BBC World News – 5 January 2011 Last updated at 19:42

Global food prices rose to a fresh high in December, according to the UN’s Food and Agricultural Organisation (FAO).

Its Food Price Index went above the previous record of 2008 that saw prices spark riots in several countries.

Soaring sugar, cereal and oil prices had driven the rise, the report said.

The index, which measures monthly price changes for a food basket composed of dairy, meat and sugar, cereals and oilseeds, averaged 214.7 points last month, up from 206 points in November.

It stood at 213.5 points at the high of June 2008 – sparking violent protests in countries including Cameroon, Haiti and Egypt.

There were further riots over food prices in Mozambique in September last year.

However, despite high prices, FAO economist Abdolreza Abbassian said that many of the factors that triggered food riots in 2007 and 2008 – such as weak production in poor countries – were not currently present, reducing the risk of more turmoil.

But he added that “unpredictable weather” meant that grain prices could go much higher, which was “a concern”.

‘Tight situation’

The current spike in prices is being caused primarily by increases in the cost of sugar and, more importantly, cereals, according to the International Food Policy Research Institute.

The price of wheat in particular has risen sharply. This is because wildfires last year in Russia, which accounts for 11% of global exports, resulted in an export ban, the institute’s director of markets, trade and institutions, Maximo Torero, told the BBC.

The recent floods in Australia, which also accounts for 11% of global exports, has compounded the problem, he said.

The price of corn has also risen, because of greater support for biofuels in the US and the increased price of oil, which makes biofuels more attractive.

Droughts in Argentina, the world’s second biggest exporter of corn behind the US, have also pushed the price up, Mr Torero said.

“The situation is very tight. If we have more natural disasters, we could have a problem,” he said.

Australian floods

Overall global food prices have risen by an average of more than 80% in the past 10 years, according to figures from the FAO released last year.

Analysts say that as well as environmental issues, fast-growing world population and the increased demand for biofuels has further put pressure on crop supplies.

“Rising food prices will have an effect almost all over the world but especially in poor countries where food and energy are the major things people spend their money on,” said George Magnus, senior economic adviser to UBS.

“There’s a risk, I wouldn’t say a huge risk, but some risk of higher energy prices and higher food prices being very destabilising in some countries.

“We saw that in 2008 and in Mozambique last year and it’s something to watch.”

‘Particularly worrisome’

The news came amid concerns about inflation in the prices of other key commodities.

Copper prices went into 2011 at record highs – in a rally driven by increased demand from the global economic recovery and that fact that most countries are holding low stockpiles.

And the International Energy Agency (IEA) said on Wednesday that the current high price of oil would threaten economic recovery in 2011.

Oil import costs for countries in the Organisation for Economic Co-operation and Development had risen 30% in the past year to $790bn (£508bn), it said.

Mr Magnus said that if oil returned above $100 a barrel this would be “particularly worrisome”.

“It could make central bankers nervous, leave them thinking that inflation was getting out of hand and prompt them to raise interest rates faster than they should. That would damage an already fragile recovery,” he said.

“And higher commodity prices could sap the world’s ability to consume because more and more of our income will be going on energy and food.”

By Graham Readfearn (original title modified)

SO you’re the news producer on a prime time Australian television breakfast show that’s been breathlessly covering the devastating affects of the Queensland floods and you’re looking for a new angle. How about a crack at climate change?

For television, the floods are the epitome of the story that has everything. Dramatic footage, a constantly evolving story with several drawn-out climaxes and a literally captive group of people with genuine against-all-odds tales of sadness, stoicism and bravery in the face of adversity.

In towns including Rockhampton, Emerald and Bundaberg hundreds of homes and businesses have been inundated with water. The Queensland Treasurer, Andrew Fraser, believes the clean-up bill could top $1 billion, saying the disaster has now taken on “biblical” proportions.

But back to Channel Seven’s Sunrise show, which earlier this week decided it was time for a segment which asked whether or not all this “crazy  weather” has anything to do with climate change. A fair and important question to ask but, unfortunately for the few hundred thousand viewers of this flagship show, Sunrise instead served-up an overcooked and unappetising “Greenie vs Sceptic” breakfast TV segment which was well beyond its best before date. Watch it here.

