Turnbull and Morrison’s 2016 federal budget let-down | The Saturday Paper | Paul Bongiorno

Twelve seconds into Scott Morrison’s budget night speech, it looked as though the Turnbull government would finally begin delivering the promised excitement and vision. “Australians,” he said, “know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy.” He could not have summed up the situation better when he said everyone knows that “their jobs and those of their children and grandchildren depend on it”.

But from there, the vision was lost in a fog of platitudes and a repetition of the word “plan” 21 times. Morrison, we were told in this motherhood statement, was all about “jobs and growth”. But completely ignored was the reality of climate change and the imperative the rest of the world sees in responding to the transition from black energy to green energy. This was more than an opportunity missed, it was a wilful blind eye to an emerging central economic reality.

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Energetics report on potential abatement | Department of Environment

Modelling and analysis of Australia's abatement opportunities - meeting Australia's 2030 emissions reduction target.

Today the Commonwealth Department of the Environment released a landmark report written by Energetics. The work assesses the contribution that can be made by a range of emissions reduction opportunities across the Australian economy towards Australia's 2030 target.

Indian Reserve Bank tightens loan availability; implications for Adani's Carmichael | Tim Buckley, Director of Energy Finance Studies, IEEFA

Indian Reserve Bank tightens loan availability; implications for Adani's Carmichael | Tim Buckley, Director of Energy Finance Studies, IEEFA

The Reserve Bank of India (RBI) has recently tightened loan availability; forcing the Indian banking sector to recognise and provide for loans from corporates in financial distress, rather than the historical approach of kicking the can down the road, effectively ignoring the issue. This was clearly evident in ICICI Bank (the second largest bank in India) reporting a 1Q2016 result of Rs7Bn, down 76% year on year and only a fraction of the market expectations for a profit of Rs31bn.

The implications for Adani Enterprises Ltd and Adani Power Ltd are significant. Both companies are having trouble servicing their interest costs and loans and an increasing portion of the Adani Group is under financial stress. Historically the RBI has not had a mandate sufficient to allow it to start to rectify this issue, one that is in our view crippling the financial sector, primarily due to the massive financial distress evident across the Indian power sector.

 

Stranded assets in the fossil fuel industry and why they are important

Stranded assets in the fossil fuel industry and why they are important

What are stranded assets?

CTI introduced the concept of stranded assets to get people thinking about the implications of not adjusting investment in line with the emissions trajectories required to limit global warming. There have been a number of interpretations, including:

  • Regulatory stranding – due to a change in policy of legislation
  • Economic stranding – due to a change in relative costs / prices
  • Physical stranding – due to distance / flood / drought

 

The concept has warranted a new programme at the Smith School of Oxford University which considers stranded assets across a range of sectors from an academic perspective. From a financial perspective, accountants have measures to deal with the impairment of assets (eg IAS 16) which seeks to ensure that an entity’s assets are not carried at more than their recoverable amount.

Why are they important?

CTI says: Stranded assets are fossil fuel energy and generation resources which, at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer able to earn an economic return (i.e. meet the company’s internal rate of return), as a result of changes in the market and regulatory environment associated with the transition to a low-carbon economy.

Stranded assets and thermal coal: An analysis of environment-related risk exposure | Smith School of Enterprise and the Environment, Oxford University

The top 100 coal-fired utilities, top 20 thermal coal miners, and top 30 coal-to-liquids companies have been comprehensively assessed for their exposure to environment-related risks, including: water stress, air pollution concerns, climate change policy, carbon capture and storage retrofitability, future heat stress, remediation liabilities, and competition from renewables and gas. The research is designed to help investors, civil society, and company management to analyse the environmental performance of coal companies and will inform specific investor actions related to risk management, screening, voting, engagement, and disinvestment. The research also has clear implications for current disclosure processes, including the new Task Force on Climate-related Financial Disclosures.

Authors: Ben CaldecottLucas KruitwagenDaniel Tulloch, Irem Kok, James Mitchell | Report

The basics of climate change

The basics of climate change

The term “climate change” refers to changes in long-term trends in climate that have been caused by human activity. Since the Industrial Revolution, the extensive burning of coal and petroleum has resulted in large amounts of carbon dioxide being emitted to the atmosphere. Extensive land clearing has had similar results.

Climate change for board risk committees

Climate change for board risk committees

Climate change is emerging as one of the most significant risks facing the Australian economy. Increasingly, shareholders, younger employees and investment managers are asking companies about their policies around climate change. Prudent, long-term planning is essential to mitigate its adverse impacts and exploit the opportunities presented by the new environment.

Carbon in the supply chain

Carbon in the supply chain

Existing supply chain management practices have traditionally focused on cost, service and quality. The new requirement to manage carbon emissions has resulted in carbon being the fourth criteria. With the possibility of a price on carbon, new opportunities arise for companies to exploit a competitive advantage by effectively managing carbon in the supply chain and to work strategically with their suppliers.

Carbon Pollution Reduction Scheme (CPRS) background

Carbon Pollution Reduction Scheme (CPRS) background

The legislation for the CPRS was rescinded by the Abbott Government in 2014, but we provide this information for historical purposes. The Rudd Government proposed an emissions trading scheme in 2008 as its central policy response to persuade Australian businesses to reduce their greenhouse gas emissions. The scheme is based on a cap and trade system.