The Big Short on climate change

Chief Investment Officer for AMP Capital Investors, Keith Poore, has said today that crashing prices for coal and oil could present attractive buying opportunities for investors who want to make money from a fossil fuel industry that is destroying our climate. There’s money to be made by gaming climate change.

Back in the real world, two-thirds of all discovered coal, oil, and gas reserves need to stay in the ground if we want to secure a safe climate for our children. The pollution emitted from burning the world’s known reserves would lead to catastrophic climate change.

The sooner finance markets accept this truth and divest from fossil fuels, the sooner scarce capital can flow out of this sunset industry and into our clean energy future.

Unfortunately for New Zealand, the National Government has encouraged all kinds of end-gaming around climate change by failing to first accept the truth about climate change, then set a clear direction for our economy towards a low carbon future. We still lack a strong price on carbon. Our carbon emissions are still rising. Our retirement savings are still invested in the world’s dirtiest oil and coal companies.

Keith Poore’s deeply unethical position on the climate is symptomatic of a finance industry in New Zealand that has yet to come to grips with one of the greatest challenges we face to our long-term prosperity. Without strong leadership on the climate from our Prime Minister however, it’s little wonder people are still trying to make a dirty buck out of our environment and our future.

James

Super Fund logo
Screenshot from the New Zealand Superannuation Fund – despite the marketing, they’re still investing hundreds of millions of our retirement savings in a fossil fuel industry that is destroying our climate.

13 Comments Posted

  1. dbuckley – I haven’t been able to confirm an exit clause yet

    There is an exit clause, Article 30.6, it’s delightfully short so I shall reproduce it in full:

    1. Any Party [ie a “country”] may withdraw from this Agreement by providing written notice of withdrawal to the Depositary [that’s… us!]. A withdrawing Party shall simultaneously notify the other Parties of its withdrawal through the contact points.

    2. A withdrawal shall take effect six months after a Party provides written notice to the Depositary under paragraph 1, unless the Parties agree on a different period. If a Party withdraws, this Agreement shall remain in force for the remaining Parties.

    And that is it.

    Of course, once a party withdraws from the agreement, the legislative changes a country made to ensure the legislation is in compliance with the TPP remain in force, unless and until they are unwound. A few years down the track, that might be horribly difficult, as there may be subsequent changes to the legislation made post-TPP that would have to be adjudged to be kept or deleted. And, this is for a legal system that works like New Zealand’s, whereby although the legislative changes are made through the Parliamentary process to comply with and in the name of the TPP, the changes once enacted are entirely independent of how and why they got there.

  2. dbuckley – I haven’t been able to confirm an exit clause yet. As you noticed, its existence is news to me. Just another example of how extraordinarily absurd it is to have a treaty negotiated in this manner. I wonder how this clause (assuming you are correct, and I have no reason to believe you are not) interacts with the corporate clauses, as the contract withdrawal issues would seem to be… difficult. I’m off to the other thread. on the topic of TPP (took us long enough to start one!) .

  3. Although I have a little sympathy with your idea that consumers aren’t good at picking the most sensible product in a social/environmental sense, dbuckley is wrong in his conclusion. We have all these products he mentions already from basic trading, therefore we don’t need the TPPA to carry this on. We need to correct our trading financial imbalances, and I can’t see how allowing foreign money more access to our already well rated education/health systems, and probably cost jobs assists this. Saving a home from starvation from spending too much isn’t fixed by borrowing more, selling the assets, or allowing a contracter in to wash your dishes.
    The agenda of correcting this process was high jacked early in John Keys reign as he slashed taxes on the wealthy to increase the proportion the workers pay, and property value goes up with foreigners the beneficiaries. Buy NZ education was scrapped to help foreign economies, education tax is made to stretch further to private Charter schools.
    The only ones benefiting in this scenario is the bankers and foreign investors who are in his circle of activity.

  4. Yet he is attempting to bind ALL FUTURE GENERATIONS of New Zealanders to this heartbreakingly insulting “deal”.

    Any future generation, or indeed, this generation can walk away from the TPP with just six months notice. Six months. That is “gone by lunchtime” territory.

    Your anger, although genuine, is misplaced. As with climate change, the gummint is not the problem, we are the problem. We are a very traditive nation because our people want stuff they we can’t, never could, and never will make. It’s not just us, the Americans suffer the same problem to. Ask an American to find something within a few feet reach that is American (or, here, New Zealand) made, and they fail. Pretty much every single one of those protesters at the anti-TPPA rallies are waving their Chinese-made, American or Chinese designed smartphones, connected to foreign made cell sites. Foreign stuff is endemic and embedded in New Zealand, and indeed throughout the world.

    To generate foreign coin to buy that stuff we have to have foreign income. We are quite good at that, mostly from our manufacturing and service sectors.

