Blackrock and the AAA rating

Blackrock, the world’s largest asset manager has announced some big steps towards divestment from thermal coal. As I observe in this article in The Conversation, Blackrock’s shift marks the point at which divestment has become the norm for financial institutions, and continued involvement with coal a choice that must be justified in the face of the evidence.

As has already happened with Adani’s Carmichael project, thermal coal miners and power station developers will soon find it impossible to get external finance except from government and government-backed sources, such as China’s Belt and Road initiative. The Australian government is already pushing in this direction.

That brings us to the next step in divestment: government bonds. The Swedish central bank has already dumped Australian government bonds in protest against our climate vandalism. As with earlier rounds of divestment, this is a small start that is likely to accelerate quickly. A large-scale divestment from Australian government bonds would lead to the loss of our AAA rating, and an increase in interest rates across the board, including home mortgage rates. That might finally shock the quiet Australians into realising how disastrous the choices they’ve made have been.

52 thoughts on “Blackrock and the AAA rating

  1. One effect will be that the price of these equities will fall – partly because they are being purchased in a slightly smaller market (it is still huge) and partly because of the risks that coal faces. This will mean that these stocks trade on low PE’s with comparatively high dividend yields. This was the case with the socially despised cigarette companies like Philip Morris when it was listed in Australia. For a long time, these were “high return” investments because of their dividend yields. Thus investors will thus be drawn in by the repricing. Of course, having less valued equity will mean that equity capital is more expensive for the firms to access forcing their greater reliance on debt.

    In my view the banks and other lenders are avoiding the coal producers, not through moral concern but because they worry about regulatory and climate policy risk.

  2. Harry: I wonder if some of the calls for divestment or rebalancing reflect a curious reverse hypocrisy, a moral concern disguising itself in pragmatism? That could fit Mark Carney. I sympathise, as I use the cost argument frequently to promote a rapid energy transition. If it cost a fortune, I would shift to other arguments. Does that make me a hypocrite?
    See Diodotus’ arguments in the Mytilenian debate in Thucydides.

  3. BHP has said that they want out of thermal coal, it is only tiny ~4% of their business and of low profit. But who’s going to buy the mines? Yancoal has been flagged as one possibility and with the port of Newcastle leased to China for 99 years the supply chain looks secure.

  4. And here is what “we – our AAA rating” & Blackrock is built on… audits by big 4 – laid bare. Cost of doing business as usual -$50m. Justice for humans – zero;

    “The next day, in a 48-minute phone call, Wada read Holder the complete confidential list of KPMG audits to be inspected by the PCAOB [Public Company Accounting Oversight Board ] in 2017, according to an indictment.”
    https://www.pogo.org/investigation/2020/01/how-accountants-took-washingtons-revolving-door-to-a-criminal-extreme/

  5. akarog, From the tip sheet I cited. Coal is certainly a non-negligible contributor to BHP profits:

    “But coal generated US$3.4 billion of underlying earnings before interest and tax (EBIT) in FY19, which was more than copper and petroleum, although copper may reclaim its second place position in FY20”.

  6. The article says BHP can avoid having its shares dumped by Blackrock by getting out of coal but Blackrock says it will sell shares in companies that have more than 25% of their revenues from thermal coal, and BHP has very little thermal coal.

    Blackrock’s commitment is actually very weak. On the 25% thermal coal revenue criterion, it could still hold shares in, dare one say it, Adani.

  7. Both BHP and RIO have, or are, divesting themselves of thermal coal. Cooking coal is more lucrative and they are hanging onto those.

    I see RIO, and others, are protesting the BCA over its stance on climate change. Orica has already left, WBC and Telstra are wavering.

  8. Best shut down Adani.

    Sufficient better quality coal already mined elsewhere and there would be less pressure on the goers in winding back until the message involving renewables starts to sink in at some locations.
    Lets have an orderly winddown to prevent a disaster later.

    Forget the Cayman Islands numbered accounts, think of Humanity.

