Fossil fuels on fire

By Old Mutual Wealth Investment Strategists Izak Odendaal and Dave Mohr

These strange times have become even more unusual. Despite the enormous efforts to reduce the demand for carbon-emitting fossil fuels, their prices have shot up in recent weeks.

The upcoming COP26 Glasgow Climate Summit could ironically take place against the backdrop of coal and natural gas prices at record levels and oil at multi-year highs even though the share of renewables in the global energy mix has thankfully risen steadily.

Chart 1: Futures prices for coal, gas and oil, US$

Source: Refinitiv Datastream

A perfect storm

It is a perfect storm of events that got us here. On a positive note, demand for energy has increased from the lockdown-induced lows. For instance, IATA estimates a 26% growth in airline passenger numbers between 2020 and 2021, though they are still more than 40% below 2019 levels. However, this improvement in demand has not been met by rising supply. On the contrary, several factors have constrained supply.

One is simply the weather. Northern Europe relies heavily on electricity from wind, but it has been less windy than usual. Droughts in Brazil, China and the US mean hydro-electrical production has also been lower than normal. This has led to increased demand for natural gas and coal. However, natural gas inventory levels have been lower than usual at storage depots across Europe. This has created an opportunity for Russia, Europe’s main gas provider, to flex its geopolitical muscles and go slow on deliveries, although it has indicated a willingness to stabilise the market recently. With winter looming, natural gas prices in Europe have gone stratospheric, pulling up prices in other parts of the world.

In China, flooding has disrupted domestic coal production. China is already the biggest consumer of coal in the world, but demand has increased recently, and with it, its price. Geopolitics play a role here too. China blocked Australian coal imports, about a tenth of its total last year, after Australia questioned the origins of the coronavirus. Imports from Mongolia have also been disrupted by Covid.

Chinese electricity prices are heavily regulated, and utilities cannot freely pass on the cost of higher coal prices to customers. Many have opted to cut back on production, rather than sell at a loss. Beijing has now announced that selling prices will be allowed to rise somewhat. All this has happened at a time when local governments were already reducing electricity production from coal to curb air pollution and carbon emissions. The net result is something South Africans know well: widespread load-shedding.

Finally, in terms of oil, OPEC (along with Russia) has largely maintained the production cuts it put in place last year to prop up the oil price. In other words, there is no fundamental shortage of oil. Supply is being deliberately held back. OPEC can increase supply if it worries that high prices will choke off demand, but for now, its members seem comfortable with the revenues flowing in. Importantly, the price increase has not yet led to the associated increases in American shale oil production as has been the case over the past decade. Shale producers have largely abandoned the old production-at-all-costs mindset in favour of maintaining profitability and shareholder returns.

Chart 2: US oil prices and production

Source: Refinitiv Datastream

An associated factor is that these companies and their peers face increased difficulty in accessing the funding needed to increase short-term (in the case of shale) and long-term production (in the case of the oil majors). Banks and asset managers across the world are phasing out exposure to fossil fuels and some have already cut all ties. This has contributed to steep declines in capital expenditure by fossil fuel producers. 

In other words, the big move among global investors towards embracing environmental, social and governance (ESG) principles might have the unintended consequences of higher fossil fuel prices until such time as renewable sources reach critical mass.

Chart 3: Capital expenditure by listed oil, gas and coal companies

Source: Refinitiv Datastream

The good news is that elevated fossil fuel prices do create a strong incentive to increase investment in alternatives. This is where ESG can play a big role to make sure the alternatives are green, not brown. Economists have long argued that the best way to tackle climate change is to put a tax on carbon emissions. This is because the price we pay for a tank of petrol, for instance, covers the cost of production and distribution but not the cost of the associated air pollution. Since the cost of this externality is not included, petrol is too cheap. This leads to excessive demand. A carbon tax raises the price to its “correct” level and lower demand. The recent price increases could therefore achieve a similar effect.

A tax on your houses

Increased energy prices act as a tax for most consumers. Most of us have no choice but to fill up our car. If you live in the snowy Northern Hemisphere, you have little choice but to heat your home with gas.

