
By Andy Rowell
Something significant happened on Friday that warrants more than just a few column inches in a newspaper.
With the most divisive presidential election in U.S. history just days away from concluding, it is easy to understand why more is not being made of the news, but just to tell you something seismic happened on Friday last week.
The world's largest listed oil company, Exxon, announced that it was going to have to cut its reported proved reserves by just under a fifth—by 19 percent.
It would be the biggest reserve revision in the history of the oil industry. It is yet another sign that Big Oil is in big trouble.
For years people have been warning that Big Oil's business model was fundamentally flawed and was not only putting the climate at risk, but millions of dollars of shareholders' money.
For years the industry's critics warned the industry was ignoring the risks of climate change and was just caring on drilling regardless.
But the oilmen did what the oilmen do: find oil and gas, no matter the consequences.
And the worst oil company has been Exxon which for decades has denied climate change and the impact that climate change will have on its business.
For decades it could have invested wisely in renewables but it carried on looking for oil and gas—including unconventional oil which is even more carbon intensive than conventional oil. Its critics warned this was pure folly: but the oilmen carried on drilling anyway.
Big Oil is used to doing things its own way.
The warnings have kept coming, but the boys from Exxon didn't listen. Oil Change International, 350.org, Carbon Tracker and many others in the #keepintheground movement have been saying for years that large swathes of oil reserves must stay in the ground.
They warned that fossil fuel reserves will become "stranded assets."
Exxon often dismissed its critics as irrelevant lentil-eating, sandal wearing hippies, who wanted to take humanity back to the stone age.
#Exxon Alleges #Climate Investigations Are Conspiracy https://t.co/dLydsSqMkA @ClimateNexus @greenpeaceusa @350 @billmckibben @NaomiAKlein— EcoWatch (@EcoWatch)1476799394.0
And it carried on drilling. And it dismissed the fact that any of its assets could become stranded.
But then came the Paris agreement on climate change last December. "With the Paris agreement on climate ratified in December 2015 … no company has more to lose than Exxon," noted the Chicago Tribune in a great article written last Friday entitled, Exxon enters no man's land.
The Chicago Tribune continued:
"Big oil companies have been solid investments for years, with a deceptively simple business model: Find at least as much new oil as you sell, book those barrels as future sales and reinvest in the hunt for new reserves. That made sense as long as oil prices went up, but it locked companies into a vicious cycle of replenishment, leading them to search for ever more extreme, and expensive, sources of crude oil in the Arctic and beneath the oceans."
And it added:
"Cheap oil has stopped that business cold and the threat of climate action raises fundamental questions about whether it'll ever be viable again."
The issue of long term viability has been raised by numerous organizations over the last eighteen months too. Last year the energy watch-dog, the International Energy Agency, argued that two thirds of known reserves would have to stay unburnt, if we are to keep climate change to the limits agreed in Paris.
But Exxon carried on drilling.
Last year Citigroup issued a report warning policies to limit climate change could render vast swaths of oil companies' reserves worthless, leading to trillions in losses.
But Exxon ignored the warnings.
In May this year, the London-based Chatham House warned in a report, entitled The Death of the Old Business Model, that the world's largest oil companies "Faced with the choice of managing a gentle decline by downsizing or risking a rapid collapse by trying to carry on business as usual."
Importantly, most of Exxon's de-booked reserves, about 3.6bn barrels, will be at the company's dirty Kearl oil sands project in Canada. The reduction would account for over three quarters of the reserves. Not only are tar sands very energy intensive, but they are expensive to produce.
In a low oil price, carbon-constrained world, they are stranded assets.
"For the oil sands, this is a tipping point," argued Andrew Logan, director of the oil and gas program at the ethical investment organization, Ceres. "Why would any company invest billions of dollars in a new oil-sands project now, given the near certainty that the world will be transitioning away from fossil fuels during the decades it will take for that project to pay back?"
Indeed, two days before Friday's announcement an article on CNN Money noted just how much trouble the oil giant was in: "Exxon's stock is down 17% from its 2014 peak amid the crash in oil prices. The oil giant's profits have plunged to 17-year lows and its once-perfect AAA credit rating has evaporated."
It quoted Tom Sanzillo, former deputy comptroller of New York State and now head of finance at the Institute for Energy Economics and Financial Analysis saying the company was in the middle of an "irreversible decline."
Friday's announcement is further evidence that we are witnessing the beginning of the end of the oil age.
And the great carbon dinosaur Exxon is slowly dying before our eyes.
Reposted with permission from our media associate Oil Change International.
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The speed and scale of the response to COVID-19 by governments, businesses and individuals seems to provide hope that we can react to the climate change crisis in a similarly decisive manner - but history tells us that humans do not react to slow-moving and distant threats.
