Friday, July 10, 2015

No more Business as Usual!

This is Anthony Day, speaker, writer, conference chair and author of this, the Sustainable Futures Show.  If you like the show please tell your friends. If you don't like it please tell me at Oh, and you can tell me if you do like it too.

This week, two reports. One from the Royal Institute for International Affairs, one from the Carbon Trust. Also, the latest update of Jeremy Leggett's The Winning of the Carbon War is out. You can download that free of charge from his website which is You really ought to read it. I did offer to record it as a podcast for him but he says it's in hand and he's talking to some people at the BBC. So, er, watch this space. That solar-powered plane, Solar Impulse 2, has landed safely in Hawaii after the longest solo flight ever. The next stages cross the United States and the Atlantic Ocean, and then back to the start point in Abu Dhabi.

Making the headlines this week has been the Greek economic situation. We won't say anything at all about that. And the UK chancellor’s budget. There's a few things there we’ll comment on - so let's start with that.

The Chancellor has maintained his freeze on fuel duty. Some would say this is a missed opportunity, because while oil prices are relatively low he could surely have slipped in an odd penny or two. The main difference for motorists is the change to vehicle excise duty, or car tax as some call it. These changes are for new cars registered from 1st April 2017 and the assumption is that cars registered before that date will be taxed at their current rate for the rest of their lives. Under the new rules only zero-emissions cars will avoid tax. All others will pay an amount on first registration depending on emissions levels and then pay a standard rate of £140 per year. This means that there’s now no real incentive to buy a low emissions car, as after the first year the annual tax is the same. There is a surcharge if the car costs over £40,000, bringing it up to £450 a year, but that’s less than the current top rate band of £505! Not very green!

The government will remove the Climate Change Levy exemption for renewably sourced electricity from 1 August 2015. Another short-notice policy change affecting the renewables industry. The purpose of the Climate Change Levy is to make it more expensive to generate electricity from unsustainable and polluting fuels. It is logical that renewable energy which avoids such fuels should not bear the levy. The Chancellor doesn’t think so. The change will have significant implications for the renewables industry but a negligible effect on tax revenues. But then, the Chancellor favours fracking above all else. He reiterated that he would establish a sovereign wealth fund from the proceeds of fracking. I remain convinced that you’ll find it next to the crock of gold at the end of the rainbow.

And so to these reports I mentioned.

“Titans or Titanics? Understanding the business response to climate change and resource scarcity.” That’s the title of a recent report from the Carbon Trust.

The report seeks to understand and explain how large businesses are responding to climate change and resource scarcity and makes a number of key findings. The most concerning is that the action of businesses on environmental sustainability today is significantly short of what is required to address the serious challenges of climate change and resource scarcity. The Trust goes on to say that there is common consensus around what will be required by businesses to address climate change and resource scarcity. They report that 70% of global business leaders surveyed are confident that action taken by consumers, governments, and investors will force the change to an environmentally sustainable future. (This sounds a bit like complacency to me - “We’re just waiting for the market to send us a signal. In the meantime, business as usual!”)  According to the report businesses recognise that climate change and resource scarcity will require them to make changes. Most executives see risks, even more see opportunities. Half of them expect to make fundamental changes and most of those are confident that they will be able to make the changes when the time comes. 99% believe they are at least average on environmental sustainability and half of them see themselves as leaders. 

The report warns that despite this, businesses are living in two realities: although they recognise and accept there will be risks and opportunities that will impact company value, they continue to focus on the short term. Despite a recognition of the likely need to change, businesses lack a clear vision of how this transition will be achieved beyond the business planning horizon.
They also say that there is a failure of governance from corporate boards, who need to better address uncertainty around the future risks and opportunities from environmental sustainability. There is also a lack of available frameworks or tools to help boards and senior executives to effectively assess and quantify value at stake. The report includes a useful checklist. We’ll look at that in more detail in a future episode.

