Keeping it in the Ground

With crude oil sitting at $40/barrel, many oil industry investments are suffering. None more so than the capital intensive tar sand projects in Alberta, Canada. Oil majors, however, have usually planned scenarios looking up to 30 years ahead. Multi-billion dollar projects have commitment to ride through the tough times and operational projects have a huge cost in decommissioning and re-starting, and thus gain a silent momentum, despite cutting jobs across the sector.

The natural beauty of Alberta, Canada.

The natural beauty of Alberta, Canada.

Tar or oil sand is a naturally occurring mixture of sand, clay, minerals and bitumen. Vast areas of trees and soil (called ‘overburden’ by the industry) need to be removed before this glutinous sand is accessed. Bitumen contains long chain carbon molecules and needs a lot of pre-treating before it ends up in your car engine, thereby making it one of the dirtiest and most carbon-intensive fuels on the planet.

Currently the tar sands industry has greenhouse gas emissions greater than New Zealand and Kenya combined, and if all the bitumen could be extracted and turned to oil, another 240 billion tons of carbon would be added to the atmosphere. This by itself would raise the planet’s temperature by 0.4 C. This increase, from one province of Canada, cannot be afforded.

Extraction of tar sands is a vast operation

Extraction of tar sands is a vast operation


This is simple arithmetic, yet where is the incentive for this project to stop operating? Even with oil prices at record lows, long term planning by companies is sure to yield a profit. It is in these cases that people bring a myopic view to the market. But let us not point a lazy finger at the market, but rather at people’s intentions which are not connected to a broader view of life on this planet.

What can be done to counter this behaviour and keep it in the ground?

A carbon tax is one measure, and has been argued for previously by myself. A carbon tax will be introduced at $20 per ton of CO2 for Albert in 2017, but that is too low to be a significant short term disincentive. It will rise to $30 in 2018, with the money being spent on pollution reducing measures. Transparency will be needed with this spending. It is a step in the right direction, but at the current levels it will not keep this oil in the ground.

Two other methods of dissuasion need considering, and these are discussed by Naomi Klein in her book on climate change called This Changes Everything. They broadly fall under community action.

The first one is examining land rights as many of the areas are inhabited by indigenous Canadian communities. These rights are real and carry weight. These communities have been affected by toxic wastewater discharged into rivers – one study indicated a 30 % rise in cancers in the community of Fort Chipewyan from 1995 to 2006. Caribou herds have also been decimated – as much as 75 % since 1998 in the area of the Beaver Lake Cree First Nation. The argument here is that no previously agreed treaty gave the Canadian government licence to destroy the indigenous communities’ environment.

Water resources are being contaminated (Athabasca river)

Water resources are being contaminated (Athabasca river)

Secondly, one can target the money. These projects require billions of dollars of shareholders’ money, so one can apply pressure to shareholders via moral argument to divest. Students have been pro-active here, with the fight still ongoing with the Harvard Endowment Fund, for example. This method of action has also been championed by, the organisation spearheaded by Bill McKibben. In London last year, student pressure led to the University of London’s School of African Studies (SOAS) announcing their commitment to fossil fuel divestment of their £32m fund. These victories are small considering fossil fuel companies invested $670 bn in exploration of new reserves in 2013, but the noise is growing louder.

Pressure to divest from Oxford University students

Pressure to divest from Oxford University students

What is asked for in keeping carbon in the ground, is not only the arguments of science and arithmetic e.g. the Bank of England governor Mark Carney at the 2015 World Bank seminar stating “The vast majority of reserves are unburnable” if global temperatures are to be limited to below a 2 °C rise. What is asked for is that that we remember what has real value, before it is too late. This is perhaps said best by the Cree proverb “When the last tree has been cut down, the last fish caught, the last river poisoned, only then will we realise we cannot eat money”.


This article can also be found in SALT magazine.

Nature is Picking up the Tab

As COP21 kicks off and international parties roll up to present their intended national contributions to cutting emissions, the gestures are already short before long negotiations begin. A calculation of these total contributions would lead to a 2.7 °C increase in global temperature; it appears most world leaders have already abandoned their sights on keeping to a 2 °C rise and have thus accepted a climate that will be quite different, and not in a good way.

