Appropriate Civilization versus New Despotism: State of Play on 20th February 2017, one month into the Trump presidency

Screenshot 2017-02-20 07.05.50

Suddenly believers in the possibility of a better civilization, one rooted in increasing human co-operation and harmony, find ourselves in a world where demagogues can now realistically plot the polar opposite: a new despotism rooted in rising isolationist nationalism and human conflict. The more we dig into how the demagogues and their supporters have organised their recent successes, in particular in using technology to manipulate voter beliefs on an industrial scale, the more terrified many of us find ourselves. Yet at the same time, tantalisingly, our visions of a better civilization, one appropriate for common security and prosperity among nations in the 21st century, seem more feasible today than they have ever been, at least in some of their component parts. In this struggle between two vastly different world views, a kind of global civil war seems to have broken out in the last 9 months or so.

I am changing this blog to reflect these changed times. For years now I have been chronicling only two relevant themes: climate and energy. Starting with this blog, I will be covering seven. After the evidence of Donald Trump’s opening month as US President, I no longer think it is valid to consider climate and energy separately from the bigger global picture.

I invite the reader to consider my seven chosen themes as dials, each of which will need to be turned up near to full positive in the next decade. They are labelled climate, energy, tech, truth, inequality, reform, and conflict. This list is not comprehensive in capturing the struggle between appropriate civilization and new despotism. But I contend that if most of these particular dials are turned down anywhere near full negative, demagogues will have found their road to new despotism, and we can expect a future based on unbreakable police states.

Let me summarise my sense of the global setting of each of the seven dials in turn, as things stand.

First, climate. Turning this dial up requires being on course for the Paris Agreement target of under 2 degrees of global warming.

Without this, an increasingly runaway global thermostat is likely to wash away all civilizations – appropriate, despotic or otherwise – as it slowly renders the planet unliveable. Recognising this imperative, or some version of it, all nations renewed their pledges to the Paris goal at the Marrakech climate summit in December 2016. They called their collective action “irreversible”.  Key states, cities, companies, financial institutions, faiths and communities lined up in support. For example, California has targets stronger than many nations. More than a thousand cities are committed to 100% renewable power. So are more than 80 of the world’s biggest companies, in Google’s case as soon as this year. More than 600 financial institutions worth more than $5 trillion are pulling their capital out of fossil fuels.

Other investors are pressuring fossil fuel companies to invest more in clean energy, and their numbers are set to grow. The G20 Financial Stability Board’s Taskforce on Climate Related Financial Disclosure involves companies with market capitalisation of $1.5 trillion and financial institutions responsible for assets of $20 trillion. It aims to build a market in transition to a sub-two-degree world.

There is a long list of serious efforts like this, across multiple relevant sectors, in most countries. The action list doesn’t yet amount to a collective outcome under 2 degrees. But it represents a clear and robust direction of travel. It has caused PWC, among others, to conclude that President Trump’s impact on global greenhouse emissions – despite stacking the White House with an unprecedented crew of fossil-fuel defending billionaires and their supporters – will be “pretty small”.

 I set the global score on the climate dial as slightly positive. It would be more positive, had the scientific news from the climate itself not been so bad in 2016.

Second, energy. Turning this dial up requires being on course for a clean energy future both in order to address climate change and to escape the multiple ways that fossil fuels err humankind towards societal problems, including mass killers like air pollution, terrorism, and war.

The good news here is that a global energy transition from fossil fuels to clean energy is unfolding before our eyes, and fast, and not just because of serious intent in climate action. Solar and wind power will be the cheapest option in most countries within just a few years, and in some sectors and countries already are. Cheap batteries will soon be storing their electricity on a massive scale. Electric vehicles are on course to knock an entire category of oil use, diesel, out of the markets within ten years.

Meanwhile, as fast as the prospects for clean energy rise, those for fossil fuels fall. China has just cancelled more than 100 coal power plants, dozens of them already under construction. India says it needs no more coal in the next five years. The oil industry is struggling under a multi-trillion dollar collective debt mountain, with analysts increasingly giving up hope of long term profitability, even if oil prices rise. Investors unconcerned by climate change are abandoning them, and oil-rich Gulf states are drawing up plans for an an end to oil within five decades.

Trump may want to dig coal, but how can he do so when it is uneconomic compared to solar and wind? One in 50 US jobs is now in the solar industry, and the growth rate is accelerating: up a record 25% in 2016. Is he going to axe those jobs somehow? When 73% of his own voters support more solar and wind, according to a recent poll?

Accordingly, I set the dial on energy as distinctly positive. I summarise many more reasons for doing so in my blogs spanning 2016 and my book The Winning of The Carbon War.

Third, tech. Turning this dial up will require artificial intelligence and robotics to be applied with appreciable net benefits for society as a whole.

The development of AI and robotics is evolving even faster than clean energy. On one hand, profound social benefits are in prospect. Medical diagnosis is a good example. Computers machine-learning while using global databases are providing life-saving diagnoses that elude human medical experts. They are making it less difficult to hold criminals to account. The UK’s Serious Fraud Office used a crime-solving robot to plough quickly through the libraries of information necessary to prove systemic corruption in Rolls Royce. Control of electricity demand by AI in data centres is achieving remarkable emissions cuts in what is a large global point source of carbon dioxide. Such examples are plentiful.

But on the other hand tech leaders are openly worrying about the effect of exponential AI and robotics on jobs. In Japan, the government is looking to robotics to boost the national economy, and robots already outnumber humans in the kitchen of one restaurant. In the UK, banks are preparing to roll out robot tellers aiming to improve customer service via machine-learned empathic responses. In the US, the world’s largest hedge fund is working to replace managers with AI, including in HR and strategy roles. Wired, the magazine of choice for many in the digital world, concludes as follows: “The AI threat isn’t skynet. It’s the end of the middle class.”

Concern over job losses is fuelling a significant component of the anger expressed by the populist right. Meanwhile, the potential downsides of AI and robotics when it comes to authoritarian regimes do not need much imagining. In the wrong hands, uncontrolled, they can quickly amount to the perfect infrastructure for police states.

Thankfully, these dangers are being recognised by both scholars and practitioners. In 2016, Prof Steven Hawking and other luminaries published a letter pledging to ensure that AI research benefits humankind. In January 2017, hundreds of AI and robotics researchers developed 21 principles – the Asilomar Principles – for use of the new technologies. Principle 23 involves Common Good, and reads: “Superintelligence should only be developed in the service of widely shared ethical ideals, and for the benefit of all humanity rather than one state or organization.”

To ensure that, a global convention on the use of AI would seem like a good idea. It would offer an opportunity to build on the renewed confidence in multilateralism engendered by the Paris Agreement. The Asilomar Principles would be a good starting point for a draft. The fact is that we are wiring the world way faster than any consideration of public policy, legal, ethical, and human rights implications, and doing so just at the time demagogues are on the rise. Even mainstream analysts are pointing out that the demagogue currently occupying the White House could easily morph into a despot, and his early attitude to the US judiciary and press are more than consistent with this.

All this being the case, the net global score for the tech dial should probably be set slightly negative. This assessment excludes the role AI plays in the next theme. Including that would drive the score much higher. 

Fourth, truth. Turning this dial up will require tech to be used for improving the processes of liberal democracy, including quality and verifiability of information, and the transparency thereof.

The rise of demagogues has been much assisted by the explosion in 2016 and 2017 of so-called fake news, otherwise fairly describable as systemic lying in mass media. Famous examples of the falsehoods pushed on populations include Pope Francis supporting Donald Trump, and the UK Brexiteers’ insistence, contradicted by the UK Statistics Authority among others, that Britons “send the EU £350 million a week” that could be spent instead on the NHS. Analysis of both the UK Brexit vote and the US Presidential election shows how pervasive the problem has become. As Wired put it, in 2016 “the Mainstream Media melted down as fake news festered.” By August fake news about the US election was increasingly outperforming the top stories at the 19 major US news outlets.

