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Investment implications of Climate Change

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Somehow, someway the Scomo government needs to recognise that climate change can only be tackled with a commitment to massive de- carbonisation and a new renewable energy industrial base. This report might give him the ammunition to take that step.

Having spent a decade framing emissions reduction in apocalyptic terms, the Coalition now has to present different facts

Katharine Murphy
Katharine-Murphy,-R.png

If Scott Morrison is inclined to execute the pivot he’s spent months telegraphing – towards net zero by 2050 – a report out this week contains some helpful fodder
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The federal government led by Scott Morrison hopes to have something concrete to say at the Cop26 in Glasgow in November. Photograph: Lukas Coch/AAP
Sat 24 Jul 2021 06.00 AEST
Last modified on Sat 24 Jul 2021 09.16 AEST

https://www.theguardian.com/austral...s-to-present-different-climate-facts#comments
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With 14 million people in lockdown and the news in Sydney going from bad to worse, and with Scott Morrison steadfastly avoiding an apology for moving too slowly on vaccinations until the moment the word sorry crossed his lips, all eyes were on the pandemic.
This was a week where any other interesting insights sank like a stone, so let’s clear some space for one of the lost insights.

On Tuesday, the group Beyond Zero Emissions released a report based on economic analysis from ACIL Allen. This work found that establishing renewable energy industrial precincts in two Australian regions would create 45,000 new jobs and generate revenue of $13bn a year by 2032. The two regions the report identified were the Hunter in New South Wales and Gladstone in central Queensland. If you follow politics closely, you’ll know these regions will be heavily contested at the next federal election.

In the world envisaged by this report, dedicated renewable energy zones would support energy intensive businesses during the transition to low emissions. I might need to repeat that sentence because the Coalition has spent more than a decade telling Australians that renewables and heavy industry are fundamentally incompatible.

In case that cacophony of mendacity has messed with your cognition, allow me to repeat: new renewable energy industrial precincts would be created to support activity like aluminium smelting, hydrogen and chemical production and manufacturing for the new energy economy. This conversation is about re-industrialising Australia for the low emissions global economy, using the existing industrial precincts that have been domestic employers and export powerhouses for generations because these regions have skilled workers, deepwater ports, existing transport infrastructure, and access to renewable energy resources.

The report says a renewable precinct in the Hunter could unlock new capital investment of $28bn in the region, including $8.6bn for storage/firming capacity, as well as transmission lines, freight networks and renewable hydrogen infrastructure and export facilities. There is an aluminium smelter in the Hunter, which the report notes will need 800-900 megawatts of firmed energy.

In Gladstone, which has Australia’s second largest aluminium smelter (at Boyne Island), the analysis points to new manufacturing activities attracting additional capital investment of $7.8bn to the region, including $1.7bn for key infrastructure such as storage and firming facilities.

If Morrison is inclined to execute the pivot he’s spent months telegraphing – the creep towards a net zero commitment by 2050 – this week’s report contains some helpful fodder. Forecasting the future is always a function of inputs and outputs, with a heavy overlay of uncertainty. But drilling into the opportunities for two industrialised regions that sit on the frontline of Australia’s deranged carbon wars marks a welcome break from the weaponised hyper-partisan windbaggery about the costs of the transition.

 

Jack Aubrey

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The Carbon Border Tax debate is heating up with both the EU and US raising the issue in international forums. I expect this will get serious after the next COP (which is less than 100 days away). (See THIS LINK for some recent commentary)

I have seen some analysis suggesting that the major impacts on Australian exports will be indirect. This is because we don't export a lot of energy intensive products to Europe or the US. Flow-on impacts on our exports to India, SE Asia and possibly China may be more significant.

Can anyone identify companies or investments that would be impacted early?
 

Dona Ferentes

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TPG has amassed private equity's largest war chest dedicated to technology aiming to curb climate change amid a growing scramble by investors drawn to one of the world's foremost global challenges. Texas-based TPG said Tuesday it has landed $5.4 billion in funding for the first close of its new Rise Climate Fund, and is still targeting a total of $7 billion, up from an initial goal of $5 billion. Hank Paulson, formerly a Treasury secretary and CEO of Goldman Sachs, serves as executive chairman of the fund.

