Friday, 20 September 2013

Big money, Big Carbon, piranha and chum.

It may seem like a stretch to say Big Money – banks, speculators would have such an adversarial relationship with big carbon – oil, coal gas as would be observed with piranha and livestock in blood filled water, but recent incidents have led me to think this may become a more accurate characterization as time goes by.

While neoliberal governments may not “pick winners” big money definitely does. Already investment in renewable energy exceeds investment in drilling mining and fracking.

Over the last couple of years the divestment movement has been picking up steam. With major church groups, and universities opting to divest from big carbon. This will depress the stock price of these industries. Most recently in New Zealand earlier this month the Synod of the Auckland Anglican Diocese voted to declare big Carbon an “industry of sin”and over the next two years will be routing carbon out of their investment port-folio. This decision came partly on the back of opinion in the Lancet that climate change will have the biggest effect on human welfare of anything seen before, but also with the business that big carbon is no longer the good investment it once was. Following on from that decision, the Catholic church of Auckland announced that it will be examining the issue at it's next Synod in 2014. Given the Pope's stated position this does not look good for carbon industry stock prices.

Fracking extraction companies have been very busy, annoying unprecedented groups of people with the range of damage done to farms, water tables and human health. But also producing such an over supply of gas there is now a glut, and stock prices for gas companies have tanked.

The international price for coal has sunk to around $1/tonne. The effect has been that coal mines have become uneconomic, causing them to shut down. In New Zealand we have the example of Solid Energy. It was so bad that even though our government has a huge hard-on for extraction industries, not even they could pump life back into west coast mining operations near Greymouth.

So the chum is in the water for big carbon, let's see how the big money piranha are responding. During the last Bush administration a system of credits was introduced to encourage the addition of ethanol to America's fuel supply. The credits are given to companies adding ethanol to fuel. These credits can be traded and the intent was that companies not dealing with ethanol could at least encourage those that do by buying these credits. But last year speculators cornered the market for these credits, then offered them back to oil companies at hugely inflated prices.

So now the big money piranha are taking chunks out of their old cash cow. As demand for carbon fuels is falling, as renewable and clean energy technology is romping onto the global stage, it appears the striped hook has caught Big Carbon by the neck and is dragging their musical fart act off the Earth's Got Talent stage.

But in terms of the relationship between big money and big carbon, the only question is will these piranha leave bones.

See Also
   Solid Energy collapse "unavoidable"-  Min Finance
   Wall Street gouges Fuel industry on ethanol - NYT
   Anglicans spurn Carbon
   Going clean and green is a better deal - Forbes
   "The bottom has dropped out of the [coal] market"- Think Progress

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