  9. I’m becoming less and less interested in commenting on economics and climate change (separately or together). I guess that will make a lot of people on this blog breath a sigh of relief. 😉

    Why am I less interested in commenting? One, I feel the situation has become close to completely hopeless. It is now probably too late to stop seriously damaging climate change. Two, the scientists, complex systems theorists and other forward thinkers, who I have followed, have been saying all the relevant stuff for at least 40 years. which I have then been repeating. Very few have listened to them. Nobody other than the already convinced is going to listen me. Why waste my typing fingers?

    It is all too little too late. Thermal coal use should already be fully stopped right now in 2020. We should already be moving rapidly into stopping oil and then gas use. But these programs take a long lead time. We have to re-engineer our entire energy and transport systems to effect the energy transition: entirely scrap the old infrastructures and set up two entire new infrastructures. The task is gargantuan. Because so little has been done to date, we are 30 years behind on the project.

    Only a global total statist commitment from all nation states equivalent in effort to waging total conventional war from now to 2050 would suffice. I don’t see people or nations capable of anything near that stern, self-denying seriousness. In addition to scrapping our current entire fossil fuel energy and private transport infrastructures and replacing them with renewable energy and mass transit systems, we would also have to scrap an economic system (corporate crony capitalism) which relies on over-consumption, planned obsolesce, waste and endless advertising promotion of same.

    I say to the human race. You are blind idiots. You can’t handle the truth. You can’t handle the stern seriousness and self-denial needed for this task. You have failed utterly and completely. You have damned yourselves to hell on earth and then extinction. No gods necessary for that, just plain natural laws. Just add human greed and stupidity.

  10. “A large-scale divestment from Australian government bonds would lead to the loss of our AAA rating, and an increase in interest rates across the board, including home mortgage rates.”

    That’s funny, I could have sworn that a certain economics professor has said, many times, that loss of our AAA rating is nothing to be concerned about.

    The quiet Australians, in any case, will not make the link between climate policies and their home loan repayments. There’s too many moving parts. They’ll only pay attention if Australia is subject to sporting boycotts and other sanctions a la apartheid South Africa, and not even Extinction Rebellion has put that on the table.

  11. Smith9

    I think you under-estimate the level of concern about climate change and the expectations that the government should be able to do something about it. People have pretty short attention spans, The government has been confidently telling everyone that climate change isn’t happening, but it is and they will expect action to be taken. Of course there is nothing the government can do to make a short-term impact. That won’t mean people won’t be expecting it to do something. Get ready for a sudden and unpredictable rise in anger when they don’t get a quick-fix. Not sure what if any good will come of it, but Australian’s eventually get around to punishing incompetence and this government has set a new standard in it. Scott Morrison has made himself a poster boy for do-nothing-on-climate-change. A pretty stupid move and a very short term one.

  12. Tutu reiterated that message more recently (i.e. late 2019), but today is not my day for posting comments on blogs, it appears, so I’ll desist.

  13. Ikonoclast – Only a global total statist commitment from all nation states equivalent in effort to waging total conventional war from now to 2050 would suffice.

    The chances of that are somewhere between Buckley’s and none. It’s near a certainty in the not too distant future that before Nature bats last there shall be total statist commitment from all nation states to waging total war.

    In addition to occasionally being just plain randomness, the end of civilisations rarely involves a sudden cataclysm or apocalypse, often the process is protracted and mild. It may take centuries, then one day it’s finally over.

    Such a course could fit the global civilisation ending soon, except for cataclysm, apaocalypse, and mild. After the whimpering we’re in for nerve agents of doom, weaponised plagues, the bangs and mushroom clouds delivered with no expense spared.

    https://www.abc.net.au/news/2019-07-05/what-we-can-learn-from-ancient-civilisations/11267702

    What fallen civilisations can teach us about avoiding our own ‘social catastrophe’

    What exactly is a collapsed civilisation?

    Dr Kemp says the term “collapsed civilisation” is often bandied about in a “colloquial and often undefined” way.

    A smiling man in white shirt and dark grey suit jacket, from shoulders up.

