Climate change is a global issue and reports indicate that more and more people are concerned about buying environmentally friendly products. We have seen tighter emissions targets and companies across the word investing in new technologies to reduce their emissions. But what can the Church of England do?
The Church of England has numerous investments, which help generate its revenue. Some of these investments are in fossil fuel companies, which are extracting resources and polluting the environment. The Church’s new environmental policy will see it selling any of its investments in companies where more than 10% of its revenue is generated from extracting thermal coal or the production of oil from tar sands. Estimates suggest that this is a total of £12 million. The Deputy Chair of the Church’s Ethical Investment Advisory Group (EIAG) said:
“The Church has a moral responsibility to speak and act on both environmental stewardship and justice for the world’s poor who are most vulnerable to climate change … This responsibility encompasses not only the Church’s own work to reduce our own carbon footprint, but also how the Church’s money is invested and how we engage with companies on this vital issue.”
However, some have seen this as ‘trivial act’, suggesting it will have limited effect on the environment and have criticised some for suggesting that the biggest moral issue facing the world is climate change. But, with more companies recognising their ‘moral responsibility’, perhaps this decision by the Church of England is unsurprising. The following articles consider this topic.
Church of England divests from coal, tar sands as adopts new climate change policy Reuters (30/4/15)
Church of England wields its influence in fight against climate change The Guardian, Damian Carrington (1/5/15)
Church of England Bishop provokes anger by saying the biggest moral issue affecting the world is … CLIMATE CHANGE Mail Online, Steve Doughty (2/5/15)
Church of England to sell fossil fuel investments BBC News (1/5/15)
Church of England blacklists coal and tar sands investments Financial Times, Pilita Clark (30/4/15)
Church of England ends investments in heavily polluting fossil fuels The Guardian, Adam Vaughan (30/4/15)
Church of England pulls out of fossil fuels, but where does it invest its cash? Independent, Hazel Shefield (1/5/15)
Questions
- Why is climate change a global issue?
- How might the Church of England’s decision affect environmental policy in fossil fuel companies?
- What other action has the Church of England taken to tackle climate change?
- The Church and the articles suggest that the poor are the most vulnerable to climate change. Why is this?
- Do you think the Church of England will lose money by divesting itself of some of these investments?
- If the Church of England now has more money to invest, which factors might influence its decision as to where it should invest?
- Where does the Church of England get its money from? What does it spend it on?
The Governor of California, Jerry Brown, has issued an executive order to cut greenhouse gas emissions 40% from 1990 levels by 2030 (a 44% cut on 2012 levels). This matches the target set by the EU. It is tougher than that of the US administration, which has set a target of reducing emissions in the range of 26 to 28 percent below 2005 levels by 2025.
The former Governor of California, Arnold Schwarzenegger, had previously set a target of reducing emissions 80% below 1990 levels by 2050. Brown’s new target can be seen as an interim step toward meeting that longer-term goal.
There are several means by which it is planned to meet the Californian targets. These include:
a focus on zero- and near-zero technologies for moving freight, continued investment in renewables including solar roofs and distributed generation, greater use of low-carbon fuels including electricity and hydrogen, stronger efforts to reduce emissions of short-lived climate pollutants (methane, black carbon and fluorinated gases), and further efforts to create liveable, walkable communities and expansion of mass transit and other alternatives to travelling by car.
Some of these will be achieved through legislation, after consultations with various stakeholders. But a crucial element in driving down emissions is the California’s carbon trading scheme. This is a cap-and-trade system, similar to the EU’s Emissions Trading Scheme.
The cap-and-trade rules came into effect on January 1, 2013 and apply to large electric power plants and large industrial plants. In 2015, they will extend to fuel distributors (including distributors of heating and transportation fuels). At that stage, the program will encompass around 360 businesses throughout California and nearly 85 percent of the state’s total greenhouse gas emissions.
Under a cap-and-trade system, companies must hold enough emission allowances to cover their emissions, and are free to buy and sell allowances on the open market. California held its first auction of greenhouse gas allowances on November 14, 2012. This marked the beginning of the first greenhouse gas cap-and-trade program in the United States since the group of nine Northeastern states in the Regional Greenhouse Gas Initiative (RGGI), a greenhouse gas cap-and-trade program for power plants, held its first auction in 2008.
