Stories by Justin Guay

Justin GuayOct 29, 2019

Expert Voices

U.S. insurance industry under growing pressure to exit fossil fuels

man stands in front of white pipes at oil pumping station — A Keystone pumping station in North Dakota for tar sands crude oil. Photo: Lucas Oleniuk/Toronto Star via Getty Images

A new policy from AXIS Capital will restrict insurance and investing in coal and tar sands, heightening pressure on other U.S. insurers to take similar moves.

The big picture: All major European insurers, with the exception of Lloyd's, have announced comparable policies. U.S. insurers had been bucking the trend until Chubb stepped forward in July, but AXIS' decision adds momentum to the shift away from not just coal but fossil fuels more broadly.

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Driving the news: Under the policy, AXIS will stop insuring and investing in tar sands extraction, pipeline projects and their dedicated infrastructure, in addition to restricting coverage of new coal-fired power plants, coal mines and coal companies.

As a global firm with 19 subsidiaries, AXIS serves more than 200 territories and countries. It is an important specialty insurer and key player on the Lloyd’s Market, with $24.1 billion in total assets and $6.4 billion in total capital.

Context: In 2018, AXIS endured significant losses from global weather-related events, including pre-tax losses of $125 million to $150 million from California wildfires.

Globally, 17 insurers across three continents have adopted policies restricting coal insurance and four have restricted tar sands insurance. More than half of those policies were adopted in 2019.

Yes, but: Consequential as the policy is, it does have loopholes that limit its impact.

An exemption for insuring new projects in "countries where sufficient access to alternative energy sources is not available" could allow AXIS to insure hundreds of new plants through 2024 in South and Southeast Asia, where the majority of the currently proposed coal-fired power plants would be built.
AXIS provides a long transition period for existing clients, as contract renewals will be considered on a case-by-case basis until 2023.

What to watch: Now that Chubb and AXIS have implemented these policies, Liberty Mutual and AIG will be closely watched for announcements of their own.

Justin Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.

Insurance

Justin GuaySep 18, 2019

Expert Voices

Indian states ending coal expansion advance goals of UN Climate Week

meeting hall at UN headquarters in New York City — A session of the 2018 UN General Assembly. Photo: Alexander Shcherbak/TASS via Getty Images

The decisions reached this month by two Indian states, Gujarat and Chhattisgarh, to stop building new coal plants align with a renewed call by UN Secretary-General Antonio Guterres to end all such construction by 2020.

Why it matters: India's pipeline of planned new coal plants ranks second in size only to China's. These commitments by its state governments come ahead of next week's Climate Summit at the UN General Assembly, where countries will face strong pressure to back off support for expanding coal facilities.

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Details: India has historically resisted global calls to halt coal expansion.

The commitment by the heavily industrialized state of Gujarat — whose 15.8 GW coal fleet is larger than the U.K.'s — was quickly followed by a similar pledge from Chhattisgarh, home to the country's third largest coal reserves.

Context: Guterres has used the conclusions of the latest Intergovernmental Panel on Climate Change reports to press for a transition away from coal.

As one form of leverage, he may deny South Korea and Japan speaking slots at the summit because of their financial support for new coal plants around the world, according to the Financial Times.

What to watch: As the UN begins to draw a clearer line between countries supporting the Paris agreement goals and those ignoring them, more world leaders may soon announce plans to end coal expansion. A yet greater step, which Guterres has also called for, would be new limits on existing plants.

Justin Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.

Coal

Justin GuayAug 16, 2019

Expert Voices

Despite decline in new coal plants, emissions targets still at risk

a coal-fired power plant behind an open field — A coal-fired power plant in Salaya, India. Photo: Sam Panthaky/AFP/Getty Images

If most of the world's proposed new coal facilities are ultimately built, their output would far exceed the level required to limit global warming to 1.5 degrees Celsius.

Driving the news: A Global Energy Monitor report found that 538 GW of coal plants are still under consideration around the world. This represents a 62% reduction in proposed coal plants over the past 3 years — from a proposed 1,427 GW in 2015 — but still amounts to much more than the global carbon budget can absorb.

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Background: According to the UN Intergovernmental Panel on Climate Change's 1.5 degree report, keeping warming below that threshold requires coal generation to decline 70% by 2030 and be phased out by 2050.

Separate analyses have suggested that OECD nations need to cut out coal by 2030.
UN Secretary-General Antonio Guterres has called for a moratorium on all new coal plants by 2020.

Between the lines: The GEM report does have some encouraging news.

Since 2010, only about one third of proposed plants have been built.
In the first half of 2019, 10 GW of coal plants have come offline, including 6 GW in the U.S. That puts the U.S. on track for its 4th-highest year of coal retirements, though it would mean a drop from the 18 GW retired in 2018.
Although this is a global problem, only a handful of countries are needed for a solution: 90% of new plant construction is concentrated in just 15 countries, with 52% in India and China alone.

Yes, but: Despite hitting peak coal consumption in 2013, China's subsequent transition from coal has been uneven. More importantly, China, South Korea and Japan account for the majority of public finance for new coal plants in developing countries.

What to watch: If those 3 countries joined the 113 finance institutions with coal exclusion policies, most plants outside India and China would go unfinanced and thus unbuilt.

Forestalling that construction could give the world a chance to stay within its carbon budget, assuming coal retirements in OECD countries also stay on track.

Justin Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.

Coal