    So, let’s be clear on what it actually means.

    “To me, a collapse is a situation where there’s a tipping point — where, basically, stresses overcome societal coping mechanisms,” he says.

    “What you have is the loss of the state and the failure of multiple systems that underpin society.”

    Furthermore, the term collapse “would also suggest that this happens abruptly”, he says, although that’s not always the case.

    Why and how civilisations collapse
    abc.net.au/radionational/programs/latenightlive/luke-kemp-_collapse/11235850

    Luke Kemp, Research Associate, The Centre for the Study of Existential Risk, University of Cambridge
    cser.ac.uk/team/luke-kemp/

  14. Svante,

    When things that are built up high collapse, they usually do so spectacularly. An little, old wooden cottage may slowly warp and deform for a long time before it tumbles down. Structural failure of a single key component (single point failure) of a tall building or large bridge usually leads to a rapid and spectacular collapse. The difference in collapse behavior is largely related to the margin by which the structure is out of thermodynamic or potential energy balance with its environment.

    Our modern civilization, as a highly complex and artificial dissipative system, is hugely out of thermodynamic, eco-service and ecological balance with the environment. Its collapse, once underway, is likely to be a very rapid chain reaction collapse.

  15. You never fail to impress me, Ikonoclast.

    Unfortunately, the cynicism expressed by Smith9 and Svante is a likely guide to what becomes of things until something triggers breakdown.

  16. You never fail to impress me, Ikonoclast.

    Unfortunately, the cynicism expressed by Smith9 and Svante is a likely guide to what becomes of things until something triggers breakdown.

  17. Smith9, I don’t think the loss of the AAA rating would be a problem if it resulted from a decision to increase public investment, nor do I think a consequential increase in home mortgage rates would be a bad thing. That would imply a reallocation of investment from housing to (physical and social) infrastructure. With divestment, there would be no benefits to balance the costs.

  18. Ikonoclast, an analogy to your tall structure vs little wooden cottage analogy can be found in the area of bankruptcies. When there are many small businesses, the bankruptcy of any one is unfortunate for the owners of the business but hardly anybody in the rest of the economy will notice it. Not so if BlackRock were to become bankrupt.

  19. “The Swedish central bank has already dumped Australian government bonds in protest against our climate vandalism.”

    If all countries in the world would be of a similar size as Sweden and Australia in terms of population, stage of technological and institutional development, natural resources per capita, to name a few characteristics I believe matter, then the buying and selling of government securities according to environmental (or social) criteria might achieve something, including no change, depending on the distribution of policies.

    Is Sweden’s central bank dumping US short term or long term or both securities in protest against Trump withdrawing the US from the Paris agreement? If so, the impact could be predicted to be approximately zero.

    As long as financial markets are driven by risk/return criteria, the Aussie bonds sold by the Swedish central bank will be bought by some large agent, say BlackRock, with negligible effects on the discount rate.

    Until proven otherwise by their action, I work on the assumption that BlackRock has mounted a greenwash corporate media campaign, most likely in response to the EU Green New Deal policy.

  20. No doubt about it Ernestine Gross, politics is key to many things, including any increasingly slender hope of rehabilitation for Australia.

    When you think of entities as vast as BlackRock, you have to consider what “politics” might actually constitute, also who in real terms provides the seven trillion dollars for further investment.

  21. It’s my thinking that the approaching northern hemisphere summer will also be traumatic and this should trigger a more comprehensive response.

  22. “ Classical economics taught business leaders that social and environmental issues were externalities that had no effect on the business, but the evidence all around us shows that this is wrong. Today’s most successful companies have learned that the social impact of their business is a critical factor in their competitive strategy and operational effectiveness. It is Larry Fink’s critics, not Mr. Fink himself, who are imposing their anachronistic personal values to the detriment of shareholders.”

    https://hbr.org/2019/01/the-backlash-to-larry-finks-letter-shows-how-far-business-has-to-go-on-social-responsibility

  23. John, you’ve said in the past that the loss of the AAA rating would cause interest rates to rise by one tenth of a percentage point. That’s not even rounding error. No one will notice or care. Of course all of this presumes that there will be large scale dumping of Australian government bonds. Australian government bonds are among the most attractive for investors in the world, with a decent yield by today’s standards. Most of the bonds from other countries have negative rates (you lend to the government and in return you pay them interest). I think it’s unlikely many investors will be following the Swedes in dumping Australian bonds for climate reasons.

