When he managed billions of dollars for Goldman Sachs Group Inc., Robert Litterman used sophisticated mathematical models to control risk. Now he is advising the government, and he believes it isn’t doing enough to avoid serious losses, including taking drastic steps to deal with the coronavirus pandemic.
In his work with federal regulators, Mr. Litterman’s main focus is climate change.
Mr. Litterman now chairs a group working on the risks of climate change for the Commodity Futures Trading Commission. In March, he testified before a congressional committee looking into the economic impact of global warming.
Mr. Litterman, who left Goldman a decade ago, told Congress that his analysis of the issue, partly based on models he used to manage risk in financial markets, shows failure to act quickly could result in a “tragic and potentially catastrophic mistake.” The way to offset that risk, he says, is to rapidly decrease emissions of carbon dioxide, a key greenhouse gas.
One way to curb fossil-fuel emissions, Mr. Litterman says, is through a carbon-tax. The Baker-Shultz legislative plan envisions a $40 per ton tax that would increase every year by roughly 5%. Money collected would be returned to U.S. citizens at a rate of $500 per person a year.
A goal of the tax—which Mr. Litterman thinks might be too low—is to affect incentives for consumers, business owners and investors, possibly changing their behavior.
He concedes, however, that the current economic downturn likely makes a tax on fossil fuels politically unpalatable for the time being.
The problem with many conventional models of climate change, including other carbon-tax proposals, is that they factor too much certainty into future outcomes, according to Mr. Litterman. Because of that, they don’t apply a high enough price on carbon right now.
Instead, the models should take into account periods of extreme volatility in global circumstances—just like the stock market has seen in recent months. The world needs to do the same with climate change, Mr. Litterman argues.
A twist in Mr. Litterman’s model is that over time, as the tax influences behavior and as new carbon-free technologies are implemented, the levy on carbon should decline. But the longer the world waits to curb emissions, the longer it’s going to take to tackle the problem—and the outcome is going to be much worse.
Creed Comments: Having a great financial mind like Mr. Litterman’s in the climate risk corner, gives significant credibility to the carbon tax cause. I believe we should “pay the public” a dividend to catalyze rapid decarbonization at scale.
Go deeper at https://carbon.substack.com/p/wizards-and-prophets-the-human-impact
It is all in the end, a matter of chemistry. Carbon dioxide is a form of what chemists call inorganic carbon—a simple molecule that is pretty inert. Fossil fuels are made of carbon in its organic form—often complex molecules that are far from inert. Combustion turns these organic complexities into inorganic simplicities: carbon dioxide, water vapour and heat.
Of the energy that people pay for 34% comes from burning oil, 27% from coal and 24% from gas. Nuclear power, hydroelectric power and all other renewables combined provide just 15%. The result of all this fossil fuel use is a modern industrial economy and an annual flow of 9.5bn tonnes of carbon out of the ground and into the atmosphere.
Through its effects on the plants, animals and microbes which make up the biosphere, on the climate and on the oceans, this industrial flow of carbon links the Earth’s distant geological past to its future over millennia to come. It is the single clearest piece of evidence for the idea that humans now have a power over the Earth as great as the forces of nature, and that their use of this power has opened up a new geological epoch that some scientists call the Anthropocene.
To appreciate the importance of this industrial carbon flow, you have to understand the carbon cycle in which it sits. At first, this context seems reassuring. Almost all microbes, and all animals, get the energy that they need for life from breaking up food made of organic molecules. The flame-free, internalised form of combustion by which they do so, which biologists call respiration, produces much more carbon dioxide than industry does.
Creed Comment: The Anthropocene fact that humans are now integral to the processes of the planet does not mean that they can change those processes without great effort - and cost. Nonetheless, it must be done.
Go deeper here https://carbon.substack.com/p/wizards-and-prophets-the-human-impact
(source: Tech Crunch)
As Congress rushes out trillions of dollars to prop up businesses, the federal government is sitting on about $43 billion in low-interest loans for clean energy projects, and critics are accusing the U.S. Energy Department of partisan opposition to disbursing the funds.
Congress is already considering more coronavirus relief, despite a growing concern for an annual budget deficit projected to near a staggering $4 trillion. To some energy experts and lawmakers, it is unconscionable that tens of billions of dollars that Congress long ago authorized has sat unused.
The loans — which would aid renewable power, nuclear energy and carbon capture and storage technology — had some bipartisan support even before the coronavirus pushed 30 million people onto the unemployment rolls. But some supporters of the program said it was being held back by a president who has falsely claimed wind power causes cancer and consistently sought deep cuts to renewable energy spending, including the loan program.
