What does JPMorgan Chase & Co. decision on coal mean for Oil Companies and Alberta?


The bank will no longer finance new coal mines around the world and will end support for new coal-fired power plants in “high income” countries of the Organization of Economic Co-operation and Development, JPMorgan said in a policy statement on its website.

The decision puts JPMorgan on a growing list of financial institutions, including Bank of America Corp., Citigroup Inc., Morgan Stanley and Wells Fargo & Co., that have pledged to stop or scale back support for coal projects. It’s part of a broader divestment campaign led by environmental groups looking to move the global economy beyond fossil fuels.

  • JPMorgan Won’t Finance New Coal Mines That Worsen Climate Change, By Tim Loh, March 7, 2016 — 1:08 PM MST, Bloomberg.com


Politicians in Alberta rarely acknowledge that the Oil and Gas Industry will change radically in the near future. In the wake of Volkswagen Diesel Engine Scandal, it seems all but clear that the future engine technology will no longer be driven by diesel engines. Instead, Toyota and Volkswagen have made it clear that they would like to end the production of internal combustion cars by 2050.


Now a set of International Banks have indicated that they will either stop or scale back their support for new coal mines and/or coal generation projects. JPMorgan, Bank of America Corp., Citigroup Inc., Morgan Stanley and Wells Fargo & Co. are now a part of the group.  What is interesting is that these banks are not alone.


Eric Reguly wrote a piece for the Globe and Mail in 2013. It was called “No climate-change deniers to be found in the reinsurance business”. Appearing in November of that year, the article noted that “Munich Re, Swiss Re and the other reinsurers, along with the Lloyd’s of London insurance market (unrelated to the bank of the same name), stand out from the rest of the business world by being on the same page as scientists on climate change”.  (No climate-change deniers to be found in the reinsurance business, by

Eric Reguly, The Globe and Mail, Last updated Thursday, Nov. 28, 2013 6:00PM EST).


Now, reinsurers are important because these are the companies that insure life, health and property insurance companies. Or put differently, SunLife Financial, MetLife, ManuLife, Intact Insurance and other insurance companies can only offer products to businesses because reinsurers insure them. So, reinsurers have to deal with the more risk than most businesses. Consequently, it should not be a surprise that they have already starting making changes to their business model(s) to reduce their risk.


This type of large scale change should underline the slow evolution in the business world to the risks and dangers of climate change. Large International Banks and Reinsurance companies are beginning to change to adapt and divest in Green House Gas producing industries, entities and corporations. Accordingly, in my mind, when large International Banks and Reinsurance Companies are beginning to show that they see the risks of our present carbon economy, one has to ask a simple question: when will politicians in Alberta wake up to the reality that is knocking on our door?


At present, our economy has not changed since Pierre Elliot Trudeau, Peter Lougheed, and Bill Davis invested money in Syncrude. For, in 1975, two Premiers and the Prime Minister had a vision to change Alberta: they wanted Alberta to reach its full potential. Those politicians invested in the province’s first Oils Sands Project – Syncrude project – because Syncrude’s private sector owners were starting to walk away from the idea. Instead of waiting another 30, 40 or 50 years for the private sector to develop the Athabascan Oil Sands, Trudeau, Lougheed and Davis ran to help. Remembering that Alberta had received transfer payments from 1957 to 1963, those Statesmen invested in a failing and experimental oil recovery project. Pierre Elliot Trudeau, Peter Lougheed, and Bill Davis understood that there were times in which Government should invest in the Private Market; and, as a result, we have an Oil and Gas Industry. Today, we need to think about Government action again.


Government Involvement is needed for Alberta’s short and long term needs. In the short term, Oil continues to trade at prices below $40 and we need a plan to deal with that. A plan that rebuilds our infrastructure and that provides opportunities. While, in the long term, we have the issue of dwindling use of our primary export. Just look at Europe or the US. Both polities have used foreign sources of energy for decades and both polities have reduced use of fossil fuels.