In other words, this will be a drag on global consumer spending, the question is just for how long will prices remain elevated. It is somewhat compensated for by the excess savings that households in the rich world have built up, but it also appears that most of the excess savings are concentrated in the hands of more affluent households. Meanwhile, it is lower-income households that are most exposed to increases in energy prices and associated rises in food prices. Nonetheless, it is worth pointing out that at around $80/barrel, the oil price is nowhere near the $150/barrel record set in 2008 on the eve of the global financial crisis, or the $100+ levels that prevailed between 2011 and 2014, especially adjusted for inflation or growth in incomes.

The other complication is that these price increases come at a time when inflation rates are already elevated. The global production and delivery of goods are already severely constrained by Covid-related disruptions, shortages of inputs and labour, and logistical bottlenecks. But now production in China, the world’s factory, has to contend with electricity blackouts. This is likely to worsen the supply chain problems already besetting the world economy.

People often confuse higher fuel prices with inflation. Fuel prices are very visible since most motorists have to fill up at least once a month. But inflation refers to sustained price increases in a broad range of consumer goods and services. Energy is a component in consumer price indices and therefore higher energy prices do have a direct short-term impact. But the big question is whether firms can raise their selling prices to compensate for higher input costs. In this way, higher energy costs ripple through the economy. If workers then demand higher wages to compensate, we have the beginnings of a wage-price spiral. This clearly requires pricing power on the part of firms and bargaining power on the part of workers that have been absent for many years. However, in the current Covid-distorted global economy, there have been signs of both.

Winners and losers

There are clear winners from this energy crunch. Net exporters of coal, gas and oil are clearly smiling, particularly countries such as Nigeria that have really struggled until recently.

In contrast, many countries are energy importers and face not only higher inflation rates, but also potentially balance of payments problems as they need to cough up more of their scarce dollars for each barrel of oil. Compounding matters, this comes at a time when the US Federal Reserve is planning to scale back its monetary stimulus, which has put upward pressure on the dollar. Some developing countries, therefore, face a triple whammy of higher energy costs, a weaker currency, and domestic central bank interest rate hikes aimed at stabilising exchange rates and inflation.

South Africa has one leg in this camp as an importer of petroleum products. The rand has been on the back foot in recent weeks, and this means a big petrol price increase is on the cards for next month.

However, we are also the world’s fifth-largest coal exporter (behind Australia, Indonesia, Russia and the US) and the rising export revenues limit downward pressure on the rand. Coal exports would be even higher if not for the capacity constraints on the Transnet rail corridor from the Highveld to the coal terminal at Richards Bay.

It also helps that inflation has been relatively stable in South Africa, with price increases excluding food and energy costs running at only around 3%. The SA Reserve Bank’s latest forecasts suggest that inflation should stay close to the 4.5% midpoint of the target range over the next two years. However, the risks are clearly to the upside. A gradual interest rate hiking cycle is therefore likely to commence in the next few months. How gradual will depend on where energy prices settle and how the rand responds. The Reserve Bank will also keep a close eye on what other central banks are doing, particularly the US Fed.

Oils well that ends well?

In summary, it is a delicate moment for the global economy, and could end up being a long, cold winter for people in the Northern Hemisphere. The big risks are a slowdown in consumer spending, further disruptions to production and persistent inflation that forces central banks to tighten monetary policy sooner than they’d like. None of this is good for markets.

However, it is worth repeating that the underlying cause is the strong recovery in demand as the world gradually puts the pandemic behind it. This is good. Moreover, energy prices are notoriously volatile. In April last year, a key oil futures contract briefly traded at a negative price. Traders were willing to pay to get rid of the oil rather than take delivery. The most recent price moves in gas and coal also have all the hallmarks of panic-driven trading, and therefore are unlikely to be sustained over time. Investors in diversified portfolios should similarly avoid making panicky moves in response to the recent dramatic headlines. The current situation is the result of a nasty confluence of events, and some of the contributing factors on the supply side could ease.

Finally, in the current context, it might be worth remembering that 13 years or so ago, “Peak Oil” was a dominant investment narrative. It was believed that the global supply of oil would peak and this justified prices surging to $150/barrel and beyond. The opposite turned out to be the case. Today, we’ve probably already passed the point of peak oil demand due to the rise of electric vehicles. Demand for coal could prove stickier, while natural gas could increase in importance as a “bridging fuel” while the world transitions to renewable sources. However, short-term price movements are clearly going to remain unpredictable.