Within the report they go on to talk about how adaptation - dealing with the consequences of climate change - will be so much more expensive than mitigation: taking action to prevent climate change getting worse. By 2050 business as usual and adaptation could cost from 5 - 20% of global GDP per annum, whereas mitigation could cost as little as 1%. Reminds me of Lord Stern’s 2006 report where he said much the same, except that the longer we delayed mitigation the more costly it would become. The report quotes Lord Stern and many other experts. It talks about the growth in population and about the pressures not from the absolute growth but from the growth in the middle classes. It talks about a shortage of fresh water and about resource scarcity. These are not new insights, but it’s depressing that the report paints a picture of a business community that is unprepared, if not unconcerned. Who are these businesses, when almost every major corporate from Unilever and Marks & Spencer to IKEA and HBOS is bragging about its green credentials? Are they islands in a sea of indifference? I asked the Carbon Trust about their research. They said: “Insights are based on six months of in-depth interviews with a range of experts from business, finance, government, academia, and civil society. The Carbon Trust also commissioned independent market research interviews with 229 board-level executive decision-makers across five regions: the UK, South Africa, Southeast Asia, Latin America, and the USA.” Looks like a pretty impressive sample. Looks like we still have a lot to do to get the message out!

This week the Royal Institute of International Affairs published Oil and Gas Mismatches: Finance, Investment and Climate Policy. The emphasis is on investment prospects for oil and gas. That might not sound very interesting to climate change watchers, but the odds are that some of your pension is invested in oil and gas, so listen up!

According to the report, oil and gas investment is affected by price volatility, the changing financial environment and climate change policy. The outlook for the oil price is uncertain and has been since Saudi Arabia abandoned the role of price stabiliser last year and the price collapsed. It remains around $65/barrel, just over half of where it was this time last year. Best estimates are that it will be much the same in 12 months, but the underlying feeling seems to be that it’s anybody’s guess. There is therefore a mismatch between the oil companies’ development plans and viability, as they were mostly drawn up on the assumption of the higher oil price. This has implications not only for oil companies like BP and their shareholders who rely on dividends, but also for the national oil companies who rely on earnings to balance their national budgets.

In a time of quantitative easing yields are low, but as this ends yields will rise and the yields expected from oil companies will also rise, putting them further under pressure.

The report looks in detail at Climate Change policies, which it sees more or less as a wild card. The issue will be the outcome of COP 21, the international climate change conference in Paris in December. Will the 195 countries decide to take strong action or weak? If the decision is weak, to do not very much or at least to delay taking any serious decisions for the time being, then oil production and demand can remain much as business as usual. (With all the consequences highlighted by the Carbon Trust). If the decision is strong, then there are all sorts of implications. First, it is likely that governments will take action by taxing the use of fossil fuels one way or another. This will drive a wedge between the price paid by the consumer and the price obtained by the producer. Where regulation is strong, investment that could have been made in an environment with weak regulation will not be viable. Indeed, strong regulation implies stranded assets, oil and gas reserves which cannot be used and therefore have no value, as regulation cuts demand. In the interim, until the outcome of COP 21 is known, significant oil and gas reserves remain in limbo. Their value is uncertain and investing in them would be highly risky. If the outcome turns out to be high regulation there will be consequences for other industries as well: power stations, manufacturers of gas-guzzling vehicles and buildings that do not effectively conserve energy, for example. 

Undoubtedly there are interest groups, albeit with a short term view, that will be lobbying hard for business as usual. We have to hope that the legislators who meet in December will be fully informed.

The report closes with the warning that the age of cheap oil production may not yet be over, but the age of cheap oil use almost certainly is.

I always like to end on a cheerful note. I’ll try and think of one for next time. This is Anthony Day, the Sustainability Coach, and that was the latest episode of the Sustainable Futures Show. Now I’m sure it’s in your diary, but don’t forget that the Sustainable Best Practice Exchange takes place in Harrogate on 5th November. We’re inviting a minister to brave the journey from London and join us in the Northern Powerhouse. I hope you can come too. Details soon!

Tuesday, July 07, 2015

Fracking - the saga continues

Will fracking be David Cameron's Poll Tax?

But first, here’s a date for your diary. Thursday 5th November 2015 at the Harrogate International Showground will see the Sustainable Best Practice in Business Conference: ESOS and energy, supply chain and skills. We’re inviting the minister from DECC, Amber Rudd; the CEO of Unilever, Paul Polman; Lord Redesdale from the Institute of Energy Managers and other industry representatives. It will be an opportunity to learn from experts and to network and share best practice with your peers. Registration opens shortly. More details soon.

This last week was a busy week and events developed almost faster than I could keep up. Fracking is once more in the news, there’s a report that soil erosion in East Anglia could seriously affect our food production, electricity could be cheaper but dirtier, what’s going on in Battersea Park?, it’s getting hot in the Tube and I talk to Daniel White from Global Energy Systems on why you need a heat pump. Well, perhaps not today, but the word is that this weather won’t last, in spite of global warming.

