are. And one must further hope that these investors will convince others that the real money is in the long term. Seems obvious to me but then I don’t run a pension fund that has to produce some returns next week.

  4. Terry Karis

    Hi,
    With the news lately about the percentage of fossil fuels that must remain un-mined and the stories from China regarding pollution and breathing difficulties, I had a thought.
    The only government capable of dramatic change is the Chinese. When the people can’t breath to the point of complaining, the leadership might well avert a revolution by cutting coal/fossil fuel burning overnight.
    It would be drastic action, and China is capable of drastic action.
    The alternatives would be applied quickly.
    Slow countries like Australia would simpply be dumped.
    Marius Cloppers (apology for the spelling) of BHP stated that we would have a coal free economy in twenty years, in 2010.
    Could I encourage the Chinese leadership to move?
    I see the emerging economy of China as a hope.
    Terry

  5. Nathan Handley

    Agreed, people really do ‘prefer good news and wishful thinking to bad news’.

    I’ve been ‘campaigning’ my friends and families of the very real consequences of the Climate Crisis for a few years now. Many have young kids, or intend on starting families; I just don’t understand how you can want to do those thing with such a big red light shining in your face, and without taking a good hard look at what is going on.

    You would think they might take an interest, possibly change their behaviours to help alleviate the problem, and teach the kids some good clean living skills. But it is just full steam ahead: rush, rush, rush, drive that car, take that overseas holiday, complain about rising power bills without thinking of the alternatives etc etc. I stand back in awe at their incredible ability to be so busily ignorant! And then you simply need to apply this to society as a whole to see the whole thing tick along nicely.

    Fossil fuel companies have a huge grip on this country. We need to spread the word about how much they have invested in our everyday lives.

    One of the things 350.org together with Market Forces have been promoting is the amount of money the big four banks and other financial institutions have invested in future fossil fuel developments. You can check it out here.

    And while you are there send a letter to your big four bank to let them know you are not happy about their investment choices by clicking on the ‘Put the Banks on Notice’ link.

    Also 350.org is premiering a Do the Math doco in the lead up to Bill McKibbens tour. It is being shown around the Sydney on the May 16 at Redfern Town Hall: Buy tickets here.

    And check out other Australian city’s times for showing the doco here.

    All I can say is, let’s push this phenomenon of ‘anti-coal campaigners protecting the Australian economy’ by getting the word out there about these kinds of campaigns and events. Surely Bill McKibben is right; the maths doesn’t add up and should be enough for more people to take notice. Tell your friends, tell your family, tell your business associates and make sure you tell your bank!

  6. The points you make in your essay are interesting and encouraging.
    The heroes in it are clearly the people in the various anti coal movements. These people all deserve a pat on the back for the good work they are doing. So too do the farmers for at least working in their own patch.

    The Government can at least argue that they are trying to do the right thing by pricing carbon and providing other support for sustainable energy. The big disappointment is the opposition.

    Let’s hope that the commercial scenario you painted last time gains some traction.

  7. Steve Posselt

    This is but one micro example: We have just lost a very valuable employee at our Ipswich factory. He has a new job in Coal Seam Gas at twice what we pay him. We lost someone important last year to the coal industry at more than twice what we can afford. They are thinking of money for their families so while I don’t agree, I can’t blame them.

    We used to export to the Middle East but that went long ago with the rise in our dollar, along with the jobs associated with it.

    I’m no economist but I am an engineer and businessman and all I can see is a lot of pain coming and all of our own doing.

  8. Wendy Armstrong

    There’s a great opportunity here for setting up an Australian investment/funding body that can receive the People’s money – e.g. superannuation – with the sole purpose of supporting sustainable energy development. All the more pertinent with the new gap in the electric car market…

  9. Duncan Noble

    Great article. Thanks for this Paul. As I read this in Canada, my first thought is “ditto for Canada”. Our government is actively promoting oil/tar sands development; and acting more like a PR agency than a responsible government. Building more long term infrastructure to facilitate the carbon economy (e.g., Keystone XL pipeline) is insane, given our knowledge about climate change and the carbon bubble. But this insanity continues…

    One great source of hope is the growing movement against reckless tar sands development. We know it is getting traction when we see the desperation in the way the Canadian government is lobbying both the US to approve KXL, and the Europeans against their Fuel Quality Directive which rightly classifies Canadian heavy crude as dirtier than conventional oil.