This is relevant when thinking about investments more broadly. Dominant narratives can lead you astray. Just because you read about a “megatrend” or “structural change”, whether it is ESG, clean energy, blockchain, biotechnology, or demographic shifts, doesn’t mean that there is easy money to be made. It could be priced on already, or simply overhyped. You could be way too soon or too late already. Maintaining appropriate diversification across different asset classes and within each asset class remains the best way of investing, even if it sounds boring.

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DBSA CALL FOR PROPOSALS: Embedded Generation Investment Programme in South Africa

The Development Bank of Southern Africa invites all private sector entities and energy developers to submit proposals in response to South Africa’s Embedded Generation Investment Programme.

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G7: why major economies are delaying a break with the fossil fuel industry

The climate crisis is certain to be a hot topic at the G7 summit in Cornwall. While the leaders of the world’s richest countries agree in theory on the need to reach net-zero emissions by 2050 at the latest, they remain faithful to a fossil fuel industry reluctant to substantively change its business model.


By George Ferns, lecturer in Management, Employment and Organisation, and Marcus Gomes, lecturer in Organisation Studies and Sustainability, Cardiff University

A recent report by the International Energy Agency, a typically conservative advisory body, argued for an immediate ban on new fossil fuel projects. But investments by oil, gas and coal companies into finding new sources continue, as does industry lobbying to undermine regulation. The environment ministers of the G7 countries committed to end funding for new overseas coal projects by the end of 2021. But 51% of their Covid-19 economic recovery funds – a total of US$189 billion (£133 billion) – paid between January 2020 and March 2021 were earmarked as financial aid for the fossil fuel industry. Worse, US$8 of every US$10 dedicated to non-renewable energy was paid with no conditions on these companies to reduce their emissions.

Why does it seem so hard for G7 leaders to match their words with action when it comes to the fossil fuel industry?

Betting on the long-term business case

Despite setbacks in volatile markets and oversupply risks, there is still a lot of money to be made from extracting, producing and selling hydrocarbons. Demand for coal has plateaued, but oil and gas demand is predicted to rise at least for the next 15 to 20 years, particularly in emerging economies such as China and India.

This puts G7 leaders in an awkward position. On the one hand, governments need to reboot economic growth after the pandemic slowdown – a profitable energy sector nourished by rising demand abroad is welcome, even though hydrocarbon extraction can be especially polluting in developing countries.

Governmental support for the industry in the form of subsidies or tax breaks artificially inflates the profitability of fossil fuels, in turn making renewables a less attractive investment. Put simply, it is less risky and more profitable to – at least for now – invest in oil and gas.

Carbon lock-in

The fossil fuel industry continues to shed public support, but it can rely on the fact that it’s embedded within a complex system of consumers, suppliers and contractors, politicians and the media. The cause-and-effect relations that define such an intricate system often produce unintended outcomes.

This interdependency is referred to as carbon lock-in. Economies have evolved in such a way that they perpetuate an energy landscape dominated by fossil fuels and plagued by an inability to radically change.

Not only does carbon lock-in result in inertia, it causes a tragedy of the commons-type problem. Big oil companies such as BP, Exxon Mobil and Shell are unlikely to make meaningful changes until the rest of the system acts in unison. National oil companies and smaller privately owned fossil fuel companies comprise the bulk of known fossil fuel reserves. But they often evade the spotlight and so can operate with more freedom. For a big oil company to make high-risk changes to its business model while others enjoy a free ride would be seen as a bad business decision.

Lock-in, as the name suggests, is very difficult to break. That said, G7 members are powerful nodes within this complex network. Strong leadership – such as divestment from fossil fuels and strong support for renewables – would cause reverberations throughout the whole system. But strong commitments coupled with counter-intuitive policies only send a signal that meaningful changes aren’t coming.

Identity crisis

People working in the fossil fuel industry often stay in the sector for their entire career – starting off as students of engineering or geoscience in departments funded by the industry, working all over the world and then heading into management positions.