The first mistake was to make no genuine attempt to answer the question they posed. Rather than speak to experts in climate science to answer the question, they chose two people who were predisposed to present two sides of an argument – something the producers must have known. Predictably and almost instantly the segment came down to two opposing sides arguing that climate change was, or wasn’t, real. False balance in all its unedifying glory.

On one side was Nick Rowley, a climate policy consultant and one of a number of former climate change advisors to Tony Blair. There’s no doubt Rowley knows a lot about the subject, but why not ask a scientist?

But the real error was in their selection of New Zealand “weather expert” Ken Ring who has no formal training either in meteorology or climate. I suspect had they known what I’m about to tell you about Ken Ring they would have pawsed for thought before booking him.

Ken Ring was a new name to me, so I thought I should find out a little more about him. That’s when things started to get a little surreal. A chance web-hit coughed-up this little hairball. In 1998, a book was published by Penguin Books New Zealand with the title Pawmistry: How To Read Your Cat’s Paws and Ken Ring was listed as the co-author.

On the back of the book, it says

Ken Ring is a mathematician and a long-time magician, mind-reader and public speaker with a passion for the ancient discipline of palmistry. Ken stumbled upon his peculiar calling at a psychic party several years ago, where he was able to deliver a reading of a cat’s paw that proved to be uncannily accurate.

Now surely this couldn’t be the same guy Sunrise chose as a weather expert, could it? To be sure, I called Ken Ring in New Zealand to ask him and he confirmed he had indeed written that book. He claimed, however, that he had written the book “as a joke” and it had “nothing to do with my work in weather” which is comforting to learn.

You can still buy the book on several online stores and there’s nothing which immediately would suggest that it was in any way a joke. The book has been re-printed at least once. Among other things, the book reveals that cats have seven different types of paw and those bearing the “Earth Paw” are courageous, spontaneous and should not be cornered because they become “disorientated and confused”, the latter part of which brings us neatly back to my conversation with Ken Ring. He went on

I’m not sorry I wrote it. I am willing to discuss it with people and people still ring me up and I’m happy to help them where I can. I’m pleased that they have found something in life to give them pleasure. If the book works then that’s fine. It’s a part of my life that’s finished… just like my clowning and school magicianing.

No, that’s not a misquote. Ken Ring also revealed that before being a “weather expert” he was a school teacher and also a clown and a magician. He was a school magician at the time of writing Pawmistry. I asked on what basis was he now a weather expert? How do you go from being a school magician to being an “expert” on the weather with several dozen books behind him? He explained he was making a living fishing when he “started to realise” that tides seemed to coincide with storms. He constructed a theory from that point.

Ken Ring uses moon and solar cycles to try and predict the weather and his predictions carry little to no respect among serious forecasters or climate scientists. On Sunrise, he dismissed the notion of anthropogenic climate change as having “no proof” and claimed that a solar minimum was to blame for “the cold” that we’ve been seeing in the last two years. Neither of the Sunrise hosts bothered to point out that 2010 is likely to be among our planet’s top three warmest years on the instrumental record, adding a big full-stop to the warmest ever decade.

I asked why he hadn’t bothered to mention that it’s widely known that the current flooding in Queensland has been caused primarily by the La Nina weather pattern in the southern Pacific Ocean. He said he only had a couple of minutes on Sunrise, but added

It’s got nothing to do with La Nina. That’s a name that they dreamt-up in order to identify a new anomaly in the weather to get research funding for, and to issue reports on.

Back to the Sunrise segment, where host Natalie Barr made the observation that both sides of the argument seemed compelling and  ”I think this is why people are confused… ” about climate change.

Well yes, Natalie. But the reason people are confused is because your treatment of the issues has just confused them. One of the most serious challenges facing world leaders and currently facing thousands of flood victims has been handed over to a man who once wrote a book about how to read cat’s paws.

One for the litter tray, wouldn’t you think?

For a simple and reliable explanation of La Nina in the context of the floods, watch the video on this link produced by the BBC. As far as understanding the link between single extreme weather events and climate change, that will have to wait for another post.

Sydney Morning Herald, January 1, 2011

Climate scientists want us to understand the world is burning, writes Adam Morton.

