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Achieving net-zero will take decades to accomplish

The world is learning the hard way that the global economy still relies on fossil fuels and net zero will take decades to accomplish With the UN-sponsored Climate Change Conference (COP26) climate talks in Glasgow over, it is important to review some…



The world is learning the hard way that the global economy still relies on fossil fuels and net zero will take decades to accomplish

With the UN-sponsored Climate Change Conference (COP26) climate talks in Glasgow over, it is important to review some of the agreements and implications that have resulted from this process and assess the impact on Canada’s energy resources sector.

Putting the rhetoric in context

One can take seriously the undeniable threat posed by climate change while also asking whether some of the theatrics and hyperbole surrounding climate summits only serve to trivialize the process. The Glasgow conference began with the usual apocalyptic hyperbole, similar to previous COP summits.

British Prime Minister Boris Johnson opened the conference by saying the world is “strapped to a doomsday device.” European Commission Vice President Frans Timmermans opined that “we are fighting for the survival of humanity.” UN Secretary-General Antonio Guterres breathlessly proclaimed that the world is “still careening towards climate catastrophe.” And Greta Thunberg provided her own brand of helpful insights by dropping the f-bomb and singing, “You can shove your climate crisis up your arse,” adding that “COP26 is so far just like the previous COPs and that has led us nowhere.” Really?

It is important to note that the climate scientists that write the Intergovernmental Panel on Climate Change (IPCC) reports on which the talks rely do not use such hyperbolic rhetoric. According to the IPCC, its reports are supposed to focus on a “solution-based approach,” helping identify how high-level climate policy goals might be met without advocating any specific mitigation options.

Naturally, at climate summits, ambitions are set artificially high on purpose, supposedly so that even when results fall short the world is left better off than before. In November 2019, the UN set a very high bar, stating that the world needed to cut greenhouse gas (GHG) emissions “by 7.6 per cent every year for the next decade” in order to hold the global temperature increase to 1.5 degrees by 2100. The IPCC has said that at current levels of CO2 emissions the globe’s 1.5-degree “carbon budget” will be used up within 12 years. The IPCC has said that global temperatures can remain below 2℃ during this century only under scenarios where CO2 emissions reach net-zero around 2050.

What has been accomplished at COP26?

It has been estimated that the additional measures agreed to at COP26 will result in about a 7.5 per cent reduction in carbon emissions by 2030. However, despite the 5.4 per cent dip in emissions brought on by the COVID-19 pandemic in 2020, global emissions are set to rise by 4.9 per cent in 2021. Given that the world has already warmed by 1.1 degrees and with economies growing again after the pandemic, many scientists and informed observers acknowledge that we have already passed the point of being able to meet the 1.5-degree goal this century.

In Glasgow, the International Energy Agency (IEA) made the surprising announcement that global warming could be limited to 1.8℃ above pre-industrial levels by 2100 if all the commitments made in Glasgow were completely fulfilled and on time. Given that no COP climate commitments have ever been completely fulfilled on time, that would appear wildly optimistic. In any case, if the IEA’s analysis is correct, then fossil fuel production does not need to be shut down immediately, and resources don’t have to be left in the ground after all because no such commitments were made at COP26.

At Glasgow, 20 countries also agreed to end financing for fossil fuel projects abroad. While several countries had already agreed to end international financing for coal, this agreement applies to oil and gas projects. The UK, Canada, the U.S. and several other countries signed on to the agreement, which promises to “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.” Judging by the careful wording, this agreement does not seem to rule out providing government funding for projects like natural gas power plants utilizing carbon capture and storage (CCS) or financing liquefied natural gas (LNG) receiving terminals, all of which continue to be in high demand in Asia and will be required to help phase out coal and provide backup for an expansion of renewable electricity generation.

In Glasgow, 23 new countries signed on to a pledge to phase out coal power, with major economies phasing out by the 2030s and the rest of the world by the 2040s. The countries also agreed to end all financing in new coal power generation domestically and internationally.