Last week I reported that the application for test drilling and test fracking at Roseacre Wood was refused by Lancashire county council. This week, against the advice of planners and legal experts, the council also refused the application for Little Plumpton. I expect there was dancing in the streets. This looks like a very high risk strategy because councillors were warned that they were very unlikely to win on appeal and the council would have to pay all the legal costs. On the other hand, an appeal will be a landmark case. It will meet the government head-on on one of its flagship policies. There was a debate in parliament this week and it revealed all sorts of things which I'm sure the government would like to keep quiet, but which will almost certainly come out if the case goes to court. I’ve been reading Hansard, the official Parliamentary record, and here are some of the things that I found in the record of last Tuesday’s debate.
Kevin Hollinrake (Thirsk and Malton) (Con) in North Yorkshire opened the debate and commented that France, Germany, New York state and others had all banned fracking. He then spoke about “Shale Gas: Rural Economy Impacts” a report from the Department for Environment, Food and Rural Affairs, and told us that it had 63 redactions within 13 pages. That means that 63 items had been blacked out or censored, including of a whole section on the impact on house prices. The Government’s position that “There is a strong public interest in withholding the information” did not go down well with his constituents.

Then, a day after this debate, the government was required to publish the DEFRA report in its uncensored form. It includes admissions such as:
  • people living near fracking sites could see their house prices fall by up to seven per cent.
  • a UK shale gas boom could lead to an increase in global greenhouse gas emissions. 
  • waste fluids leaking from fracking operations in the US have resulted in environmental damage.
  • properties could incur additional insurance premiums if they are within a five mile radius of fracking operations.
  • the report includes "early, often vague, assumptions which are not supported by appropriate evidence”.

No wonder they wanted to keep all that quiet!

 Kevin Hollinrake had other concerns as well. He said he would like to see a clearer, more robust and independent monitoring regime for the regulations.

“The operator commissions and pays for the services of the well examiner… This might be someone employed by the well operator’s organisation.” 

He quoted evidence provided to the House of Lords Economic Affairs Committee stating that  "the weakest point of the regulatory process concerns the Environment Agency”, which appears to have “insufficient in-house expertise.”

He also told us that fracking company Third Energy, had stated that it might drill 950 wells in less than a third of his constituency, which would require hundreds of thousands of lorry movements, all in one of the country’s most beautiful counties, with an economy heavily dependent on agriculture and tourism.

Dr Alan Whitehead (Southampton, Test) (Lab) was concerned about projected production figures from DECC as they were based on the maximum output from any well ever achieved in the US. He thought this was an unrealistic baseline. He said that 10,000 to 18,000 wells would be needed nationally to replace the gas which we currently import from Qatar. These would not be scattered all over the country but would be concentrated in Lancs and the Weald in the southeast. They would have a life of about 20 years, but would need re-drilling every 7 years or so. New pipelines would have to be built across the country or lorries would have to collect the gas. This is in addition to the thousands of lorry journeys needed to deliver the fracking fluids. After 20 years the sites would be abandoned. He suggested that AD, converting agricultural waste to gas, should be considered as an alternative. This process could continue as long as farmers were in business, not just for 20 years.

Farmers in South Ribble are particularly concerned about fracking. Seema Kennedy MP said any pollution of groundwater could contaminate their crops and destroy their business. The Ribble Valley is one of the most fertile parts of the country and produces a major part of the nation’s salad crop.

The debate continued, with concerns raised about the regulations, the disposal of used fracking liquids and the effects on house prices and on public health. Two MPs were firmly in favour of fracking, two were cautious, most were opposed.

Andrea Leadsom The Minister of State, Department of Energy and Climate Change, responded to the debate emphasising the need for energy security and stating that “We are likely to continue relying on gas to provide much of our heat, as well as to generate electricity into the 2030s…Flexible electricity generation, such as that fuelled by gas, is also needed to help balance the electricity grid as our policies bring forward relatively inflexible and intermittent low-carbon generation.”

She talked about the benefits of a successful shale gas industry, not just in energy security, but in direct benefits to jobs, growth and community investment. And she promised a sovereign wealth fund - with the industry’s commitment to putting £100,000 per exploration well to local communities and then a minimum of 1% of any subsequent production revenues. Local councils would retain 100% of the business rates that they collect from productive shale gas developments.