The industry’s identity is predicated on certain values that have existed since the early days of hydrocarbon exploration, including, as one study found, a deep trust in the potential of science and technology to further humanity’s control over nature and to drive progress and economic development.

The ideological commitments of leaders in the fossil fuel industry will take a firm challenge from governments to overcome. It’s clear from financial decisions in the lead up to the summit that G7 leaders aren’t quite up to that test yet. But the meeting in Cornwall is their opportunity to signal that that cosy relationship is finally coming to an end.

Courtesy: The Conversation

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Five satellite images that show how fast our planet is changing

Satellite observations can provide far more insights than that. In fact, they are essential for understanding how our planet is changing and responding to global heating and can do so much more than just “taking pictures”.

By Jonathan Bamber Professor of Physical Geography, University of Bristol

It really is rocket science and the kind of information we can now obtain from what are called Earth observation satellites is revolutionising our ability to carry out a comprehensive and timely health check on the planetary systems we rely on for our survival. We can measure changes in sea level down to a single millimetre, changes in how much water is stored in underground rocks, the temperature of the land and ocean and the spread of atmospheric pollutants and greenhouse gases, all from space.

Here I have selected five striking images that illustrate how Earth observation data is informing climate scientists about the changing characteristics of the planet we call home.

1. The sea level is rising – but where?

Map showing global sea level rise
The sea is rising quickly – but not evenly. ESA/CLS/LEGOS, CC BY-SA

Sea level rise is predicted to be one of the most serious consequences of global heating: under the more extreme “business-as-usual” scenario, a two-metre rise would flood 600-million people by the end of this century. The pattern of sea surface height change, however, is not uniform across the oceans.

This image shows mean sea level trends over 13 years in which the global average rise was about 3.2mm a year. But the rate was three or four times faster in some places, like the southwestern Pacific to the east of Indonesia and New Zealand, where there are numerous small islands and atolls that are already very vulnerable to sea-level rise. Meanwhile, in other parts of the ocean, the sea-level has barely changed, such as in the Pacific to the west of North America.

2. Permafrost is thawing

Source: ESA

Permafrost is permanently frozen ground and the vast majority of it lies in the Arctic. It stores huge quantities of carbon but when it thaws, that carbon is released as CO₂ and an even more potent greenhouse gas: methane. Permafrost stores about 1 500 billion tonnes of carbon – twice as much as in the whole of the atmosphere – and it is incredibly important that carbon stays in the ground.

This animation combines satellite, ground-based measurements of soil temperature and computer modelling to map the permafrost temperature at depth across the Arctic and how it is changing with time, giving an indication of where it is thawing.

3. Lockdown cleans Europe’s skies

Source: ESA

Nitrogen dioxide is an atmospheric pollutant that can have serious health impacts, especially for those who are asthmatic or have weakened lung function, and it can increase the acidity of rainfall with damaging effects on sensitive ecosystems and plant health. A major source is from internal combustion engines found in cars and other vehicles.

This animation shows the difference in NO₂ concentrations over Europe before national pandemic-related lockdowns began in March 2020 and just after. The latter shows a dramatic reduction in concentration over major conurbations such as Madrid, Milan and Paris.

4. Deforestation in the Amazon

Credits: ESA/USGS/Deimos Imaging

Tropical forests have been described as the lungs of the planet, breathing in CO₂ and storing it in woody biomass while exhaling oxygen. Deforestation in Amazonia has been in the news recently because of deregulation and increased forest clearing in Brazil but it had been taking place, perhaps not so rapidly, for decades. This animation shows dramatic loss of rainforest in the western Brazilian state of Rondonia between 1986 and 2010, as observed by satellites.

5. A megacity-sized iceberg

Source: ESA

The Antarctic Ice Sheet contains enough frozen water to raise global sea level by 58 metres if it all ended up in the ocean. The floating ice shelves that fringe the continent act as a buffer and barrier between the warm ocean and inland ice but they are vulnerable to both oceanic and atmospheric warming.

This animation shows the break-off of a huge iceberg dubbed A-74, captured by satellite radar images that have the advantage they can “see” through clouds and operate day or night and are thus unaffected by the 24 hours of darkness that occurs during the Antarctic winter. The iceberg that forms is 1,270 km² in area which is about the same size as Greater London.