The last new project approved under the programs came in late 2016, a loan to a carbon capture and storage plant in Louisiana. The Trump administration did approve one follow-up loan for a nuclear reactor project in Georgia, but the process had begun under the Obama administration.
Shaylyn Hynes, a spokeswoman for the Department of Energy, declined to explain why loans are not being disbursed. She said the Trump administration had supported renewable energy in other ways, like funding research and development for wind and solar power. She also said in a statement that Energy Secretary Dan Brouillette had directed the agency to “utilize all of its resources to be supportive of the energy industry during the Covid-19 pandemic, including the loan program office.”
Go deeper at https://carbon.substack.com/p/reimagining-capitalism-and-climate
(source: Dr. Robert Ballard) “Father of Environmental Justice”
Two important pieces of coronavirus research have come out in recent weeks. One showed that African Americans are getting infected and dying from Covid-19 at disproportionately high rates. The other found that counties with higher levels of pollution are seeing greater numbers of coronavirus deaths than cleaner ones.
The data in both reports is preliminary. But environmental experts said that together, the statistics pointed to a troubling story of vulnerability in communities of color.
There is still much more to be learned. Many cities and states still are not reporting coronavirus data by race, and experts note that other factors, like income, also are in play. The pollution study, from the Harvard University T.H. Chan School of Public Health, looks at aggregated data from counties, not individual cases, so it offers little insight into the role pollution plays in susceptibility to the coronavirus. LINK
Creed Comments: The coronavirus mortality data is shining a light on the correlation between race, pollution and health. These problems are institutional. Climate justice must be addressed.
Go deeper here LINK
Markets of all sorts, in every part of the world, are responding to the shock of Covid-19. Almost nothing is left untouched, whether it’s consumer-facing, a luxury, or a commodity. Looking across a number of markets this week, there are two states: bending and breaking.
One bending market has been U.S. aviation. On March 6, checkpoints run by the Transportation Security Administration processed nearly 2.2 million passengers. On March 31, the TSA processed all of 146,000—a nearly 93% decline.
A broken market occurs where nothing is transacting at all. Last week, an auction for European Union aviation carbon allowances failed, with just four airlines bidding. Demand for air travel is so low, and therefore airlines’ energy consumption and emissions as well, that their need for permits has fallen to the point where there’s no market to be made.
Looking ahead, it’s worth watching corporate sustainability markets to see how much they bend (or if they break) in our current economic climate.
Consider the RE100, a group of corporations that have committed to meet 100% of energy demand with clean sources. There were 12 members when it was founded in 2014; now there are 221. How many more companies will make such a commitment given everything else corporate executives now have to focus on? Companies might not renege on commitments, and if they do, they probably won't make much noise about it.
But there’s a more immediate—and more market sensitive— place to watch this dynamic play out: corporate renewable energy power purchase agreements.
The appetite to sign more of these agreements will certainly be curbed. Falling power demand should depress power prices in most markets, making grid power more attractive. (Although in many places, renewables will still at least be competitive, if not the lowest-cost option.) From a CFO’s perspective right now, “sustainability” is probably more about keeping a business going than examining its electricity mix.
Go deeper at https://carbon.substack.com/p/planet-of-the-humans-coronavirus
(source: Ashleigh Olinger/NYT)
The science is clear: The world is warming dangerously, humans are the cause of it, and a failure to act today will deeply affect the future of the Earth.
This week the New York Times published a 7-part crash course on climate change, in which seven reporters from the Times’s Climate desk address the big questions:
Go deeper at https://carbon.substack.com/p/planet-of-the-humans-coronavirus
(source: Planet of the Humans)
Planet of the Humans, the new documentary film from director Jeff Gibbs and executive producer Michael Moore, contains a stunning criticism of green energy and the people profiting from it. It was released on April 21 for free viewing on YouTube and as of the afternoon of Friday, April 24, had been viewed over 1.5 million times.
However, it may not be available for public viewing much longer. A pressure campaign is underway to get the distributor to pull the film.
Every type of green energy is "exposed" as phony, useless, or inextricably dependent on fossil fuel production and large-scale hardrock mining. The targets include wind power, solar power, ethanol, biomass, battery storage, electric vehicles, and seaweed.
The film features Al Gore, Bill McKibben, Richard Branson, Robert F Kennedy Jr., Michael Bloomberg, Van Jones, Vinod Khosla, Koch Brothers, Vandana Shiva, General Motors, 350.org, Arnold Schwarzenegger, Sierra Club, the Union of Concerned Scientists, Nature Conservancy, Elon Musk and Tesla.