Since January 2014, the Californian cap-and-trade scheme has been linked to that of Quebec in Canada and discussions are under way to link it with Ontario too. Also California is working with other west-coast states/provinces, Oregon, Washington and British Columbia, to develop a co-ordinated approach to greenhouse gas reductions
To achieve sufficient reductions in emissions, it is not enough merely to have a cap-and-trade system which, through trading, encourages an efficient reduction in emissions. It is important to set the cap tight enough to achieve the targeted reductions and to ensure that the cap is enforced.
In California, emissions allowances are distributed by a mix of free allocation and quarterly auctions. Free allocations account for around 90% of the allocations, but this percentage will decrease over time. The total allowances will decline (i.e. the cap will be tightened) by 3% per year from 2015 to 2020.
At present the system applies to electric power plants, industrial plants and fuel distributors that emit, or are responsible for emissions of, 25,000 metric tons of carbon dioxide equivalent (CO2e) per year or more. The greenhouse gases covered are the six covered by the Kyoto Protocol ((CO2, CH4, N2O, HFCs, PFCs, SF6), plus NF3 and other fluoridated greenhouse gases.
Articles
California governor orders aggressive greenhouse gas cuts by 2030 Reuters. Rory Carroll (29/4/15)
California’s greenhouse gas emission targets are getting tougher Los Angeles Times, Chris Megerian and Michael Finnegan (29/4/15)
Jerry Brown sets aggressive California climate goal The Desert Sun, Sammy Roth (29/4/15)
California’s Brown Seeks Nation-Leading Greenhouse Gas Cuts Bloomberg, Michael B Marois (29/4/15)
California sets tough new targets to cut emissions BBC News, (29/4/15)
California’s New Greenhouse Gas Emissions Target Puts Obama’s To Shame New Republic, Rebecca Leber (29/4/15)
Governor Brown Announces New Statewide Climate Pollution Limit in 2030 Switchboard, Alex Jackson (29/4/15)
Cap-and-trade comes to Orego Watchdog, Chana Cox (29/4/15)
Cap and trade explained: What Ontario’s shift on emissions will mean The Globe and Mail, Adrian Morrow (13/4/15)
California’s Forests Have Become Climate Polluters Climate Central, John Upton (29/4/15)
States Can Learn from Each Other On Carbon Pricing The Energy Collective, Kyle Aarons (28/4/15)
Executive Order
Governor Brown Establishes Most Ambitious Greenhouse Gas Reduction Target in North America Office of Edmund G. Brown Jr. (29/4/15)
Frequently Asked Questions about Executive Order B-30-15: 2030 Carbon Target and Adaptation California Environmental Protection Agency: Air Resources Board (29/4/15)
Californian cap-and-trade scheme
Cap-and-Trade Program California Environmental Protection Agency: Air Resources Board (29/4/15)
California Cap and Trade Center for Climate and Energy Solutions (January 2014)
Questions
- Explain how a system of cap-and-trade, such as the Californian system and the ETS in the EU, works.
- Why does a cap-and-trade system lead to an efficient level of emissions reduction?
- How can a joint system, such as that between California and Quebec, work? Is it important to achieve the same percentage pollution reduction in both countries?
- What are countries coming to the United Nations Climate Change conference in Paris in November 2015 required to have communicated in advance?
- How might game theory be relevant to the negotiations in Paris? Are the pre-requirements on countries a good idea to tackle some of the ‘gaming’ problems that could occur?
- Why is a cap-and-trade system insufficient to tackle climate change? What other measures are required?
Many UK coal mines closed in the 1970s and 80s. Coal extraction was too expensive in the UK to compete with cheap imported coal and many consumers were switching away from coal to cleaner fuels. Today many shale oil producers in the USA are finding that extraction has become unprofitable with oil prices having fallen by some 50% since mid-2014 (see A crude indicator of the economy (Part 2) and The price of oil in 2015 and beyond). So is it a bad idea to invest in fossil fuel production? Could such assets become unusable – what is known as ‘stranded assets‘?