These examples illustrate just a few ways in which satellite data are providing unique, global observations of key components of the climate system and biosphere that are essential for our understanding of how the planet is changing. We can use this data to monitor those changes and improve models used to predict future change. In the run-up to the vitally important UN climate conference, COP26 in Glasgow this November, colleagues and I have produced a briefing paper to highlight the role Earth observation satellites will play in safeguarding the climate and other systems that we rely on to make this beautiful, fragile planet habitable.

Disclosure statement

Jonathan Bamber receives funding from the UK Natural Environment Research Council, the European Commission Horizon2020 Framework Programme and the European Space Agency.

Courtesy: The Conversation

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Wind power producers may provide immediate surplus power

The South African Wind Energy Association has engaged with its members to ascertain if the sector is able to provide additional power, in line with the recent call for additional energy from existing Independent Power Producers by the Department of Mineral Resources and Energy (DMRE).

The Department of Mineral Resources and Energy (DMRE)’s proposed ‘Additional Megawatt Programme’ will see the Department entering into agreements with existing renewables Independent Power Producers (IPPs) to procure additional energy that wind and solar farms could supply, over and above, what is currently allowed under their existing Power Purchase Agreements.

“We welcome this call from government and can confirm that several of our IPP members have indicated that they will be responding. They are of the view that it is possible to run their wind turbine generators (WTG) at higher power output or include a power boost to increase generation output of already installed wind turbines,” explained Ntombifuthi Ntuli, CEO of SAWEA.

She added that the industry will be seeking clarification on practical details of the ‘Additional Megawatt Programme’, but that the response has been positive overall. When the country reached unprecedented Stage 6 load-shedding in 2019, SAWEA called for the immediate release of available additional capacity from operational wind farms into the national grid, by lifting the Maximum Export Capacity (MEC) on all operating wind farms.

“Earlier this month, the IPP Office issued a call to all operational IPPs with projects in Bid Window 1 to 4, to make available additional capacity from their operational plants, in order to contribute towards closing the power supply capacity gap. It is encouraging to see that industry proposals are being taken seriously by government and are now being implemented,” said Ntuli.

Due to demand exceeding available supply capacity, South Africa has been plagued with power shortages for a long time. This is despite government’s efforts to implement a number of programmes to close the capacity gap, which include the announcement of preferred bidders for the RMIPPPP and issuing of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Round 5 Request for Proposals (RFP) as well as announcing future procurement plans.

“Eskom’s Electricity Availability Factor has been below recommended levels for a very long time, as demonstrated by the protracted load-shedding that our country has been experiencing for well over a decade now. This indicates an urgent need to procure new generation capacity, both in the long-term and short-term, to bring the available capacity to healthy levels again,” added Ntuli.

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Scatec’s winning bid brings SA into the future with progressive renewable energy plan

Renewable energy power producer Scatec has announced the awarding of their bids to supply South Africa with 150 megawatts of dispatchable power through the use of renewable energy. The bid has been awarded as part of the national Risk Mitigation Independent Power Procurement Plan (RMIPPP) by the Department of Mineral Resources and Energy.  

It represents government’s response to the current energy crisis, in which power shortfalls have threatened to bring the country’s economy to its knees. Unlike its predecessors, the RMIPPP is a progressive, energy-agnostic scheme and therefore not prescriptive when it comes to power generation technology, but rather focused on technical outputs, driven by power system requirements.

On that basis, Scatec opted to present solar plus battery only bids; going toe-to-toe with fossil fuels and other hybrid configurations. It should be noted that the Scatec bids are the only renewable energy only bids awarded in this tender process – showcasing the company at the forefront of future-oriented power delivery in South Africa and indeed globally. The plan aligns with government’s 2019 Integrated Resource Plan – a living document that articulates South Africa’s envisioned transition to a cleaner, mixed energy supply, with greater emphasis on renewable power.

Jan Fourie, Scatec’s General Manager for Sub-Saharan Africa, states that the project site will house over 2-million individual solar panels, reach roughly 10 kilometers from end to end, and will require a total capital expenditure of around $1-billion. “To our knowledge, this may well be the world’s largest solar and battery storage hybrid plant,” he adds. The initiative will consist of solar arrays totalling 540MWp, all situated at the same site in the sunny Northern Cape.