One of the best forensic analyses of how this happens is by journalists at Scout. They describe four ways in which AI has been “weaponised” by organisations owned by conservative and alt-right interests, such as Cambridge Analytica, and leaders of the far right such as President Trump’s chief strategy advisor, Steve Bannon.

The first involves the marriage of big data surveillance and computational psychology. Cambridge Analytica has created a model on this basis that compiles individual predictive personality profiles for entire populations. Predicting a subject’s behaviour better than their partner could requires analysis of just 300 Facebook likes, so one expert professes. This before considering many other easily available analyses of online behaviour, and numerous sources of megadata that can be bought.

The second involves automated engagement scripts that prey on human emotions. The practitioners call this “behavioural micro-targeting” and it allows them to change behaviour on an industrial scale. In the US election, personally targeted ads were used extensively in key swing areas. These included Facebook “dark posts”, visible only to those targeted. Cambridge Analytica were able to monitor peoples’ responses, such as sharing on Facebook, and assess which messages were resonating, tuning advertising accordingly.

The third involves creation of propaganda networks that rapidly accelerate ideas. The purveyors of fake news have spent years building websites, and these now operate on a scale that allows gaming of search engine optimisation, including crucially at Google.

The fourth involves use of an army of bots – computer programmes that talk like humans on fake social media accounts – to echo fake news and police public debate, including by intimidating and suppressing the voice of the opposition.

The problem is going international, fast. Brexit-backer and Trump ally Arron Banks plans to launch a “news” site in the UK that aims to repeat the successes of US lie machines like Breitbart, the news agency founded by Steve Bannon. It will be pro-Brexit, pro-Farage, pro-Trump, anti-establishment, anti-open borders, and anti-corporatism. In the US, where rightist billionaires outnumber those openly supportive of liberal causes, figures like fossil-fuel tycoon David Koch are funding campaigns to smear prominent potential champions of counter views like Elon Musk.

Meanwhile, it is not as though rightist populism goes unfueled in the editorial suites of the mainstream media. In the UK tabloid press, it dominates. When judges ruled in November 2016 that Parliament should vote on Brexit, the Daily Mail published a front page headline “Enemies of The People”. Believers in functional democracy attack their independent judiciary at their peril.

This is all happening today. Tomorrow? Silicon Valley guru Peter Diamandis warns that within four years – by the time of the next US election – AI will be ten times more powerful, and will be being applied to 50 billion devices and a trillion sensors. Digital avatars will be photorealistic and fully programmable, able to have instant conversations with citizens. Picture standing in a taxi queue having a conversation with an avatar of a candidate on a screen. The operators of the sensors in the screen, having auto-identified you from facial recognition databases, will know from your profile if you are susceptible to any of their candidate’s arguments. They will know more about you than you do yourself. The candidate’s avatar will ask you a leading question, targeting your emotions. You respond. The candidate responds back in real time, with libraries worth of machine learning picking the answer used.

All this manipulation will be unfolding in a world becoming inexorably more permissive of mass surveillance.  In November, the UK legalised – barely noticed – the most extreme surveillance powers in the history of western democracy. As Ed Snowden commented at the time, the Investigatory Powers Act goes further than many autocracies. It was passed despite the fact that only a few weeks earlier the Investigatory Powers Tribunal had ruled that UK security agencies have been illegally collecting data for 17 years, in violation of the European Convention on Human Rights.

So much of this drama focusses on the creations of Silicon Valley, where company founders and employees have tended to favour the Democrats over the Republicans. What is the response there?

The pushback has begun, but it hardly amounts to a resistance consistent with the scale of the problem yet. Over 100 Silicon Valley firms have filed a legal brief opposing President Trump’s executive order banning travel from seven mostly Muslim countries. These include Apple, Facebook, Google, Microsoft and Tesla. Employees of tech firms rallied in their thousands against the ban. Customers projected an intense displeasure in the marketplace: tweets protesting Uber’s links to Trump pushed competitor Lyft ahead in downloads for the first time. Uber’s CEO felt the pressure so strongly that he resigned from Trump’s economic advisory council. But none of this has addressed the process by which Silicon Valley’s innovation with megadata is being hijacked by the far right yet.

Facebook founder Mark Zuckerberg is aware of the problem. In a 5,700 word Facebook post, he has endeavoured to chart a responsive course for his creation. It was met with scepticism. “Mark Zuckerberg’s Answer to a World Divided by Facebook Is More Facebook”, Wired concluded. Guardian tech correspondent Alex Hern, wrote a withering paragraph-by-paragraph dissection of it. Nikki Usher, Professor of new media and technology at George Washington University, concluded: “He might be in denial, because a lot of the rest of us are.”

All this considered, the global score for the truth dial, as things stand, must surely be set at net severe negative. Already. Far worse is eminently conceivable, in relatively short order, unless resistance can be marshalled effectively.

Fifth, inequality. Turning this dial up will require significant narrowing of the income gap, both within the developed and developing worlds.

Many analyses of the rise of the new demagogues show that rage over a widening income gap strongly influences those prepared to vote for them. The figures are shocking in America. Between 1970 and 2014, average income grew 77%, but almost all of these gains went to the top 1% of earners. Elsewhere, elites have also allowed disproportionate self enrichment to run rife. Globally, the 8 richest people own the same wealth as the poorest 50% and the richest 1% own more than the other 99%. Every year at the World Economic Forum, attendees openly worry about the unsustainability of these figures, and the social divisiveness they create. Yet each year they do precious little about it.

Efforts to reduce inequality have seen some limited success at the bottom of the wealth league table. The percentage of people in extreme poverty – those earning under $1.90 a day – is falling in all regions of the world. But it must fall far faster if the World Bank is to hit its target of eliminating extreme poverty by 2030.

The global score for the inequality dial as things stand, must be set at a clear net negative.

 Sixth, reform. Turning this dial up will require much more attention to market failures.

 The need for significant reform of capitalism has been widely acknowledged since the financial crisis of 2008. The absence of it has been the subject of rage even in the conservative press. One Daily Mail headline in June 2012 exhorted “Put Bankers In The Dock”. The virtual absence of legal redress for financial malfeasance, even in the case of companies and executives with hands caught jammed in the till, has undoubtedly contributed to the rise of the populist right and the demagogues they support.

In the US, the Dodd-Frank Act went some way to introducing checks and balances on Wall Street. Having railed against the excesses of bankers in his campaigning, Trump in office wants to roll back even that.

With the advent of the VW “dieselgate” scandal, and the prospect of multiple executive jailings for the systemic fraud involved, it may be possible that the tide could beginning to turn. But many of the proposals put forward for re-engineering of modern capitalism in the wake of the financial crisis, even by pillars of the capital markets, have gone by the wayside. Bonuses in the UK today are even bigger, in real terms, than they were pre financial crisis. World debt has been allowed to balloon to more than $150 trillion, a record. Out of control bonuses and mountainous unsecured debt were two of the main triggers of the 2008 global financial crisis.

The global score for the reform dial, as things stand, must accordingly be set at clear net negative.

