Guest essay by Eric Worrall
The Bank of England has stepped into the climate fray, with a claim that climate change poses a huge financial risk to UK based businesses. For once I believe the Bank of England is absolutely correct (more below).
According to the Sydney Morning Herald;
Bank of England Governor Mark Carney said Britain’s insurers face potentially “huge” exposure to shifts in climate-change policy and Group of 20 nations need to do more to combat associated financial-stability risks.
“The challenges currently posed by climate change pale in significance compared with what might come,” Mr Carney said in a speech at a Lloyd’s of London dinner.
“Once climate change becomes a defining issue for financial stability, it may already be too late.”
England’s central bank has been looking into the economic and financial-stability risks posed by climate change and Carney spoke as the BoE published a report on the impact on the British insurance industry. As well as physical and liability risks, British insurers, which manage almost £2 trillion in assets, also face threats from the re-pricing of investments in fossil fuels in the move toward a lower carbon economy, Mr Carney said.
“The exposure of UK investors, including insurance companies, to these shifts is potentially huge,” Mr Carney said. General insurers are the most directly exposed to such losses, he said.
Why do I agree with Mark Carney, that climate change poses a huge financial risk to UK based businesses? The reason has nothing to do with the weather, which, given the multi-decadal decline of weather extremes, is currently surprisingly benign.
In my opinion, the biggest climate related risk for owners of UK based businesses, is the risk of lunatic political interventions, which destroy the financial viability of your business.
WUWT reported that Shell recently abandoned exploring the US Arctic, because of regulatory uncertainty.
In the UK a similar scandal has erupted, with the closure of Redcar steel, a major steel works. One of the reasons given for the closure, and loss of thousands of jobs, is that the excessive green tariffs UK based steel plants and other intensive energy users have to pay, are making it impossible to compete with foreign businesses. (h/t Roger Helmer MEP)
Gareth Stace, director of UK Steel, said: ‘Sympathy and warm words are welcome, but Ministers must now get behind British steel and deliver the support that we urgently need.’
He called on the government to ‘create a level playing field for British steel by fully compensating the industry for the high cost of electricity caused by the imposition of climate change policies‘.
What should UK businesses do, to avoid catastrophic regulatory instability, and unsustainable, politically imposed green costs? One option surely well worth considering is to relocate business assets and infrastructure to Asia.
Asia does not appear to have abandoned cheap energy and economic sanity. As WUWT recently reported, China and Japan are stepping in, to finance energy / industrial infrastructure, and to facilitate economic activity on a scale which the Western world no longer wishes to embrace.
Businesses should also seriously consider moving their head office and share market listing, as well as their physical assets. There have been multiple suggestions over the years, that the global assets of businesses should be fully included in any carbon accounting regime, regardless of the regulatory regime in the country where the assets are physically located. Keeping the business head office in the UK might still leave a business vulnerable to future regulatory instability.
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No surprise , anyone who can make a dollar from this scam will , who is there to prosecute them ?
Edmonton Al
very intelligent and has a lot of potential… that’s why!
Why yes isn’t it obvious that there is going to be financial risk to allow these frigging banks and funds to trade in yet another unsecured piece of paper representing nation’s contribution to the atmosphere? Back in the old days they called that sort of thing a “blue sky” scam. It’s now central to our monetary system! Damn volatile too!
Must be nice to have billions of “dollars” to move at a whim.
Generally before anybody else sees/were notified of the play.
It must get boring after awhile, always being on the right side of the play ?
Please recheck that the source of this quote is not “The Daily Onion”.
hunter:
No, the source is not “The Daily Onion”.
The BBC is reporting the Governor of the Bank of England, Mark Carney, claims “In other words, once climate change becomes a defining issue for financial stability, it may already be too late.”
The link provides a report and a video of him saying it.
Richard
It’s not a coincidence, I think, that the wives of our PM, Cameron, our former Liberal Party leader, Clegg, and the BoE governor, Carney, all have “green” credentials. Clearly these chaps are all scared of being condemned to sleeping in the spare room – if you get my meaning. Christopher Monckton would have the right word – uxorious.
You’re not funny!
I think that it is an example of the “Lady Bountiful” effect.
In times past , when great country houses dominated rural England the lady of the house would drive around the hamlets , dispensing money and food to those she thought in dire need of them .
The money , for this exercise of aristocratic philanthropy came from her estate coffers , but in the modern examples it comes from the UK taxpayer. It is not her money at all .
That is why one dreads to hear of Cameron visiting anywhere in the world because it inevitably means that his wife is telling him to offload a billion here , 500million elsewhere , etc and it is getting some of us very angry , the more so because there is no way of stopping him.
hunter
September 30, 2015 at 9:14 pm
“Sparks,
You are so far off base you are not even wrong in your comments about CO2 in the atmosphere.”