  24. Dear Professor,

    One thing is clear to me while I am coming from the Post Keynesian vantage point. You do understand very well how things work. You probably have better intuitive understanding of the macroeconomic processes than the large number of Post Keynesians. You know that the RBA can fix the whole yield curve and they actually have to anchor its short end because this is how they control the “cash rate” https://www.rba.gov.au/education/resources/explainers/how-rba-implements-monetary-policy.html

    Do you think that the supporters of the status quo can be convinced by expressing the perfectly valid arguments using the questionable neoclassical / New Keynesian framework, based on the Loanable Funds Theory? To convince the so-called middle class “intelligentsia” who are a bit “progressive” but have little vested interests? Nobody else reads these articles.

    Or the oligarchs? They won’t listen to you/us/anybody anyway. They may spend a few million dollars on hiring a PR firm and doing a little bit of greenwashing. They, these Ginas, Clives, Ruperts, the emissaries of the CCP, buying the mining assets / water allocation rights. Or the propagandists from Russia Today. They are not stupid or pretending to be stupid like the clown who has been hired to be our PM. They are driven by their own understanding of what’s good for them in the short run. What is good for them, the magnates or their Russian sponsors (as bloody obvious as in the 18th century First Commonwealth, not here but there, these are the guys who pull the strings), is also supposed to be good for us, the peasants. I am sure that the marginal value of me as a human being to people like these Rasputins is less than the value of oxygen I breathe. I am a таракан for them.

    They are rational bastards and they are not corrupt. They cannot be. They are the corruptors.

    Here is how I would express the same without the AAA “framework”. We, the people living in Australia, are the pariahs of the civilised world. We deserve to be treated like this because we are cutting off the branch all of us are sitting on. Don’t come to visit us and don’t waste your money on our tourist industry until we stop destroying the Coral Reef (or what’s been left of it) and the temperate rainforests (or what hasn’t burned yet). Don’t buy real estate here as you will lose money rather than hide it from your tax inspectors. This real estate is a Ponzi. Air quality can quickly get worse than in Shenzen. You have been warned. This is how we can cut off the funding of the scam also called the “service economy of Australia”.

    I read some stuff on RIA Novosti the other day (no, not in English, this would be waste of time). This is the real source of the global climate denialism, not some retarded American bloggers from Texas. The Internet Research Agency. They stuffed up big in 2014, they could not even get their Novorussian Kharkov and Odessa back. So they are hell bent on poisoning our minds because they are fretting that nobody in Europe and in China will buy they coal, oil and gas and the Empire will go bankrupt for the third time in a century.

    We have to fight back the real way and stop pussyfooting (with our minds full of Political Correctness) around the real enemies of our Western civilisation. I know that this is also propaganda but it is like backburning, sometimes better than doing nothing. The meme for today: “Whoever is a climate denialist is a Russian troll”. The meme for tomorrow: “Are you supporting Adani? You are a CCP agent”.

  25. Ikonoclast says:
    January 17, 2020 at 11:29 am
    I say to the human race. You are blind idiots. You can’t handle the truth. You can’t handle the stern seriousness and self-denial needed for this task. You have failed utterly and completely. You have damned yourselves to hell on earth and then extinction. No gods necessary for that, just plain natural laws. Just add human greed and stupidity.”

