On identity, complexity and a ‘little’ fossil fuel project off the West Australian coast

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By David Salt

Earlier this month I spotted a tweet that chilled my soul while neatly summing up the challenge of sustainability for our age.

Here it is:

In a nutshell it shows the CEO of a major fossil fuel company extolling the virtues of a massive new project, the Scarborough development, with a comment from one of the world’s top coral scientists describing it as ‘a crime against humanity’ (while asking the responsible politicians to respond appropriately).

One single development

We’ve discussed aspects of the Scarborough development (the biggest oil and gas development to be built in Australia in a decade, situated off the coast of Western Australia) a few times on Sustainability Bites (see Lies, damned lies and environmental economics). It’s worth repeating that an analysis by the company Climate Analytics found that the total emissions from the proposed Scarborough project will be just under 1.4 billion tonnes, three times Australia’s annual emissions! Think about that. Climate Analytics is under no illusion and points out this single project undermines the Paris Agreement (of which Australia is a signatory).

The Australian Conservation Foundation has calculated these emissions will result in 0.000394 degrees of additional global warming that will, among other things, accelerate the decline of the Great Barrier Reef (which may partly account for the coral scientist’s dismay at Woodside’s promotional tweet).

Is an extra 4 x 10,000ths of a degree significant? Keep in mind this is a single development which, by itself, has the capacity to create a measurable global temperature increase at a time when the world is already overheating. This summer has seen unprecedented droughts, storms, fires and floods across Asia, Europe and North America. At this time no-one has even attempted to calculate the economic impact of the carnage from this northern summer, let alone tally the lives lost. And this situation only promises to get worse as carbon emissions increase.

A boon for the economy

Despite the accelerating impacts from climate change being felt all around the world, Woodside’s CEO tells us (though more likely she’s really wanting her shareholders and politicians to hear this) that Scarborough will “deliver value for Woodside shareholders and significant long-term benefits locally and nationally, including thousands of jobs, taxation revenue and supply of gas to export and domestic markets for decades to come.”

I cynical paraphrase might read: “let this project proceed and shareholders will be richly rewarded by quarterly rises in share price; while the enabling government can claim ‘jobs, jobs, jobs’, regional development and a secure supply of energy well into the future (and definitely beyond your next election).”

The planet? Well, it may endure a little more heating but focus on the profits.

And humanity? Bits of it will do very nicely, thank you very much, from the increased economic activity. And those that don’t? Well, most of them don’t vote in Australia and they definitely aren’t shareholders in Woodside, so there’s nothing to worry about here.

In any event, the planet and humanity are not the focus of the CEO’s missive to the masses; she’s more worried about quarterly returns to shareholders.

The standard model

The standard explanation for this situation goes something like this: some people put the economy before all else and believe the ‘climate alarmists’ are overstating the problem. These people might even acknowledge the climate is becoming increasingly problematic but are confident that as the crisis grows we’ll make more of an effort to fix it, and science and technology will save us. These people think that radical action to reduce carbon emissions will cause deep and unjustifiable pain to the economy and everyone’s standard of living.

The other side (which includes most scientists) believe humanity is changing the Earth System in deep and unpleasant ways that will hurt everyone. We need to do something now. Enabling new fossil fuel developments is mad; some describe them as ‘crimes again humanity’.

Both sides think the other side is crazy, and many have stopped listening to anything coming out of the other side.

You might have your own variant on this ‘standard model’ of the sustainability challenge but I believe most people subscribe to some version of it: two sides/tribes, two sets of values/priorities, situation gets worse, both sides blame the other and after a while everyone stops listening to anyone outside of their own tribe. It’s simple and neat – my side right, your side wrong.

A more complex model

Now here’s a more nuanced explanation that uses a bit of complexity (resilience) theory. Each of the players/actors/groups in this situation are complex systems, and each has its own identity emerging from the structure, function and feedbacks that make up that system. Understanding the feedbacks is important to understanding the behaviours of these systems.

The politicians are very responsive to voter’s needs and the level of support received from party supporters (including lobbyists and political donations).

The fossil fuel companies are very responsive to changes to the quarterly returns on investment and shareholder sentiment.

The scientists are very responsive to changes in biophysical indicators of the many components that make up the Earth System, the respect of their peers and the papers they can publish.

And the voters just want to be able to pay their bills, have a little certainty in what tomorrow brings, and maybe have the occasional holiday.

