Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. I do make mistakes, but I try hard to do my analysis thoroughly, and to make sure my data are correct. Remember: the unexpected sometimes happens. The expected does too, but all too often it takes longer than you thought it would.

The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Thursday, November 23, 2017

Record number very worried about climate change


From EcoWatch.

Seven in ten Americans (71 percent) think global warming is happening, an increase of eight percentage points since March 2015. Only about one in eight Americans (13 percent) think global warming is not happening. Americans who think global warming is happening outnumber those who think it is not by more than five to one. 

Americans are also becoming certain global warming is happening—47 percent are "extremely" or "very" sure it is happening, an increase of 10 percentage points since March 2015. By contrast, far fewer—seven percent—are "extremely" or "very sure" global warming is not happening.

Over half of Americans (54 percent) understand that global warming is mostly human-caused. By contrast, one in three (33 percent) say it is due mostly to natural changes in the environment.

Only about one in seven Americans (15 percent) understand that nearly all climate scientists (more than 90 percent) are convinced that human-caused global warming is happening.

More than six in ten Americans (63 percent) say they are at least "somewhat worried" about global warming. About one in five (22 percent) are "very worried" about it—the highest levels since our surveys began, and twice the proportion that were "very worried" in March 2015.

Two in three Americans feel "interested" in global warming (67 percent), and more than half feel "disgusted" (55 percent) or "helpless" (52 percent). Fewer than half feel "hopeful" (44 percent).

Nearly two in three Americans (64 percent) think global warming is affecting weather in the U.S., and one in three think weather is being affected "a lot" (33 percent), an increase of eight percentage points since May 2017.

A majority of Americans think global warming made several extreme events in 2017 worse, including the heat waves in California (55 percent) and Arizona (51 percent), hurricanes Harvey, Irma, and Maria (54 percent), and wildfires in the western U.S. (52 percent).

More than three in four Americans (78 percent) are interested in learning about how global warming is or is not affecting extreme weather events.

More than four in ten Americans (44 percent) say they have personally experienced the effects of global warming, an increase of 13 percentage points since March 2015.

Four in ten Americans (42 percent) think people in the U.S. are being harmed by global warming "right now." The proportion that believes people are being harmed "right now" has increased by 10 percentage points since March 2015.

Half of Americans think they (50 percent) or their family (54 percent) will be harmed by global warming. Even more think global warming will harm people in the U.S. (67 percent), the world's poor or people in developing countries (both 71 percent), future generations of people (75 percent) or plant and animal species (75 percent).

Most Americans think global warming will have future impacts, causing more melting glaciers (67 percent), severe heat waves (64 percent), droughts and water shortages (63 percent), floods (61 percent), and other impacts over the next 20 years.

Two in three Americans (67 percent) say the issue of global warming is either "extremely" (12 percent), "very" (19 percent), or "somewhat" (37 percent) important to them personally, while one in three (33 percent) say it is either "not too" (19 percent) or "not at all" (14 percent) important personally. The proportion that say it is personally important has increased by 11 percentage points since March 2015.

Nearly four in ten Americans (38 percent) say they discuss global warming with family and friends "often" or "occasionally," an increase of 12 percentage points since March 2015. However, more say they "rarely" or "never" discuss it (62 percent). Additionally, half of Americans (51 percent) say they hear about global warming in the media at least once a month, and one in four (25 percent) say they hear people they know talk about global warming at least once a month.

More than half of Americans (54 percent) say they have thought "a lot" (22 percent) or "some" (32 percent) about global warming. Fewer say they have thought about global warming just "a little" (32 percent) or "not at all" (14 percent).

Few Americans are confident that humans will reduce global warming. Nearly half (48 percent) say humans could reduce global warming, but it's unclear at this point whether we will do what is necessary, and one in four (25 percent) say we won't reduce global warming because people are unwilling to change their behavior. Only five percent say humans can and will successfully reduce global warming.

[Read more here]

What is striking is just how convinced Americans are that climate change is happening and how pessimistic they are that anything will be done about it.  People have forgotten their collective power.  You have the vote, people.  You can write to newspapers.  You can re-tweet articles about global warming.  You can write to your Congressman/woman or Senator.  It's up to us.