Seventh, conflict. Turning this dial up will require a proliferation of common security in the world

We live in a world where superpowers are fighting wars by proxy. Russia & Syria stand accused of deliberately “weaponising the refugee crisis” – as one NATO official has put it – in an effort to destabilise Europe. Meanwhile the superpowers are probing each others’ cybersecurity with increasingly sophisticated malware. Pointers to the pervasiveness of this new form of conflict bubble to the fore from time to time. In January 2016, hackers shut down the Ukrainian power grid. Kiev accused Russian special forces. The malware involved had previously infected power suppliers in the US and Europe, without shutting down supply. It is widely suspected that malware sits waiting to be triggered throughout infrastructure in the superpowers. Given the fragility of US electricity grid infrastructure this should be a particular concern. The three US grids are aged, with large power transformers on average 40 years old. The US suffers more blackouts than any other developed nation.  Centcom Commander General Lloyd Austin has said of the grids’ susceptibility to attack: “it’s not a question of if, it’s a question of when.”

The CIA, NSA and FBI have all concluded that Russia tried to influence the US presidential election in an effort to get Trump elected. We can only imagine what they know of Russian hacking of trojan horses into the US power grid.

For their part the Russians have to fear American capabilities too. An attack on Russian bank Sberbank in late 2014, for example, hints at the vulnerability of their capital markets. It spooked depositors into withdrawing $20bn in one week.

Other states would appear to be playing the same kinds of games. Saudi Arabia has blamed Iran for serious cyber attacks on its aviation authority and on four other unnamed bodies.

Dangerously destabilising as these proxy conflicts are, the potential for cyberattack on the world’s nuclear weapons, and their aged software support, hardly bears thinking about. The reduction in global warhead inventory from around 70,000 in the mid 1980s to some 15,000 today has been a somewhat positive feature of the years since the cold war. Yet both Putin and Trump have recently said they want to “strengthen” their nuclear weapons stockpiles.

The global score for the conflict dial, as things stand, must be set at a manifest net negative.

This completes my survey of the state of play on 20th February 2017. I will continue to review the evolving drama periodically from here on. In a subsequent blog, I will examine options for an integrated global plan aiming to tip all the seven dials into net positive territory, en route to an appropriate civilization, and away from the new despotism. I need hardly add that the challenges involved in so doing will be without precedent. But there is nothing in the sum of human affairs that is more important.


Posted in Blogs

G20 climate risk report is a wake-up call for fossil-fuel investors


My latest for Recharge:

It is rare for a report to hold the potential to change the world, but one study published last month may do just that. The Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD — a group of experts assembled by the G20’s Financial Stability Board) aims to give investors, lenders and insurers visibility of how climate-change risk will affect individual businesses, and a road map for reacting to it.

The report presents the results of a year of deliberations by 32 representatives of companies with a combined market capitalisation of $1.5trn and financial institutions responsible for assets of $20trn. Their intention is for the capital markets to behave consistently with the aims of the Paris Agreement on climate change — ie, to progressively retreat from fossil fuels, and increasingly favour clean-energy investments such as wind and solar.

A reminder of the background. The target of the Paris Agreement, agreed by every independent nation on the planet in December 2015, is to keep global warming at less than 2˚C. If society is to do that, most reserves of fossil fuel will have to stay underground, unused. Since companies view all reserves as having financial value, this means a risk — should governments do what they promised to do in Paris, or some it — of what investors call “stranded assets”: having money invested in a resource that you then can’t use. Investing more money to add to this stock of potentially unburnable reserves creates what can be thought of as a “carbon bubble”. The risk of stranded assets is growing with every decision made by fossil-fuel companies to invest in yet more unnecessary fossil-fuel projects: new coal mines, new oil and gas fields, new fracking, new fossil-fuel power plants, and so on.

The Bank of England awoke to this issue as a systemic risk in September 2015. After listening to arguments by Carbon Tracker, a financial think-tank I chair, and other worried financial experts, they came to fear that fossil-fuel asset-stranding could threaten global financial stability.

The effort to stop this threat soon went international. The G20’s Financial Stability Board set up a taskforce in December 2015 with a brief to specify the information investors need to be provided with in order for them to avoid stranded-asset risk. It is chaired by no less a figure than Michael Bloomberg.

Key players in the capital markets quickly began seeing writing on walls. For example, ratings agency Moody’s said it will be using the Paris Agreement in future credit assessments of companies. Suncor, the biggest oil producer in the Canadian tar sands, has been talking to the Canadian government about being rewarded for leaving some its reserves untouched underground.

As soon as the report came out on 14 December, more than 30 organisations — including Aviva, AXA, BHP Billiton, JPMorgan and Daimler — announced their support for its conclusions. Many more will surely follow, because the starting point in the TCFD’s proposed road map is that companies should include climate-related financial disclosures in their public financial filings. Not to do so would be to ignore material risks to organisations, the Task Force professes.

Those disclosures should span the core elements of how organisations operate: governance, strategy, risk management and the setting of metrics and targets. Crucially, the TCFD advocates that companies should align business models with a 2°C future. Remuneration of chief executives and boards should be linked to the extent to which their companies are hitting targets aimed at a sub-2°C world, the taskforce says.

Even before the Paris Agreement was adopted last year, climate risk was high on the agenda of the world’s largest institutional investors and asset managers. Resolutions asking oil and gas companies to stress-test their business models against a 2°C-consistent climate outcome were generally opposed by boards, but received record-high support levels from shareholders. Now there will be no hiding place. The TCFD report provides a template for best practices and a road map for better disclosure that fossil-fuel companies and asset managers will find hard to ignore.

Some investors have not waited for the taskforce’s advice. By the time of the Paris climate summit, investment funds with collective assets of $3.4trn had either divested from all or some fossil fuels, or announced their intention to.

This movement continued to grow in 2016. Last month, the value of funds divested passed $5trn. Some 80% of the funds involved, spanning 688 institutions, are managed by commercial investment and pension funds.

This shows that the campaign is now mainstream in the capital markets.

One of the most notable divestors is one of Sweden’s state pension funds, AP4, which is not just divesting its $14.5bn equity portfolio, but is deliberately reinvesting some of the proceeds in low-carbon funds.

What next? I predict a snowball effect, and much drama on Wall Street — much of it to the great benefit of the renewables industries.

Posted in Change for Good

Two heart-warming competitions aiming to accelerate the revolution


In an era of populist leaders prepared to ignore both the clean energy revolution and the imperatives for it, favouring wilful denial and incumbents that are uneconomic or soon to be, companies and governments with eyes open face much greater leadership responsibilities than they would have in a world unified by respect for the rational. One of their options in this role is the staging of competitions to reward front-running revolutionary innovators. Let me describe two such competitions, under way at the moment, that I am exciting by and involved in.

DSM is a global science-based health, nutrition and materials conglomerate which began life as a miner of coal, among other things – DSM originally stood for Dutch State Mining – and is now one of the world’s front-running transnational corporations not just on climate change but sustainability across the full spectrum. That journey in itself is an inspiring story, but if you want to be truly inspired (and based on my own experience, shaken up emotionally) watch this short film of what DSM believes science can do for the state of the modern world.

I am proud to be a consultant to this company, and that two solar organisations I founded, Solarcentury and SolarAid, are partnered with them and others in the Bright Minds Challenge. This is a competition that seeks to reward entrepreneurs with renewable energy solutions that are ready to scale, with a specific focus on solar and energy storage solutions. Applications close on 1st February and the winner is announced in June. The prize is in kind: a basket of expert help aiming to turbocharge the winner. Here is what innovators at Solarcentury have to say about it all.

The Start Up Energy Transition Award is an initiative of the Germany government. This competition seeks to create a platform with a clear focus on scaling up innovation to make global energy transition a success while speeding up efforts against climate change. It aims to identify the most promising start-ups worldwide working on energy transition, and offers a different prize model: 5-digit prize money in each of the 5 categories. Applications close at the end of January, and the winners will be awarded at the Berlin Energy Transition Dialogue in March 2017. This is a key event in the climate calendar for the coming year, especially given Germany’s chairmanship of the G20. It is organized by the Ministry for Economic Affairs and Energy (BMWi) and the Federal Foreign Office (AA). I am proud to be an ambassador for it, and for SolarAid to be a partner.