On the same day (26 July), Brookfield Asset Management announced the initial closing of a $7 billion climate-focused fund that has a goal of achieving a net-zero carbon economy. Dubbed the Brookfield Global Transition Fund, the vehicle will be hard-capped at $12.5 billion. If it meets its target, the fund would be the largest devoted to climate sustainability, according to PitchBookdata.
 

Dona Ferentes

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from CXL presentation

Growing legislative pressures and incentives continue
… Our initial target markets, the EU and US, have made significant moves in the last two months…
EU update ... July 2021
• CO2 EU ETS permit price doubles since 2019 to over €55/tonne
• EU introduces even more strict / ambitious targets in draft legislation
•55% reduction by 2030 from 1990 levels
•Maritime shipping to be included for the first time in CO2 caps

USA update May–June 2021
• Various Acts (tax credits) being introduced into congress and senate looking to increase Enhanced Oil Recovery - EOR to $US50 - 60 and Geological formations storage - GS to US$85 / tonne CO2 + min. facility size dropped to 10kTpa, claimable out to 20 years
 
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Around 15 years ago at ASF I was one of a small number at this site explaining the problems of CC and advocating an understanding of the science. Way back then I used the word "catastrophic" in relation to what was ahead.

Despite what you and I believe to be true there remains a lot of people who are still saying "it's just weather".

Comparatively few of us are currently "suffering" the everyday effects of climate change as they are mostly transient... like bushfires and floods that skeptics wave away. Attribution remains problematic irrespective of the trend having been obvious for decades.
That said, I agree with all your points.

But as @explod points out, we're relatively fine on the way out, but not those coming after us. Red Rob


Redrob suggests that comparatively few of us are suffering from the every day effects of CC as they mostly transient. I suggest from an investment and financial impact POV the reality is likely to be far more immediate and widespread.

1) The impact of the current fires and floods on insurance companies is formidable. What will be the impact on insurance costs ? Will insurance companies survive ? if so what will they cover ?

2) Almost certainly whole swathes of property will become uninsurable for fire and flood in a short space of time. This would almost certainly destroy their economic value. Banks won't loan against an uninsurable property for example.

3) CC is impacting on crops around the world. Russia is already reducing its export of wheat because of scorching weather. It will take very little to undermine world food security.

4) The effect of CC catastrophes on countries will risk many failed states. How will our financial system fare with these multiple collapses?

5) At what stage will institutions bring to book the CC eventualities facing us ? Just to pick one example we have seen a waterfront apartment block collapse in Florida. The seas are rising and Florida is sinking. When will the fact that all the buildings on that foreshore are going to inevitably soon become uninhabitable be acknowledged? And this will be repeated across millions and millions of sea side property.

We know from experience that businesses and individuals don't highlight market failures willingly. Far easier to try and sell them on. ;) But that is not going to be possible in the near future IMV.
 
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The Carbon Border Tax debate is heating up with both the EU and US raising the issue in international forums. I expect this will get serious after the next COP (which is less than 100 days away). (See THIS LINK for some recent commentary)

I have seen some analysis suggesting that the major impacts on Australian exports will be indirect. This is because we don't export a lot of energy intensive products to Europe or the US. Flow-on impacts on our exports to India, SE Asia and possibly China may be more significant.

Can anyone identify companies or investments that would be impacted early?

those handling accountancy and money transfers should be positively impacted possibly some legal firms as well ( think of it as an extra layer of taxation/regulation )

since there seems to be little of this collected tax being reinvested in research into better energy utilization or storage , i assume the extra cost burden will leak into inflationary pressures ( like GST did ) whereas greater efficiency in energy use/creation would have tended to reduce production cost rises

how will the market react .. who knows , it is basically dancing around in Fantasyland now ( or is that Wally World ?? )
 

Joules MM1

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excerpt

GREENLANDIC ROCK-FLOUR - NEW RESEARCH SHOWS THAT GREENLANDIC ROCK-FLOUR SIGNIFICANTLY ENHANCES PLANT GROWTH​

08.09.2021 - 09.09.2021

Every year, billions of tons of rock-flour is washed out with melt water from the glaciers of Greenland. There is a near infinite amounts of the material, and its high content of mineral nutrients can be part of the solution to the climate crisis and bio-diversities grand challenges. Rock-flour has the potential to improve food security for all of us.