“Ernst and Young, she said, has estimated that a thriving shale industry could mean 64,500 jobs nationally or over 100 jobs per year at a typical site. The value of the supply chain for the industry has been estimated at £33 billion between 2016 and 2032. This is an incredible opportunity. We are at a pre-beginning phase, but there is a huge amount to play for. British engineering is at the forefront of the world and we have the opportunity to showcase that further by developing for ourselves a safe and environmentally sound shale gas industry.”

What do I think?

It’s still a fossil fuel. It still has a carbon footprint. We have a commitment to reduce the nation’s carbon footprint. 

When he heard that the applications had been rejected the chief executive of Cuadrilla repeated the point that sourcing gas locally was far more secure than buying it from Qatar or Russia. True, and there’s no doubt that we have an energy problem as our power stations age and the margin between supply and winter demand gets tighter and tighter. But gas is not the only answer, and we don’t yet know that it is an answer. That’s why they are carrying out test drilling. On the other hand we already know that solar panels and wind turbines and anaerobic digesters all work. Yes, they are intermittent, (not the digesters), but the old complaint that electricity cannot be stored is increasingly untrue. Tesla recently announced new domestic battery packs: technology is advancing rapidly. And there are other technologies apart from batteries that can store energy. To anyone who says we haven’t got time I would simply say that even if everything goes strictly to plan, it will be at least five years before fracking starts producing gas commercially. And it will be a very, very long time before we have 10,000 wells in production. But what about demand? We waste vast amounts of energy. Managing demand is essential. Bring back the Green Deal - or at least something like it that actually works. (That will create jobs, too!)

And why do I call fracking David Cameron’s Poll Tax? Well the poll-tax was brought in by Margaret Thatcher against the advice of her ministers and against strong opposition in the country which led to riots. The poll-tax was repealed and replaced with the council tax and it was the beginning of the end for Margaret Thatcher as Prime Minister of Great Britain. The majority of MPs who opposed fracking in this debate were from David Cameron’s own Conservative Party. He is going to find implementing this policy extremely difficult. Almost as hard as the Third Runway at Heathrow. But that’s another story.

Meanwhile, in other news this week, Moody’s published a report suggesting that electricity is likely to get cheaper as we increase our capacity to import it from the continent. Their electricity is cheaper because at least in Germany their lower carbon taxes encourage them to generate more electricity from coal. Cheaper, but dirtier.

The Committee on Climate Change warns that agricultural land, particularly in East Anglia, could become unviable within a generation unless something is done. We’ll have to add still more to the 40% of food that we already import, with consequences for food security and food prices. East Anglia grows acres of wheat and farmers have removed trees and grubbed up hedges to make fields ever larger and to give ploughs and combine harvesters long straight runs. Britain has lost 84% of its fertile topsoil since 1850, and these changes in land management are accelerating the problem. Without trees as windbreaks the wind is blowing the soil away. As climate change reduces rainfall and warms the soil it crumbles to dust and the problem only gets worse. When rain does come, and increasingly it comes in violent storms, it washes the soil away. It’s time to take action and recognise that topsoil is another vital non-renewable resource that is rapidly running out.

What has been going on in Battersea Park? Last weekend saw the final race in the international Formula E series that started in Beijing last September and saw meetings in Buenos Aires, Miami, Monte Carlo, Berlin and Moscow before the final in London. Yes, it’s Formula 1, but not as we know it! For example, when the drivers make for the pits it’s not to change the tyres, or top up the washer bottle but to pick up a completely new car - with a fully charged battery. My petrolhead friends say it’s not the same. It’s not as fast and it doesn’t make that roar as the cars go past. I’m sure J Clarkson hates it as much as he hates my Toyota Prius. Nevertheless, names like Trulli, Prost and Yamamoto; Renault, Audi and Virgin are taking it seriously. Formula 1 has always been seen as an essential testbed for new automotive technologies. Welcome to the future.

Wednesday 1st July was the hottest July day on record, at 36.7℃. It got up to 35℃ in the London Tube as well. I remember reading somewhere that waste heat is a problem for the network in normal times, with heat from passengers, from the trains, the lights, the escalators and all the other plant. What could they do with it? Maybe they need a heat pump! It so happens that this week I was talking to Daniel White from Global Energy Systems.

Go to to listen to this blog as a podcast and hear the interview with Daniel.

I'm Anthony Day, The Sustainability Coach, dedicated to spreading the word about sustainability, about better ways of doing things so we can all, in all countries, enjoy a comfortable lifestyle in spite of the challenges from rising population, climate change, energy shortages and all the other sustainability issues. 

Let’s get out there and find opportunities!