Wednesday, March 13, 2013

High-Carbon Fossil Fuel's Achilles' Heel

The Fossil Fuelers' nightmares lie not so much with environmentalists and regulators as with shareholders and investors.   The energy companies are pretty adept at fending off environmentalists and regulators but shareholders and investors pose even greater challenges.

Lie to the public, lie to the government and big deal.   Wall Street has been doing that for decades and even the collapse of 2008 wasn't enough to stop them.

Lie to shareholders and to investors, however, and you can be held personally liable, even criminally liable.

Two advocacy groups, As You Sow and the Unitarian Universalist Association, are using shareholder rights to file resolutions requiring energy companies to report how much of their assets could be left "stranded" if the U.S. was to pass sweeping greenhouse gas regulations.

As You Sow, a shareholder advocacy group for environmental issues, filed a resolution with Consol Energy late last year. The Unitarian Universalist Association, a religious organization that promotes social justice, filed a similar resolution with Alpha Natural Resources.

The groups' point is that coal and other energy companies would be dangerously overvalued in a carbon-regulated world, thus creating a "carbon bubble" that could one day pop.

"This carbon bubble is so big, it's going to make the housing bubble look like chump change," Andrew Behar, CEO of As You Sow, said in an interview. "It's another order of magnitude."

According to a recent report by banking giant HSBC, major firms like BP, Shell and Statoil could lose up to 60 percent of their market values if countries get tough on carbon.

Shareholder activists often use shareholder votes to challenge fossil fuel companies on climate change issues, but this is the first time social investment groups filed carbon bubble resolutions.

They represent a "new and powerful way" of pressuring firms to act on global warming, said Dan Bakal, director of electric power programs at Ceres, a coalition of sustainability-focused investors with $11 trillion in assets. "I think it's likely that more investors will get involved in this kind of activity."

Next stop, Athabasca.

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