These are interacting complex systems and expecting them to behave in simple rational ways doesn’t necessarily help us resolve the differences that emerge between them over time.

Pointing out that the other side is wrong may work well with your own tribe but it usually does nothing to change the behaviour of the other side.

However, understanding what’s central to the identity of the other side and working on the feedbacks that shore up that identity is much more likely to produce change.

If voters don’t believe the future is safe, if shareholders no longer trust their shares will yield dividends in the longer term, if politicians are only allowed to make fully accountable and transparent decisions, then the very identity of their systems change, as does its behaviour. Of course, changing these feedbacks is never easy.

Another thing about complex systems

Another thing about complex systems that’s very relevant to this discussion. They are non-linear. That means you can’t always predict how they’ll change based on how they have changed in the past. Sometimes big disturbances can hit your system and yet it can absorb them and its identity remains intact (the system is ‘resilient’). Other times, it will only take a small disturbance and the system’s identity collapses (unexpectedly and often quickly, does anyone remember the Soviet Empire?).

The Earth System itself is a good example of this non-linearity. The group of scientists who first proposed the idea of ‘planetary boundaries’ (Rockstrom et al, 2009) pointed out that the Earth System itself is a complex system that has considerable capacity to absorb disturbances (changing atmospheric concentrations, declining biodiversity etc) and still retain its identity. For the past 10,000 years, that identity has been one of a relatively stable climate that has enabled the rise of civilisation.

But this capacity to continually absorb disturbance has limits, sometimes referred to as thresholds. They proposed a set of planetary boundaries (possible thresholds) beyond which the stability of the Earth System could well be lost. They proposed nine planetary boundaries, most of which we have now transgressed.

In some ways, the scientists suggest, the complexity of the Earth System has lulled us into a false sense of security. All the change we’ve imposed on it (most of it in the last half century), has been absorbed by the Earth System and it continues to function in a way conducive for humanity. But, having crossed these planetary boundaries, we have exhausted the planet’s capacity to absorb further disturbance. Many now believe further incremental disturbance may change things drastically. Indeed, we may even be seeing this with the savage summer of 2022.

Which all serves to underscore how complex the challenge of sustainability can be. We are all complex units operating in complex groups within a complex Earth System. ‘Simply’ pointing out why the opposite side is wrong may score points with our side but does little to fix the problem. For that to happen we need a deeper engagement with the complexity in which we find ourselves, more reflection on what gives us (our tribe and our planet) our identity, and a greater respect for the things that impact on that identity.

Banner image: Civilisation rose during an epoch of climate stability. Now that stability is possibly breaking down. So far, our response to this possibility has been simplistic and ineffective. Maybe it’s time to acknowledge the problem is complex. (Image by Reimund Bertrams from Pixabay)

Passing the buck – the rights and responsibilities of fossil fuel divestment

What happens when the ‘Big Australian’ sees the writing on the wall

By David Salt

Heard the news? BHP, one of our biggest miners (and biggest emitters), is going ‘green’! Indeed this big news from the company that once promoted itself as the ‘Big Australian’. It began selling off its coal assets a couple of years ago and now it it’s dumping its oil and gas assets. It looks like it’s getting out of fossil fuels (such a dirty business), focussing instead on its profitable iron ore and buying up potash mines (so you can grow healthier plants, potash being an essential potassium plant fertiliser).

With carbon emitting fossil fuels so on the nose, it’s great to see our big corporates finally pulling their weight…

…until you look at the detail and realise it’s just ‘business as usual’ – profits before people and smoke and mirrors with a little greenwashing to tick the corporate responsibility box.

Better do something

As everyone is now noting, our planet is suffering under climate change (this week it’s Louisiana’s turn) and our very future is increasingly uncertain. The science, now half a century strong, is being borne out and the underlying problem is the carbon emissions from how we do business.

Coal, being a dirty (carbon intense) source of energy, is particularly smelly. In recent years many sections of society (for example institutions in law, economics and science) have been trying hard to stop our use of coal and this has led to coal assets falling in value.

Companies everywhere are divesting themselves of fossil fuels but coal is particularly problematic, and even coal companies are now divesting from coal. Consider, for example, BHP’s Mt Arthur, in NSW’s Hunter Valley. Two years ago the mine was worth $2bn. Now it’s a $200m liability that BHP is struggling to off load!

