On Friday, September 27, 2013, for the first time in my life, I awoke to an intense desire to monitor the opening of New York’s stock market. I pictured stock market people falling over each other in a fire sale of fossil fuel assets. Desperate phone calls from modern day oil, coal, and gas protégé’s of Gordon Gekko dialing their proxies and screaming: “Sell, Sell, Sell.”
Surely, the release of the 5th climate report from the Inter-Governmental Panel on Climate Change (IPCC) would presage a deluge of sell-offs of valueless oil, coal, and gas stocks. Realizing the worthlessness of formerly expensive scraps of paper denoting fossil fuel reserves held by Exxon, BP, Chevron, and other luminaries of the stock market, the impact on stocks would prove catastrophic.
After all, seven years on, the latest assessment from the IPCC panel, the synthesis of several hundred of the top climate scientists in the world, paints an “unequivocal” portrait detailing that, “Human influence on the climate system is clear. This is evident from the increasing greenhouse gas concentrations in the atmosphere, positive radiative forcing, observed warming, and understanding of the climate system.”
“The atmospheric concentrations of carbon dioxide (CO2), methane, and nitrous oxide have increased to levels unprecedented in at least the last 800,000 years. CO2 concentrations have increased by 40 percent since pre-industrial times, primarily from fossil fuel emissions and secondarily from net land use change emissions. The ocean has absorbed about 30 percent of the emitted anthropogenic carbon dioxide, causing ocean acidification.”
Even were we to stop emitting greenhouse gasses today, industrialized human civilization—based on the burning of fossil fuels for energy—has set in motion changes to the earth that are essentially irreversible and can only be measured on time-scales which are difficult to comprehend: “A large fraction of anthropogenic climate change resulting from CO2 emissions is irreversible on a multi-century to millennial time scale, except in the case of a large net removal of CO2 from the atmosphere over a sustained period. Surface temperatures will remain approximately constant at elevated levels for many centuries after a complete cessation of net anthropogenic CO2 emissions.”
As the entire planet is an interlinked set of ecosystems, which together form the biosphere, changes in the composition of the earth’s atmosphere and its ability to retain the sun’s heat, inevitably lead to disruptive changes elsewhere. Loss of polar ice, leading to sea level rise (up to 1 meter by 2100, assuming some reduction in emissions) will threaten low-lying island nations as well as major cities, the continuing acidification of the oceans (killing off the basis of the food web: coral, phytoplankton, and shellfish) and more climate disruptions such as an increased number of hotter days and extreme weather. Even with some real action to reduce emissions, scientists predict that the earth will likely overshoot the “safe” limit of an average temperature increase of 2 degrees Celsius.
However, if the world continues with business as usual, average global temperature between 2080 and 2100 are predicted to be 2.6-4.8C higher than today. At the higher end, this would make life for many species, including ourselves, untenable across significant areas of the globe and cause the disintegration of complex ecosystems. (It’s important to remember that the IPCC has been criticized for being too conservative in its estimate because of the consensus nature of decision-making imposed by national governments on the UN body.)
Considering that a large percentage of its value is based on fossil fuel reserves, all of this should be very bad news for Wall Street. The stock exchanges of London, Sao Paulo, Australia and Toronto have 20-30 percent of their valuation from fossil fuels and, as of 2011, the top 100 coal and top 100 oil corporations are collectively valued at $7.42 trillion, or half the annual GDP of the United States. If these stock markets suddenly lost up to a third of their value, the effect on the world financial system would be cataclysmic (previous largest drops, in 1987 and 2007/8, have not exceeded 20 percent).
A Carbon Budget
However, what really hammered the last nail into the coffin labeled “fossil fuel corporations” and presumably stock markets the world over was, for the first time, the IPCC report put a budget on carbon. The report indicated that, if we are to have any chance of staying below the crucial limit of two degrees Celsius of warming, we could only burn a maximum of 800-880 gigatonnes of carbon (GtC). As we have already set fire to 531 GtC as of 2011 and added that carbon to the atmosphere and oceans, we’re only left with approximately 350 GtC leeway.
How does that number compare to how much we’ve discovered and is used to calculate in the reserves of fossil fuel companies and those held by governments and hence the basis for their valuation on stock markets around the world? According to the Carbon Tracker Initiative report cited above, that number is 2795 GtCO2, 65 percent of which is from the most abundant and polluting source, coal.
The portion of reserves controlled by the top 100 coal and top 100 oil and gas companies is 745 GtC02. In other words, the overwhelming majority of oil, coal and gas reserves can never be fracked, drilled, or mined out of the ground, even though they are worth trillions of dollars on the balance sheets of those corporations. A suitably devastating prognosis for corporate survival that would surely have to be reflected in market valuations the second the IPCC report went public.