A Game of Jenga
<p>Think of it as a game of Jenga and the planet's climate system as the tower. For generations, we have been slowly removing blocks. But at some point, we will remove a pivotal block, such as the collapse of one of the major global ocean circulation systems, for example the Atlantic Meridional Overturning Circulation (AMOC), that will cause all or part of the global climate system to fall into a planetary emergency.</p><p>But worse still, it could cause runaway damage: Where the tipping points form a domino-like cascade, where breaching one triggers breaches of others, creating an unstoppable shift to a radically and swiftly changing climate.</p><p>One of the most concerning tipping points is mass methane release. Methane can be found in deep freeze storage within permafrost and at the bottom of the deepest oceans in the form of methane hydrates. But rising sea and air temperatures are beginning to thaw these stores of methane.</p><p>This would release a powerful greenhouse gas into the atmosphere, 30-times more potent than carbon dioxide as a global warming agent. This would drastically increase temperatures and rush us towards the breach of other tipping points.</p><p>This could include the acceleration of ice thaw on all three of the globe's large, land-based ice sheets – Greenland, West Antarctica and the Wilkes Basin in East Antarctica. The potential collapse of the West Antarctic ice sheet is seen as a key tipping point, as its loss could eventually <a href="https://science.sciencemag.org/content/324/5929/901" target="_blank">raise global sea levels by 3.3 meters</a> with important regional variations.</p><p>More than that, we would be on the irreversible path to full land-ice melt, causing sea levels to rise by up to 30 meters, roughly at the rate of two meters per century, or maybe faster. Just look at the raised beaches around the world, at the last high stand of global sea level, at the end of the Pleistocene period around 120,0000 years ago, to see the evidence of such a warm world, which was just 2°C warmer than the present day.</p>Cutting Off Circulation
<p>As well as devastating low-lying and coastal areas around the world, melting polar ice could set off another tipping point: a disablement to the AMOC.</p><p>This circulation system drives a northward flow of warm, salty water on the upper layers of the ocean from the tropics to the northeast Atlantic region, and a southward flow of cold water deep in the ocean.</p><p>The ocean conveyor belt has a major effect on the climate, seasonal cycles and temperature in western and northern Europe. It means the region is warmer than other areas of similar latitude.</p><p>But melting ice from the Greenland ice sheet could threaten the AMOC system. It would dilute the salty sea water in the north Atlantic, making the water lighter and less able or unable to sink. This would slow the engine that drives this ocean circulation.</p><p><a href="https://www.carbonbrief.org/atlantic-conveyor-belt-has-slowed-15-per-cent-since-mid-twentieth-century" target="_blank">Recent research</a> suggests the AMOC has already weakened by around 15% since the middle of the 20th century. If this continues, it could have a major impact on the climate of the northern hemisphere, but particularly Europe. It may even lead to the <a href="https://ore.exeter.ac.uk/repository/handle/10871/39731?show=full" target="_blank" rel="noopener noreferrer">cessation of arable farming</a> in the UK, for instance.</p><p>It may also reduce rainfall over the Amazon basin, impact the monsoon systems in Asia and, by bringing warm waters into the Southern Ocean, further destabilize ice in Antarctica and accelerate global sea level rise.</p>The Atlantic Meridional Overturning Circulation has a major effect on the climate. Praetorius (2018)
Is it Time to Declare a Climate Emergency?
<p>At what stage, and at what rise in global temperatures, will these tipping points be reached? No one is entirely sure. It may take centuries, millennia or it could be imminent.</p><p>But as COVID-19 taught us, we need to prepare for the expected. We were aware of the risk of a pandemic. We also knew that we were not sufficiently prepared. But we didn't act in a meaningful manner. Thankfully, we have been able to fast-track the production of vaccines to combat COVID-19. But there is no vaccine for climate change once we have passed these tipping points.</p><p><a href="https://www.weforum.org/reports/the-global-risks-report-2021" target="_blank">We need to act now on our climate</a>. Act like these tipping points are imminent. And stop thinking of climate change as a slow-moving, long-term threat that enables us to kick the problem down the road and let future generations deal with it. We must take immediate action to reduce global warming and fulfill our commitments to the <a href="https://www.ipcc.ch/sr15/" target="_blank" rel="noopener noreferrer">Paris Agreement</a>, and build resilience with these tipping points in mind.</p><p>We need to plan now to mitigate greenhouse gas emissions, but we also need to plan for the impacts, such as the ability to feed everyone on the planet, develop plans to manage flood risk, as well as manage the social and geopolitical impacts of human migrations that will be a consequence of fight or flight decisions.</p><p>Breaching these tipping points would be cataclysmic and potentially far more devastating than COVID-19. Some may not enjoy hearing these messages, or consider them to be in the realm of science fiction. But if it injects a sense of urgency to make us respond to climate change like we have done to the pandemic, then we must talk more about what has happened before and will happen again.</p><p>Otherwise we will continue playing Jenga with our planet. And ultimately, there will only be one loser – us.</p>By John R. Platt
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