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Biggest Coal Exporter Says Climate Change Won’t Strand Assets

Glencore Plc, the top exporter of coal used in power stations, expects efforts to curb climate change by keeping its fossil-fuel reserves in the ground to fail in the face of world energy demand.

Shareholders won’t be “prevented from realizing the full value of Glencore’s fossil fuel assets,” Ivan Glasenberg, 58, Glencore’s billionaire chief executive officer, said Tuesday.

His comments are a snub to a growing campaign that wants investors to shun fossil fuels that cause climate change. The world can’t safely extract all its oil and coal reserves, meaning some will end up as worthless stranded assets, campaigners say. Investors from Stanford University to the British Medical Association plan to cut fossil fuel holdings.

Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell Plc are among those defending their interests with the argument that the only way the world can feed its appetite for cheap, reliable energy is by burning fossil fuels. Coal supplies the world with about 30 percent of its main energy needs and more than 40 percent of its electricity, according to the World Coal Association. Global coal output reached a record 7.8 billion metric tons in 2013.

“Some of our stakeholders are concerned about the future of our fossil fuel reserves; in particular that they may become stranded assets,” Glasenberg said in Glencore’s sustainability report on Tuesday. “We do not believe that the global energy reality will economically support carbon measures that would prevent us from fully utilizing our fossil fuel reserves.”
Glencore’s Reserves

Glencore owns 4.3 billion tons of reserves of coal used for energy and to make steel in Australia, South Africa and Colombia. It produced 146 million tons last year. Prices for thermal coal are trading near their lowest since 2007 amid a glut estimated by Credit Suisse Group AG to be 38 million tons this year, or about 4 percent of the trade.

Two-thirds of the world’s fossil-fuel reserves must remain unburnt to hold temperature increases below dangerous levels, according to researchers at University College London.

Half the world’s known gas reserves, one-third of its oil and 80 percent of its coal should stay in the ground and unused before 2050 to limit temperature increases to 2 degrees Celsius (3.6 degrees Fahrenheit), the maximum scientists say is safe, according to a January report from the UCL Institute for Sustainable Resources in the scientific journal Nature.
Global Temperatures

With heat-trapping greenhouse gases from burning oil, coal and natural gas at record levels, global temperatures are set to warm by 3.6 degrees Celsius by the end of the century, according to the International Energy Agency. That’s the fastest shift in the climate in 10,000 years, which scientists say raises risks of more violent storms and rising seas.

“Fossil fuels are currently the most reliable and affordable route to energy security, especially for developing economies,” Glasenberg wrote in the annual report. “Balancing growing demand with climate change concerns will require a range of energy sources, including renewables and nuclear.”

source: http://www.bloomberg.com