    Actually Ikon you have passed the test;
    Upon completing the tests, they were asked to analyse the degree of control their responses exerted over outcome – that is, how many times the green light came on as a result of their actions. It turned out that, the sadder but wiser students were more accurate in judging the degree of control they exerted. Alloy and Abramson concluded that depressed students were less prone to illusions of control, and therefore showed greater realism. The nondepressed students, on the other hand, overestimated the degree of their control, and therefore were engaged in self-deception in favour of enhancing self-esteem.”
    https://aeon.co/essays/the-voice-of-sadness-is-censored-as-sick-what-if-its-sane

    Keep posting.

  26. @Smith9 My standard estimate is 0.2 to 0.4 percentage points, just under 1-2 standard Reserve Bank rate cuts. If you think that ” No one will notice or care”, cast your mind back to the last time the banks failed to pass on a rate cut in full.
    https://johnquiggin.com/2014/09/29/australian-states-are-losing-their-aaa-ratings-should-we-panic/
    As regards your suggestion that no one will follow Sweden, can you point to anyone outside the divestment movement predicting the effects we have actually seen in making a project like Adani’s unfinanceable and apparently uninsurable. Did you expect it?

  27. Blackrock could toss a billion over here to balance the research… useful to justify more ss research funding I assume.

    Energy Research & Social Science
    Volume 62, April 2020, 101349

    “The misallocation of climate research funding

    “However, these are precisely the fields that receive least funding for climate-related research. This article analyzes a new dataset of research grants from 333 donors around the world spanning 4.3 million awards with a cumulative value of USD 1.3 trillion from 1950 to 2021. Between 1990 and 2018, the natural and technical sciences received 770% more funding than the social sciences for research on issues related to climate change. Only 0.12% of all research funding was spent on the social science of climate mitigation. ”
    https://www.sciencedirect.com/science/article/pii/S2214629619309119?via%3Dihub

  28. @johnquiggin

    So far it’s only the Swedish central bank and I will go out in a limb and say they didn’t hold many to begin with.

    If the big holders of the bonds start selling to punish the government for climate and incur financial losses in the process that’s another matter but so far, no deal.

    In the absence of a wish-granting genie, hoping that something happens doesn’t mean it will. But, who knows, I might be proven wrong. Time will tell.

  29. “If the big holders of the bonds start selling to punish the government for climate and incur financial losses in the process ”

    Cross out “government” and replace with “Adani” and your point would be equally (in)valid. If enough people jump ship, those who remain are exposed to lots of risk. For existing assets, that means a downgrade. For new investments, it means a higher required rate of return, which may not be there.

    As you say, time will tell,

  30. I am really sorry if my style is inappropriate and I accept this critique. English is not my first language but my writing skills in Polish are even worse than in English. At least I am not from Leningrad.

    The real problem is that the opponents of undertaking any meaningful action against global warming (and coincidentally also right-wing nationalists) use even more inappropriate style in their propaganda and in my opinion this is what makes them successful. Even worse, they plant conspiracy theories whenever they can. Let me present an example from the “canary mine” of liberal democracy in Eastern Europe.

    This is a record of a debate between the Polish liberals (who keep losing) and the right-wingers (who keep winning) in the EU parliament
    http://www.europarl.europa.eu/doceo/document/CRE-9-2020-01-15-ITM-017_EN.html

    In order to get a real taste of what the former Polish PM Beata Szydło and the others said, you will probably need to use automated translation. Effectively the liberals have been accused of treason and lying in regards to the debate about the removal of the elements of judicial independence in Poland.

    These are the arguments which stick. Everyone who is not supporting the right wing government is a traitor. I am afraid the rest of the mainstream political debate is waste of time unless it is proven that the opponents took money from the Russians (what still may be demonstrated during Donald Trump’s impeachment – then we will have President Pence who is even worse).

    This issue is related to the main topic – the current government of Poland is one of the main opponents of any meaningful international action against global warming within the EU. They don’t care about the AAA ratings. They can “print” their own money, they don’t have Euro.