THE climate scientist Neville Nichols has long believed his role was research, not advocacy. But when he woke on the morning following the Black Saturday bushfires in Victoria, turned on his TV and caught his breath after witnessing the shocking aerial footage of what was once Marysville, he instinctively blamed himself.

”My initial thought was ‘Is this my fault? Has this happened because I haven’t been out there saying that this stuff is going to have catastrophic consequences for us?”’

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”It is the first time I have ever been shaken from my belief that I shouldn’t be an advocate on climate change.”

Nicholls – an Australian Research Council professorial fellow at Monash University and an author and reviewer with the UN’s Intergovernmental Panel on Climate Change – resolved to take more responsibility to be a public voice; not to lobby for a particular political response, but to explain and defend the science that is his life’s work.

He was not alone. Increasingly, as the first decade of the century unfurled, Australia’s most decorated scientists in climate fields were concerned that published evidence in their areas of expertise was being misused or ignored. Believing they faced a calculated misinformation campaign driven by fossil fuel interests and an intransigent political system, they formed Climate Scientists Australia as a means to improve the quality of public information and decision-making.

The public debate over climate change has yielded its share of controversies, confected and otherwise, but in the eyes of leading scientists the royal commission into the bushfire’s response – which barely mentioned climate change – is emblematic of the biggest of the past 10 years: the failure to convince policymakers and shapers to take the warnings of the world’s most reputable scientific agencies seriously enough to respond effectively.

The global public’s awareness of climate change grew significantly over the decade, but by this year, according to some polls, its acceptance of the science had diminished.

The decline was particularly marked in Britain and the United States. Britain was home to the affair in which senior scientists were accused of manipulating data after ambiguous emails were leaked from the University of East Anglia. The scientists were exonerated of the most serious claims of dishonesty by a series of inquiries, but the damage was done – the findings clearing their names received only a fraction of the media coverage of the initial allegations.

A separate investigation by the InterAcademy Council recommended changes to the IPCC, including greater transparency, but found its work synthesising published climate science was mostly successful.

In the US there was a concerted attack from the resurgent Republican Party and influential parts of the media claiming climate science was a hoax and conspiracy. A University of Maryland study published last month found Fox News viewers were 30 percentage points more likely to incorrectly believe that most scientists do not agree that climate change is occurring, or that views are split.

The public mood was not helped by the debacle of the United Nations Framework Convention on Climate Change meeting in Copenhagen in December 2009, which left people with the not unreasonable perception that the world’s leaders had no idea how to tackle the problem. The recent follow-up meeting in Cancun managed to glue the pieces of the broken talks back together, but left the most challenging issues in forging a new treaty to build on the Kyoto Protocol – which covers little more than a quarter of global emissions – to a later date.

Meanwhile, the claims made on climate change’s behalf continued to mount. Delegates in Cancun were handed a report by the aid agency Oxfam that quoted the insurance agency Munich Re. It linked 21,000 deaths in the first nine months of 2010 to climate change. It was twice the number of casualties caused by extreme weather events in all of 2009.

The mid-year floods that soaked a fifth of Pakistan alone killed about 2000 people and affected the lives of 20 million. The same weather system caused extraordinary summer heat in near-Arctic Russia that wiped out crops, caused rampant wildfires and doubled the usual summer death rate for Moscow.

These events rang alarm bells for those familiar with the IPCC’s projection, based on more than 20 climate models that to date have proved remarkably accurate, that a significant temperature rise above pre-industrial levels will increase the likelihood of floods in southern Asia and the risk of heatwaves and wildfires in Europe.

Munich Re reported that its database of natural catastrophes showed that the number of extreme weather events such as windstorms and floods had tripled since 1980 ”and the trend is expected to persist”.

It should be noted that not everyone working in the area is comfortable with linking the present shift in extreme events with greenhouse gases. According to one view, there is little to no change in the proportions of people affected once population growth is factored in.

What does not remain a contested area in the scientific literature is that the planet is becoming hotter. Analysing the data from the world’s three temperature data sets, the World Meteorological Organisation reported in November that the past decade was the warmest since instrumental measurement began in 1850, and 2010 was on track to be the hottest – regardless of the extraordinary snow dumps clogging European and US cities over Christmas.