So if you are a clean energy innovator reading this, or if you know of someone who is, you have three weeks to get applications in, if you haven’t already. And of course, the great thing about these competitions is that positive outcomes can transpire even if you don’t win. The key thing about revolutions is to act. If you do that, you create the space for good things to happen.

We are all going to need a lot of good things to happen, to countervail the bad that we seem locked into, in the year ahead. As such, both these competitions are microcosms for hope.

Posted in Blogs

State of The Transition, December 2016: As fossil fuel diehards take over The White House, the evidence of a fast-moving global energy transition has never been clearer


As captains of the fossil fuel industries and their lobbyists prepare to take over the White House – appointed by a President elected by a minority, claiming to represent the people on an anti-elite ticket yet possessing by far the highest cumulative wealth of any cabinet ever – they will face evidence breaking out all around them of a fast-moving global energy transition threatening to strand the fossil fuels they seek to boost.

“World energy hits a turning point”, a Bloomberg headline read on 16th December. “Solar power, for the first time, is becoming the cheapest form of new electricity,” the article marvelled. Analysis of the average cost of new wind and solar in 58 emerging-market economies – including China, India, and Brazil – showed solar at $1.65 million per megawatt and wind at $1.66.

Google leads the giant corporations eagerly going with this flow. The largest corporate buyer of renewable energy announced on 6th December that it expects to hit its target of 100% renewable power in, wait for it, 2017. Google is a huge consumer of power, and going solar means deep emissions cuts, especially when solar infrastructure is hooked up with all the digital efficiency-enhancement fandangoes that Silicon Valley giants are zeroing in on in the fast emerging era of artificial intelligence in an internet of things.

Google’s emissions reductions will be meaningful even considering full product life cycles. Solar panels made today pay back the energy used to make them in little more than a year, a Belgian research team from the University of Louvain reported in December. “For every doubling of installed photovoltaic capacity”, Atse Louwen and his colleagues write, “energy use decreases by 13 and 12% and greenhouse gas footprints by 17 and 24%, for poly- and monocrystalline based photovoltaic systems, respectively.” This means that solar panels now return more energy than American oil: an average energy-return on energy-invested of around 14 (and rising) versus around 11 (and falling).

This is excellent news not just for rich Californians but for the developing world, where “solar lanterns and rooftop photovoltaics are becoming the energy of choice”, so Bloomberg reported. In India, “the millions not connected to the grid may never connect” now, dooming much coal to be stranded underground in the process. The cumulative market of new Indian households accessing small-scale energy is potentially 200 gigawatts, with only a tiny fraction currently served.

In Myanmar the government needs no further persuasion: it announced plans to bring solar to all as soon as 2030.

The technical advances in batteries and electric vehicles also became ever clearer in December. “Diesel faces global crash as electric cars shine”, the Financial Times announced. According to a UBS report, this whole category of oil use will be gone from the global market within ten years.

The positives of EVs synergise with the negatives of air pollution to create a perfect storm for diesel. At the C40 cities summit, Paris, Mexico City, Madrid and Athens all vowed to ban diesel vehicles by 2025. In China, the worst air pollution this year put 24 cities on red alert, with schools shut and flights grounded. Half a billion people were affected by this “airpocalypse”. In Chengdu, protestors took to the streets, putting smog masks on statues in the city centre. A heavy handed response by the police suggested that the government is super-sensitive to this issue.

Which is not to say that the Chinese authorities aren’t trying to abate the problem at source. I have summarised their rapid advances in renewables in earlier monthly reports. This month, a presentation in London by Zhang Gang, Counsellor of the State Council of China, revealed that China’s efforts to use electricity more efficiently, cutting the need for coal, now involve 317 million smart meters in operation across 100% of urban areas and 70% of rural areas. These are hooked up in smart co-ordination, spanning all aspects of grids, at all scales, in a vast project involving 230 million users. Part of this co-ordination involves China’s first expressway fast-charging EV network, stretching for 1,262 km between Beijing and Shanghai.

No other country comes remotely close to this kind of smart-grid deployment. On 12th December, the International Energy Agency issued a report concluding that China’s coal fired power plants “make no economic sense”. Small wonder.

India is on a similar rapid transition path. On 12th December the Central Electricity Authority announced that India does not need more coal-based capacity addition until 2022. The Authority now plans for non-hydro renewables to meet 43% of electricity as soon as 2027. Such an ambition would have been inconceivable until recently. On 20th, Bloomberg analysed the widening gap between projected and actual demand in the world’s third largest emitter, and put their conclusion in an encouraging headline: “India’s energy forecasts are falling short and climate could win.”

What are investors to make of all this? Well, it is rare for a report to hold the potential to change the world. But one published on 14th December did. The Recommendations of the Task Force on Climate-related Financial Disclosures  (TCFD) aim to give investors, lenders and insurers visibility of how climate-change risk will affect individual businesses, and a roadmap for reacting to it. The report presents the results of a year of deliberations by 32 representatives of companies with market capitalisation of $1.5 trillion and financial institutions responsible for assets of $20 trillion. Their intention is for the capital markets to behave consistently with the aims of the Paris Agreement on climate change, which is to say progressively retreat from fossil fuels, and increasingly favour clean-energy investments, not least renewables.

A reminder of the background. The target of the Paris Agreement, agreed by every independent nation on the planet in December 2015, is to keep global warming at less than 2˚C. If society is to do that, most reserves of fossil fuel will have to stay underground, unburnt. Since companies view all reserves as having financial value, this means a risk – should governments do what they promised to do in Paris, or some it – of what investors call “stranded assets”: having money invested in a resource that you then can’t realise.  Investing any more money to add to this stock of potentially unburnable reserves creates what can be thought of as a “carbon bubble”. The risk of stranded assets is growing with every decision made by fossil-fuel companies to invest in yet more unnecessary fossil fuel projects: new coal mines, new oil and gas fields, new fracking, new fossil fuel power plants, and so on and so on.

The Bank of England awoke to this issue as a systemic risk in September 2015.  After listening to arguments by Carbon Tracker, a financial think tank I chair, and other worried financial experts, they came to fear that fossil-fuel asset-stranding would risk wasting a lot of investment capital, and might even threaten global financial stability.

The effort to stop this threat soon went international. The G20’s Financial Stability Board set up a taskforce in December 2015 with a brief to specify the information investors need to be provided with in order for them to avoid stranded-asset risk. It is chaired by no less a figure than Michael Bloomberg. As soon as his Task Force’s report came out out, more than 30 organisations – including Aviva, Axa, BHP Billiton, JPMorgan and Daimler – announced their support for its conclusions. Many more will surely follow, because the starting point in the TCFD’s proposed roadmap is that companies should include climate-related financial disclosures in their public financial filings.  Not to do so would be to ignore material risks to organisations, the Task Force professes.

Those disclosures should span the core elements of how organisations operate: governance, strategy, risk management and the setting of metrics and targets. Crucially, the TCFD advocates, companies should align business models with a 2°C future. Remuneration of chief executives and boards should be linked to the extent to which their companies are hitting targets aimed at a sub-2˚C world.

Even before the Paris Agreement was adopted last year climate risk was high on the agenda of the world’s largest institutional investors and asset managers. Resolutions asking oil and gas companies to stress test their business models against a 2°C-consistent climate outcome were generally opposed by boards, but received record-high support levels from shareholders. Now there will be no hiding place. The TCFD report provides a template for best practices and a road map for better disclosure. Neither fossil fuel companies nor asset managers investing in them will easily be able to ignore it.