Each project will be capable of generating 50 megawatts of dispatchable power (or Contracted Capacity, in RMIPPPP terms) and will be co-located with cutting-edge energy storage technology plants using lithium-ion batteries, in aggregate having a capacity of 1.1 gigawatt hours, allowing for an unprecedented level of output control and dispatchability.

The site has been overly capacitated to generate agreed-upon power even in the lowest-performing solar months – with 22 years of hourly historical data being studied to ensure optimal performance. Together, they will meet the requirement to be dispatchable, according to market needs, and be fully dispatchable daily from 5:00 am to 9:30 pm.  

“Totalling an impressive output capacity of 150 megawatts of clean, dispatchable power, the projects will play a major role in closing the energy gap in South Africa and mitigating the threat of continued load shedding in coming years. These bids will also contribute large amounts of skilled and unskilled jobs to the South African economy during the construction phase, and generate substantial long-term employment going forward,” says Fourie.

Scatec, who is present on four continents and headquartered in Norway, brings global experience in a diverse range of renewable power generation projects, having been active in the South African market since 2010. From their local offices in Cape Town, the group operates and manages an impressive portfolio of 6 utility-scale solar PV sites and operations, including the Kalkbult plant in the Northern Cape (the first utility-scale solar plant in SA), as well as the recently completed 258 MW Upington Solar Complex.

“We are proud to be the country’s leading supplier of solar power, with an array of plants and projects totalling 448 megawatts of renewable energy.”

Jan Fourie, Scatec’s General Manager for Sub-Saharan Africa

The call for bids has attracted power industry heavyweights who will collectively supply a grand total of 2 gigawatts of electricity by July 2022, in order to reduce the impact of load shedding on the national economy in a timeous manner.  

Fourie believes that the bid comes at a crucial time in the energy-landscape where renewables are poised to become more cost-effective than ever before, and in which many global fossil-fuel giants are now pivoting their efforts and resources towards renewables.

Scatec’s bid is based on renewables, innovative battery, and storage technologies alone, and represent an appreciable contribution towards South Africa’s cleaner energy goals – part of a broader global effort to reduce carbon emissions and ameliorate global warming – as outlined in the IRP.

“Our work demonstrates a commitment to a brighter, greener future globally, and stands as an important testament to the fact that renewables are now fully dispatchable and can compete in the market against traditional, less sustainable energy resources,” Fourie says.

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Developing countries need to chart their own course to net-zero emissions

Translating complex climate science into language people understand has always been difficult. At various times, the aim of different climate policies has been holding average global temperature rise to 2°C or 1.5°C or ensuring emissions peak by a particular year. Net-zero targets are the most recent attempt to simplify the climate crisis in order to make it manageable.


The Paris Agreement called on countries to balance greenhouse gas sources, such as cars and factories, with ways of removing emissions from the atmosphere, such as forests and carbon capture technology, in the second half of this century. A report by the Intergovernmental Panel on Climate Change, released in 2018, examined how temperature rise could be limited to 1.5°C and urged the global community to reach net-zero emissions of carbon dioxide by 2050.

Framing the effort to tackle climate change this way has proved useful. More than 30 countries have net-zero targets set or proposed in law and existing policies, while more than 120 countries are discussing their own net-zero targets. Some of these targets concern all greenhouse gas emissions, others just carbon dioxide, and most set 2050 as the deadline.

Same goal, different paths

There is a risk that the call for global emissions to reach net zero by 2050 is seamlessly translated into a call for each country to announce net zero by 2050 targets. In recent months, leaders from the US and the UK and the UN Secretary-General have suggested that a net-zero emission target consistent with reaching global net-zero carbon by 2050 is an important yardstick by which climate pledges by major economies are to be judged.

Yet how much each country has to do depends on how fast other countries reach net zero. So how should the international community decide the relative pace of change? Here, the hard-won agreement at Paris provides some guidance. It recognises that emissions will take longer to peak in developing countries because addressing poverty is an overriding challenge. For the whole world to reach carbon neutrality in 2050, developed countries have to reach net-zero carbon emissions earlier.