(In fact, there is significant evidence to suggest that global warming is responsible for the extreme northern winters of the past two years. An increase in air pressure in the Arctic atmosphere caused by warmer heat coming off a relatively ice-free ocean is pushing cold air south.)

Eighteen countries broke their records for the hottest day ever this year. Only one year in the 20th century, 1998, was warmer than any so far in the 21st.

The noughties was the decade of the killer heatwave. Western Europe was hit in August 2003, when extreme heat was estimated to have contributed to the deaths of 46,000. There were widespread crop failures and forest fires, particularly in southern Europe. About a tenth of Portugal’s forests burned.

In Australia, Victoria had never had three consecutive days above 42 degrees until January 2009, when there were three above 43 degrees. The January heatwave is estimated to have killed 500 people in Victoria, South Australia and Tasmania.

Perhaps the biggest change came in Russia this past northern summer, when at least five days in Moscow topped 100 degrees Fahrenheit (38C) – a barrier that had never been crossed. An estimated 15,000 people died and the country’s massive grain harvest was devastated by wildfire.

The Russian state weather service chief, Alexander Frolov, said it was the country’s worst heatwave in a millennium. ”Nothing like it can be seen in the archives.”

Meanwhile, greenhouse gas emissions have continued to rise. Last month the Mauna Loa Observatory in Hawaii showed that atmospheric carbon dioxide had reached 390 parts per million – a 40 per cent increase on pre-industrial levels.

All of this is in line with the IPCC’s most recent assessment report, published in 2007, which found that there was at least 90 per cent certainty that most of the increase in the globe’s temperature since mid-last century was due to the rise in industrial greenhouse gases.

There is, of course, still significant uncertainty about the future effect of climate change. But the fundamentals predicted by climate models – marked declines in Arctic sea ice in summer, rising sea levels due to thermal expansion and glacier melt and increases in temperature – are being matched by observations.

That is the science. The response, the politics and economics, remains a thornier question still.

The preferred model under the 1997 Kyoto Protocol is carbon trading, under which emissions are capped and pollution permits exchanged so that the cheapest way to meet the target can be found. This method has been adopted in haphazard fashion across Europe, New Zealand and a band of US states, and several more countries including Australia and China are looking at signing up.

There is near universal agreement among economists that a carbon price is the most efficient way to reduce emissions, but carbon trading faces criticism that, while nice in theory, it is ineffective in the real world when it includes poorly policed offset schemes. The US Congress has rejected a national trading scheme; Japan and South Korea have postponed the decision on theirs.

What are the hopes of a global solution to this diabolical problem? A recent prognosis by the Paris International Energy Agency found the national targets submitted under the loose Copenhagen Accord of 2009 would put the world on a path of 3.5 degrees warming by the end of the century. Even if you assume that countries introduce policies to back their international promises – Australia and the US, to name just two, at present have no way of meeting their targets – few scientists or policymakers expect the temperature rise to be kept within two degrees, the goal agreed under the UN process.

In Australia this year there will be a concerted effort from Labor, the Greens and parts of the business world to introduce a carbon price – most likely a tax that could evolve into carbon trading. Attention is then likely to turn to the challenge that has only just begun to find its way into the public debate, but will increasingly become apparent over the next decade: adapting to unavoidable change.

Amidst the rubble of international and Australian climate change policies a remarkable expansion of the Australian resources sector continues.

A new mega-mine, the Carmichael Coal Mine, is now proposed in Queensland, Australia, by a subsidiary of the Indian-based Adani Group. It will produce around 60 million tonnes of thermal coal for 150 years.

The Sydney Morning Herald reports that the mine is estimated to have an indicated and inferred resource of 7.8 billion tonnes of thermal coal.

No details of the greenhouse gas (GHG) emissions from the mine have yet been published but a very rough calculation of the total GHGs that will be produced by the mining and burning of the coal from it can be done using the formulas and figures set out in the Australian Government’s National Greenhouse and Energy Reporting (Measurement) Determination 2008.

Based on this methodology the mining and burning of coal from the Carmichael Coal Mine will produce around 20 billion tonnes of carbon dioxide (CO₂) over the 150 year life of the mine. This figure is a rough estimate only and there are significant uncertainties that cannot be resolved without detailed information on the coal resource and mining methods (which the proponent has yet to provide).