Of course, this is not what happened. Wall Street, to my dismay, but no great surprise, opened with barely a ripple. There was clearly no expectation from fund managers, investors, and assorted other masters of the universe that the devastating IPCC report had anything to do with their business models.
Furthermore, last year, fossil fuel corporations spent $674 billion scouring the earth for new deposits of coal, oil and gas. As the International Energy Agency’s World Energy Outlook 2012, reported, “Despite the growth in low-carbon sources of energy, fossil fuels remain dominant in the global energy mix, supported by subsidies that amounted to $523 billion in 2011, up almost 30 percent on 2010 and 6 times more than subsidies to renewables.”
In contrast with what the IPCC says needs to happen, the IEA stated what is the most probable path for the United States, “By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s). With increased oil and gas production from fracking, deep off-shore deposits, and exploiting reserves in the Arctic, North America becomes a net oil exporter around 2030.
In other words, despite another report which indicated that by 2050 the world will need to spend $1 trillion annually to protect low-lying cities like New York and Shanghai from rising oceans, it’s very much business as usual. The inexorable logic of capitalist market relations and the fixation on short term profitability, trumps common sense or the physical constraints of the universe, as reported by the world’s preeminent scientific experts.
Where do the recently announced carbon emission limits proposed by the EPA on new coal and gas plants in the United States fit into this picture? Despite the fact that they were heralded by major “green” groups such as the Sierra Club and the Environmental Defense Fund, they don’t come close enough to doing anything to alter the situation.
In defense of Obama and the idea that his Administration is seriously tackling the coal lobby on September 21 the New York Times noted, “The Obama administration on Friday announced that it was not backing down from a confrontation with the coal industry and that it would press ahead with enacting the first federal carbon limits on the nation’s power companies. The proposed regulations, announced at the National Press Club by Gina McCarthy, the administrator of the Environmental Protection Agency, are an aggressive move by Mr. Obama to bypass Congress on climate change.”
The first thing to say about these new, supposedly “aggressive” regulations is that they have already been watered down from the ones first proposed a few months ago. Second, they only apply to new coal (only 8 are being built) and gas plants (91 new ones), not the hundreds of older plants, which in some cases are well over 50 years old, are far more inefficient and can carry on spewing out unlimited amounts of carbon pollution unimpeded. Third, in another concession to the coal industry, any new plant will have up to 7 years to comply, which will take them well into the 2020s.
However, Gina McCarthy gave the game away when she said, “I believe the proposal, rather than killing future coal, actually sets out a pathway forward for coal to be part of the diverse energy supply in the future.”
As part of its gambit to protect coal and natural gas from competition from wind and solar, the Obama administration is reviving the government’s controversial loan guarantee program for clean energy—the one in which the failure of solar panel maker Solyndra became such a talking point for Republicans because it lost the government $500 million when it went bankrupt. Just as a point of reference, $500 million sounds like a lot, until you contrast that with the $20.2 billion per year that the Pentagon spends just on air-conditioning in Afghanistan.
This is from the business section of the New York Times on the exact same day that the paper labeled the Obama regulations an aggressive anti-coal move: “The revived program is broader than its predecessor, which focused on capturing carbon emissions from coal plants and on turning coal into gas. Mr. Davidson [executive director of the loan program office at the Energy Department] said officials were looking for projects that reduced carbon and other gases along the various stages of energy production, like cutting methane emissions or water usage in the natural gas extraction process known as ‘fracking’ as well as retrofitting existing coal-fired power plants.”
In other words, the new loan program will be broadened to try to find a solution to the pollution generated by burning coal and fracking for natural gas; a solution which doesn’t include the most obvious and effective one: namely, shutting down the coal plants, banning fracking, and retraining the skilled workforce of miners and power plant workers to build and operate the new clean energy infrastructure we need.
On the perversity of trying to develop a technology that currently doesn’t exist and will require more coal to be burned in order for coal not to pollute, the Times quotes Michael E. Webber, deputy director of the Energy Institute at the University of Texas at Austin: “If you do coal the right way, it’s so expensive that wind and solar beat it on the markets and that’s why the guys who want to do coal the right way need their policy support with loan guarantees, research assistance and tax incentives…. Wind and solar are big kids and almost competitive on their own already, but the advanced fossil and small nuclear are still years away.”
In other words, rather than aggressively attacking the coal industry, the Obama administration is ensuring its survival. The only thing they’re aggressively pursuing is more oil, coal, and natural gas, as depicted in numerous government reports and statements.