The Paris Agreement formulation makes sense. It would hardly be fair to ask a country like India to reach net zero at the same time as the UK. India has yet to peak its emissions and currently emits less than half of global average emissions per capita, while the UK peaked its emissions two decades ago at a much higher GDP and its emissions remain above the global average.

The Paris Agreement also requires that developing countries receive support – in the form of money or green technology – to speed up their transition. Net-zero targets are a powerful way to signal common cause between nations. But retaining that sense of solidarity requires these targets to be consistent with demands for climate justice.

This is not only fairer, but also makes for smarter politics and so increases the chances of real action. The Paris Agreement broke a long-standing political deadlock by allowing each country to develop its own nationally determined contribution to cutting global emissions. This let national governments tailor climate policy in order to maximise its appeal to people at home. In countries such as the UK, the idea of reaching net zero emissions as soon as possible has considerable support. In other countries, winning political support may require climate action to be embedded in other goals.

In South Africa, there is crippling inequality and unemployment stood at 43% in late 2020. Emissions cuts can only proceed if jobs are created during a transition from a coal-based economy to a low-emissions one, particularly for young people.

In India, too, job creation is paramount. So are environmental concerns like air pollution and unequal access to reliable energy. This may require action in the electricity sector to address these development challenges and prevent the future economy becoming locked in to high-carbon energy sources.

Both South Africa and India’s domestic priorities can be translated over time into a clear formulation for reaching net zero emissions. But that translation between domestic development narratives and global obligations has to be undertaken, not presumed. Instead of a single net zero transition, there must be space for multiple transitions, consistent with climate justice and tailored to different national contexts.

Net zero targets have to be credible to be meaningful – long-term statements of intent are not enough. Doing more, earlier, is necessary. Recent pledges by leaders for action by 2030 are a step in the right direction. These declarations should be embedded in Paris Agreement processes to ensure countries are accountable. Equally important is addressing the often ignored “net” in net zero. National plans should not be over-reliant on the future existence of technology to remove emissions. Any pledges based on purchasing emissions credits from other countries must be credible.

Net zero can be an important focus for climate action. But it must not become a set of blinkers that seeks to compel all countries down a single path. Instead, we need credible, just transitions to net zero.

Courtesy: The Conversation

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Nersa to oppose Eskom High Court application

Nersa to oppose Eskom High Court application to review energy regulator
decision on the regulatory clearing account and supplementary applications for the 2018/19 financial year

The National Energy Regulator of South Africa (NERSA) confirms that at its meeting held on 28 April 2021, the Energy Regulator resolved to oppose the High Court application brought by Eskom Holdings SOC Limited (Eskom) against NERSA to review and set aside the Energy Regulator’s decision pertaining to the approval of a Regulatory Clearing Account (RCA) balance of R13.271-billion for the 2018/19 financial year, and the Energy Regulator’s decision to grant Eskom’s supplementary revenue balance of R1.288-billion in respect of the 2018/19 financial year.

The Eskom judicial review application was received on 12 April 2021. In arriving at the decision to oppose the application, NERSA considered the factual matrix, applicable regulatory and legal principles. NERSA further considered the impact of Eskom’s continuous court review applications on the Government’s economic recovery plans, as well as hardships on customers. In this regard, interested stakeholders are welcomed to join NERSA in opposing the review application if they consider that the Court decision may negatively affect them.

NERSA will be opposing the judicial review application within the required time frame and process.

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‘Sacred forests’ capture carbon and keep soil healthy

Michele Francis | The Conversation

In parts of West Africa, patches of forest have been preserved for long periods of time because of their cultural or religious significance. These “sacred forests” are believed to be inhabited and protected by gods, totem animals or ancestors. Local communities have their own rules prohibiting reckless harvesting of timber and game, which have protected the sacred forests over many generations.

Unpaved road with large trees on either side
Giant old trees in the rainforest at Campement de Kloto, Missahoe, Agomé in Togo, West Africa. Getty Images

The forests cover several hundred square kilometres, and may be the remnants of a once continuous forest along the West African coast. The historically dense forest ecosystem in West Africa has been reduced by over 80% since 1900. The age of the remaining patches means they often contain more biodiversity than surrounding areas of agricultural land. They are the last remnants of ecological niches.

