In the news: Are fossil fuels accelerating?

The energy transition to reach a net zero carbon economy could be at risk due to human-caused warming and the world's dependency on fossil fuels
by Bethan Rees


"The world's dependency on fossil fuels is likely to get even worse in the coming decades," writes Sam Meredith for CNBC. This in turn could exacerbate the "risk of climate catastrophe as world leaders and CEOs repeatedly tout their commitment to the so-called 'energy transition'," he writes.

Ahead of this year's 26th UN Climate Change Conference of the Parties (COP26) in November, policymakers are under pressure to deliver assurances in relation to the Paris Agreement, but hopes of limiting global warming and meeting a crucial target "are quickly deteriorating", says Meredith. As part of the Paris Agreement, almost 200 countries have pledged to attempt to limit the global temperature increase to 1.5°C above pre-industrial levels. However, hitting this target is "virtually impossible", according to some climate scientists.
Levels of carbon dioxide and methane continued rising despite the economic slowdown initiated by the Covid-19 pandemic

The Intergovernmental Panel on Climate Change (IPCC) estimates that "human-caused warming as a result of past and ongoing emissions is adding roughly 0.2°C to global average temperatures every decade", says Meredith. The IPCC forecasts that warming is likely to hit 1.5°C between 2030 and 2052 if this continues. To combat this, there needs to be a 45% reduction in carbon dioxide emissions by 2030, in comparison to 2010 levels, according to climate scientists. Currently, the earth’s carbon dioxide levels are higher than at any time in the past 3.6 million years, according to research published on 7 April by National Oceanic and Atmospheric Administration, as referred to by Meredith. The research finds that levels of carbon dioxide and methane continued rising despite the economic slowdown initiated by the Covid-19 pandemic.

Carroll Muffett, chief executive at the non-profit Center for International Environmental Law, is quoted in the article. He says, "It is absolutely the case that the transition is moving too slowly from the climate perspective, but what is important to recognise is that it is primarily a matter of political will and economic choices."

Clark Williams-Derry, energy finance analyst at the Institute for Energy Economics and Financial Analysis is also quoted in the article, and describes the "energy transition" as "the process of shifting a 19th-century energy system into the 21st century". He asks whether the transition is "fast enough to relieve air quality concerns in developing world cities", citing the dangerous levels of air pollution in countries such as India, China, Vietnam and Bangladesh among others.

Meredith references an analysis by the United Nations published on 26 February 2021 that "finds pledges made by countries around the world to curb greenhouse gas emissions were 'very far' from the profound measures required to avoid the most devastating impacts of climate breakdown," he writes.

CNBC article

Covid-19 and the green energy transition

Conversely, energy researchers in Europe have been looking at "a drop in carbon emissions and an acceleration of the energy transition from fossil fuels to renewable electricity" as a development caused by the pandemic, writes David Vetter in an article for Forbes.

Research from Finnish energy firm Wärtsilä, as reported by Vetter, finds that the reduced energy demand over the past year has caused a 7% drop in carbon dioxide emissions in Europe's ten richest nations. "That’s roughly equivalent to shutting down the entire global aviation industry for two weeks," Vetter writes. The research finds that Spain and the Netherlands made the biggest cuts in emissions, each lowering carbon dioxide output by 10.2 million tons over a year. This was achieved in some part by Spain closing seven coal-fired power plants and the Netherlands importing a larger proportion of low and zero carbon electricity from other countries, such as Germany.

Tony Meski, senior market development analyst at Wärtsilä Energy Business, is quoted by Vetter. "The impact of Covid is like achieving a gold medal while spraining both ankles in the process … We’ve achieved record-breaking carbon reductions, but our global economy has been put under intense strain." Meski also says that as we come out of the pandemic, energy demand will rebound and therefore so will emissions. "We need to capture this moment and be ambitious with our investments in renewables and flexible technologies while they remain highly competitive," he's quoted as saying.

There could be some lasting changes, though, due to the reduced reliance on coal in Europe. Vetter references a study by the Potsdam Institute for Climate Impact Research that was published in February 2021, which finds that coal plants are the first sources of electricity generation to be turned off during a reduced demand for electricity. 

"The energy transition, then, is fully underway. But to reach net zero emissions, world leaders will need to move a lot faster," writes Vetter .

Forbes article 

Halting export finance for fossil fuels

In a step towards reducing the use of fossil fuels, according to France's first minister Bruno Le Maire, seven European countries – Germany, France, Spain, the Netherlands, Denmark, Sweden and Britain – are committing to stop public export guarantees for fossil fuel projects, as reported by Leigh Thomas for Reuters.

"Coal, oil and gas infrastructure have traditionally made up a large share of the portfolios of many countries’ public export finance agencies, which support exports through state-backed financing guarantees and insurance against losses abroad," Thomas writes.

Le Maire also hopes the US will join the initiative. The US accounts for 40% of export finance among Organisation for Economic Co-operation and Development countries, Thomas writes.

Reuters article 

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Published: 16 Apr 2021
  • International regulation
  • Corporate finance
  • global energy transition
  • climate change
  • Covid-19
  • responsible finance
  • Paris Agreement

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