Some investors have not waited for the G20 Task Force’s advice. By the time of the December 2015 Paris climate summit, investment funds with collective assets of $3.4 trillion had either divested from all or some fossil fuels, or announced their intention to. This movement has continued to grow in 2016. On 12th December the value of funds divested passed $5 trillion. 80% of the funds involved, spanning 688 institutions, are managed by commercial investment and pension funds. This shows that the campaign is now mainstream in the capital markets. Capital is fleeing fossil fuels just as the fossil fuel industries manoeuvre their capos into the White House for the first time.

What damage can a Trump administration do to this analysis? According to a PWC report this month, the impact they can have on global greenhouse emissions will be “pretty small”, if others hold course. With the trends I have chronicled each month in 2016, and the declaration by all governments in Marrakech in November that the Paris process is “irreversible”, a holding of course seems a more than a reasonable assumption.

Trying to derail Paris, and revive coal, Trump will have to somehow suppress the progressive American states. His problem is that 33 states and the District of Columbia have cut carbon emissions while expanding their economies since 2000, including some Republican states. How do you persuade officialdom in those states to revert to a failed economic model that seeks essentially to recouple economic growth and fossil fuel use? Fifteen of the states, led by California, New York, Virginia, Vermont and New Mexico, have already told Trump that if he tries to kill US climate plans, they will see him in court.

How has Big Energy coped on the transition frontier as 2016 came to a close? Two snapshots. The utility industry continues to be split into companies seeking to defend the fast shrinking status quo, and those now rushing to be part of the new world. One of the latter, Engie (formerly GdF Suez) announced that it sees the oil price falling to $10 as a result of current trends in energy markets, and the wave of clean-energy investments it and other major corporates are making. That would be interesting, should it transpire. For example, on 1st December BP gave the green light to a $9bn investment in a deepwater oilfield, rather appropriately named Mad Dog 2, due onstream (cue laughter, based on the industry’s record of delivering major projects on time) in 2021. Good luck to them in recouping their investment if Engie’s view of the world comes to pass.

My conclusion, as the new year begins, is that the global energy transition is progressing faster than many people think, and is probably irreversible. Trump’s prospects of resurrecting coal, and giving the oil and gas industry the expansionist dream ticket most of it wants, are very low.

There is a caveat, of course: that he doesn’t manage to blunder into a world war. All bets would be off then.

In 2017, I will consider this wider security question in my summaries, plus the issues of cybersecurity and fast-emerging artificial intelligence and robotics. For they have all now become clearly relevant to the ultimate outcome of the great global drama in the energy-climate-data nexus.

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State of The Transition, November 2016: Steps forward continue to outnumber steps back, notwithstanding the Trump election. But.


The global energy transition remains in a state of net forward momentum as of the end of November. However, evidence that the society is in danger of reaching its eventual target of complete or near-complete energy decarbonisation too late to save the planet from runaway global warming was particularly clear this month. As if we didn’t know it before the events of November, this is going to be a tight race.

The Paris Agreement, a global decarbonisation pact adopted by every independent nation on Earth, entered into force on November 4thI summarised the state of play in international climate politics, as it stood after the Marrakech climate summit, in a blog on November 21st. In essence, every government but the Trump regime-in-waiting sees the Paris process as “irreversible”. In the Marrakech Declaration 195 of them essentially told the climate-denying President-elect that he will lead a rogue state in a minority of one on the climate issue if he walks away from the treaty.

360 US companies wrote to Trump adding that withdrawal from the Paris accord would put US prosperity at risk. Corporate front runners around the world this month performed consistently with such an analysis. In Europe, notably, Dong Energy profits soared in the third quarter as a result of successful offshore wind projects and the selling off of their gas grid. The company began life as Denmark’s national oil company. This month their CEO, Henrik Poulsen, announced Dong’s intention to divest all remaining oil and gas assets and focus just on renewables, mostly offshore wind. The company sees “strong investor demand”, Poulsen said.

One example of that was HSBC’s UK pension scheme investing £1.85bn in a fund recently established by the UK’s largest fund managers, LGIM, with no coal, reduced oil and gas exposure, and a focus on low carbon investments. Said LGIM’s head of sustainability, Meryam Omi: “This is a powerful message that we are sending to companies that they need to step up to meet the challenges of moving to a low carbon economy.” The chief investment officer at HSBC’s UK pension scheme, Mark Thompson, added that this would be “the new normal.”

Another mover in this general direction is the UK’s National Grid, which is disposing of its UK gas grid, recognising the rapid expansion of renewables, and making investments in batteries and smart meters accordingly. CEO John Pettigrew says that “2015 was the last year we operated the system in the way it has operated for the past 50”, with coal power plants being paid to meet peaks of demand. Now adjustments focus on paying companies to reduce demand. Soon, in a country where solar generation has exceeded coal for months at a time of late, batteries and smart meters will add to the capability to keep lights on and emissions down.

In America, Tesla shareholders voted through a $2.6bn merger deal with SolarCity, approving CEO Elon Musk’s vision by an 85% majority, despite Wall Street scepticism. Musk has now created the world’s first EV-battery-solar conglomerate. Others will not be far behind, I predict. In October Mercedes-Benz unveiled its latest EV at the Paris Motor Show, and parent Daimler announced it will be building a €500 million battery factory in Germany. In November Mercedes-Benz announced plans to introduce a residential energy storage product to the US market in 2017, and set up a new energy company, Mercedes-Benz Energy Americas, to market it.

The writing on the wall when it comes to electrification of road transport can be seen in a regular flow of announcements these days. Notably this month, Daimler joined with VW, BMW and Ford to announce a €1 billion project to build 400 EV charging stations, a staging post to the thousands they and other EV converts envisage across Europe.

As for where the electricity comes from for EVs going forward, renewables seem set to win on simple economics. In some southwestern American states, new wind farms can be built today for just $22 a megawatt-hour and solar projects are less than $40 a megawatt-hour. The average lifetime cost for US natural gas plants is $52 and for coal $65. Trump may want to dig coal, but who is going to pay to burn it?

All this may seem obvious to converts to renewables in the utility industry. But most of the oil and gas companies continue to dig in and try to find ways to justify and defend the status quo. Shell boss Ben van Beurden is among the oil leaders who are lobbying for a major role for gas far into the future. He came out with a remarkable example of tunnel vision this month. The ability to make money from renewables “has been remarkably absent”, he told a conference in Paris. In attendance was the CEO of Saudi renewables developer Acwa Power, Paddy Padmanathan. “I did talk to him for a few minutes as he was leaving to point out that we are investing and we are making profits,” Padmanathan said. “And we are making profits with solar energy priced at $0.05 per kWh.”

Sometimes one has to wonder about the kind of advice people like van Beurden are getting. Why would he discount the developments at Dong Energy, for example? That former-oil-and-gas now-renewables company undermines every oilman who likes to say that oil companies cannot profitably entertain major changes in their business model.

And of course the oil industry hardly stands up to close inspection when it comes to profitability, as my blogs spanning 2016 have chronicled. As the Wall Street Journal has put it, oil companies are “binging on debt” – not least Shell – and often borrowing money just to pay dividends.

As well as increasingly unattractive economics, the oil and gas industry faces a burgeoning catalogue of environmental problems. Previous blogs this year amount to a depressing story, notably when it comes to gas leakage. In November, one little noticed development was particularly instructive of the winds of change, I would suggest. In Monterey county, California, the citizens voted on November 9th to ban fracking completely. There have been other such bans, both in the US and abroad. Two things made this one singular. First, Monterey is a county long extolled as a major oil target. Second, the oil and gas industry engaged in a multi-million dollar lobbying blitz to defeat the proposed ban. My prediction is that there will be ever more of this kind of adverse citizen reaction to their routine operations around the world, as the clean energy transition becomes ever more tangible and credible to the public, and as the environmental problems routinely associated with oil and gas operations become ever more exposed.