Climate promises again fall short of solutions

However, China, India and the U.S. – which, together, account for over 70 per cent of global (thermal) coal consumption – refused to sign on to the agreement. Both China and India rely heavily on coal power and the average age of their plants is only around 12 years, with 20 to 30 years of lifespan left in them. And U.S. President Biden needs West Virginia Senator Joe Manchin, whose state is a major coal producer, onside to pass his legislative agenda. Coal currently accounts for 37 per cent of the world’s electricity, yet China and other large emitters have not committed to stop increasing coal use domestically. Since coal-fired power remains integral to energy affordability and economic sustainability in India and China, the prospects of coal-fired power plants being consigned to history anytime soon are considerably low.

It seems unfair for rich Western countries to expect energy-poor developing countries like India to remove coal from their energy mix while millions of their people still live without access to electricity or fuel for their stoves. In India, the pandemic diminished the ability of many people to pay for fuels and made it very difficult to travel to liquid fuel refilling stations during the lockdown. Yet India was criticized. Rather than criticize India for not signing on to net-zero emissions by 2050, rich countries should applaud India for committing 2070, given how far India needs to go to catch up with the developed West.

If other countries are serious in wanting India or other developing countries to align with the 2050 target, it’s unlikely that New Delhi would turn down the billions or even trillions of dollars in transfers needed to achieve that goal. In the meantime, India will likely continue to expand renewables while also expanding reliance on coal power. It is easy to criticize India, but the reality is that coal is a cheap and reliable fuel source, both of which are critical to India’s continued economic development.

Canada’s COP26 commitments

In his national statement at COP26, Prime Minister Trudeau announced that Canada will “cap oil and gas sector emissions today and ensure they decrease tomorrow at a pace and scale needed to reach net-zero by 2050.” This appears to build on earlier commitments he made on the campaign trail and at the Leader’s Summit on Climate in April, where he announced Canada will enhance its emissions reduction target under the Paris Agreement to 40-45 per cent below 2005 levels by 2030.

The oil and gas sector, which accounts for about 26 per cent of Canada’s total GHG emissions, had already agreed to cut emissions and several major producers have signed on to an initiative to achieve net-zero emissions by 2050. The Alberta government has already agreed to a 100-megatonne cap on emissions from the oil sands. The Prime Minister’s COP26 announcement raises questions about how much further the federal government will go in reducing caps on emissions, how the five-year emissions targets would be issued and enforced, and whether the cap would apply to the whole oil and gas sector or whether it would target specific companies or extraction practices.

It is fair to ask why emissions caps are needed at all when Canada already has a price on carbon that will be ratcheted up over time (from $40 per tonne today to $170 per tonne by 2030). While the announcement may not have a significant negative economic impact beyond what has already been announced and agreed to, the question remains whether expanding oil sands production while staying under the cap is still a possibility.

Canada also announced a commitment toward achieving net-zero emissions in its electricity grid by 2035. Given that 60 per cent of Canada’s power generation is hydro, and all coal-fired power plants are slated to be either decommissioned or retrofitted with CCS technology, this should be achievable. Strict emissions requirements already in place will only impact gas-fired power plants with lower efficiencies. The prime minister also announced upwards of $1 billion in aid for developing countries to help transition them from coal-based to low-emissions electricity. This is a positive move that should be applauded.

In terms of energy exports, Canada’s prospects for exporting its energy resources don’t seem to be significantly impeded by the commitments made in Glasgow so far. Given that the federal government is still proceeding to complete the TMX pipeline (which it owns), Canada remains on track to increase oil exports offshore. The prime minister also announced that Canada is “working toward” ending exports of thermal coal by no later than 2030. This statement is somewhat ambiguous, but, in any case, the ban will have little impact on Canada’s balance of trade because the vast majority of Canada’s coal exports are metallurgical coal used in steel-making, and this is not directly affected by the ban.

