While the UN climate talks seek to slow climate change, the fossil fuel lobby still argues the benefits of traditional fuels.
Kieran Cooke is a former foreign correspondent for both the BBC and the Financial Times, and continues to contribute to the BBC and a wide range of international newspapers and radio networks.
Cross-posted from Climate News Network
The fossil fuel lobby is still at it. The advocates of traditional fuels are determined to push their case at the climate change talks in Bonn – even though all the evidence says that the continued use of coal, oil and gas threatens severe climate change and the whole future of the planet.
According to a new report those lobbyists are not only endangering future generations – they are also digging a deep financial hole for themselves, virtually throwing away multi-million dollar investments.
The report by Carbon Tracker, an independent financial think-tank specialising in the energy sector, looks specifically at the oil-refining sector and has some distinctly uncomfortable news for investors in the industry.
It says that by 2035 a growing tide of climate regulations, along with rapid advances in clean technologies, will lead to big cuts in the demand for oil and result in at least a quarter of the world’s more than 500 refineries having to close.
“Many players will exit the market rather than haemorrhage cash”, says Andrew Grant, a co-author of the report. “Investors should beware that the risk of wasting capital extends to all new investments, including expansions or upgrades to existing facilities.”
The thousands of delegates at the meeting here – referred to as the Conference of the Parties, or the COP – are discussing ways to ensure that average world temperatures do not rise to more than 2°C above pre-industrial levels, beyond which catastrophic climate change is, say many scientists, inevitable.
Carbon Tracker says that if the world is serious about keeping within the 2°C target, oil use will have to be radically cut back and the oil refining sector, which demands high levels of investment capital, will be especially hard hit.
The least profitable refineries will go out of business. Earnings for the industry as a whole could halve by 2035 as a result of less oil being processed.
Analysing the workings of 492 refineries around the world – representing more than 90% of global refining capacity – the report says tens of billions of dollars of investment are at risk.
More than 20% of the world’s refineries are unprofitable at present, says Carbon Tracker; it forecasts that some of the biggest players in the oil business, such as Total, Eni, Shell and Chevron, are likely to see earnings from refining drop by between 60% and 80% by 2035.
The fossil fuel industry refutes such analysis. Buoyed by a recent surge in the oil price – due in part to the political turmoil under way in Saudi Arabia, the world’s biggest oil exporter – oil companies see demand growing steadily in the years ahead.
The 2°C target on limiting the global temperature rise was agreed by nearly 200 countries at the Paris COP in late 2015. The US administration of President Trump – he has described climate change as a hoax – recently announced that it would be withdrawing from the Paris accord.
Earlier this week Syria agreed to join the Paris Agreement, leaving the US as the only country in the world at present refusing to acknowledge the climate deal.
“It is undeniable that fossil fuels will be used for the foreseeable future. And it’s in everyone’s interest that they be efficient and clean”
Negotiations on the US withdrawal will take some time; in the interim, Washington is sending a delegation along with a large group of fossil fuel lobbyists to the Bonn meeting.
Demonstrations against the US are likely: already there have been street protests against Germany’s continued use of coal – the most polluting of fossil fuels – for much of its power.
While some US states, cities and other bodies will be telling the meeting in Bonn that they continue to support international efforts to combat climate change and limit fossil fuel use, the Trump administration says coal, oil, gas – and nuclear – will remain at the heart of energy generation for years to come.
“It is undeniable that fossil fuels will be used for the foreseeable future” says a White House spokesman. “And it’s in everyone’s interest that they be efficient and clean.”