In response to the IPCC report, one wonders how John Kerry, whose State Department is still mulling over approving the Keystone XL tar sands pipeline, has the gall to come out with a statement like this: “The United States is deeply committed to leading on climate change. We will work with our partners around the world through ambitious actions to reduce emissions, transform our energy economy, and help the most vulnerable cope with the effects of climate change. We do so because this is science, these are facts, and action is our only option.”
Meanwhile, the Environmental Protection Agency awarded a Climate Leadership Award this year to Raytheon, a company which specializes in being ”the world’s premier missile maker, providing defensive and offensive weapons for air, land, sea and space.” In presenting the award, now-EPA head Gina McCarthy said, “Our Climate Leadership Award winners are leading by example with their outstanding actions to reduce carbon pollution…. These organizations are tackling the challenge of climate change with practical, common-sense, and cost-saving solutions to improve efficiency and cut waste.”
Of course, for the apologists of capitalism, the insanity goes even deeper than the concept of environmentally friendly missiles. As a recent special report on biodiversity in the Economist notes, “More growth, not less, is the best hope for averting a sixth great extinction.”
In particular, what offers species desperately clinging to survival the best hope is more rich people: “Greater human prosperity now offers other species their best chance of hanging on…when people start to reach middle-income level, other species start to benefit. That is partly because, as people get richer, their interests begin to extend beyond necessities towards luxuries: for some people that means expensive shoes, for others a day’s bird-watching…. Growth also has indirect benefits for biodiversity. People clean up their environment in ways that help other species: through building sewage-treatment plants, for instance, and banning factories from pouring effluent into rivers. Prosperity and peace tend to go together, and conflict hurts other creatures as well as man, as the wars in the Congo have shown.” (I’ll leave it to readers to decide which incorrect or misleading statement in the passage above is the most egregious.)
To Wall Street, which sorts risk by its ability to maximize profit, “adaptation” to climate change simply means learning how to make profits from it. As David Ravens- bergen writes, “Even as extreme weather wreaks havoc on crop yields and threatens coastlines, new custom-made financial instruments offer the savvy investor the chance to profit from destruction. Weather derivatives offer both a profitable investment today and an insurance policy against future damages by flooding or drought. While the estimated costs of climate change continue to climb, the profits to be made by betting on those costs keep growing faster.
“In effect, what we have is a situation in which investors are busy betting on what’s going to happen with the climate. Depending on how they invest, they can make money if things get worse or if they get better. If they pick the wrong horse, their bad investments can also be insured by purchasing still more derivatives.”
Capitalism Cannot Prevent Diaster
The financial system, profit-based production and the growth imperative of capitalism are three of the core reasons why capitalism cannot prevent ecological disaster. The fourth Horseman of the Climate Apocalypse is the nature of inter-state competition, otherwise known as imperialism, which acts as the international counterpart to domestic competition between corporations, and prevents binding and effective international agreements on climate change.
The historically contingent reason is that capitalist growth for the last 150 years has been predicated on fossil fuels and the corporations which extract and process them; these entities are now some of the largest economic, and thereby political, actors on the planet, with a multi-trillion dollar vested interest in preventing change. On top of that, examine the infrastructure of fossil-fuel dependent capitalism:
- hundreds of thousands of miles of oil pipelines snaking across every continent
- over 200,000 gas stations in the United States alone roads and refineries
- pharmaceutical and petro-chemical complexes
- factories that manufacture 70 million new cars every year
- concrete, rubber, and asphalt manufacturers and the vast military-industrial complex ensuring the control and flow of oil continues at increasing rates
This should not be taken as an argument that fighting for meaningful reforms to make our lives less polluted, to buy time to slow down carbon pollution, and to build our confidence and organization cannot be won under capitalism. The title of this piece is taken from Civil Rights activist Charles Sherrod, a key member the Student Non-Violent Coordinating Committee and its first field organizer. In the battles in the early 1960s fighting segregation, he recalled the police chief of Albany, Georgia, Laurie Pritchett, the architect of the strategy of “non-violent” mass arrests of Black protesters, dismissing even the existence of African-Americans with his comment, “You know Sherrod, it’s just a matter of mind over matter. I don’t mind and you don’t matter.”
The militant organization and resole for justice of tens of thousands of marchers, picketers, and demonstrators proved Pritchett wrong—Jim Crow was smashed. A similar independent mass movement for climate justice should enact a comparable level of change within the system. But we also know that while racism may no longer be official government policy, it persists everywhere because capitalism requires racism. The system acts to perpetuate and reinvent it in the same way it requires sexual oppression and war. Therefore, we need to replace capitalism with a more rational, cooperative, democratic and humanistic system in sync with our “species being” and nature. If we don’t, we will lose our only home.
Chris Williams is an environmental activist and author of Ecology and Socialism: Solutions to Capitalist Ecological Crisis.