    Despite you calling for it, and many who understand the global implications of it, this is not going to change anytime soon. Because we the people don’t want ti to. Its a bugger of a problem to crack, BJ, but the TPP is neither here nor there in these things. The problem is much bigger than a trade agreement. Its a global societal problem.

  5. The government’s evaluation of TPP is “factually accurate” but also quite deficient. In order to make up even a 1% increase in GDP over 15 years they also had to assume a lot of things that would make you spit the dummy.

    “The reasons for New Zealand becoming a Party to TPP”…fluff…”the Government’s Business Growth Agenda (BGA) identifies the high-level goal of growing exports to 40 percent of GDP by 2025.”

    Wait… that isn’t a goal for the Nation… it is a goal of the National Party. It is an Ideologically driven agenda, and it is dead wrong.

    Now we go into the basis on which all the rosy prognostications are based… the sophisticated “model” which makes a set of assumptions that would make us choke even if there weren’t the dead-rat of a bad deal being supported by them.

    ” the optimistic expectations about the TPP’s effects on trade assume an unrealistic functioning of the economy. In particular, they assume that the higher savings generated through the TPP’s boost to corporate profits will be immediately invested in productive activities. But in contemporary economies savings do not necessarily generate investment.”

    and

    the CGE model used excludes, by assumption, TPP effects on employment and income distribution, thereby ruling out the major risks of trade liberalization.

    Negative outcomes after several trade liberalization experiences in the 1990s have been associated precisely with failure to appreciate these risks.

    http://www.ase.tufts.edu/gdae/Pubs/wp/16-01Capaldo-IzurietaTPP.pdf

    There is yet another problem with their study. They assume that everything else is going to remain the same as the climate compels us to put ever higher prices on CO2 emissions. At the end of 2030 when their analysis says we’ll have grown and we’re supposedly even more globalized and immune to the tyranny of distance, we’ll have CO2 costs in triple digits and greatly constrained global growth and trade as a result. Changing the ships of the world over to renewable energy is not the work of an afternoon.

    The point here is that the people who are trying to sell you this roadkill shishkabob have rocks in their heads or are bought and paid for traitors to the nation of New Zealand. I’ve said before that Key was treasonous, and I have had no reason to change my mind since. He either knows what he is doing and is selling NZ out, or he doesn’t know what he is doing and just got lucky in FOREX where he gained a name… “the smiling assassin”. I don’t see a third choice here.

    Free Trade isn’t a panacea, and in the case of New Zealand it is almost always a worse problem than the ones it is intended to solve. That said the Union driven protectionism that preceded the violent shift to Reaganomics and laissez-faire privatization was no bargain either. Someplace between the two extremes is a more tenable policy. National and New Zealand in general are not really looking for it. Greens are. Andrew Little has started to look. It’s there.

    http://www.huffingtonpost.com/dave-johnson/when-the-real-world-confr_b_7944164.html

    I’m sorry to say it but New Zealand has had it wrong for several decades now. It has hollowed out its own economy, and the structural economic imbalance that we have to correct is instead locked in by measures like the TPP.

    Finally (as if the above were not enough), the reason that Key can be called “Treasonous” over this effort has to do with the way in which it is implemented. There has been no debate. There has been no consultation. There has been no information. There have been no votes taken. Yet he is attempting to bind ALL FUTURE GENERATIONS of New Zealanders to this heartbreakingly insulting “deal”. That violates much more than just the “spirit” of any legitimate representative democracy. It makes him our autocratic, arrogant master.

    John Key is a pimp. There is no virtue of this nation that he will not sell.

  6. Regarding Christchurch Hospital’s heating needs, my question would be why they need so much heat? Most commercial buildings need more cooling than heating, due to all the lighting being used and other equipment, which in the hospital’s case is usually running 24/7. Is it double-glazed? I understand that they would need to keep the temperature a bit warmer than most places and keep that temperature 24/7, but I would have thought heat pumps would be a reasonable solution to their space heating needs. Is the coal more for hot water heating?

    Trevor.

  7. If you want to understand the impact of the TPPA, you would be better off reading the National Impact Assessment from here: https://www.tpp.mfat.govt.nz/ – its less than three hundred pages long. It will certainly hurt your eyes less than all those fonts and colours on the other site. Even most anti-TPPA folks agree that it is factually accurate, their disagreement with the pro-TPPA folks is on what the facts mean in real terms, and as to whether they consider some impact to be beneficial, neutral, or negative. But: without actually understanding the facts, one cannot form an opinion, one can only parrot others.