Indian coal demand to peak soon

Source: IEEFA

An analysis from IEEFA:

 New research by the Institute for Energy Economics and Financial Analysis sees India within a decade of peak thermal coal demand.

In a report published today—“India’s Electricity Sector Transformation: Momentum Is Building; Peak Coal in Sight”—the institute projects a significant increase in renewable energy generation across India, a trend that will be pushed by sharply falling prices and major efficiency gains over the next 10 years.

Tim Buckley, lead author of the report and IEEFA’s director of energy finance studies, Australasia, said that—as a result—Indian demand for imported coal will most likely decline, undercutting what U.S. and Australian exporters had hoped would be a long-term growth market.

“IEEFA forecasts that India’s thermal coal use is likely to peak not more than 10 percent above current levels, a far lower peak than most other analysts are forecasting,” Buckley said. “India’s target to all but cease thermal coal imports by the end of this decade is now the logical economic outcome.”

The conclusion is in stark contrast to the International Energy Agency’s forecasts, which have Indian coal use doubling by 2040.

“IEEFA would challenge IEA’s coal-centric view of the world as entirely out of touch with energy developments in India under Prime Minister Modi,” Buckley said. “While IEEFA acknowledges that our forecasts are non-consensus, we believe strongly in them and note that we were ahead of the pack in predicting a similar transition in China.”

“India’s national decarbonisation policy is in line with global trends, which have seen renewable energy infrastructure investment running at two to three times the level of new fossil fuel capacity investment since 2011,” Buckley said. “India is on track to catalyze US$200-300 billion of new investment in renewable energy infrastructure over the coming decade, and IEEFA expects global capital inflows will play an increasingly important role.”

[read more here]

Dunno about you, but the forecast rise after 2018/2019 looks so small as to be scarcely visible on the chart.  And it is very likely that after the mid 2020s that the operating cost of coal will exceed the total cost of renewables, so although new coal power stations will continue to be used, old ones will start to be closed.  So in fact coal demand may peak much sooner than 10 years.

Monday, November 20, 2017

Investment in renewables doubles

This chart from BNEF shows how even though nominal investment in renewables has been flat over the last 6 years, in real (volume) terms, it's actually doubled, because price declines have been so rapid.

Source: BNEF

Sunday, November 19, 2017

Trump a christian?

EU grew 53% & cut emissions 23%

Change in real GDP, GHG emissions and GHG emission intensity in the EU, 1990-2016

Between 1990 and 2016 the European Union has cut greenhouse gas emissions by 23% while at the same time growing its economy by 53%, proving again that environmental action need not negatively affect the financial bottom line.

The European Commission published its annual climate action progress report this week, Two years after Paris — Progress towards meeting the EU’s climate commitments, which highlighted the EU’s ability to increase economic growth while at the same time decreasing emissions — so much so that it remains on track to meet its 20% by 2020 greenhouse gas emissions reduction target.

On a large scale, the EU’s greenhouse gas emissions dropped by 23% while the economy grew by 53%. On a shorter scale, the EU economy grew by 1.9% in 2016 while greenhouse gas emissions decreased by 0.7%.

[Read more here; note that this is for all emissions in the whole economy, not just for electricity generation]

This is a remarkable achievement.  But it's not enough.

The world needs to get to zero emissions, or as close as we can, by 2050.  In the EU, the average decline in CO2 emissions since 1990 is about 1% a year.  To cut emissions by 90%  by 2050 from here, emissions need to fall by 7% per annum.  And each year that we delay means the annual rate of decline needs to be larger.  The costs of renewable electricity and transport are likely to drive a switch away from fossil fuels, and this switch is likely to accelerate exponentially as costs decline, so we may well achieve significant annual percentage declines by the mid 2020s.  All the same, the target is too low.  It was a brave goal when renewables were expensive--and all kudos to Europe for doing something despite that--but now renewables are cheaper than coal, it's simply not fast enough.