Climate puritanism vs. climate realism

It was reported on Oct 21 that Saudi Arabia, Australia and Japan were among some countries attempting to make changes to the IPCC Working Group III draft report that is to be published next March, according to leaked documents. Apparently, they objected to the following statement in the draft report: “the focus of decarbonization efforts in the energy systems sector needs to be on rapidly shifting to zero-carbon sources and actively phasing out fossil fuels.”

Of course, these countries are being criticized for daring to suggest changes to a report that is supposed to reflect policy options for governments to consider. In fact, what many countries legitimately argue is that their energy systems will still require fossil fuels for some period of years while they shift to alternative sources. It seems that some people in the IPCC may be listening to environmental advocacy groups that promote a kind of ideological purity test that blesses only certain “zero-carbon” sources for use in the transition. Fossil fuels with CCS and nuclear power are “dirty” under this rubric, even though they are low carbon. However, the reality is that a wide range of low-carbon sources will need to be employed to meet the aggressive targets that have been agreed to in the COP process.

Despite the lofty ambitions and rhetoric surrounding climate summits, the hard work begins where climate commitments meet the reality of economics and local politics back in home countries. As such, trade-offs will have to be made in order to manage the impact on economies, prices and jobs while also being fiscally responsible. The consequences of not doing so risk social and political pushback and ultimately public support for the transition itself. The consequences are also seen in energy markets today, reflected in fuel shortages and rising prices in many countries.

The world is learning the hard way that the global economy still relies on fossil fuels. While the emissions they produce must eventually be reduced to net-zero, this process will take decades to accomplish.

By Jeff Kucharski
Senior fellow
Macdonald-Laurier Institute

Jeff Kucharski is Adjunct Professor at Royal Roads University and a Senior Fellow at the Macdonald-Laurier Institute. He has a PhD in energy science and his current research focuses on energy, transitions, energy geopolitics and energy security.

Courtesy of Troy Media.

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Why Is The VIX So Low? A Surprising Answer Emerges In The Market’s Microstructure

Why Is The VIX So Low? A Surprising Answer Emerges In The Market’s Microstructure

One of the most frequent questions tossed around Wall Street…



Why Is The VIX So Low? A Surprising Answer Emerges In The Market's Microstructure

One of the most frequent questions tossed around Wall Street trading desks (and strip clubs), and which was duly covered by Bloomberg recently in "Fear Has Gone Missing in Wall Street’s Slow-Motion Bear Market", is why despite the crushing bear market and the coming recession, does the VIX refuse to rise sustainably above 30, or in other words, why is the VIX so low?

As Goldman's Rocky Fishman wrote in a recent note "Option Markets Take the SPX Bear Market in Stride" (available to professional subs), "one of the most popular questions we have received is why the VIX hasn't surpassed its March peak (36) despite the SPX being lower than it was in March and realized vol being higher than it was in March."

Here, Fishman notes that implied volatility was unusually high in March, and the current VIX level (29) is only slightly low for the current level of realized vol. Furthermore, a VIX around 30 typically happens with the 5Y CDX HY spread above 600, and although it has risen steadily it's currently in the mid 500's.

Meanwhile, even as the VIX has fallen moderately since late April, both vol risk premium and skew have both fallen dramatically.

Picking up on this quandary, overnight JMorgan also joined the discussion with its analyst Peng Cheng laying out his own thoughts on why the VIX remains so low (note is also available to professional subs), and similar to Goldman notes that the current bear market, despite being deeper in magnitude, has produced VIX levels well below the peak observed during previous market sell-offs:

However, unlike Goldman which mostly analyzes the VIX in the context of a macro framework, JPM's Cheng offers observations based on his analysis of market microstructure in both equity and options markets.

