A report released in October by United Nations’ climate scientists was an ominous wakeup call for many. The Intergovernmental Panel on Climate Change now predicts the Earth’s atmosphere will warm by more than 2.5 degrees Fahrenheit by 2040—a shift that could cause global environmental and humanitarian catastrophe.
The news delivered a bleak message, but it also underscored that our work to create sustainable, equitable communities and a healthy environment here in Cascadia is more important than ever.
The year delivered a few policy blows, but we also saw some major advancements in the expansion of renewable energy and a better understanding of the increasingly unstable oil, gas, and coal markets. Here’s the year of climate policy and economics in review:
Washington’s Initiative 1631
A people-driven ballot initiative to get some of Washington State’s biggest polluters to pay for carbon dioxide emissions turned a lot of heads around the world in 2018.
But, alas, a combination of boatloads of opposition funding, and fear of increased taxes and fees defeated the measure.
Initiative 1631 would have reduced pollution “by investing in clean air, clean energy, clean water, healthy forests, and healthy communities by imposing a fee on large emitters based on their pollution.”
I-1631 was projected to create about $1 billion in revenue each year. The plan was to reinvest 70 percent of that money for “clean air and clean energy” investments; 25 percent would have been earmarked for “clean water and healthy forest” investments; The remaining 5 percent would have gone to healthy community investments, to include anything that helps “prepare communities for challenges caused by climate change.”
Only 44 percent of voters cast a ballot in favor of I-1631.
Oregon Clean Energy Jobs bill
Hearings and workshops throughout 2018 have set the Oregon Clean Energy Jobs bill up for success in 2019. The bill will cap climate pollution in Oregon and invest the revenue in transportation and clean energy projects in the state. The cap will ensure Oregon meets its 2050 reduction targets, which have been state law since 2007, while the investments will spur innovation and create clean energy jobs in the Beaver State.
Portland Clean Energy Initiative
The Portland Clean Energy Initiative will charge large retailers operating in Portland a fee and invest the roughly $30 million per year in revenue in cleaner energy projects and job training. The measure’s success was a resounding victory for the broad coalition of groups that championed it. Other cities will be closely watching its implementation to see if it is a model for local action on clean energy.
Juliana v. United States
The 21 youth plaintiffs of Juliana v United States probably hoped to end 2018 by finally wrapping up a trial against the US government. The case, filed in 2015, alleges the government has been so reckless with its climate policies that our environment is on a fast track to becoming untenable. The kids, now aged 11 to 22, have gone on record to document how climate change has already devastated their lives and the lives of people in their communities.
The trial was scheduled twice, and twice it was delayed by last-ditch motions from the defendants. While the Ninth District Court tends to be liberal-leaning, the judges haven’t been subtle about indicating they think the kids’ arguments are too broad.
The latest delay requires both sides to submit their arguments (again) to the Ninth Circuit Court. It could take months for the next decision to come down.
Cloudy Future for Cloud Peak Energy
Cloud Peak Energy—the nation’s third-largest coal company, and the only major Powder River Basin coal producer still exporting coal to Asia—appears to be sliding into bankruptcy. Despite slashing medical benefits for retirees, the company managed to produce only $10 million in cash over the past 12 months–a major problem for a company that owes investors nearly $300 million in just 3 short years. And the company’s financial prospects look even grimmer: Cloud Peak’s coal output has been sliding for 7 years, its profit margins have nearly vanished, and utility companies have scheduled early retirement for many of the coal plants that the company serves.
In financial terms, the signs of impending insolvency couldn’t be clearer. The company’s stock is trading below $1, and may soon be de-listed from the New York Stock Exchange. Meanwhile, Cloud Peak bonds are trading at a steep discount–suggesting that the company will be unable to pay back its debts. And in mid-November, the company announced plans to review “strategic alternatives, including potential sale of the company”—a move that commonly signals an imminent financial collapse.
Cloud Peak is far from the only US coal company in dire straits. Westmoreland Coal, which also operates mines in the PRB, filed for bankruptcy in October, and Tennessee-based Mission Coal followed in Westmoreland’s footsteps within days. The Trump Administration’s pro-coal rhetoric can’t alter reality: coal’s profitability is going up smoke. A recent utility industry analysis concluded that it’s often cheaper to build new wind and solar power than to operate existing coal-fired power plants–a trend that will deepen as the cost of renewable power continues to fall.
So consider Cloud Peak’s current financial struggles as just another sign that the Big Coal is sinking into obsolescence.
Fracking’s Dirtiest Secret
Wall Street increasingly realizes that “fracking” has a dirty secret. No, we’re not talking about the groundwater contamination, or the earthquakes, or the water consumption or the climate impacts. No, what investors care about is money—and fracking’s dirty secret is that it doesn’t make much. Most fracking-focused companies consistently spend more cash on drilling than they generate from selling oil and gas. So they must continually draw in new investors to keep their oil flowing. It’s a perfect recipe for Ponzi-style economics and dismal returns.
Sightline, together with colleagues from the Institute for Energy Economics and Financial Analysis, has written a series of reports exposing the fracking sector’s weak cash flows. And the ranks of Wall Street analysts who agree with our thesis grows by the day. It’s not hard to see why: over the past 5 years, the stock market as a whole has grown by 41 percent, while a basket of oil and gas stocks actually fell by an astonishing 58 percent.
John Sandvig
The defeat of I-1631 was a big disappointment to a sizeable minority of WA State voters but there were reason not enough of them supported it. This article mentions a couple. Meanwhile, as William-Derry & Eberhardt point out, there is good reasons for high expectation in both OR and WA in 2019, so in the immediate future we should look to those legislatures to lead the way.
Meanwhile, voters should not give up on holding their members of Congress to account to protect our well-being including a sound environment as well as a sound economy and lots of good jobs. Effective policy to deal with the massive challenge of fossil fuel caused warming REQUIRES federal action. Those who conclude based on I-1631 experience that voters will never support a price on carbon do not appreciate the one carbon pricing approach that people of virtually any political tribe can support — Carbon Fee and Dividend in which all fossil fuel revenues are returned to US households in their entirety. Under CFD people make their own energy choices. They may continue to select increasingly costly fossil fuel if what they wish and they have more money in their pocket to offset that increased price, so they’re no worse off. Of course, alternative, sustainable energy sources become relatively more affordable, so most people will choose to switch thereby reducing carbon emissions while they also pocket a few bucks. A nationwide, federal policy of this type will also eliminate business “leakage” across state boundaries that can make it difficult to make the progress needed for states acting alone.
Bravo! for CA showing the way and lets look to WA and OR legislatures for crucial leadership. But let’s not give up on Congress and a national Carbon Fee and Dividend approach. It’s the best next step.
Frank Gibbons
1631 was not a people driven initiative. Rather it was driven largely by Seattle-based environmental special interest groups like Sightline. The real people driven initiative was 732 which proposed a revenue-neutral carbon pricing similar to the one in British Columbia which has been in place since 2008 and has been largely successful. Sightline opposed this initiative.
Stephen A. Verchinski
Seems that the independents in WA did not trust the politicians. I support a fully returned dividend. Give it to the people and let them decide with good information for their decisionmaking.