But now comes the fate-of-civilisation question. Will the continuing collage of progress that we have seen in November, as in all the other months of 2016, be enough to beat the climate change clock? This month the North Pole reached a scarcely credible 36 degrees F (20˚C) warmer than normal for the time of year, with the extent of Arctic ice at an unsurprisingly record low. This sits most uncomfortably alongside UNEP’s warning to the world this month, in its Emissions Gap report, that nations will have to go much further with emissions reductions plans than they have, before 2020, if there is to be any chance of keeping below the 1.5˚C global warming that the Paris Agreement aims at. Even 2˚C, the upper limit of ambition, is very questionable.

Yet China is still burning way too much coal, according to reports in November by Bloomberg, Carbon Tracker, and others. At the same time, it has scaled back solar and wind ambitions. With Trump in the wings, the world needs Chinese leadership badly. As I describe in The Winning of The Carbon War, there has been much evidence of that since 2014: China has worked very closely with Obama’s America both in delivering the Paris Agreement, and shepherding it into force. Now they have to go it alone.

The same disparity between Paris commitments and policy action can be found in Europe, where, for example, officials are mulling removal of priority access for renewables to the grid ahead of other forms of energy. In the UK, the numbers of civil servants working on climate has been cut, even as the government bends over backwards to support shale drillers and waste billions attempting a nuclear renaissance.


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State of The Transition post-Marrakech: Unity is strength as the “irreversible” climate train rolls towards Trumpism


My latest for Recharge:

Donald Trump’s would be climate saboteurs might have hoped that merely the mention of their intention to quit the Paris Agreement would be enough for the climate talks to fall apart at the annual climate summit in Marrakech. Exactly the reverse happened: the rest of the world pulled together. In the second week, with ministers and some heads of state in attendance, nations strengthened their collective resolve to decarbonise global energy. 195 countries issued a Marrakesh Action Proclamation reaffirming the Paris Agreement, the urgent imperative for it, and the speed of the energy transition in the real economy. They spoke of their “urgent duty to respond” to the threat of climate change, and agreed that “momentum is irreversible – it is being driven not only by governments, but by science, business and global action of all types at all levels.”

 Key countries pledged their commitments in similar vein. China spoke of a “a global trend that is irreversible”. Russia said they will stick the treaty “even if others don’t.” No major country disagreed, not even Saudi Arabia. Eleven countries elected to send the clearest of messages to Trump Tower by ratifying the treaty during the summit, including two that could easily have used the incoming Republican regime as an excuse for foot dragging, the UK and Australia. A group of 48 countries known as the Climate Vulnerable Forum, determined to shoot for a 1.5˚C ceiling to global warming, pledged to meet 100% of their energy from renewable sources as soon as they could.

 “Marrakesh sends out strong signal on climate change” read the headline in the Financial Times on the final day. “UN delegates determined to push through Paris accord despite Trump vote”.

 The Paris summit in December 2015 was about targets. Marrakech was about plans. Germany assumed leadership with a sector-by-sector plan for decarbonisation by 2050. “By 2050, the whole German economy will be fully renewable”, Jochen Flasbarth, State Secretary at the Environment Ministry announced.

 The US, Canada, and Mexico joined Germany in tabling plans for deep cuts by 2050: the US and Canada by 80% from 2005 levels, and Mexico by 50% from 2000 levels. They are the vanguard of a “2050 Platform” group, launched at the summit, who have pledged to follow with plans through 2050 soon. They include Colombia, Costa Rica, Peru, UK, Marshall Islands, Sweden, EC, Chile, Norway, Mexico, Italy, New Zealand, Japan, Ethiopia, Switzerland and France.

 Trump may simply drop the US plan, but many of his states and companies won’t. This is the big difference from the previous time the US became a rogue climate state, in 2001, when George Bush pulled out of the Kyoto Protocol. Then, many big businesses remained to be persuaded that climate change was a significant threat. Not so today. 360 US businesses urged Trump not to back out of the Paris agreement. DuPont, Hewlett Packard, Kellogg, Mars, Nike, Starbucks and other well known brands all agreed that “failure to build a low-carbon economy puts American prosperity at risk”. 196 companies joined governments in the 2050 Platform. Over $100 trillion in investor assets now acknowledges the reality of climate change.

 As for the states, California, Vermont and Washington state all sent delegations to Marrakech. California, the sixth biggest economy in the world, is considering applying to join the Paris Agreement should the federal government pull out. 10-12 US states, representing 30% of the US economy, are set to actively oppose Trump’s plans to quash climate laws, according to a Californian delegate.

 Trillium Asset Management CEO Matt Patsky summed up the Marrakech summit well. “The train has left the station”, he said, “and to stand in its way is folly”.

 Will Trump commit such folly? We will see. The renewables industries will be among the many on the train looking down at him on the tracks, should he and his appointees choose to stand there.

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Trump’s win will slow climate action and renewables, but as the reactions at COP 22 show already, he will fail in his fossil promises


My latest for Recharge:

The unexpected election of Donald Trump is undoubtedly a setback for the international climate talks and the renewables industries. The shock dominated the first week of COP 22, the first annual meeting of the nations party to the Paris Agreement, in Marrakech. But by week end the message was clear. The rest of the world will march on towards emissions cuts and clean energy. Trump’s administration risks isolation if it presses ahead with plans to walk away from Paris commitments and renewables, and go all out for fossil fuels.

The nations that joined with Obama’s US to drive the Paris climate treaty through in December last year, the so-called High Ambition Group, issued a clear statement. “The Paris Agreement marks a turning point toward a more prosperous and stable world”, it said. “Acting on climate change is in all of our national interests – it is good for our environment, good for our economies, and good for our climate security. Our commitment to be climate leaders remains steadfast.” EU commissioner Miguel Arias Canete joined with ministers from Mexico, Germany, Norway, Sweden and a group of the world’s poorest nations in relaying this.

China was equally clear at a press conference. “Our policy is that our actions will not be impacted by a new US government. We would continue to be an active player,” said Gu Zihua of the Ministry of Foreign Affairs. Global carbon cutting efforts would continue whatever Trump’s stance on the UN deal, said Chen Zhihua, a representative with the National Development and Reform Commission, China’s main economic agency.

Saudi Arabia took their side. “History shows that climate action is global in nature. Universal participation will enhance its ambition”, said one of their delegation.

The world has been here before with its stongest superpower and the less than half of its voting population that errs to the right. Newly elected President George W. Bush walked away for an earlier climate agreement, the Kyoto Protocol, in 2001. What did the rest of the world do? Met in Marrakech, at the seventh annual climate summit (COP 7) and decided to go ahead with the treaty minus the USA. That historic multilateral decision was essentially the kick-off point for global renewables growth since.

China, India, and Germany will be particularly key players now. We will see what China and India have to say next week, when ministers arrive in Marrakech. But the Germans have already made it known they intend to unveil an ambitious plan for 2050.  This will up the German target to emissions cuts of between 80 and 95%, a goal that entails a phase out for their coal sector. It will include 2030 sector targets for the power, buildings, industry, transport and agriculture sectors. They intend a strong leadership signal for politicians, and investors.

Trump has pledged to revive the US coal industry. He will struggle even to keep today’s depressed production flat, as Bloomberg pointed out this week. Coal industry leaders themselves agreed with this: gas is simply too cheap, and renewables are rapidly heading the same way.