Regarding its oil and gas assets, BHP is giving Woodside all of them in exchange for shares in Woodside meaning BHP shareholders will own 48% of Woodside. Which sounds like a sleight of hand to me in which BHP can claim it doesn’t own them because the assets are actually owned by BHP shareholders. This means, according to the Guardian, that shareholders will be able to sell their shares if they want to reduce their exposure to fossil fuel assets.

Meanwhile, Green groups are saying Woodside doesn’t have a good record on managing fossil fuel assets after it sold a floating oil rig, Northern Endeavour, for a nominal amount to a company that collapsed three years later without paying decommissioning costs estimated at between $200m and $1bn. Woodside claimed the sale was all above board.

Passing the buck

Which raises the big and complex issue of what is to become of all these ‘stranded’ fossil fuel assets. Will big companies simply off load them for whatever they can get and let some other hapless soul deal with the repercussions?

And does getting rid of these assets mean they’ll stop producing carbon emissions?

Political philosopher Jeremy Moss believes BHP (along with other companies) is banking the profits from their failing assets, while washing their hands of the responsibility to do something about their past and ongoing contribution to climate change. Instead of selling these assets, he says, companies should retire the assets and wear the costs.

In a recent Conversation editorial, Professor Moss reckons that if fossil fuel producers are truly serious about their climate responsibilities then two things need to happen: Fossil fuel producers should retire their mines or wells instead of selling them and they should pay for the cost of restoring mined land. Governments also need to step up to the plate and establish a national inventory of liabilities and an independent body to monitor safety of former mine and well sites.

Sounds reasonable and logical, just not doable. Based on past performance (eg, decades of climate denial and effective lobbying to prevent proactive climate policy), I think it’s safe to say the big fossil fuel miners think it’s cheaper to manipulate government than be true to their rhetoric on social responsibility.

Having said that, fossil fuel miners are now being hard hit by the divestment movement. Financial institutions around the world have adopted divestment policies aiming to end or reduce their involvement in the carbon economy and it does appear that new investments in oil, gas and coal are drying up. Which is likely why BHP is quarantining its fossil fuel assets in this joint venture with Woodside.

The non-fossil fuel BHP entity (which gave away its oil and gas assets) is no longer a target of the divestment movement and can once again access international capital. The exclusive fossil-fuel BHP/Woodside entity will carry on emitting because of the enormous injection of assets from BHP, possibly the only way it could develop given the divestment movement is depriving it of traditional forms of capital and insurance.

And then the music stops…

It’s a win-win for the corporates (and their shareholders), and a lose-lose for the planet (and its inhabitants).

Of course, one day the music will stop and the corporates betting their profits on stranded fossil fuel assets will find there’s no chair for them to sit on. The Bank for International Settlements has suggested that when this happens there could be a collapse in asset prices of fossil fuel industries that could lead to a wider economic collapse along the lines of the GFC.

What might a win-win look like? That’s a win for corporates and a win for society. Based on a realistic costing of the impacts of climate change in coming years* and being realistic about the tiny chance that the big corporates play fair (ie, be true to their social responsibility and not interfere with governmental policy), I think the best we could hope for might be governments stepping in and buying out the whole fossil fuel sector at some cut (heavily-discounted) rate based on their falling asset value.

Corporates will always pass the buck. But governments are elected to protect society. So why not accept the situation and get our governments to actually accept the buck on our behalf?

Haven’t we already spent trillions coping with the corona pandemic (and misbegotten adventures in Afghanistan). Why not draw down the debt a bit further and buy all the stranded fossil fuel assets? We can then restore the minesites (a few good jobs there, I reckon), repurpose the assets we’ve picked up to maximise their social utility (oil rigs make excellent platforms for hotels) and wear the cost?

Yes, I know this will have me labelled as a pixie in cloud cuckoo land (and a communist to boot) but do the maths yourselves. The cost to us of buying these stranded assets versus the cost of allowing them to continue functioning (ie, destroying the planet after taking out the economy) surely makes it a rational thing to do.

*There are many robust estimates of the cost of climate change in the coming years from many respected institutions. They are all scary and they have all been ignored by the Australian Government. Here’s one:
Lack of climate action over 50 years will cost Australian economy $3.4tn and 880,000 jobs

Banner image: Stranded assets? Maybe with a lick of paint they’d make nice floating hotels. (Image by Elise Aldram from Pixabay)