Cheng starts with the previously noted low realized volatility: as the JPM strategist writes, YTD, the SPX realized vol, measured on a close to close basis, is only 25.5, which means that delta-hedged put options would have lost money in the gamma component. From a technical perspective, JPM believes that return volatility is dampened by a lack of intraday price momentum and increasingly frequent occurrences of intraday price reversal. As seen in the next chart, intraday reversal has only started to become noticeable in the last two years. Prior to that, intraday momentum was the dominant market behavior.

This diminishing intraday price momentum has had a non-trivial impact on realized volatility, according to JPM which estimates that if the intraday return correlation remained the same as pre-pandemic, YTD volatility would be close to 28.8, or 3.3 vol points higher than realized.

As an aside, those asking for the reason behind this change in intraday patterns in the last couple of years, Cheng notes that "this is a complex topic" but in short, his view is that it is a result of 1) crowding in intraday momentum trading strategies and 2) a potential shift in option gamma dynamics as discussed below.

Supply/demand of S&P 500 options: Although the estimation of market level option gamma profile is highly dependent on many factors, including assumptions on open interest, OTC options, and leveraged ETFs, etc., in a report published earlier this year, JPM's quants presented a more dynamic estimation of the gamma profile by using tick level data. Specifically, they assigned directions to SPX and SPY option trades based on their distance to the best bid/offer at the tick level, rather than the constant assumption of investors being outright long puts and short calls. The updated results are shown below.

Tha chart shows that starting in 2020, the put gamma imbalance has fallen meaningfully. This is the result of investors’ changing preference from buying outright puts to put spreads for protection, in JPM's view. And year to date, the decline in gamma demand has not improved. Moreover, and echoing what we have said on several recent occasions, JPM notes that judging from the outright negative put gamma imbalance in early 2022, it appears that investors have been monetizing hedges that had been held since 2021 - note the consistently positive and relatively elevated put gamma imbalance throughout 2021, which suggests that protections were put on during this period.

More in the full note available to pro subs

Tyler Durden Wed, 06/29/2022 - 15:05

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Dr. Stephen Kingsmore receives prestigious Precision Medicine World Conference 2022 Luminary Award

SAN DIEGO, Calif. – June 29, 2022 – Rady Children’s Institute for Genomic Medicine® (RCIGM) today announced that Stephen Kingsmore, MD, DSc, President…



SAN DIEGO, Calif. – June 29, 2022 – Rady Children’s Institute for Genomic Medicine® (RCIGM) today announced that Stephen Kingsmore, MD, DSc, President and CEO, was presented with the Precision Medicine World Conference (PMWC) 2022 Luminary Award at this year’s conference in the Silicon Valley region of California for his innovation in rapid neonatal molecular diagnoses using whole-genome sequencing.

Credit: Rady Children’s Institute for Genomic Medicine

SAN DIEGO, Calif. – June 29, 2022 – Rady Children’s Institute for Genomic Medicine® (RCIGM) today announced that Stephen Kingsmore, MD, DSc, President and CEO, was presented with the Precision Medicine World Conference (PMWC) 2022 Luminary Award at this year’s conference in the Silicon Valley region of California for his innovation in rapid neonatal molecular diagnoses using whole-genome sequencing.

The Luminary Award recognizes the recent contributions of prominent figures who have accelerated precision medicine into the clinic. Additional PMWC 2022 honorees included Dr. Albert Bourla, Pfizer, for his extraordinary achievement in leading the record-time development of a vaccine and antiviral drug against the coronavirus and Dr. Stephen Hoge, Moderna, for overseeing R&D of the first antiviral synthetic mRNA vaccines ever created, including the one against COVID-19.

“I am honored to receive this award and be among this extraordinary group of past and present recipients focused on the clinical adoption of precision medicine,” said Dr. Kingsmore. “At RCIGM, we are transforming pediatric healthcare through the power of Rapid Precision Medicine™ by offering the fastest delivery of rapid Whole Genome Sequencing™ to enable prompt diagnosis and targeted treatment of critically ill newborns and children in intensive care. We know that time matters – a fast, molecular diagnosis can make the difference between improved outcomes and a lifetime of disability, or even life itself.”

