Home > What we do > Campaigning

Pensions, carbon and (oil) pipe dreams…

Posted by Colin Butfield on 28/07/10 09:30 AM

Campaigns blog header Colin Butfield

Every month a chunk of money whizzes out of my pay packet and away to be invested in some magical fund that means when I'm 65 I can retire to spend my days sipping cocktails and wandering up mountains. How lovely. I don’t have to think about it, it just happens. Most of us are like that. Pensions are dull. Pensions are for later. I do it because I know I should, but that’s about it. Or is it…

What if I told you that the folk investing your magical 'cocktail and alpine view' pension fund are only just waking up to a big, looming, worrying hole in your retirement plans.

Large portions of most of our pensions are invested in oil and gas. Perhaps that’s not surprising – we use a lot of these fuels, the companies tend to make huge profits, so the pension companies win and so do you and I. Except there's a big problem.

Our continued reliance on fossil fuels has meant that most of the easy-to-reach oil is spoken for. And the big oil companies have responded by taking ever greater risks to gain access to unconventional oils, like tar sands and reserves in dangerous or highly sensitive environments – like deepwater or drilling in the Arctic. This is risky, expensive and extremely carbon-intensive. And here's the rub….

There is a cost to carbon. Currently this is low and only really implemented through things like the EU Emissions Trading Scheme. But in the future this is expected to rise dramatically and essentially function like a tax on high-carbon activities – like oil and gas.

Watch the video summary of Toxic fuels: toxic investments

This means companies like BP and Shell could be facing billions of pounds in future liabilities as the cost of carbon goes up. And the higher carbon their activities, the more expensive they become.

So, for example, at a very very low price of £12 per tonne, BP's total carbon liabilities would hit £7bn – not really the news they need this week. But using the cost of carbon predicted in the now-famous Stern Review (£57 per tonne), those liabilities rise to £32bn. Shell's figures would be £6bn and £26bn respectively.

Obviously this isn't great for oil companies, but that's their problem right?

Except for the fact that, at the moment, their investors, including our pension companies, aren't being told about these liabilities. So they are continuing to invest in oil companies who are spending huge sums of money on high-carbon projects like the Canadian tar sands, which will land them with vast bills if the price of carbon gets anywhere near what’s expected. This means investors will lose out and so, ultimately, will pension holders.

So I think there’s a need and a right to know the risks. It seems pretty reasonable to me that companies should have to report both their current greenhouse gas emissions and the projected future emissions of the projects they are undertaking. That way anyone investing in them will know the financial and climate risks being taken with their money, and can choose if they want to take that risk.

We've partnered with Co-op to ask the government to pass those regulations and give investors the certainty they need to invest, give the market clear signals to move out of climate-risky projects, and give you and I the certainty that our winsome dreams of cocktails and mountains (or your own equivalent of course) can endure.

The report Toxic fuels: toxic investments tells you more.

Bookmark this:

Comments

Add your comment

Add your comment

  • Please enter Code (required) reload captcha captcha