In a speech on 3 March 2015, Confronting the challenges of tomorrow’s world, delivered at an insurance conference, Paul Fisher, Deputy Governor of the Bank of England, warned that a switch to both renewable sources of energy and actions to save energy could hit investors in fossil fuel companies.
‘One live risk right now is of insurers investing in assets that could be left ‘stranded’ by policy changes which limit the use of fossil fuels. As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels and related technologies – a growing financial market in recent decades – may take a huge hit. There are already a few specific examples of this having happened.
… As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels and related technologies – a growing financial market in recent decades – may take a huge hit. There are already a few specific examples of this having happened.’
Much of the known reserves of fossil fuels could not be used if climate change targets are to be met. And investment in the search for new reserves would be of little value unless they were very cheap to extract. But will climate change targets be met? 
That is hard to predict and depends on international political agreements and implementation, combined with technological developments in fields such as clean-burn technologies, carbon capture and renewable energy. The scale of these developments is uncertain. As Paul Fisher said in his speech:
‘Tomorrow’s world inevitably brings change. Some changes can be forecast, or guessed by extrapolating from what we know today. But there are, inevitably, the unknown unknowns which will help shape the future. … As an ex-forecaster I can tell you confidently that the only thing we can be certain of is that there will be changes that no one will predict.’
The following articles look at the speech and at the financial risks of fossil fuel investment. The Guardian article also provides links to some useful resources.
Articles
Bank of England warns of huge financial risk from fossil fuel investments The Guardian, Damian Carrington (3/3/15)
PRA warns insurers on fossil fuel assets Insurance Asset Risk (3/3/15)
Energy trends changing investment dynamics UPI, Daniel J. Graeber (3/3/15)
Speech
Confronting the challenges of tomorrow’s world Bank of England, Paul Fisher (3/3/15)
Questions
- What factors are taken into account by investors in fossil fuel assets?
- Why might a power station become a ‘stranded asset’?
- How is game theory relevant in understanding the process of climate change negotiations and the outcomes of such negotiations?
- What social functions are filled by insurance?
- Why does climate change impact on insurers on both sides of their balance sheets?
- What is the Prudential Regulation Authority (PRA)? What is its purpose?
- Explain what is meant by ‘unknown unknowns’. How do they differ from ‘known unknowns’?
- How do the arguments in the article and the speech relate to the controversy about investing in fracking in the UK?
- Explain and comment on the statement by World Bank President, Jim Yong Kim, that sooner rather than later, financial regulators must address the systemic risk associated with carbon-intensive activities in their economies.
This weekend, Australia will play host to the world’s leaders, as the G20 Summit takes place. The focus of the G20 Summit will be on global growth and how it can be promoted. The Eurozone remains on the brink, but Germany did avoid for recession with positive (just) growth in the third quarter of this year. However, despite Australia’s insistence on returning the remit of the G20 to its original aims, in particular promoting growth, it is expected that many other items will also take up the G20’s agenda.
In February, the G20 Finance Ministers agreed various measures to boost global growth and it is expected that many of the policies discussed this weekend will build on these proposals. The agreement contained a list of new policies that had the aim of boosting economy growth of the economies by an extra 2% over a five year period. If this were to happen, the impact would be around £1.27 trillion. The agreed policies will be set out in more detail as part of the Brisbane Action Plan.
As well as a discussion of measures to promote global growth as a means of boosting jobs across the world, there will also be a focus on using these measures to prevent deflation from becoming a problem across Europe. Global tax avoidance by some of the major multinationals will also be discussed and leaders will be asked to agree on various measures. These include a common reporting standard; forcing multinationals to report their accounts country by country and principles about disclosing the beneficial ownership of companies. It it also expected that the tensions between Russia and Ukraine will draw attention from the world leaders. But, the main focus will be the economy. Australia’s Prime Minister, Tony Abbott said:
“Six years ago, the impacts of the global financial crisis reverberated throughout the world. While those crisis years are behind us, we still struggle with its legacy of debt and joblessness…The challenge for G20 leaders is clear – to lift growth, boost jobs and strengthen financial resilience. We need to encourage demand to ward off the deflation that threatens the major economies of Europe.”