In the absence of more detailed calculation of the GHG emissions being supplied by the proponent, the figure of around 20 gigatonnes of CO₂ from the mining and burning of the coal at least gives a rough estimate of the total GHG emissions from the mine. These emissions are truly enormous on a national and global scale. They are equivalent to around 36 years of direct emissions from the whole of Australia based on current levels of emissions of around 550 million tonnes of carbon dioxide equivalents per year (excluding LULUCF).

The emission of 20 billion tonnes of CO₂ from the mining and burning of coal from the Carmichael Coal Mine alone will add around 1 ppm to atmospheric CO₂ levels based on current levels of global emissions of around 32 gigatonnes of CO₂ equivalents/yr and corresponding annual rises in atmospheric CO₂ of 1.6 ppm/yr.
The fact that the coal from the mine will be produced over 150 years means little for the atmosphere given the fact that the CO₂ released by the burning of coal will continue to affect the atmosphere for “300 years, plus 25% that lasts forever” (Archer 2005).

Despite the enormity of the greenhouse gas emissions involved the mine is certain to be approved by the Australian Government and the State Government in Queensland.

The Australian Government’s commitments to prevent dangerous climate change while at the same time allowing massive expansion of coal mines is, as John Podesa put it, like “trying to ride two horses galloping in opposite directions.”

This coal mine brings Elizabeth Kolbert’s closing lines in Field Notes from a Catastrophe to mind:

“It may seem impossible to imagine that that a technologically advanced society could choose, in essence, to destroy itself, but that is what we are now in the process of doing.”

Several people have sent me this quote from Michael O’Leary, head of Ryanair.

You have to wonder how they could let a fellow like this run an airline who doesn’t understand the difference between noise and trends!  Question:  Would you let someone guide your investment portfolio who draws more inspiration from the day-to-day jitter in stock prices than the long-term trends?  Probably not!

Time for another Guinness!

Hans Hoegh-Guldberg is a prominent specialist on the economic impacts of climate change on natural ecosystems and dependent industries.  He recently posted the following discussion on the list server, coral-list.  I believe he makes some important points regarding types of climate change denial out there today and the way forward given their existence and persistence.

By Hans Hoegh-Guldberg, Economic Strategies, NSW, Australia

The Pew survey showing that public belief in climate change and its reasons has waned should be no surprise to anyone who has been observing the scene over the past couple of years. Neither should there be much surprise that attitudes to climate change tend to follow party lines. The same thing happens in my adopted country, Australia, according to a recent University of Queensland survey.

Structural change is always resisted by mainstream corporations with huge investments in present plant, but while it can be delayed it will happen. Joseph Schumpeter as early as 1914 identified “creative destruction” as a hallmark of capitalism. It is true today as much as 100 years ago, with climate change the current elephant in the room. Scientists, and economists taking a hard look at the long-term implications of their own discipline, agree that the crucial issue is whether the structural change that is needed will be in time to avoid a worst-case scenario.

There are two kinds of climate change deniers. Vested interests are the most influential because of their power to operate through lobby groups and other channels, and doing their best to discredit the scientific evidence and generally try and delay when they themselves have to adapt. But by far the biggest group is made up of those who are influenced. The lobbyists have an easier task because the short term is instinctively the most important, and climate change is not generally seen as a critical issue in that context. So we can have the Australian opposition leader being a cat’s whisker from winning the August 2010 election by warning the electorate against a proposed carbon tax as “a great big tax on everybody”.

The financial crisis naturally brings the short term into greater focus, causing climate change to recede.

Some scientists try to perfect the art of strategic conversation (to use Kees van der Heijden’s description of scenario planning) with the general public and popular press. They realize that their case is not so convincing that they can just rely on lecturing others about the righteousness of the case.

On July 14, “adaptation mavens” Lara Hansen and Jennifer Hoffman referred to the classical Cartesian insurance argument that if God doesn’t exist, and you express faith, you are no worse off, but if you don’t express that faith, and there is a God, you may rot in hell. The parallel in the CAKE version is that if climate change doesn’t exist it doesn’t matter whether or not you adapt, but if it does exist and we don’t cut our greenhouse gas emissions it could cost humankind dearly. The insurance policy is that we all pay a relatively small cost now to mitigate against a big future risk before the adaptation task becomes too huge(http://www.cakex.org/community/advice/we-adapt-therefore-we-are).

