by Chris Becker
Investment opportunities lay all round us at the macro level yet Australia seems hell bent on doubling down on the most riskiest and least likely to payoff in the long term – namely building more coal mines and extracting LNG and CSG as fast as possible. Two recent reports highlight this dangerous dichotomy with news that investment in renewable energy in Australia has fallen 88% and that reservation of fossil fuels is a key risk mitigation strategy against climate change.
First, the decade low level of investment in renewable energy is of no surprise given the Abbott government’s stark opposition to the sector and its tilted push at abandoning the renewable energy target (RET).
From ABC:
A report by Bloomberg New Energy Finance said large-scale energy investment fell 88 per cent – to $240 million – in 2014 compared to the previous year. It was the lowest level since 2002, the report said.
Analyst Khobad Bhavnagri said uncertainty over the renewable energy target was to blame and that Australia was faring poorly on an international scale.
“In 2013, Australia was the 11th largest investor in large-scale clean energy projects and in 2014 it slid to 39th,” he said. “And it’s lagging behind Honduras, which came in at 33, Costa Rica, which was 27th, and Myanmar at 24th.”
Total investment in clean energy fell 35 per cent over the same period, the report said, propped up only by investments in rooftop solar power.
Resource-rich countries such as Canada, South Africa and Brazil invested as much as 20 times more in large-scale clean energy projects as Australia over the year, the report said.
It follows a November report from the Climate Council that suggested Australia had “moved from a leader to laggard” on renewable energy, with investment dropping 70 per cent.
Quite embarrassing really. With the technical and technological resources at hand, not including the vast amount of unemployed and ability of federal and state governments to fund such large projects (as hundreds of billions of dollars sit idling in cash in superannuation accounts) right at a time when the nation’s economy teeters over the edge of the mining capex cliff, the ineptitude is staggering.
Perhaps Peter Martin at Fairfax hits it on the head when it comes to this ideological drive away from reason, innovation and risk management to that of obfuscating a non-debate about warming into how best to protect rent-seekers:
The first step in getting people to at least agree that it’s getting hotter is to stop talking about how to prevent it. Muddying the two, as we do all the time, gets people’s backs up.
That it’s getting hotter is what economists call an empirical question – a matter of fact not worth arguing about, although it is certainly worth arguing about the reasons for the increase and what we may do about it. But that’s not the way many Australians see it.
If the bureau had been displaying measures of the temperature on a specific day or a cricket commentator had been displaying the cricket score, there would be no quibbling. The discussion would centre about the reasons for the result and its implications.
But when it comes to the slowly rising temperature some of us won’t even accept the readings. And that says something about us, or at least about those of us who won’t accept what’s in front of our faces.
I am not prepared to believe that these people are anti-science. Some of them are engineers, some mining company company executives. Like all of us, they depend on science in their everyday lives.
Nor am I prepared to believe they’ve led sheltered lives, although it’s a popular theory.
Another theory is that it’s to do with psychology. Some people are more threatened by bad news than others, making them less able to accept that it’s real.
And now a more sophisticated theory suggests that it’s not about the facts at all. It’s really a debate about the implications, disguised as a debate about the facts. Troy Campbell and Aaron Kay, a researcher and associate professor in neuroscience at Duke University in North Carolina find that belief in temperature forecasts is correlated with beliefs about government regulation and what those forecasts would mean for government regulation.
The implication in Australia is those who want to continue fossil fuel extraction and consumption can latch onto the anti-authoritarian and anti-regulation bent of most Aussie voters (or the marginal ones that count), which plays well into the likes of Abbott, Hockey and their rent seeking backers.
And this brings us back to the report about fossil fuel reservation. The study concludes that several trillion dollars worth of known coal, oil and gas reserves (including 90% of all Australian coal) must be left untouched – stranded – if global warming is kept to a minimum of 2 degrees celsius.
The math on the carbon side is quite clear as there is only a certain range of gigatonne of carbon that can be burnt up before exceeding the 2 degree cap. The vast amount of exploration spending (nearly $700 billion in 2013) on finding new reserves of fossil fuels, instead of investing those funds into renewable energy sources is also a clear case of massive malinvestment over the long run.
While the developing world clearly needs more energy as it becomes more prosperous, the demand for fossil fuels in the developed world is shrinking as the move towards renewables gathers apace. That the major fossil fuel companies and their well-lobbied governments do not recognise this new paradigm will likely be their downfall.
As Leslie Samuelrich of Green Century Capital Management states:
We think that investors can potentially reduce financial risk by staying away from fossil fuel companies. The report amplifies the message that fossil-free investors have been hearing and responding to. It’s like one more nail in the coffin of developing fossil fuels that the earth can’t afford to burn and that investors shouldn’t risk supporting.
In the short-term, investing in fossil fuels is becoming more and more expensive for companies…. big oil companies have tripled their capital spending in the last five years, as they pursue more dangerous and expensive projects to find oil.
All that money could be going back into shareholder pockets but instead is being used to pursue unneeded oil that may never be able to be burned. It’s an irresponsible corporate strategy to be pursuing.
The more evidence and ammunition that independent reports can demonstrate for investors on this, the quicker we get to people moving out of investing in fossil fuels and investing in companies doing water conversation, renewable energy and energy efficiency.
Evidence based logic hasn’t worked so far, so I’m not sure where we go from here. The time is right for renewable energy investment, but timing is not yet on the Australian investor, or citizens, side.