Hi Hunter! first of all you’re not even false admitting that I’m correct, Carbon dioxide under our atmospheric conditions is a low lying gas, it falls to the center of gravity when it’s potential is lost. a bit like you right now dumb ass.
ralfellis
Are you calling for the “RICO” act? because I can say a lot worse..
ralfellis
Carbon dioxide under our atmospheric conditions is a low lying gas, it falls below nitrogen and oxygen, it is heavier. every plant including you have evolved taken advantage of this principal.
ralfellis
Carbon dioxide under our atmospheric conditions is a low lying gas, it falls below nitrogen and oxygen, it is heavier. every plant including you have evolved taken advantage of this principal.
Oh, dear. I was right, Sparks did escape from the play-pen.
Joking aside, take a look at a plot of CO2 vs altitude. The concentration of CO2 is constant all the way up to 80 km altitude. CO2 a ‘low lying gas’? You mean ‘low lying’ up to 80km? Or do you mean ‘lying’ out of your backside?
The graph is taken from Spectral-Cal.
http://spectralcalc.com/atmosphere_browser/modify_atmosphere.php
CO2 vs Altitude VMR = volume mixing ration in ppm.
.
You might also want to browse this science paper from ACP. Check out figs 7, 8 and 9, which show how CO2 vs altitude varies between spring and summer. Despite surface concentrations varying by 20 ppm, the concentration with altitude does not vary by more than 5 ppm all the way up the 300 mb or hpa (or 8,500m altitude). And sometimes, the CO2 concentration is lower at the surface than at high altitude (I shall give you a clue – plants).
In the adult world, which I presume you will reach in a couple of decades, this is called ‘a well mixed gas’. We are not talking oil and water here, but well-mixed gasses. You will come across more of these difficult terms and concepts when you go to the big school.
http://www.atmos-chem-phys.net/11/2455/2011/acp-11-2455-2011.pdf
Kind regards,
Ralph
Funny.. Are you trying to prove that there is CO2 in earths atmosphere with that graph? I don’t know anyone disputing that fact, CO2 is heavier than O2 and N it falls to the center of gravity where all the trees are, if CO2 was lighter than O2 it wouldn’t be a well mixed gas and very little would reach the surface, do you see what I’m getting at? you seem to have a fear of the fact that CO2 is regulated in earths atmosphere, it is cooled by the same processes that cools every other component, got that? .
Is this Sparks guy for real?
It has to be a wind-up.
I seriously doubt it, Siilver, looks to me like one of the hired for a mere pittance “trolls” that I figure are surely assigned to a site like this one, to disrupt and sidetrack rational discussion, and make the joint seem inhospitable to any fresh eyes. Look at the topic for a clue as to who hired them, I suggest.
Hi Sparks, you’re in a big hole already, but I recommend that you keep digging just so that people can laugh at the spectacle of a person making a total arse of themselves.
Unfortunately for you, many of the people who visit this site have a solid rounded practical grasp of physics and engineering principles.
And therefore the majority of people can immediately spot that you are a faker.
“WUWT reported that Shell recently abandoned exploring the US Arctic, because of regulatory uncertainty.”
No, Shell abandoned exploration due to poor results from their initial drilling. Whatever regulatory uncertainty you are referring to has existed for 6 years under Obama (who approved Shell’s request in April 2015 over the objections of environmentalists). Why on earth would Shell spend billions, work for 10 years to get approval, get a rig to the site, start drilling in early August 2015, and then abandon the project 6 weeks later due to regulatory uncertainty?
Ask Shell
I provided a link to support my claim about Shell. The following WUWT article references a quote in Bloomberg.
http://wattsupwiththat.com/2015/09/29/shell-to-quit-us-arctic-due-to-unpredictable-federal-regulatory-environment/
Eric, you provided a link to a WUWT article about this topic, but you listed only one reason as the cause – a reason that Shell only listed at the bottom of their quote – and you made no mention of the primary reason. Your statement was “WUWT reported that Shell recently abandoned exploring the US Arctic, because of regulatory uncertainty.”
Here is the first paragraph of Shell’s press release: ““This is a clearly disappointing exploration outcome,” Marvin Odum, director of Shell’s Upstream Americas unit, said in a statement. While indications of oil and gas were present in the Burger J well in Alaska’s Chukchi Sea, they weren’t sufficient to warrant further exploration, the company said. Shell will now plug and abandon the well.”
Is regulatory uncertainty one of the factors in Arctic drilling? Yes, but that was known 10 years ago, when Shell started their multi-billion dollar effort. They still proceeded. It makes no sense that they would abandon 10 years of effort and billions of invested dollars 6 weeks into a drilling program due to new-found regulatory uncertainty. Exactly what changed in the last 6 weeks from a regulatory standpoint?