    What is going to happen in Poland next? Unless there is a major recession, the right wingers will keep winning until their true leader Jarosław K. disappears because of the natural reasons (he is probably quite sick). Then they may split and fight each other to death – and the liberals may have a chance if they meet all the requirements specified by the Catholic clergy. Why will the right wingers win the next elections (subject to conditions mentioned above)? Because of the foreign denominated (CHF) mortgage loan scandal in 2009. Enough of the middle class people won’t forget because they still have to pay these mortgages. This is to an extent a macroeconomic issue and another nail in the coffin of the Loanable Funds Theory. Anyway, because the natural electorate of the liberals won’t vote, the right-wingers will win. I believe it is very likely a similar (but not identical) mechanism works in the US, UK and even here, in Australia.

    All the potentially right-wing voters are mobilised because of the “treason” and “lies” – and conspiracy theories about Muslims being transported to Christian Europe to dilute the local population. Enough of the potential supporters of the liberals / social-democrats / labor / greenies are switched off. In Australia it was all about losing the value of real estate and some mythical tax breaks. And more … Our Australian conspiracy theories may be less racist. In the US they match the level of hatred present in the Polish / Hungarian versions. People like Steve Bannon visit Poland and Hungary to seek inspiration and proving grounds. The Democrats are split and even Warren and Sanders are fighting for no reason, Paul Krugman goes after Sanders and everyone hates Biden and Bloomberg. This is worse than pathetic and virtually guarantees that Trump will win. Because he has balls, he knows how to stir hatred and love and his supporters can impose discipline even if his opponents claim high moral ground and may have more money.

    How is this going to work in regards to the claim that the loss of AAA sovereign rating may have a real impact on the costs of mortgages in Australia? I honestly believe that we cannot support this thesis and even worse, the decision makers also know about that. I agree that if there is massive disinvestment, the exchange rate may fall. However it would be really strange to assume that a “true” capital flight episode could be sparked by some minor central banks and hedge funds reducing their holding of Australian bonds due to environmental reasons, knowing that enough financing is provided by the “markets” to for example cobalt mining operations in Africa involving not only the degradation of the environment but also slave labour of children. They just follow the scent of money… If there is no massive change in the exchange rate and the yield curve bends upwards too much, the RBA will step in. There has already been a talk about the so-called QE in Australia.

    I am not in favour of lying but my claim that the Russian state propaganda machine is seriously involved in spreading climate change denialism is not a baseless conspiracy theory. At least internally in Russia. I can send a lot of links but following them would be waste of time unless you can read Russian.

    Regarding Adani it is obviously not the Chinese who are involved at this stage but in fact there is a very complex game there involving attempts to counter-balance the Belt and Road initiative. It is still possible that these assets will end up on the balance sheet of some investment fund listed in Hong Kong or Shanghai and coal (if any coal is to get extracted) will be burned in China not India.

    My point is that plausible conspiracy theories and more aggressive push back rather than “stretches” such as the “loss of the AAA hypothesis” are required otherwise the other side will keep running circles around the so-called progressives. Time is not on “our” side.

  31. @ Adam K

    Apologies for my mischaracterisation of you. Birdwatching here is incidental for me and a new skill I shouldn’t have to master. I actually read this blog to have a grasp of Australian social and economics issues not to play gotcha.

  32. Adam K. “..You know that the RBA can fix the whole yield curve and they actually have to anchor its short end because this is how they control the “cash rate”

    About sums up that part of the argument.

  33. As a non economist I often wonder what is the full economic cost of shutting down our coal industry, followed by our LNG exports. All necessary if we are to play our part in saving the planet. We are not Saudi or Qatar, we have been happy to let foreigners extract our energy resources for little return in taxes or royalties. We allow tax right offs for capital investment, exploration etc to the point that government income is in the millions not billions. Then we provide billions in diesel subsidies, access to scarce water resources etc. In return we get employment some 30,000 in the coal industry, gas would be much less in the operational phase. With recent climate change turbocharged catastrophic events, it looks like we will lose hundreds of jobs in tourism and agriculture if the drought continues. On the flip side need a lot more employment to manage our national parks and state forests, you know to deal with the so called massive fuel loads and rampant arsonists. If we could replace those FF jobs what other economic costs do we suffer if we moved to shutdown these industries over the next 10 years? It seems to me the big losers would be foreign entities and of course local shareholders.