Tesla's "semi" truck -- and a new roadster

On Friday, Elon Musk presented Tesla's new semi truck:

  • 20% cheaper than diesel
  • faster (smooth underside, greater power, greater acceleration, sustained uphill speeds)
  • recharged in half an hour, using a new network of Tesla megachargers, powered entirely by the sun, with guaranteed fixed price of  7 cents/kWh. 
  • 1 million mile breakdown guarantee
  • unbreakable windscreen.
  • will stop automatically if driver has medical emergency
  • has 500 mile range (twice the distance of the average semi trip distance)
  • recharges in half an hour.
  • starts shipping in 2019 (but we must allow for Elon time)
As for the new roadster .... wow!

Have a look at the short version of the presentation, below.

Thursday, November 16, 2017

3.4 degrees by 2100

Source :NOAA

By approaching 2100, a world set for 3.4˚C will, on present trends, probably be the reality confronting our descendants – slightly less warm than looked likely a year ago, analysts think. That’s the good news, you could say.

But the bad news is twofold. First, this improvement in planetary prospects will still leave the global temperature increase more than twice as high as the internationally agreed target of 1.5˚C. And secondly, it depends largely on the efforts of just two countries – China and India.

They have made significant progress in tackling climate change in the last twelve months. In contrast, a report by the analysts, from the Climate Action Tracker (CAT), says that not only US climate policy has been rolled back under President Trump. Most individual governments’ climate commitments are going in the wrong direction.

The CAT report says the world will – on present trends – still reach 2100 a long way above the 1.5˚C target for the Earth’s maximum tolerable temperature rise, which was endorsed in the Paris Agreement.

[Read more here]

These guys have done the thorough analysis, so I won't argue with their depressing conclusions.  But I will explain how I come to a lower number.

World temperatures are rising by 0.2 degrees C every decade, on average.  So if that rate continues, then by 2100, 8 decades from now, the increase will be 1.6 degrees C added to what we already have experienced (+1.5 C according to Berkeley Earth).  That gives 3.1 degrees, implying that these analysts expect the decadal increase to rise slightly, which would be perfectly consistent with ongoing rises in atmospheric CO2.  (However, BEST's calculation of the increase in global temperatures is higher than other bodies because they go farther back, and the article doesn't say whether they're using BEST or other calculations to estimate how much temps have risen since pre-industrialisation.  But since the 1970s, global temperatures have risen about 1 degree C)

I come to a more optimistic (but still not very happy) forecast based on estimated timetables for the transition of electricity generation to renewables and the electrification of transport. At some point in the mid 2020s, existing coal power stations will start being closed because renewables plus storage will start getting or will already be cheaper than the operating costs of coal power stations.  That shift will prolly take (let's be conservative) 20 years.  This will reduce global CO2 emissions by 30%.  With transport, EVs and PHEVs will likely reach 100% of total car sales by the late 2020s.  It will take another 20 years for the global car fleet to be 100% electric. 

So by 2050 annual emissions could have fallen 60%.  This isn't enough to stop the level of CO2 in the air from rising.  For that to stabilise, we need to cut emissions to below the annual amount which is withdrawn from the atmosphere by natural processes, ignoring any man-made efforts to sequester carbon dioxide safely out of the atmosphere (carbon capture and storage, or CCS), or by at least 80%.  Forest clearing and burning contributes 10%, cement 5-6%, iron and steel 4-5%, air travel 3%.  We could stop destroying forests and even start reforestation--which some scientists estimate might itself move us one quarter of the way needed to limit the temperature rise to 1.5%  Stopping forest clearing and burning will by itself take emission reductions to 70%, starting a global program of reforestation will get us even closer.  Green concrete will help, as will steel production processes which use more renewable energy, but we will prolly need to have (and pay for) CCS for cement and steel.  Air travel will be partially electric or will use fuel created via the Sabatier process.

To sum up, I see net CO2 emissions falling by 80%+ by 2050.  Until 2050, temperatures will keep on rising by 0.2 degrees C per decade, or another 0.6 C.  But after that, as atmospheric CO2 peaks, the decadal  temperature increase will slow.  And none of this will be happening in a vacuum.  As temperatures rise and droughts, floods and storms worsen, the political pressure will increase. Within countries, politicians in the pay of fossil fuel interests will lose office.  Between countries, slow movers will be pressured to up their games.  I don't think we'll see 3.4 C.  But we will almost certainly see 1.8 C (from the 1970s) by 2100.  That will be bad enough: pray we don't see 3.4 C.