    Jeremy Grantham’s latest newsletter that you refer to is definitely worth reading. It’s available here:

    http://www.gmo.com/websitecontent/GMO_QtlyLetter_1Q2013.pdf

    After reading this, I picked up a copy and am now reading William Ophuls’ “Immoderate Greatness: Why Civilizations Fail”. It’s short (70 pages), easy to read, and brilliant. In Grantham’s words: “It is a straightforward summary and synthesis of all of the ways to fail in 70 small pages, yet with extensive notes and references.” Strongly recommended.

  10. Michele Rhodius

    Whilst globally humankind are still embroiled in the economics of growth and consumerism, believe that this planet’s resources are infinite and the politics of Climate Change doubt are still being expounded by fossil fuel corporations to bring market force pressure upon western politicians – nothing will change the status quo. All governments are still only paying lip service to renewable energy investment and it may well take the bursting of the Carbon Bubble to initiate positive action. Nevertheless, this campaign certainly seems to be an intelligent and novel approach.

  11. Paul,
    As always a well written and well researched article with the necessary “twist” – that NGO:s and others protesting against the Coal-industry is actually doing the work a government should do – take care of its citizens!
    In the attached blog-post are links to the “Unburnable Carbon” report from Carbon Tracker and to Bill McKibbens movie – “Do the Math”

    http://sorenandersson.com/bubbles-dont-crack-slowly-they-burst/

    Best Regards / Sören

  12. Stephen Glanville

    G’day Paul,

    As always you bring evolving meaning to the term ‘crystal balls’. :-)

    I think that Steve Posselt raises an important observation that this is a ‘micro example’. But I don’t think that you implied otherwise. Nevertheless, I consider that perspective important because although this issue may be a hopeful indicator of an emerging trend, it is far from a point one might consider to be of significant or ‘sustainable’ ‘traction’ in terms of ‘investor’ confidence, preference or consequent market paradigm influence, as Michele Rhodius reasonably suggests.

    I doesn’t appear to me that one would reasonably consider the battle/s that these Enviro NGOs are waging in the ‘Fracking’ arena to be yet won, let alone the war for the hearts, minds and wallets of the powerful elite (here meaning ‘investors’) at the scales of national and global economics.

    And if the Enviro NGOs do in fact establish a significant traction and influence in this battle alone, what will be the political repercussions of that, if indeed what Michele says is true…and I think it largely is.

    In other words, is it likely to shift or at least shake the foundations of what we know to be ‘vested interest’ on a scale of meaningful consequence…and if so what are those consequences likely to be and/or mean?

    As always a distinct pleasure. Good to know that bastions of quality content written by actual humans yet exist in an increasingly automated medium.

    Cheers

    Stephen G

  13. Hazel M

    Great article. My partner and I chose to invest our savings in rooftop solar and double glazing. Our household has 5 adults, and we haven’t had to pay a power bill in 18 months – a better return than you are likely to find in any term deposit or super fund!
    If CSG drilling continues, I can see Australia having serious problems with pollution of water and arable land ( neither of which we have to spare), and having no money to address the damage. I sincerely hope that the financial world DOES recognise the bubble before the worst happens – but I won’t be holding my breath.

  14. Steve Gill on fb:
    – I love the book, look forward to each chronicle.
    – I pray your analysis is correct, and that the bears will stop the CO2 chimneys before they damage us too much, but is it too late?
    – I have to ask your ghost writer to learn how to use apostrophes.
    – And have to ask you, Paul, what are the most effective steps we can take to reduce the environmental damage humans are doing. Maybe a top 50, ranked by effectiveness.
    – I buy 100% green power, have SHWS, 1.5kW PV, 4cyl cars, insulated ceilings, smart power boards, we’re quitting the gas stove and try to buy local.
    – What’s the next step?
    Like · Reply · 2 hours ago

  15. George Burrett

    Paul, another Canadian has pointed out the particularity of Canada – oil not coal the bane of our future – and the province of Ontario, Canada, where I live, is shutting down the last of its public, coal-fired generators (we have no coal in Ontario and so it was perhaps “easier.”

    But, now, the provincial Liberal government that took “clean air” advice and shut down coal, is in serious difficulty, facing charges that higher-cost electricity from wind turbines, solar, and gas-fired turbines, is the partial cause of our loss of industry.