Many people have protested about the lack of action on climate change, but perhaps this has been addressed to some extent by the deal between China and the USA on climate change and Barak Obama’s pledge to make a substantial contribution to the Green Climate Fund. This has caused some problems and perhaps embarrassment for the host nation, as Australia has remained adamant that despite the importance of climate change, this will not be on the agenda of the G20 Summit. Suggestions now, however, put climate change as the final communique.
Some people and organisations have criticised the G20 and questioned its relevance, so as well as discussing a variety of key issues, the agenda will more broadly be aiming to address this criticism. And of course, focus will also be on tensions between some of the key G20 leaders. The following articles consider the G20 Summit.
Articles
Ukraine and Russia take center stage as leaders gather for G20 Reuters, Matt Siegel (14/11/14)
The G20 Summit: World leaders gather in Brisbane BBC News (14/11/11)
G20: Obama to pledge $2.5bn to help poor countries on climate change The Guardian, Suzanne Goldenberg (14/11/14)
G20 in 20: All you need to know about Brisbane Leaders summit in 20 facts Independent, Mark Leftly (13/11/14)
G20 leaders to meet in Australia under pressure to prove group’s relevance The Guardian, Lenore Taylor (13/11/14)
Australia PM Abbott accuses Putin of bullying on eve of G20 Financial Times, George Parker and Jamie Smyth (14/11/14)
G20: David Cameron in Australia for world leaders’ summit BBC News (13/11/14)
G20 summit: Australian PM Tony Abbott tries to block climate talks – and risks his country becoming an international laughing stock Independent, Kathy Marks (13/11/14)
Incoming G20 leader Turkey says groups must be more inclusive Reuters, Jane Wardell (14/11/14)
Behind the motorcades and handshakes, what exactly is the G20 all about – and will it achieve ANYTHING? Mail Online, Sarah Michael (14/11/14)
Is the global economy headed for the rocks? BBC News, Robert Peston (17/11/14)
Official G20 site
G20 Priorities G20
Australia 2014 G20
News G20
Questions
- What is the purpose of the G20 and which countries are members of it? Should any others be included in this type of organisation?
- What are the key items on the agenda for the G20 Summit in Brisbane?
- One of the main objectives of this Summit is to discuss the policies that will be implemented to promote growth. What types of policies are likely to be important in promoting global economic growth?
- What types of policies are effective at addressing the problem of deflation?
- What impact will the tensions between Russia and Ukraine have on the progress of the G20?
- Why are multinationals able to engage in tax evasion? What policies could be implemented to prevent this and to what extent is global co-operation needed?
- Discuss possible reforms to the IMF and the G20’s role in promoting such reforms.
- Should the G20 be scrapped?
On my commute to work on the 6th October, I happened to listen to a programme on BBC radio 4, which provided some fascinating discussion on climate change, growth, capitalism and the need for co-operation. With more countries emerging as leading economic powers, pollution and emissions continue to grow. Is it time for a green revolution?
The programme considers some ‘typical’ policies and also discusses some radical solutions. There is discussion on developing and developed nations and how these countries should be looked at in terms of compensation, entitlement and aid. Carrots and sticks are analysed as means of saving the planet and how environmental damage can be reduced, without adversely affecting the growth rate of the world economy. I won’t say any more, but it’s certainly worth listening to, for an interesting discussion on one of the biggest problems that governments across the world are facing and it is not going to go away any time soon.
Naomi Klein on climate change and growth BBC Radio 4, Start the Week (6/10/14)
Questions
- What are the market failures with the environment?
- Why is global co-operation so important for tackling the problem of climate change?
- Which policies are discussed as potential solutions to the problem of climate change?
- What has been the problem with the European carbon trading scheme?
- Why may there be a trade-off between capitalism, growth and the problem of carbon emissions?
- To what extent do you think that countries such as Bangladesh should be ‘compensated’?
Climate change is a global issue and reports indicate that more and more people are concerned about buying environmentally friendly products. We have seen tighter emissions targets and companies across the word investing in new technologies to reduce their emissions. But what can the Church of England do?