No doubt if the results had been more encouraging that might have tipped the balance. But regulatory uncertainty played a part in killing that effort.
http://www.bloomberg.com/news/articles/2015-09-28/shell-to-stop-exploring-offshore-alaska-on-regulations-costs
No they abandoned exploration because the oil price is low and they are cutting costs on non essential expenditures. The reality is that this was a very expensive undertaking that looked unlikely to find economically recoverable oil. Even had the single well they drilled been a high producer they would likely have sealed it and pulled out. If oil hits $100 per barrel they will probably start looking again.
All the major oil companies are cutting expenditures as this Wood MacKenzie report shows
“EDINBURGH/SINGAPORE/HOUSTON, 26th March 2015 – The oil & gas industry is responding to the low oil price environment with exploration budget cuts in 2015 which will average 30%, leading to suggestions that exploration activity could be significantly curtailed. However in an effort to drive value, Wood Mackenzie says the industry is addressing a long standing cost inflation issue, and asserts that on average exploration costs will fall by a third, softening the blow of budget cuts. Although overall well numbers will dip in 2015, Wood Mackenzie says drilling activity in 2016 is set to recover as many explorers seize their chance to drill at lower costs.”
Of course they want the regulatory regime to be clarified but that’s not the primary issue.
Chris, it used to be called: “shovel in the ground”, or “staking a claim”.
Fewer regs and hoops to jump through to restart exploration than to start from scratch. Shell know what they are doing. I imagine their projection for the oil price into the future is the guiding factor. It never hurts to have a dig at the regulatory regime to remind the next administration to watch their step or risk no oil at all.
Ivor, sure, I understand them getting that point in their press release, I just have an issue with it being conveyed as the primary reason. I believe if it was a promising well, they would’ve continued, even with oil prices where they are, since developed Arctic sites takes many years. I think only a dud outcome would have caused them to cap it, after all the effort they have gone to to get approval.
It is strange that Mr Carney has total faith in predictions of catastrophic climate change over the next 100years, yet he cannot even predict when he is going to raise UK interest rates, let alone the future of the world economy.
Isn’t this just a result of the current market for energy being in the cellar?
How can Arctic Oil and Gas exploration be profitable at $40 USD/barrel?
The glut will end, eventually; and prices will go up.
Wait for 2016 elections to see if the political winds change.
I find it interesting that financiers , government and warmists do not realise that the halving of fossil fuel prices actually doubles the relative cost of renewables. Therefore the financial risks are now entirely with renewables where the equivalent increase in expense represents a bubble. Renewable prices are in fact only maintained by government subsidy with the taxpayers hopefully realising that the opportunity cost of choosing to support these industries has doubled. The impact of choosing coal rather than renewables on electricity prices and the consequent improved competitiveness of industries would be very significant. In fact I believe that countries such as Germany with strong green influences are heading for an economic crisis from which it will take years to recover.
The financial risks globally are all skewed to things affected by green policies not climate change.
Yep. Bubbles have come and gone. Renewables next. Good riddance.
Carney is right, insurers risks are “exposure to shifts in climate-change POLICY”. He didn’t say they were exposed to “shifts in climate”.
The problem is that most people don’t listen carefully enough to the words he uses — he is very precise. He said he would not raise interest rates until unemployment was below 7%. Not, that he WOULD raise rates when unemployment dropped below 7% — which is how everyone (mis)interpreted it.
Risks are actually opportunities for insurers. That’s what their business is with profits to be made from uncertainty.
Wonder if interest rates have been kept low so as to facilitate renewable energy investments? Any thoughts on this?
You can bet your boots that the Marxist-Maoist pinko Commie socialists who run the British insurance companies (and City generally) will find a way of making vast sums of money from this.
RoHa:
Please say what you think are “Marxist-Maoist pinko Commie socialists” and inform as to how you think some (all?) of them have taken control of “the British insurance companies (and City generally)”.
Thanking you in anticipation of your explanations.
Richard
richardscourtney:
Hi Richard. Didn’t you say you lived in Surrey?
Dahlquist:
No. I have made no such claim and I never have “lived in Surrey”.
I was born on 1 October 1946 and lived with my parents in Devon until we moved to Cirencester, Gloucestershire, in the 1950s. I moved to Cheltenham, Gloucestershire, in the 1960s, and since 2000 I have lived in Falmouth, Cornwall.
But I know the origen of your suggestion.
John Hunter started a smear campaign against the late John Daly and me as response to our documented complaint that he had published fabricated data. Hunter’s campaign focused on me when John Daly died. Several blogs have copied those fabrications one of which was that I lived in a Surrey town I have never visited. .