Coal workers were key to his election in swing states. They are heading for disappointment. And if Trump is not aware that American solar and wind workers outnumber coal, oil and gas workers combined, with more than 100,000 working in renewables even in oil’s Texas heartland, he will soon find out.

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“Something post-colonial”: As Mrs May pitches UK plc in India, my eye witness account of Mr Cameron’s equivalent trip. …And that was then.


Extract from The Energy of Nations: Risk Blindness and the Road to Renaissance, 2013

New Delhi, July 2010.

 The bus weaves miles across the far fringes of Heathrow’s tarmac with CEOs and chairmen clinging to straps like tourists being driven to a charter flight. We reach a souped-up portacabin labelled the Queen’s Suite, and after the quickest check in I have ever experienced, board a BA jumbo jet, chartered by Her Majesty’s Government for their trade mission to India.

We land en route in Istanbul, and there pick up David Cameron. As we wait for him, I chat to Vince Cable, the Business Secretary. I bring up peak oil. He tells me he doesn’t believe the below ground arguments on supply constraint, and is much more worried about above ground factors. I remind myself that he was once Chief Economist at Shell.

Flying over Iran, I stand talking to the former Chief Scientist at the Ministry of Defence. He assures us Iranian anti-aircraft missiles can’t reach this high. If they could, and they fired one, they would make one hell of a story. A Prime Minister and half a dozen ministers are aboard, not to mention 29 captains of industry. Or perhaps more accurately, 28 captains of industry and me.

Dehli. A meeting at the Indian Chamber of Commerce. Almost the entire UK business delegation sit’s across a very long table from just four Indian civil servants. We hear the most senior Indian describe his government’s plan for 10% GDP growth every year until 2020. It is painstaking, impressive in a way.

If you do that, I sit thinking, and China does something similar, and you keep going after coal the way you are, then you compound the greenhouse gases the rich nations have already pumped into the atmosphere and we lose a liveable future. It’s as simple as that.

But the discussion focuses on how the two nations might collaborate, to mutual benefit, in the search for the 10% growth. This mission is all about access for UK plc to the mass markets of the rising Indian middle class.

There are several bank bosses in the room. The Barclays CEO, John Varley, launches into a pitch for the Indians to open up their financial services markets to British banks.

I study an ink mark on the table in front of me. I wonder what would happen to me if I said out loud what is in my mind.

Do you think they are crazy?

I risk a look at the Indian civil servants. They are doing fairly well as diplomats, but nonetheless unspoken words are written all over their faces.

Do you think we are crazy?

There is something post-colonial about this whole exercise. I can feel the resentment just below the surface in almost all the Indian officials and business people I talk to.

In a small meeting on solar, it surfaces. The Indian environment minister, Jairam Ramesh, and his British equivalent, Greg Barker, lead a condensed discussion. Half a dozen or so business people on each side are able to make short statements. I am one of them. The ministers then sum up.

Greg Barker does the best job he can, in the circumstances.

Jairam Ramesh has a reputation for being blunt. He ends the meeting by telling Barker that he shouldn’t be under any illusions that the UK’s colonial past gives us any special rights in access to Indian markets.

We get delegations coming here all the time, Ramesh says. He names a few countries that have been in town recently.

You have to tell us what your unique selling points are, he continues, with a didactic edge. I haven’t heard any. Other than perhaps this gentleman’s solar rooftiles.

He points at me.

I could quite see those on the rooftops of Indian cities, he adds.

I counsel myself against getting excited. I have seen enough to know what Ramesh is probably thinking.

So long as they are made in India.

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State of The Transition, October 2016: As the Paris Agreement enters into force, momentum in the great energy system change continues to outpace setbacks


Today the Paris Agreement on climate change comes into force, defying doubters the world over. Many said a decarbonisation treaty could never be negotiated. In December last year it was, and every independent nation on the planet adopted it. Many thought it would not be signed in critical mass. In April it was, by 175 nations, more than any other treaty in history. Many then doubted it would be ratified by enough nations to come into force. It was: amazingly, less than a year after its adoption.

The post-Paris climate negotiations should not be viewed as a stand alone process. They take place in a world where three pertinent megatrend meta-narratives all pump wind into the sails of climate diplomacy. No one on its own would be enough to force the global energy transition underway now: it is the power of all three, acting in parallel and synergy across the full breadth of the climate-energy-information nexus, that drives the system change. First, society is awakening in critical mass to the twin threats of climate change and air pollution, and responding. Second, an energy insurgency is disrupting traditional energy markets fast. Third, the energy incumbency is facing an array of serious problems not always related to the other two megatrends. I summarise the emerging course of these megatrends each month on my website. In among all the positive developments are inevitable setbacks, but the net outcome is that the three megatrends have whipped up a fair wind in every month of 2016. My summary for October and early November follows.

The UN landed two more multilateral agreements that build on Paris. An aviation pact on global warming won support from both airlines and 200 governments, and a global deal to limit use of hydrofluorocarbons also crossed the finish line. Climate diplomats go to their annual climate summit, taking place in Marrakech over the next two weeks, on a roll.

Further momentum can be expected, even in the horrific eventuality of a Trump victory in the US Presidential election. Recall that America under George Bush Jr quit the 1997 Kyoto Protocol treaty on climate, but the rest of the world still brought it into force.

Whatever happens in the current White House race, history will be clear on the climate leadership of the Obama Administration. An email leak in October revealed the tightness of US-China climate ties in the years approaching the Paris deal. As US climate envoy Todd Stern wrote to his counterpart, Xie Zhenhua: “You know, President Xi told President Obama in their bilateral meeting in Paris that climate change could be an illustration of the new model of major power relations, and I think we have, in fact, made it so.”

The courts continue to play a major role in the climate story. In the UK, the High Court ruled that the government’s flimsy plans to tackle air pollution are illegal. Cutting air pollution cuts greenhouse gases by default, and strong new control measures can now be expected. In America, the New York Supreme Court ordered ExxonMobil to produce climate documents they had been withholding from the states Attorneys General who are probing them suspecting securities fraud over climate change.

Meanwhile, the stranded assets story continues to gain traction. Among the developments this month, the recently retired deputy head of the Bank of England, Paul Fisher, suggested that a sudden repricing of fossil-fuel assets poses a systemic risk to capital markets. The financial world is awaiting the first report of the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures, due in December, with avid interest.

Renewables overtook coal as the world’s largest source of power capacity. Half a million solar panels are being installed every day now, the IEA enthused. 153 GW of renewables capacity was added in 2015, making a total of 23% of global electricity (coal is at 39%). A wonderful simulation launched on 3rd November showed how far the rise of renewables can go in principle. A Finnish team modelled a global 100% renewable electricity system for the first time country by country, hour by hour for a whole year. They conclude such a system change is achievable by 2030, and the emissions cuts entailed would keep governments on track for holding global warming below 2˚C, the Paris goal.

The catalogue of renewable “firsts” continued to grow. In cloudy Britain, solar exceeded coal over the last 6 months. A Solar Trade Association study emphasised the low cost of high solar in the grid. “The cost of solar variability is negligible now, and remains low with high penetration”, the industry body concluded. Despite opportunities such as this, the REN 21 Renewables 2016 Global Status Report concluded that renewables should be progressing faster. Meanwhile, energy intensity improvements are speeding up, according to the IEA Energy Efficiency Market Report 2016. But these too need to go faster.