Here is a list of some possible ways forward:

• Support and elaborate on the insurance argument promoted by the mavens and others.

• Identify more “canaries in the mine” to add to the most famous original one – coral reefs.
• Island nations have been trying to attract attention for a long time – still for deaf ears?
• Sea-level rise has added urgency to the original global warming dimension. Florida and other threatened areas would provide a special voice to support and promote.
• The impact of ocean acidification (“the evil twin of global warming”) not just on coral reefs but on all oceanic calcareous organisms is not well-known and understood by the voting public.
• Promote the virtues of technological change and its commercial benefits, and other positive  aspects, rather than continuing with in-your-face climate change doom-saying with negative or at least mixed results. People are very good at switching off against persistent arguments.
• Advocate the development of a better Genuine Progress Indicator (GPI) as an alternative to or at least development of GDP (which still takes little or no notice of environmental and social costs). The GPI went a long way but was last published in 1995 and when or if reconstituted is likely to underestimate the impact of greenhouse gases in the atmosphere.
• Build on the fact that President Sarkozy of France lost patience with economic statistics last year and commissioned Nobel Prize-winning economists Joe Stiglitz and Amartya Sen to investigate how these statistics might be developed to incorporate the social and environmental costs into a proper economic measure, not just catering for the GDP growth fetish (http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf.
• Demonstrate that significant technology change is already happening and gathering pace, nationally and internationally, in renewables, energy efficiency, developing green and blue carbon sinks, and spreading to a widening circle of countries, including the least developed ones. In Schumpeterian terms, this may be seen as part of the creative destruction that will eventually prevail – one can only hope in time.
• Advocate web links that can be even better publicized, e.g. John Cook’s Skeptical Science – “getting skeptical about global warming skepticism” (see especially the arguments page (http://www.skepticalscience.com/argument.php)).

Hans Hoegh-Guldberg, Economic Strategies, NSW, Australia

Paul Gilding more than often has some interesting and provocative insights.  In Cockatoo Chronicle number 24 Paul discusses whether or not coal is the terrific investment opportunity after all.   This and the recent study published in the internationally respected magazine Nature, which highlighted the instability of future coal prices due to over-estimates of the availability of coal worldwide, should have people and organisations starting to wonder whether investing in coal mining is a great idea after all.

By Paul Gilding | November 18th, 2010 | From: Cockatoo Chronicles

The very conservative International Energy Agency has just released its closely watched annual World Energy Outlook (WEO), with forecasts for the structure of the energy market through to 2035. This year’s WEO was much anticipated, given the pace of developments in renewables and climate policy, and it didn’t disappoint. The report included the IEA’s interpretation of what major governments’ commitment to a 2°C temperature target would mean for the energy market. The contrast with what most market players assume, particularly coal companies, could hardly be more dramatic.

One global coal player, Peabody, recently told the World Coal Conference that it assumes demand for coal will increase by over 50 per cent by 2030. The IEA on the other hand tells us that if we are to have a reasonable chance of limiting warming to 2°C degrees, coal demand will have to peak by 2020, and by 2035 will have dropped to levels last seen in 2003. These are dramatically different views of the market and the implications for company valuations, and therefore for investors and corporate strategy, are considerable.

The same IEA report compares coal and oil’s current 46 per cent share of global electricity generation to what it would be in 2030 under the 2°C degree scenario. The answer is just 22 per cent. The difference would be picked up by low CO2 energy, nuclear and renewables, which would see massive growth. They assume non-hydro renewables would go from 3 per cent to 20 per cent, all the more remarkable given the assumed increase in overall energy demand. Interestingly, despite significant demand growth, even the total amount of coal-generated electricity would fall in absolute terms.

The significant thing about these forecasts is that the IEA has generally been considered to be excessively conservative and largely aligned with the views that dominate the fossil fuel industry. Indeed, the Peabody forecasts referred to above reference an earlier IEA WEO report. So what’s going on when this industry friendly body chooses to prick the coal bubble? And what does it all mean for investors and resource companies?

