Wednesday, December 18, 2013

Leave the coal in the ground

In the fall of 1962, my eighth-grade science teacher was talking about all the things that could be made from coal—plastics, medicines, fertilizers, etc.  At one point he said, "when you think about it, burning coal may be the stupidest thing you could do with it."

One classmate just exploded in genuine anger.  "Only someone who has never been cold would believe that burning coal was stupid!" he raged.  Both the rest of the class and the teacher were surprised at the anger.  On the other hand, we all agreed he had a legitimate point.

I thought about that exchange today because it encapsulates the essential dilemma of burning coal.  Yes, it would be a good idea to save that coal for some future higher purpose.  Yes, burning coal will destroy the atmosphere.  On the other hand, there is something to be said for doing whatever is necessary to keep warm.  So the trick is to figure out ways to stay warm and power the society without resorting to fire.  And that, folks, will be a LOT harder than it looks.

Mining insider: 'Leave the coal in the ground'

16 December 2013 by Michael Slezak

Executive-turned-environmentalist Ian Dunlop says that mining corporations will have to abandon much of their coal to avoid climate and business suicide

You now champion a low-carbon economy. Why do you want a seat on the board of BHP, the world's biggest mining company?

If I got on it, I would hope to spark a much more extensive discussion on climate issues. We need emergency action if we are going to stop the worst outcomes of climate change becoming a reality. Corporations have been waiting for government to develop the right policies. But it has become clear that governments are never going to provide that leadership, so if we want to see serious action then business is going to have to lead it.

Why should businesses take the lead?

It is in their own interest. If you look at the science, we are headed for a world, on current policies, where temperatures will go up by at least 4 °C by the end of the century. Business in that world is not possible. The potential damage to shareholder value is huge.

You got 4 per cent of the vote, far off what's needed for a BHP board seat. Is that a failure?

The board was against my appointment, so I needed investors to give me sufficient votes to countermand that. A lot of them were supportive but didn't want to appear to lack confidence in the existing board. But this is just the beginning. I will try again. So no, I don't regard it as a failure.

What should companies such as BHP do?

First, stop investments in thermal coal and then phase it out completely. But in Australia, we are talking of doubling coal exports in 10 to 15 years and quadrupling oil and gas exports. It is suicidal.

How might such a change work in practice?

It is not a question of divesting these resources. That solves nothing from an environmental point of view. You have to leave them in the ground.

What about other types of natural resources?

Coking coal, used to make steel, is a bit different because we will need steel to create the low-carbon economy. Oil will still be a premium fuel because we don't have an alternative to transport fuels yet, although the impact of unconventional oil and gas needs to be better understood. Potash is a good investment because we are going to have a fertiliser problem. Uranium too, because nuclear needs to be part of the energy mix.

Surely one company can't act alone?

Somehow you have to form coalitions and that isn't going to be an easy task. It needs to be between the big emitters in business who have enough resources and clout to be listened to, and also the capability to shift things. So it has to be the BHPs, Shells, BPs and Exxons of the world.

Why is it so hard for businesses to change?

Climate change, for both the company and most big industries, is still what they call an ESG issue – environmental, social and governance – which has become a focus in the last 10 years or so. But ESG issues are second-order priorities compared with the top-order priority of shareholder value. And people see shareholder value as some magical thing independent of climate change. To me this has always been a big mistake.

This article appeared in print under the headline "At the climate coalface"


Ian Dunlop, a former oil, gas and coal industry executive and ex-chair of the Australian Coal Association, now directs Safe Climate Australia. Last month he ran for a seat on mining giant BHP Billiton's board on a climate change ticket  more

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