Professor Minik Rosing has over the past three years - in collaboration with the Novo Nordisk Foundation - investigated the properties of the Greenlandic rock-flour and carried out growth experiments in Ghana and Denmark. These experiments show that crop productivity can be improved significantly by the administration of rock-flour to the soil, and that the positive effect is sustained through several growth seasons.

Minik Rosing states: "We have been positively surprised by the high increase in crop yield we see when we fertilize with Greenlandic rock-flour on the experimental plots in Ghana and Denmark. Actually, the effect increases year by year at least into the third growth season in the Ghana-plots where we have grown maize. What initially started out as an idea has now proven to be reality: Greenlandic rock-flour works!"

There is so much of this ultra fine-grained rock-flour in one lake by the Nuuk Fjord that it could improve the nutritional value of all agricultural lands south of Sahara in Africa.
 
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excerpt

GREENLANDIC ROCK-FLOUR - NEW RESEARCH SHOWS THAT GREENLANDIC ROCK-FLOUR SIGNIFICANTLY ENHANCES PLANT GROWTH​

08.09.2021 - 09.09.2021

Every year, billions of tons of rock-flour is washed out with melt water from the glaciers of Greenland. There is a near infinite amounts of the material, and its high content of mineral nutrients can be part of the solution to the climate crisis and bio-diversities grand challenges. Rock-flour has the potential to improve food security for all of us.

Professor Minik Rosing has over the past three years - in collaboration with the Novo Nordisk Foundation - investigated the properties of the Greenlandic rock-flour and carried out growth experiments in Ghana and Denmark. These experiments show that crop productivity can be improved significantly by the administration of rock-flour to the soil, and that the positive effect is sustained through several growth seasons.

Minik Rosing states: "We have been positively surprised by the high increase in crop yield we see when we fertilize with Greenlandic rock-flour on the experimental plots in Ghana and Denmark. Actually, the effect increases year by year at least into the third growth season in the Ghana-plots where we have grown maize. What initially started out as an idea has now proven to be reality: Greenlandic rock-flour works!"

There is so much of this ultra fine-grained rock-flour in one lake by the Nuuk Fjord that it could improve the nutritional value of all agricultural lands south of Sahara in Africa.
Good point @Joules MM1 , i am into proper agriculture: regenerative cattle farming, and permaculture:
Rock dust is a valuable real plant food and catalyst.
Many do not realise that most modern food production is oil based, meaning that we use nature to transform xx litres of oil into n kg of cereals.without oil so fossil fuels, we can not feed our 8 billions population as we do now.
And i am not talking about machinery diesel or storage cooling...
It is so high that i read somewhere that bio fuel..ethanol where corn or wheat is used to create fuel is actually negative.. consuming more fuel than producing...
There is a serious wakeup call to add to this no fossil fuels mantra.
Is there a "mining" company tapping this Rock dust in Greenland?
 
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the way Lendlease is going , they will easily comply , they are unlikely to still be in business , they will be too busy hiding from shareholders

( i hold LLC )
 

Jack Aubrey

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Can someone explain the BHP - Woodside deal to me? I get that BHP is edging away from potentially stranded fossil fuel assets (plus making it more suitable as an "ethical" investment) but what's in it for Woodside shareholders longer-term? Is this simply a case of (very) different perceptions of risk or is there some 3D chess move that insulates Woodside? I know that some are now relying on the Government subsidies to ease the withdrawal from coal, but I can't see that happening in any sustainable way.
 
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Can someone explain the BHP - Woodside deal to me? I get that BHP is edging away from potentially stranded fossil fuel assets (plus making it more suitable as an "ethical" investment) but what's in it for Woodside shareholders longer-term? Is this simply a case of (very) different perceptions of risk or is there some 3D chess move that insulates Woodside? I know that some are now relying on the Government subsidies to ease the withdrawal from coal, but I can't see that happening in any sustainable way.
One word: narrative..
I invite you to look at strategic decisions by BHP in the last 20y.
Coal selling, shale gas investing/divesting ,S32 and now oil divesting.
look at the "success" of these....
Where was bhp 20y ago vs Rio, Fmg..
Pathetic so based on history a bad deal for BHP..and a good one for Woodside if they can manage it...not a given
 
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The implications of climate change, rising sea levels and the effects on houses near the sea have been raised often.
The particular question is not when sea levels will rise to the point of undermining houses but when insurance companies will refuse to insure properties for such forseeable consequences. When properties become uninsurable they also become very hard to buy or sell.