Not only are they culturally valuable and biodiverse, but these ancient forest remnants are also crucial to the fight against climate change. They also improve agricultural output. These were the findings of a recent study I co-authored, looking at the soil types in and around a sacred forest in northern Togo. The parent material of these soils is not calcareous, (are not lithogenic carbonates), thus making them an important carbon sink.

I calculated that one hectare of forest is able to permanently remove as much carbon dioxide from the atmosphere as is released by a power station burning nearly 16 tonnes of coal.

Organic matter – dead leaves and remains of trees – which has been on and in the soil for a long time and decomposing that makes the difference both to soil fertility and to carbon storage. As the trees and plants die, or the dead leaves drop down, these are slowly worked into the soil by the tiny creatures that live in it.

This stable ecosystem of organic matter can help fight climate change because of its potential for carbon sequestration – the capturing and storing of atmospheric carbon dioxide. This is relevant in global climate change policies.

The soil in the area is also important because it could contribute to yields in agricultural production. Adding organic matter to farmland areas surrounding these forests can increase the agricultural yields by “copying” the nature of these sacred forest soils.

Litter processors capture carbon

Forests remove large amounts of carbon dioxide from the atmosphere and bind it into their leaves. When trees die and eventually decompose on the forest floor, this carbon dioxide is released back into the atmosphere, unless it’s captured and stored in a more permanent form. My research showed that this carbon capture was taking place on the floor of a sacred forest on a farm in Northern Togo.

Soils under the sacred forest are extremely biodiverse and high in nutrients and organic matter, in contrast with the surrounding soils. The agricultural lands are affected by soil erosion and carbon losses.

In the forest soil, I found evidence of the activity of litter processors, such as oribatid mites. They decompose the organic carbon and their biological activity helps to form a mineral called calcite in the soil. Calcite forms when root respiration and microorganisms decomposing organic matter generate carbon dioxide. This process reacts with soil moisture to form dissolved inorganic carbon and later precipitates as calcite.

The calcite in the floor of the sacred forest is formed like needle fibres and rods. These shapes are typical of biological origins.

None of these features are present in the soil from the degraded lands surrounding the sacred forests. The surrounding soils are very low in organic matter. They are non-calcareous and show very little microfaunal activity.

Calculations show that the soil under the sacred forest in Northern Togo stores 227 tonnes of organic carbon per hectare, and permanently captures atmospheric carbon dioxide at a rate of at least 8.64 tonnes of recalcitrant inorganic carbon per hectare.

That’s why one can say that one hectare of forest removes as much carbon dioxide as a power station releases when burning nearly 16 tonnes of coal.

Because this area of Togo is dry, this mineral form of inorganic carbon remains in the soil and doesn’t dissolve.

Improving crop yields

Woody savannah and crops including peanuts, corn, rice, millet, soy and cotton surround the sacred forest I studied in Togo. Crop yields are low because of the low fertility of the soils and a lack of fertilisation.

The farming centre at Tami, has a remnant of only a quarter hectare of the sacred forest. The sacred forest has sharp and straight boundaries, strongly suggesting that its size is controlled by long-term cultivation. The properties of the surrounding soil are completely different.

The farm is developing techniques that put organic matter back into the depleted soils, for example by adding leaf litter as compost. This adds nutrients to the soils that increase food yields. It also mirrors the processes in the sacred forests. It potentially increases carbon sequestration relevant to global climate change policies such as “4 per mil” – an initiative to increase the carbon in agricultural soil by 0.4% or 4 per mil ‰ per year.

Efforts to improve soils are particularly important in areas where these forests are becoming more fragmented because of population growth, expansion of buildings, construction of roads, and erosion of traditional religious beliefs.

Preserving the old-growth forest remnants and restoring degraded farmlands has two benefits: increasing food yields and reducing global CO₂.

Its important that land users, whether in the agricultural and forestry sector or urban gardeners, know of the benefits of conserving organic carbon.

Author
  1. Michele Francis Researcher, Department of Soil Science, Stellenbosch University
Disclosure statement

Michele Francis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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