Go deeper at https://carbon.substack.com/p/planet-of-the-humans-coronavirus
Corporate reporting on sustainability — including environmental, social and governance (ESG) performance and achievements — has grown more than fivefold in the past 10 years. Roughly 20 percent of S&P 500 companies published a sustainability report in 2011. In 2018, that number rose to 86 percent. During that time, sustainability professionals have fretted about whether anybody reads their reports.
What we’re beginning to see is that it may not be "who" but "what."
Automation and artificial intelligence (AI) are being leveraged to both generate and evaluate ESG data.
The bots and AI are largely in response to the confusing world of ESG reporting. There are more than 600 ESG ratings agencies globally, according to the Global Initiative for Sustainability Ratings, as ESG data becomes a greater factor in a company’s valuation and access to capital. The challenge is that current corporate ESG disclosures lack consistency and standardization.
Further complicating things, financial markets don’t produce enough data to get the most out of AI and machine learning, according to industry watchdog MarketWatch. AI functions best on billions of data points rather than millions, but three decades of daily share-price data for the benchmark S&P 500 Index would yield only about 4 million data points, a mere drop in the big-data bucket.
For many investors, the technology doesn’t have to be exotic. For example, bot searches of companies’ 10-Q and 10-K filings with the U.S. Securities and Exchange Commission can track and redline what has changed when it comes to sustainability and ESG topics. Investors take notice when a phrase in what normally may be seen as boilerplate shifts from "probable" to "likely" from one report to the next. A machine is more likely to spot such subtleties.
The takeaway is that bots and AI work best when humans develop an investment thesis and machines test that theory. Go deeper here. LINK
(source: Stockholm Environment Institute)
As the covid-19 outbreak rages across the world, it’s easy to forget about the climate crisis. The priorities right now are, and should be, slowing the pandemic, saving lives, and then restarting economies left in shambles. But by that point few countries are likely to be able or especially eager to sacrifice near-term growth to help slow climate change.
In the short term, global emissions are falling, as they did during steep economic declines in the past. But carbon dioxide can stay in the atmosphere for centuries, meaning the total concentration will continue to rise even if we’re producing less of it. And emissions will bounce back as soon as economies do.
So the threat of rapidly accelerating climate change will remain. And we’ll be living in a much poorer world, with fewer job opportunities, less money to invest in cleaner systems, and deeper fears about our health, our financial futures, and other lurking dangers.
When the pandemic wanes, a poorer, more divided world will still face the rapidly rising threat of climate change.
These are ripe conditions to further inflame nationalist instincts, making our global challenges even harder to solve. Indeed, the breakdowns in international (and even intra-national) cooperation as countries race to understand and tackle the covid-19 outbreak offer a stark warning for our climate future.
Another major casualty of the pandemic has been our faith in a global supply chain. As countries shut down production and distribution, first in China and then around the world, essential goods are in short supply. It has become evident how vulnerable we are to trade relationships and concentrated manufacturing centers.
That too presents a challenge for climate change. China produces about a third of the world’s wind turbines, two-thirds of its solar panels, and roughly 70% of its lithium-ion batteries used in electric vehicles. What happens if we enter a cold war on clean tech?
In the end, whether people feel the need to tighten international ties or erect higher walls may depend on how ugly things get in the coming weeks and months, and the political narratives that take hold as we try to make sense of how it all happened.
Author James Temple goes deeper addressing America First, the collapse of trust and Climate Fascism in the full article.
Go deeper here LINK
Solar power on electric cars has yet to become a common feature, but Tesla is about to change that – starting with the Cybertruck electric pickup.
Electric Vehicle expert and Electrek writer Fred Lambert, has discussed solar roofs on EVs before, most recently with the one on the latest Prius Prime, but a recurring problem is that they rarely generate enough power to be worth it.
According to Lambert, the solar cells on the Prius Prime’s roof were estimated to generate enough power to add about 2 miles of range during the day. However, solar power technology has been improving greatly, and it is increasingly starting to make more sense.
There are even startups, like Sono Motors and Lightyear, developing electric vehicles mainly powered through onboard solar power.
Tesla CEO Elon Musk has been looking into the idea for years.
In 2017, he said that he pushed his Tesla engineers to look into integrating solar cells on Model 3, but they concluded that it wasn’t worth it at the time.
Two years later, things have changed.
After the launch of the Cybertruck, Musk said that Tesla’s new electric pickup truck will have a solar roof option that will add 15 miles of range per day.
It’s the first time that a solar roof system has been confirmed to be coming to a Tesla vehicle.
Tesla has yet to open the configurator for the Cybertruck and therefore, the price or availability of the solar roof feature for the Cybertruck is still unknown.
The automaker is aiming to release the Cybertruck in late 2021. Go deeper here. LINK