Dr. Kingsmore leads a multi-disciplinary team of scientists, physicians, genetic counselors, software engineers and bioinformaticians who are pioneering the use of rWGS® to enable precise diagnoses for critically ill newborns. In 2021, he led the RCIGM team to set a new record of 13.5 hours for achieving the fastest molecular diagnosis using rWGS, breaking his previous 2018 world record of 19.5 hours. 

PMWC is the largest and original annual conference dedicated to precision medicine. PMWC’s mission is to bring together recognized leaders, top global researchers and medical professionals, and innovators across healthcare and biotechnology sectors to showcase practical content that helps close the knowledge gap between different sectors, thereby catalyzing cross-functional fertilization and collaboration in an effort to accelerate the development and spread of precision medicine.

Rady Children’s Institute for Genomic Medicine

Rady Children’s Institute for Genomic Medicine is transforming neonatal and pediatric health care by harnessing the power of Rapid Precision Medicine™ to improve the lives of children and families facing rare genetic disease. Founded by Rady Children’s Hospital and Health Center, the Institute offers the fastest delivery of rapid Whole Genome Sequencing™ to enable prompt diagnosis and targeted treatment of critically ill newborns and children in intensive care. The Institute now provides clinical genomic diagnostic services for a growing network of more than 70 children’s hospitals. The vision is for this life-changing technology to become standard of care and enable clinicians nationwide to provide rapid, personalized care. Learn more about the non-profit Institute at Follow us on Twitter and LinkedIn.

Media Contact:

Ben Metcalf
+1 (619) 822-8593

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Fauci Suffers “Much Worse” COVID Symptoms After ‘Paxlovid Rebound’

Fauci Suffers "Much Worse" COVID Symptoms After ‘Paxlovid Rebound’

Fully-vaxx’d and double-boosted mask-admirer Anthony Fauci is suffering.




Fauci Suffers "Much Worse" COVID Symptoms After 'Paxlovid Rebound'

Fully-vaxx'd and double-boosted mask-admirer Anthony Fauci is suffering.

Two weeks ago, we reported that President Biden's chief medical adviser had COVID.

The 81-year-old reportedly had 'mild symptoms' and of course he 'said the words'...

Of course, Fauci followed the CDC guidelines and ingested the government-blessed treatment - Paxlovid - due to his age and possible risks from the virus.

So, that should have been it right?

But no. During an event at Foreign Policy’s Global Health Forum, Fauci admitted he had not had a good experience:

“After I finished the five days of Paxlovid, I reverted to negative on an antigen test for three days in a row,” Fauci said Tuesday .

“And then on the fourth day, just to be absolutely certain, I tested myself again. I reverted back to positive.”

Interestingly, Fauci admitted:

"...this is becoming more and more typical based on more clinical studies..."

As Bloomberg reports, large numbers of patients have reported the phenomenon, often called Covid rebound or Paxlovid rebound, of returning symptoms after taking a full course of Pfizer’s drug.

While Pfizer Chief Executive Officer Albert Bourlasaid in May that doctors could prescribe a second course of treatment to such patients, US drug regulators have said there’s no evidence that a repeat will help.

However, Fauci said he started taking a second course of Paxlovid after experiencing symptoms “much worse than in the first go around.”

Now near completion of the five-day oral treatment, he said he was still enduring symptoms but felt “reasonably good.”

Finally, as we reported less than two weeks ago, Pfizer stopped enrolling in a clinical trial for Paxlovid for standard-risk COVID-19 patients after the latest results suggested the drug did not reduce symptoms or hospitalizations and deaths to a statistically significant degree.

Watch the full interview below: (forward to around 5:26:00):

Not exactly encouraging news...

Tyler Durden Wed, 06/29/2022 - 11:45

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