Electric cars are set to pass the 2m landmark globally by the end of 2016. At the Paris motor show carmakers queued to show off their latest EV models. Tesla continued its pioneering effort to capture EVs, solar and batteries in one company, unveiling its new line of camouflaged solar rooftiles, plus the second iteration of its Powerwall for residential properties. This saga is not just about Tesla, or Silicon Valley, though. Daimler, for example, announced this month that it would be building a €500m battery factory in Germany. Bloomberg and McKinsey combined resources in a report concluding that lead cities availing themselves of renewables, EVs and batteries in digital networks could increase GDP almost 4% by 2030. As though to emphasise the point, the UK’s National Grid achieved another first: successfully transmitting data via the national electricity grid.

Statoil’s CEO Elder Saetre gloomily concluded that the rise of electric cars will shrink the oil industry as soon as the 2020s. Shell seemed to agree. Simon Henry, their CFO, let it be known that he now thinks oil demand may peak in as little as 5 years. “We’ve long been of the opinion that demand will peak before supply”, he said. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.” This view of the future is radically different to those on offer from ExxonMobil and BP, whose scenarios project oil demand growing steadily as far out as 2040.

But who would finance the drilling needed to supply that? All the oil majors have been slashing capex in the face of the protracted low oil price. And it doesn’t look as though the price will go up any time soon. “Zombie companies” are “killing the oil rally”, Bloomberg reported. Around 70 bankrupt companies are allowed under Chapter 11 protection to keep churning out oil: more than a million barrels a day of it, enough to keep prices low.

And as the low price era rolls on, reserves have to be written down. Exxon Mobil warns it may be facing the biggest reserves revision in its history: 19% This on top of its eighth decline in quarterly profit in a row.

And even if the days of big capex budgets return, would the companies find much oil? Big spending on exploration since 2010 has lead only to plunging oil and gas discoveries, the Wall Street Journal reported this month. And here too the law is at work. Norway faces a climate lawsuit over its Arctic oil exploration plans. A constitutional amendment passed in 2014 reads: “every person has a right to an environment that is conducive to health and to a natural environment …Natural resources should be managed on the basis of comprehensive long-term considerations whereby this right will be safeguarded for future generations as well.” Good luck to anyone trying to make the case that exploring for new oil in the Arctic, in the era of the Paris Agreement, is consistent with that!

What a challenge for oil and gas business models all this is. The oil industry resembles Goldilocks and her porridge: the oil price has to be just right. As John Hess, CEO of Hess Corporation, put it: “If $100 was too high for the world, $50 is too low for the industry. It will have to be somewhere in between.”

On the European shale scene, Polish firms have conceded defeat and given up exploring. In the UK, Cuadrilla has been given the go ahead for trial fracking in Lancashire by the government, who have over-ridden local concerns. Yet more of the British public are against fracking than in favour. The latest UK poll suggests only 17% support fracking (while 79% support renewables). The Tory government professes to rule “for the people”. Their claims do not stand up to much scrutiny when it comes to energy.

Then there is the problem of attracting capable workers to the oil industry in enough numbers to run it efficiently and safely going forward. 14% of millennials would not want to work in the industry because of its negative image, a recent poll showed. BP CEO Bob Dudley is among those who know there is a huge problem here. He admitted this month that in what the industry calls “the Great Crew Change”, companies risk losing out in the battle for talented staff.

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Spare a thought for energy CEOs in this tech-race world


My latest column in Recharge magazine:

We live in an era where change seems to be accelerating, wherein eventualities once deemed black swans because of their unlikelihood regularly come to be viewed as predictable surprises after the event. In this context, imagine sitting down for confidential in-depth interviews with 60 business leaders and their equivalent in public service, and asking them what they honestly feel about their situation: in particular their personal ability to spot what is coming, and to put proactive plans in place.

That is what BBC veteran Nik Gowing and change guru Chris Langdon did in 2015. In a report entitled “Thinking the impossible: a new imperative for leadership in the digital age”, they share the results. They found that many leaders, once guaranteed anonymity, admit to a dire state of doubt and inadequacy, and many say their insecurity burgeoned in 2014.

Gowing and Langdon describe their findings as “deeply troubling”. They talk of 2014 as “the great wake up” year, because of the multiple geopolitical and strategic disruptions it threw at the world. They found that the insecurity of leadership, and the unwillingness of leaders to square up to “unpalatable” issues, is particularly marked in the digital domain. “In what is fast becoming a new disruptive age of digital public empowerment, big data and metadata”, they write, “leadership finds it hard to recognise these failings, let alone find answers and solutions.”

In the light of these conclusions, it is interesting to consider the full extent of the challenges energy-industry leaders face today. Let me consider five themes, all greatly relevant to the energy markets of the future: transition, data, artificial intelligence, robotics, and capital.

First, the challenges of transition from fossil fuel dependency to zero carbon. Business models are dying in the incumbency, yet the best operable replacements are far from obvious. Prizes are huge, and penalties dire. On the one hand, Tesla can raise $400 million of free money from customers tabling deposits for a product (the Model 3) that can’t even be delivered to them for a year. On the other hand, SunEdison can plunge from multi-billion dollar status to bankruptcy within less than a year.

Second, the world of big data has largely yet to manifest in energy markets. It will. Ever more advanced algorithms have allowed tech companies to grow in recent years from nothing to multiple-billion-dollar valuations. They have done so utilising a broad array of strategies, including use of real time data (e.g. Waze), peer to peer bypassing (e.g. Skype), hyper personalisation (e.g. amazon), the leveraging of assets in the citizenry (e.g. airbnb), leveraging of assets and workers (e.g. Uber), sharing of assets (e.g. zipcar), outsourcing of data processing (e.g. kaggle), and people-power financing (e.g. Kickstarter). Tech giants with operations that span these strategies, such as Apple, Google and Facebook, have made their first plays in energy long since. This in a world where, to take one example of massive relevance, the UK national electricity grid achieved a first in October by transmitting data down its own wires.

Third, artificial intelligence. This new technology, which has so many potential benefits for society alongside inherent threats, is breaking out all around us. Machine learning of a kind only dreamed of for years is now reality, and applicable to multiple business sectors. In energy, driverless car technology is not just in design phase. Uber is testing the first self-driving taxi fleet, on the streets of Pittsburgh.

Fourth robotics, with which AI will go hand in hand. Toyota, for example, has launched a $400 robot with the intelligence of a 5 year old for use in homes. Why? “This (product) may help people get interested or fond of Toyota, or help in connecting with our customers who have let go of Toyota vehicles”, says a company spokesperson.

Fifth, capital. Gillian Tett has written in the Financial Times recently that our future has become “unfathomable”, and investors generally are particularly ill equipped to cope with it. Banks come high of the inadequacy list. They have lost consumer trust on a grand scale since the financial crisis, and are now leaking customers to alternative service providers of many kinds. One bank CEO says openly that his sector is becoming “not really investable”.

The banks are trying to fight back by grasping the changes underway in use of technology. Some are pitching to central banks a narrative that holds they will become more efficient if they are granted use of a utility settlement coin for clearing and settling blockchain trades. (If you haven’t heard of blockchain, now is the time for a few study hours). UK banks are readying to roll out robot tellers, aiming to improve customer service via learned empathy.

So pity the poor confused and insecure CEOs of the energy industry in their casino, as they try to make sense of a world changing as fast as this.

But not too much. Some of them will grab the chips, shuffle them around, and place the right bets. These people will come to know what it feels like to ride an exponential-company rocket. And, if we are lucky, to improve society as they do so.

Posted in Blogs
Appropriate civilization includes environmental balance, sustainable capitalism, empathic societies, racial and religious harmony, poverty alleviation at home and abroad, common security, and use of tech for social good.

New despotism includes environmental sabotage, reckless capitalism, isolationist nationalism, incitement to racial and religious hatred, retreat from aid, war mongering, and the use of tech for social harm.

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