  34. Ikonoclast – “Structural failure of a single key component (single point failure) of a tall building or large bridge usually leads to a rapid and spectacular collapse. ”

    Short of actual intentional demolition, sabotage, random “acts of god”, or equivalents, one will find a lengthy train of causation before the visually spectacular event. All those preceding contributions later seen as flaws/errors in , for example, design, engineering, materials, construction, operation, management, maintenance, communication, &etc, are part of the collapse.

    Global civilisation is in collapse. It has been for at least 50 years. A truly hypothetical future historian (there’ll be no other kind, unless perhaps AI) would as likely wind the time of collapse commencement back another 50 years, or yet another 50 to, say, the arrival of ocean crossing coal-fired steamships, or the surge in North American rail, heavy industrialisation, and the “success” demonstrated there in modern weapons mass production.

    Nature will bat last but prior to that, and resulting from all the insults pitched earlier against her, the consequences of climate destruction and massive envioronmental degredation shall surely cause non-random “total statist commitment from all nation states” to ultimately waging global wrecking total war.

    Nature will bat last. Apart from that non-random certainty we have been and will remain teetering on the knife edge of a random civilisational collapse due to all out total war for half a century. All it would take is one random mad/bad human action. There is no “fail safe”.

    Perhaps this clarrifies what I wrote above,eg: “In addition to occasionally being just plain randomness, the end of civilisations rarely involves a sudden cataclysm or apocalypse, often the process is protracted and mild. It may take centuries, then one day it’s finally over.
    Such a course could fit the global civilisation ending soon, except for cataclysm, apaocalypse, and mild.”

  35. We have *already* lost hundreds of jobs in tourism and farming. A friend is going to wind up his sea kayaking business as soon as he has time, because while he still has the kayaks he has done roughly zero business this summer which means for income he’s going straight from the winter slump last year into the winter slump this year. The staff were let go as soon as the first wave of fires hit and he doesn’t see a way to bounce back, he’d have to rebuild.
    One side effect of being world leaders is that everybody knows what we’re doing. Having the biggest bushfires, the hottest summer, the most devastation, the largest area burned… all that stuff is seared into the minds of our customers. Even the one who would come anyway are suffering flygskam and might not come for that reason.

  36. Tourism is a bad bet for the future. Promoting a tourist “industry” means wasting precious resources which we cannot afford to waste. Why do the federal government and state governments subsidize incoming tourism? It’s a bad strategy. These are bets and wasted resources on something that will inevitably collapse anyway. It would be better to spend the money on renewable energy and fire-resistent infrastructure plannning.

  37. Ikonoclast: I wonder the same. At least with coal there’s demonstration CCS plants that physically exist to show that it can be done, but for long range air travel (ie, 90% of tourists) there’s not even a theory of how a carbon-neutral aircraft could be built (even the nuclear aircraft was expected to use fossil fuels to get airborne). Hence the focus on using food to fuel them (Gossamer Albatross style 😁 ).

  38. The Hindenburg used hydrogen for buoyancy not fuel. But yeah, it went up in flames anyway. I am not convinced by hydrogen as a fuel. It’s major drawbacks are;

    (1) It doesn’t exist in free form on earth, in significant available amounts, due to its high reactivity. It has to be made by reaction at great energy cost. Pedantically, it’s an energy store not a fuel, if a fuel is something you get in free form, for recovery costs only, and then burn.

    (2) Hydrogen must at all times be stored and transported under high pressure and it is highly flammable / explosive. It is not a safe fuel.

    (3) Hydrogen has really tiny atoms. It leaks through almost anything, especially seals. It corrodes seal and metals.

    (4) Poor energy density. Even liquid hydrogen has less than 1/3rd the energy density (MJ/L) of jet fuel.

    We would probably be better off synthesizing jet fuel from carbon-neutral methane production. In the bigger picture, the idea that there could or should be many jets flying around in future is a non-starter.

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