THE CARBON WAR

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The Winning of The Carbon War
Their event is in a room deep in one of the larger tents, a structure that is
creating its very own greenhouse effect. Fans blow warm air noisily, creating a
virtual sauna, making it difficult both to hear and to concentrate.
The companies represented on the platform today are Chevron and Eni.
Robert Siveter of IPIECA, the global oil and gas industry association for environmental
and social issues, opens the event. IPIECA represents half the world’s
oil and gas production, he says. We contest the concepts of stranded assets and
a carbon bubble. We do so for five reasons.
First, there is no evidence of a carbon bubble. More than 80% of company
valuation is by proved reserves. Resources may not be used for 15-20 years,
and barely impact the valuation of companies. How can there be a bubble if
there is no threat to valuation?
I am sitting among journalists. Calm is good. But how on earth do they
think it is relevant to mix up the bubble of potentially unburnable carbon that
Carbon Tracker talks about with the way oil companies are valued? Even if we
accept the premise that valuation of oil companies is all about current reserves,
there must at least be some risk that some of those reserves will be stranded
by policy. And anyway, if oil companies go on forever recycling vast amounts
of profit into capex investments to turn resources into ever more reserves, as
their business model requires them to do by default, in what way is this not
inflating a pool of assets at risk of being stranded at some later point? And a
growing pool of overvalued assets is a bubble, is it not?
Second, all energy forms will be needed going forward, Siveter says. So
the International Energy Agency tells us.
Yes, I think, if you selectively choose from their policy scenarios. But the
IEA has a long history of promoting fossil fuels. It was set up by governments
to do so. Why not at least consider what the Fraunhofer Institute, or the Rocky
Mountain Institute, to name just two centres of excellence, tell us about the
future energy mix? They tell a very different story.
Third, not all fossil fuels are the same, says Siveter. Gas burning emits
around 50% less carbon dioxide than coal burning for power generation.
Oh for heavens sake. Only if you ignore all the fugitive emissions everywhere
along the gas infrastructure chain from the drilled wells to the gas hob
in the home. And even if it were true, a two-degrees global-warming target
requires 80% of fossil fuel reserves to be left underground, including a lot of
gas. Even the IEA will tell you that.
Fourth, Siveter says, the industry manages many risks. We use a shadow
price for carbon, for example.