COP21 banner

While some pledges appear significant with respect to emission reduction by 2030 e.g.  Ghana (84 %), Eritrea (81 %) and Phillipines (70 %); these are based on spending money they have yet to receive from developed countries. It‘s also easy to make pledges when spending other people’s money.  The US, with Obama arriving with one arm tied behind his back, has limited ambition and their presence on this occasion is deemed little more than symbolic. China has shown real action with respect to renewable investment, and there is still some hope that real talk can happen with major emitters behind the fanfare, along with France and India who have solar ambitions.

But before the world focuses on pledges and who should pay for them, we should look at the operation of markets, as these are fundamentally linked to the production and emission of CO2.

Firstly, although often defended by those espousing free markets in the U.S., the oil and gas market is certainly not free, and not a shining beacon of capitalism in action. The OECD recorded 800 programs around the world which subsidised the industry by $160 – $200 billion from 2010 to 2014. That is money that could be directly invested into renewables and would also let renewables compete on a fair basis. The political interests behind these subsidies need to be tackled before leaders arrive at conferences with pledges. This is also ignoring the subsidies that this industry receives indirectly by not paying for the harm to people by air pollution and the damage caused by exacerbated climate events, the sum estimated by the IMF is $5.3 trillion per year, which Nicolas Stern, chief climate economist of the London School of Economics, says is an underestimate.

The destruction from the Canadian tar sands

The destruction from the Canadian tar sands. Should fossil fuels be subsidised?

Secondly, free markets have been shown in the human history of experimenting with different economic systems to produce the most wealth for the most people. This is not by luck, but due to individual desires being matched to individual suppliers, yielding the most efficiency and opportunity, far more than that obtained by State controlled prices or regulated supply. Markets are an expression of individual freedom in this regard, however, they can only run on information that is entered into the system. Currently, we are not inputting information regarding the cost of carbon on the planet and ourselves. Thus for the most part, markets are operating oblivious to actual costs and Mother Nature is picking up the tab. E.g. beans offered by your local farmer can be priced the same as those imported from across the seas, ignoring the fuel oil and diesel burnt to get them there.

Is fundamental pricing information missing from the goods we import?

Is fundamental pricing information missing from the goods we import?

We can bring this extra information to the market in two ways. Ideally, individuals will act according to their values and express these ethics when participating in the market. This would mean, for example, supporting local produce and being aware of where goods originate, being active as shareholders or implementing divestment of fossil fuel power sources. However, many people shop on price and the planet does not have enough time for the majority of consumers to change their values. Alternatively, it means implementing true price information at source. We have seen experiments moving towards this with the cap and trade system in Europe on emissions. This has had several problems including a glut of permits, the influence of organised crime and weak targets. This system, however, still has the potential to deliver if backed by serious political will on an international level. However, what would be simpler and what needs to be examined at COP21 and which has been ruled out for this conference, is a global carbon price. This is the information that the market is missing and one that can influence all activities and goods with a carbon component.

This article appeared in SALT magazine.

The Voluntary Carbon Market

The voluntary carbon market (non-compliance) has experience average growth from 2008 to 2012 of 13 %, with suppliers predicting market value could reach $1.6 to $2.3 billion in 2020. In 2013, 101 million tons of carbon were traded at a value of $523 million, with trade decreasing last year to 76 million tons prices at $379 million, with the price of carbon also decreasing. Forestry projects made up one third of this trade.

The drop in activity last year has been attributed to a decrease in pre-compliance activity in anticipation of regulation. E.g. the compliance market in California has taken off, while Australian scrapped their carbon tax. However, Ecosystem Marketplace Director Molly Peters-Stanley notes that “The total drop that we saw in the marketplace last year is not necessarily related to a decrease in purely voluntary demand for offsets. If we were to attribute a proportion to the actual purely voluntary activity in the marketplace that fell, it would be about 5%, versus the 26% that we have to report as the headline numbers”.

Interestingly, Christian Dannecker, Director of Forestry at South Pole Group notes “There are good opportunities for those that add value and bring some new ideas to the market. There is growth, but it’s much more diversified into different products and different transaction types than before, it won’t be only VERs (verified emissions reductions).”

TFS Green also notes “The voluntary market may at present be smaller and less liquid than the compliance market, however, general market opinion is that the wider scope of the voluntary market, and growth led by the private sector, not public policy, means that it has a strong potential to outstrip the mature market size of the compliance regime.”

The World Bank estimated the size of the compliance market at $176 billion in 2011.

This sets the scene nicely for Teratrees.


  • Forest Trends Ecosystem Marketplace and Bloomberg New Energy Finance, 2013. 
  • The Future of Global Carbon Markets, Ernst and Young 2012
  • World Bank