THE CARBON WAR

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The Winning of The Carbon War
City of London, 1 st December 2014
Accountability. Yesterday was one of those days that breathed credible life into
that rather loaded word, where defence of fossil fuel profligacy is concerned.
Two pinch-me-to-check-I’m-not-dreaming developments hit the headlines
one after the other. First, the FT reports that the Bank of England is launching
an internal enquiry into whether or not fossil fuel companies pose a threat to
global financial stability. The Bank failed to spot the threat that the financial
sector’s excesses posed to the capital markets in 2007 – or at least, failed to
sound an alarm. Evidently, it doesn’t want to risk repeating the act, less than
a decade later, in the case of the energy sector.
Governor Mark Carney is clear on why. A key risk in need of appraisal
involves stranded assets. If climate policymakers begin delivering on their
promises to cut carbon emissions to sub-danger levels, most coal, oil and gas
reserves will need to remain underground.
Second, Germany’s largest utility E.ON announces it will be retreating
from coal and gas to focus its future growth on renewables, distribution
and customer services including energy efficiency. Legacy assets from the old
regime – coal-, gas-, and nuclear plants, energy trading and exploration and
production – they will park in a separate company.
So the first major energy company has instigated a U-turn with its business
model, firmly in the direction of energy transition. And the Bank of England,
by recognising that there is a case the energy incumbency threatens financial
stability, has cast a long shadow over the prospects of all fossil fuel investments
going forward.
Nobody will be told whose arguments carried the day in these milestone
decisions. But the Carbon Tracker team can surely be allowed some quiet
self-congratulation about their role in the Bank’s decision. And Hermann
Scheer’s parenting of the German feed-in tariff for renewables can certainly
assume posthumous credit for E.ON’s.
What a day, then, to check out the state of the conservative brain on
climate change and energy. The Spectator, a British magazine of great popularity
among the political right, is running a conference on energy. Carbon
Tracker, desirous of appealing to all political tribes, is co-sponsoring it. But the
colleagues who dreamt up this collaboration are away on the day: an exhausted
Anthony Hobley on paternity leave, Mark Campanale and James Leaton on the
fundraising trail in Denmark. Mr Chairman has to hold the fort.