I can always tell when people are referring to Hunter’s fabrications when they assert that I live – or have lived – where Hunter claimed. And I always address that fabrication when rejecting all of them because addressing that one demonstrates the assertions are fabricated without drawing attention to the more serious untruths.
Richard
I keep getting told that anything and everything to do with Climate Change (TM) is a Marxist-Maoist pinko Commie socialist plot, and anyone who does not roundly denounce that plot is a Marxist-Maoist pinko Commie socialist. Since the BOE and insurance companies are not denouncing it here, that suggests that they have all been taken over by Marxist-Maoist pinko Commie socialists,
Somehow, people seem to have forgotten that organized crime syndicates/cartels really exist, and really do take over Governments and thereby countries/regions.
If they have taken over the banking sector, of course they’re not going to present themselves as psychopathic criminals, anymore than bank robbers are going to dress in striped jumpsuits to gain entry undetected. They’re going to present themselves as our buddies on high, fighting for the downtrodden and oppressed . . dressed as Marxist-Maoist pinko Commie socialists, or something like that.
RoHa:
Thankyou for your reply to my question.
I, too, keep being told the same meaningless gobbledygook.
In reality, of course, financial services – especially insurance companies – gain financial benefit from perceived scares and, therefore, they promote AGW.
The anthropogenic (ie. man-made) global warming (AGW) scare is a bandwagon that people join because it is going in a direction they all want to go. Increased profits are where financial service providers ‘want to go’.
Richard
Richard,
“In reality, of course, financial services – especially insurance companies – gain financial benefit from perceived scares and, therefore, they promote AGW.”
Seems rather callus and disingenuous, don’t you think? Have they no scruples? No hearts? No honor?
Sounds like sociopaths/psychopaths to me. You know, like the sort of people who run organized crime syndicates; i.e. criminally insane?
the full Mark Carney text:
30 Sept: AFR: Mark Carney: The financial sector needs a new set of time lines when preparing for climate change
The combination of the weight of scientific evidence and the dynamics of the financial system suggest that, in the fullness of time, climate change will threaten financial resilience and longer-term prosperity
There is a growing international consensus that climate change is unequivocal. Many of the changes in our world since the 1950s are without precedent, not merely over decades but over millennia…
http://www.afr.com/news/policy/climate/the-financial-sector-needs-a-new-set-of-time-lines-when-preparing-for-climate-change-20150930-gjxy02
As a Teessider born and bred it pains me to see the reality of the crisis in the Steel Industry described so simplistically. The simple reality is that the steel made at Redcar costs more to produce than they can sell it for. Yes carbon taxes and their ilk are a factor in their costs but the collapse in the world price of steel is the main problem. Rolled steel prices are down to almost half of what they were 3 years ago, They dropped 25% in the last year alone.
The reason is simple. Between 2007 and 2013 Global steel consumption rose from 1,000 million tons to 1,388 million tons but production rose faster. In the home market (the EU) steel consumption fell by almost 30% in that period. The slow down in the Chinese economy has made things worse.
Increased supply and low demand have only one result.
So your thinking is loading on massive politically determined arbitrary extra costs on Teeside steel plants at a time of competitive stress is not an important factor?
Keith,
A reality check. I’m a shareholder of Origin Energy Ltd and as I was pursuing thru the 2014/2015 financial statement, it’s cash flows were down 394 million which 300 million of that was the carbon scheme payment owed to the government. The result? Dividend payout was down a few cents and the company is now trying to raise funds and manage capital by investing in other activities not related to energy exploration and extraction and retail distribution.
An imposed carbon tax does impact on productivity and supply.
Did Leahman carbon trading start the last financial crash?
It isn’t “climate change” that’s driving this “huge financial risk”. What’s driving it are brainless policies imposed by idiots that believe the meme. Stupid is as stupid does.
Meanwhile, in the UK, Scotland’s last remaining coal-fired power station is to close in March 2016.
Lang Banks, WWF Scotland director, commented that the power station is “Scotland’s single biggest source of climate emissions and a combination of its age, air pollution rules, carbon pricing and transmission charging have made closure inevitable.”
Source:
http://www.bbc.co.uk/news/uk-scotland-edinburgh-east-fife-33970594
But in Germany two new coal-fired stations have just opened.
AND approval has been given for a new open-cast coal mine.
Climate Change Idiocy is like slimemould: it creeps everywhere and digests everything in its path.
Making AGW climate change scare a business risk message is just another aspect of the propaganda effort, along with public health, religion, education, and other social programs. It’s a peeking order of using and undermining institutions in succession. That is not so hard to understand. Once science process was warped for policy reach goals, the template for callus use and abuse of other disciplines followed. That does require an ongoing disrespect for fact checking at its core. It’s a form of mob rule with organization.