    The larger causes of industrial loss – particularly to the provinces of Ontario and Quebec – are, firstly, a dollar driven to par with the Greenback by our commodities, and a neo-liberal government for which intervention is NOT a consideration.

    Finally, Paul, let this old solar advocate-teacher say that here, above the 49th parallel of latitude, N, there is not a lot of solar insolation for too much of the year to even consider that alternative.

    It’s very early in the morning of May 13th, and snow is falling on the 5 cm high pea plants in the backyard garden, and who knows if a screwed-up climate will let me get away with planting those very vulnerable bush beans later this week, the traditional “safe” date? And I’m at 44 degrees N Latitude, in that little corner of Ontario projecting south to the latitude of northern California.

    My long-winded message, Paul (and I know that you are aware of the gazillion, climatic anomalies) is that we haven’t quite reached the death of Homo sapiens’ hubris, dammit.

    And when we do reach that turning point, only a universal command economy is going to bring off our project..

    Happy camping in the meantime.

    George

  16. Joan Halgren

    Paul,

    Good starter-topic for how to reel in the elites and sustain our planet. It’s so difficult dealing with folks with short-term, greedy goals. Fortunately, I’ve seen Bill McKibben at events in the U.S. and give him huge credit for his passion to turn the tide—targeting pension funds is a good start. However, I agree strongly with Terry Karis who brings up the Chinese, and Jeremy Grantham, as you know, believes the Chinese will be our salvation since they must reign-in their problems and that will have a ripple impact for the rest of us.

    So it will be in everyone’s best economic interests to try keeping ahead of China if we wish to compete on this planet for the foreseeable future whether we are investors, fossil fuel companies or consumers. Otherwise, these smaller campaigns, while having a wonderful moral compass, are just that. The bigger picture is having investors who are now vested in fossil fuels watch China quickly switch to renewables that will knock their socks off. It will be the game changer. It’s the overdue incentive that will get fossil fuel executives and investors off their behinds.

    Meanwhile, we can only hope to make little inroads here and there. But the future looks bright with a push from the Far East!

    Cheers,
    Joan

  17. Graeme Mcleay

    Recently the feisty mayor of Pt Augusta,Joy Baluch, died and with her the plan for large scale solar in the region (including a tower to store the energy generated). Sadly there was not a ripple of interest from the mainstream media. 400 ppm and rising!

  18. Jesper Lind

    Before hailing the Chinese, I would like to see them turning off a few coal power plants. But I applaud them for building out nuclear.

    But before anything changes there has to be real crisis. Apparently Australia burning and America burning is not enough. The question then becomes: What is enough? And even on that one, humans may just muddle along and struggle to adapt to a less and less liveable planet. I’m just not convinced that there will be a sudden change, and then the world will start building out clean energy. It’s entirely possible that we’ll burn all the oil and much of the coal, and for sure all the gas. And then we’ll talk about the “future”.

  19. Jason Dow

    Hi All,

    I have spent some time now reading a lot of work by you Paul and listening to your various talks and only have one minor point to make. Your assumption that we are going to act rationally is dubious at best given the nature of our power systems and what is evolving as we speak.
    There is more than just vested interests at work here and corporations looking to protect their profits, there is a genuine difference in the way the world is viewed, that is driving a great deal of the resistance.
    I want to believe the great transformation will happen in the general way you put forward in your book by the same name and I am fighting to see that it does, but I am also keenly aware of the irrationality of the opposing forces based around religious world views.
    We are underestimating how close this group is to real power in the US and the power and the yearning for a great cleansing of violence of the end of days story at the centre of a lot of the evangelical teachings dominant in the US.
    At the end of the day it is worth nothing to worry but it is a group that will have a large effect on the final outcome and we should be much more vigilant than the general secular society is currently being.
    Kind Regards

  20. Hi Paul. Tnx for sharing here. If possible in subscribing to your posts, if possible I would prefer to receive updates and posts at the Facebook page as I rarely venture to my email address these days. Should this be enviable for what ever reason the email address is there, tnx.
    Your lifestyle there in Tassy sounds appealing except for the cold. brrr. I am in balmy Eastern Versais of the Philippines. Cheers mate and best wishes.

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