Fossil fuels, energy transition & risk

• Exxon states: “The risk of climate change is clear and the risk warrants action.”
• US listed coal majors have seen share price declines of over 75% since 2011, in stark contrast to the 42% gain in the Dow. Australian listed coal companies have matched this underperformance.
• Coal demand continues to undershoot expectations, with new data in Germany, Japan and Australia.
• Transitioning to a gas dominated electricity system will see US emissions continue to rise.
• Manufacturing Australia predicts that Australia’s gas export plans could cost 100,000 jobs due to surging domestic gas prices.
• McKinsey is the latest to acknowledge “The disruptive potential of solar power”. Solar stocks have massively outperformed the wider market since 2013, reversing some of the 2011-12 losses.
• First Solar, the US’ largest solar PV manufacturer, continues to achieve record efficiencies.
• One of the largest undeveloped coal basins in the world remains stalled, with both GVK and Adani again pushing out their expected financial close for the Galilee by another year.
• Wiggins Island Coal Export Terminal is a year behind schedule with A$1bn of writedowns expected on this 100% debt/preference share funded A$3.3bn project.
• Chinese Premier Li Keqiang declares a “war on pollution”, announcing that China will shut down 50,000 small coal-fired furnaces across the country in 2014
• China’s first carbon market in Chongqing plans a 4.1% pa cut to carbon dioxide emissions starting in 2014, using 2013 as the baseline.
• Santos agrees to not undertake drilling activities on private land without landholder consent.
• UniSuper announces it is adjusting its Socially Responsible Investment Option to “screen companies involved in fossil fuel exploration and production”.
• In the face of investor pressure, Peabody has agreed to release a report regarding fossil fuels and their impact on climate change, and potential liabilities.
• Blackrock, the world’s largest fund manager highlights the “licence to operate” risk for any company operating in the Great Barrier Reef.
• The Norwegian Sovereign Wealth Fund commences a review of whether to divest its holdings of all fossil fuel stocks.

Please view full report PDF for references and sources.

Press release: Briefing note: Fossil fuels, energy transition, and risk