  8. Instead of seeing the example cost of the hospital heating in isolation we have to take the macro picture and that is what Government should be doing. In all the public service cost modelling (and private too) the long term cost of climate change, especially to a health budget needs to be added. If the likes of these investment funds did this as the insurance industry is then investment in more readily available supplies of biomass may eventuate, bringing the cost down. I would imagine the first cars that replaced horses changed from expensive toys to something more relavent, although horses might of stayed if environmental cost was fully appreciated. This is where Governments need to engage in looking at the whole picture, and the Green taxing rejig would change the impact. Without a change in income policies then we are in for a mess, and we have to stop saying there will be little change.
    The question becomes, if hospitals and essential services need some coal then what luxuries are going to be switched off. The time the coal boilers need to be changed are when capital replacement is needed anyway. In the mean time, instead of flogging the dead planet for a cheap buck the investment funds need to adjust their promises to the investors to a longer term reality.

    Another movement of pressure gaining credible momentum in making these investors see reality is in this link – this one focused on Monsanto.
    https://www.endecocide.org/press-conference-tribunal-against-monsanto/#

  9. Actually dbbuckley I completely disagree with you saying James is telling “straight lies” as Keith Poore clearly says he thinks that negative market feeling could influence investment around coal down below the actual need and money in the industry. While James has paraphrased and you may be right in pedantically saying it’s not exactly the same thing I think you’d be very hard pressed to say the interpretation is substantially different, let alone deliberately disingenuous. James also does provide the link so anyone can listen for themselves.

    Where I take issue with James’s post is his use of “back in the real world” as I think Keith Poole and what he is saying about coal is very much the real world – from the high level of major investment flows down to the average person not wanting to pay more for petrol or business not wanting a more expensive form of heating.

    Unfortunately the real world is very largely unconvinced and unconcerned about climate change (at least anywhere as much as is probably warranted) and that needs to be accepted. The more this is ignored the less effective messages about the likely realities of climate change are going to be.

  10. Looks like Tomato growing in the South Island survived ….http://www.galaxytomatoes.co.nz/growing

    Nought against Tomato growers or the need for such large scale production but does highlight issues about correct pricing of energy inputs and CO2 – and then complexity if competition is Australian growers, air-miles (international emissions not liable to ETS), OZ treatment of CO2 emissions, eating Tomatoes all winter at $2.99 a kilo etc. Seem to have moved topic …. who thinks of coal and tomatoes together …. just Googled a solution “Industrial symbiosis: Growing tomatoes with an ethanol plants waste” – might push the price to $3.99

  11. Replying to DBuckley – I just listened to the interview and I think Mr Poore did pretty much say what you said he didn’t. While he didn’t use the word “crashing” he did say “near zero” which for a coal or oil price is the same. He certainly suggested they might be good buying for investors – and for a representative of AMP and the NZ Finance industry I think this reflects and confirms the poor ethics that James Shaw is criticising. Fossil like thinking indeed.

    The rest of your comments are worthwhile – we do need to work out how we replace coal and to do this we particularly need the price of coal to reflect the environmental damage is causing. A functioning ETS with a correct carbon price would help here – the carbon price needs to at least reflect the limits on its use agreed in Paris. Christchurch Hospital might then get a different answer from their analysis – or it may confirm that this is one of the last places that we can dare to use coal and our carbon budget. {I remember that the early days of the ETS saw off some coal-heated South Island Tomato growers … although with recent coal and ETS prices they have probably sprung back into full production/pollution mode}

  12. Oh dear, straight lies from new boy James. I though he’d be better than this.

    Keith Poore (and that’s a funny name for someone in banking in its own right, but lets just let that pass) did not say “crashing prices for coal and oil could present attractive buying opportunities for investors who want to make money from a fossil fuel industry that is destroying our climate.” That is utter bullshit. Anyone who is unconvinced of this should follow the link, and actually listen to what he actually said.

    http://www.radionz.co.nz/national/programmes/businessnews/audio/201787685/falling-prices-for-out-of-favour-commodities

    Coal is interesting though. Out electricity is 80% renewable, and we can see pathways to getting that much further up towards 100%, even though there is disagreement about how we could and should achieve that 100 percent-ful-ness. But where heat is needed for commercial and industrial purposes, coal is still widely used. And what is not clear is how we can displace coal with a renewable source for those purposes. Although its filthy and polluting, coal is an energetic, cost effective, and convenient fuel.

    As an easy example, I know of a number of establishments that use coal for space heating. One good and public example is Christchurch Hospital, which has recently decided to continue using coal for heating. They examined replacing coal with biomass, and determined they would need a big truck every day of wood chips, compared with one truck a week for coal. A while back I ran the numbers for what it would mean to use electricity, excluding capital costs for more expensive plant, and their heating bill would increase by several times, money that has to come from somewhere, and given we are “only” at 80% renewable electricity, they would be improving rather than replacing polluting heating.

    So, we are still some way from having a plan to actually replace a goodly chunk of our emissions.

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