What it means is the coal industry is headed for a crash. This is heresy in the industry and would be dismissed by some as starry-eyed naivety. But the numbers don’t lie and this issue has cold hard rational numbers all over it.

One of these numbers is 2°C. There are many uncertainties in the detail of climate science, but there is clear consensus on that number. It is the line in the sand scientists have drawn and said, if we go past it we face catastrophic system-wide risk. While some scientists argue that number is too high and too risky, none of any consequence argue it is too low. That’s why the governments of China, India, Europe and the USA have all agreed, along with many global corporates, that 2°C is the line we can’t cross.

Not crossing it requires the numbers in the IEA report to be achieved. This is hard science. If you put any more CO2 in the atmosphere than that, we will almost certainly be heading past 3-4°C. The economic consequences of that would make the collapse of the coal industry look like a picnic. The science also tells us, supported now by the IEA, that the decision will be made this decade, by action or lack of it.

Further complicating assumptions of growth is a very interesting analysis published today in Nature by two well regarded US energy experts, Richard Heinberg and David Fridley. Their article, “The End of Cheap Coal,” calls into question assumptions of endless supplies of cheap coal, using much of the same logic as earlier predictions around the end of cheap oil. It’s worth remembering that those who have been predicting the end of cheap oil since the late 90s, including Heinberg, were ridiculed for many years.

Now even the IEA supports that view with comments like “the age of cheap oil is over.” The new analysis in Nature suggests there may be a similar dynamic at play with coal, with reserves constantly being revised downwards as time passes. They also remind us that industry has a history of getting their forecasts wrong, noting that for oil, “the current price of more than $US80 per barrel is about three times higher than the upper range in official forecasts for 2010 that were being issued in the late 1990s.” Like oil, the issue is not any risk of running out, but volatile and rising prices as the peak level of quality supply is reached.

But isn’t this good news for the coal industry? Aren’t rising coal prices good? The answer is surprising – and this is where the two issues combine. In the short term the answer is yes, but ultimately higher prices will trigger the death of coal. Everyone knows the only way coal can survive in the low-carbon world the science demands, is if carbon capture (CCS) technology can make coal a zero CO2 energy source. The economic viability of CCS is already questionable and is rapidly losing support, but if it is ever to work it can only do so with cheap coal.

This is because the additional cost of CCS equipment and CO2 pipelines, along with the inherent loss of efficiency involved in its use, means that if coal prices rise, renewables will become cheaper than coal with CCS. So if Heinberg and Fridley are right, coal prices will increase, CCS will be confirmed as uneconomic and renewables will take over. This, of course, will then see coal prices drop again. But it seems likely, by then, that the market will have shifted its focus to renewables, and perhaps nuclear, with coal unlikely to recover given renewables prices will keep falling.

So why do Peabody and so many others assume levels of growth that are in such contrast to this hard logic of both the market and climate science?

Firstly, of course, because they want it be so. They sell coal and the more they can convince the market of an endless coal boom, the higher their share price. This is particularly so for resource companies that are heavily or exclusively reliant on coal like Peabody. Self-interest is a powerful driver of denial. But it’s more complicated than that.

What these people and their investors are falling for, supported by many people in government, is what I call the “economic inertia trap”. This is the belief that something that is big and moving in a certain direction will continue to do so. They simply can’t imagine the level of change required to shift that inertia could possibly occur. The argument goes: coal is cheap and plentiful, people need lots of energy, so coal will be burnt. This is delusion on a grand scale. Does anyone really believe society will calmly stand by as we head towards 3°C, then 4°C, staring economic and social collapse in the face while we focus on cheap energy as some kind of overriding objective?

Let there be no doubt, we will act on climate change – and when we do, the coal industry will face an almighty crash, as Phil Preston and I argued in our recently released paper on the financial implications of all this. Probably not this year or next, but we think before the end of this decade.

But don’t expect Peabody or their friends to come on board early. Horse and cart companies didn’t become auto companies. Amazon reshaped the book retailing business before book retailers woke up. Kodak failed to be ready for digital photography, and so on. We can safely expect coal companies to stay in denial all the way to the finish line – or in their case, their finished line. That is their choice to make. It is also their investors’ choice on whether to go with them or when to jump. The clock is now ticking.