You see, the main difference which I'm sure you know but which I suspect many of our people have forgotten, between the modern and the pre-modern world is energy consumption and it is our destiny in this country to bring affordable energy to the world.
It's particularly important that we do not demonise the coal industry and if there was one fundamental problem, above all else, with the carbon tax was that it said to our people, it said to the wider world, that a commodity which in many years is our biggest single export, somehow should be left in the ground and not sold.
Well really and truly, I can think of few things more damaging to our future.
This is where major investors and much of Australia diverge from his worldview……….
In this briefing note, the Institute for Energy Economics and Financial Analysis (IEEFA) explores regulatory, market, technology and reputational risks resulting from the transformation of global energy markets – with a focus on the implications for Australian fossil fuel investment.
Executive Summary – The Structural Decline of Coal?
A key theme emerging in the global energy markets relates to the increasing debate on the topic of cyclical verses structural decline in the thermal coal industry.
Evidence continues to mount that investment in renewables, distributed solar and energy efficiency combined with regulatory change is continuing to erode the traditional demand base for thermal coal.
This is a well established trend in developed countries like Germany and the United States. Germany's coal demand was down 11% year on year in the March quarter of 2014. President Obama's use of the Environmental Protection Agency's ability to regulate air pollution combined with record solar installs and a resurgence in US wind installations to see the same end spells the progressive decline in U.S. coal demand. The Environmental Protection Agency forecasts coal demand will fall 30% by 2030 due to its emissions rules.
Further, the evidence that China is pursuing an energy policy that is based on more of everything except coal continues to increase. The US$400bn Russia-China gas transaction is
a case in point. The doubling of China's solar target to 70GW by 2017 is another. A trebling of China's installed nuclear capacity by the end of next year is a third example.
India is the last major bastion of growth in imported coal demand, for now. India's new Prime Minister Narendra Modi aims to kick-start investment and remove domestic growth impediments. Coal India Ltd aims to grow domestic coal production 6% over the next three years if logistics impediments are removed. If Modi is successful, more imported coal is not needed. Additionally, we question why India would lock in imported fossil fuel inflation when domestic renewables provide a more commercial solution that is able to be rapidly deployed without undermining India's current account deficit.
Global financial markets continue to facilitate an increasing flow of capital to renewable energy. The growth of the U.S. "YieldCo" listed renewable equities sector and the global Green Bonds initiative illustrate this trend. Divestiture trends also show the increased focus on the risks of stranded fossil fuel assets….
Deutsche Bank and HSBC both Agree Not to Finance Abbot Point Coal Expansion
Deutsche Bank confirmed at its AGM in Germany that it will not fund any coal export port expansion. Co-chair Juergen Fitschen said:
"As there is clearly no consensus between the Australian government and UNESCO regarding the impacts of the Abbot Point expansion on the reef we will not consider financial applications of an expansion".
At HSBC Holdings AGM in London, the company was asked to match Deutsche Bank's commitment not to fund the Abbot Point port expansion adjacent to the Great Barrier Reef. In response, Chief Executive Officer Stuart Gulliver said it was "extraordinarily unlikely it would go near it."….
Investor Responses – Australia
AMP Capital introduces fossil fuel screening
AMP Capital announced it will screen out companies with a material exposure to fossil fuels in its Responsible Investment Leaders (RIL) range of funds, in response to client demand. This fund will now screen out companies that have more than a 20% exposure to mining thermal coal, exploration and development of oil sands, brown-coal, coal-fired power generation, transportation of oil from oil sands or conversion of coal to liquid fuels/feedstock. AMP Capital Head of ESG Research Ian Woods said: "The Charter of Operation requires the RIL funds to avoid investing in companies with a material exposure to activities that have a high negative social impact including the production and manufacture of tobacco, nuclear power (including uranium), armaments, alcohol, pornography and gambling."
Hunter Hall Ends Fossil Fuel Investments
Hunter Hall Investment Management announced it will exclude investments in fossil fuel companies. Hunter Hall's Ethical Investment Policy excludes investment in companies directly involved in tobacco, gambling, armaments, uranium, nuclear energy, cutting down old growth forests and intensive animal husbandry. CIO Peter Hall said: "The decision to exclude investments in fossil fuel companies is a natural addition to our existing list of exclusions."
Retail Australian Investors Express Concerns over Fossil Fuel Investments
Concerns about coal and gas projects on the Great Barrier Reef and other protected areas are putting banks and super-funds at risk of losing customers, with 67% indicating they would choose a bank or superfund that doesn't invest in fossil fuels over one that does, a new survey from Lonergan Research has found. The nationwide survey of 1300 randomly-selected Australians shows that 77% are concerned about their bank or super fund financing coal and gas projects in or near the Great Barrier Reef and 72% are concerned about their bank or super fund financing coal and gas anywhere in Australia. Australians are also concerned about the long-term risks involved in investing in fossil fuels with 76% believing the risks associated with these investments are growing and 75% believing that Australia has too many eggs in the mining basket