The problem for Alberta is that this long-term trend might pick-up. China, for example, has committed to a plan to reduce their fossil fuels use over the next few decades. Such a commitment will likely mean that the Chinese Government will start to develop, implement and enforce the use of better technology and higher standards. Such an action from a country that represents one sixth of the human population is big on its own. But, it will only reinforce efforts of Western politicians. Consequently, firms like Tesla, who are pushing the boundaries of energy story and energy use, will find it easier for their products to come to market. With a ready-made pipeline for goods and services and have an international demand for better energy use, one can only say that our assumptions of technological change are now quant and out of date. Or put differently, Albertans breathing space has been dramatically reduced. The 75 years we thought we had to adapt to the oncoming storm, might have turned into 10, 20 or 30 years before we have to change. Alberta’s dependence on the Oil and Gas Industry will be challenged shortly and our politicians have to create policies so that we can adapt.


For, those who want solutions, they are evident, easy, obvious and abundant.  The Government of Alberta or the Government of Canada could offer a tax credit to any Oil and Gas Energy company who decreases their Greenhouse Gas (GHG) output or Oil and Gas Production; and, instead invests in conservation or provides new investments into diversifying into solar, wind, hydro and tidal power.


However, tax credits are not the only solution. Governments can create single purpose financial institutions. For example, in the 1930’s, the Social Credit Party of Alberta created the organization that would eventually become ATB Financial. While, the Federal Governments of various stripes have created different financial organizations including Export Development Corporation (EDC), The Business Development Bank of Canada (BDC), Farm Credit Canada (FCC) and Canada Deposit Insurance Corporation (CDIC) and Canada Mortgage and Housing Corporation.


In our case, we can do the same thing. The Government of Alberta could provide either the regulatory or investment base which would allow Oil and Gas companies to invest in other projects. Imagine if Calgary based firms energy like Suncor, Cenovus, Syncrude, Encana, Husky Energy, ARC Resources Ltd, Canadian National Resources or Talisman Energy could invest in Green Energy Projects that they didn’t have to manage. Instead of hording cash, those same companies could simply put money into cash-starved projects. Such a “virtuous circle” would provide employment and diversification opportunities. It would also push Alberta’s economy onto a more sustainable path.


History tells us that without such a government effort, Alberta will be left behind. From the first flight of the Wilbur and Orville Wright to the moonwalks of Neil Armstrong and Buzz Aldrin, it took humanity less than 70 years to conquer the skies. From Alan Turing’s seminal 1936 paper, it took just over 40 years to see retail computers like the Apple II, the Tandy TRS-80, and the Commodore PET. Or think about my experience. In my life time, as a child, I used a Commodore PET computer. Today, I can use a cellphone which has more than 1,000 times the computer power. Each of those leaps in technology – the plane, the computer and the cellphone – required government aid in the forms of patents, monopolies, grants or military procurements, aid and funding.


If technology can move that quickly, imagine what will happen in 20 or 30 years as governments begin to regulate carbon and other GHG emissions. Imagine what will happen in 34 years, when Toyota and Volkswagen want to reduce their production of internal combustion cars by 90%. Alberta needs to begin to change and our politicians’ need to be honest with their electorate.


Our politicians should dig deep for the courage to tell us that we need to have a great government investment in our economy because Toyota, Volkswagen, JPMorgan, Bank of America, Citigroup, Morgan Stanley, Wells Fargo, Munich Re, Swiss Re and the Lloyd’s of London are all divesting from various fossil fuel projects. Like Trudeau, Lougheed and Davis did in 1975, our Politicians need to explain the oncoming storm that change will bring and give us a vision on where to go. In my opinion, government action will provide the most benefit to our society. Such action will ensure that individuals’ jobs – and thus their economic freedom – will be protected by Government intervention. The electorate should also know that by acting it will ensure a reduction in social cohesion and harm. All of that is a strong reason to act. All that is needed is the courage to do so.


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