Excellent story on the ABC outlining how this is already happening. Well worth considering for people with direct or indirect financial interest in sea side properties. Or perhaps seaside apartments ?

I think there are implications here for banks making loans to people whose properties are currently in danger of sea level rises.

Beautiful one day, uninsurable the next?

There’s a long history of adaptation on the Queensland coast — but our changing climate could soon make it harder to get a mortgage there.

 

Jack Aubrey

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The implications of climate change, rising sea levels and the effects on houses near the sea have been raised often.
The particular question is not when sea levels will rise to the point of undermining houses but when insurance companies will refuse to insure properties for such forseeable consequences. When properties become uninsurable they also become very hard to buy or sell.

Excellent story on the ABC outlining how this is already happening. Well worth considering for people with direct or indirect financial interest in sea side properties. Or perhaps seaside apartments ?

I think there are implications here for banks making loans to people whose properties are currently in danger of sea level rises.

Beautiful one day, uninsurable the next?

There’s a long history of adaptation on the Queensland coast — but our changing climate could soon make it harder to get a mortgage there.

Pretty much as expected. When I first started taking an interest in climate change issues in the 1990s, several economists I knew theorised that "endogenous adaptation" (ie. change without government intervention), would be the most efficient way to adapt to change - insurance companies and banks were central to this idea.

I don't entirely agree because there will be substantial inequities in this process, with the rich, well connected and well informed able to pass on costs to others, either directly or via government subsidies and bail outs. We are seeing this in some industries at the moment - using their tame politicians to soften up the public for big subsidies "to keep the lights on".
 
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This is a very rosy eyed view of dealing with CC. Just electrify everything! I agree with the principle . But it certainly isn't that simple. There is so much more that has to be done on the way.

However it is an encouraging energetic direction.

 
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but of course electricity just grows on trees and blows in the wind to spread across the nation

SIGH , but i saw this 'instant gratification' mentality coming about two decades ago

all fun and games until a switch fails
 
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This is a very rosy eyed view of dealing with CC. Just electrify everything! I agree with the principle . But it certainly isn't that simple. There is so much more that has to be done on the way.

However it is an encouraging energetic direction.


I didn't know enough about Saul Griffiths and his work when I made that comment.

He is one seriously effective inventor/researcher/entrepreneur. Worth checking out IMV. The detail of his work in Rewiring America is very. very impressive.
 
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This is a very rosy eyed view of dealing with CC. Just electrify everything! I agree with the principle . But it certainly isn't that simple. There is so much more that has to be done on the way.
Electrification can't of itself fix things like emissions from agriculture and waste disposal but it most certainly can get fossil fuels out of the energy supply chain, indeed it's the most plausible way to do it.

Electricity is electricity is electricity so long as demand and supply are matched in real time. Anything from a century old hydro station through to a brand new solar installation or nuclear plant does the exact same thing in terms of the end result.

Good ole' Lake Margaret power station in Tassie, the oldest fully operational power station in Australia, is perfectly capable of charging your iPhone yes - that the machinery in power station pre-dates computers, TV and even AM radio is no barrier there. 107 years after it commenced production and the machines are still roaring away quite nicely. It doesn't generate much power that's true but the point stands - electricity is electricity so long as it's available when you want it.

That "universal currency" aspect of it is what makes electrification the key. Unlike, say, jet fuel or natural gas where the product is a chemical one and has to meet exact specifications to be safe and usable, it's comparatively easy to get electricity to exactly meet a standard specification such that any resource can run any end use. :2twocents
 
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I found an excellent analysis from Saul Griffiths on electrification of the US.
He has no delusions about what is required to ,somehow, avert the worst effects of global heating.
Offers an excellent mathematical/technical outline of what we need to do..

Well worth checking out. This is a privately posted video.
 
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Rising sea levels and 20 story beach side apartments. A match made in purgatory and then hell.

The collapse of the Champlain Towers condo in Florida a few weeks ago has focused attention on the immediate reality of rising sea levels. The move is on and once fashionable condos are being deserted and the new investment focus is surprise, surprise, buying up inland properties that are currently poor, cheap and have 10 feet more elevation than coast side condos.

I'm not sure how orderly this movement will be and how the old condos will actually be sold or insurable in a few years

Excellent in depth story.

 
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