Not a pretty picture for someone concerned about climate change. An oil company that invests in fossil fuels is greeted with applause in the stock market. And those who show green ambition to oil rivals will be punished.
For example, this week BP announced an additional $8 billion investment in oil and gas. A U-turn. Compared to many other oil and gas companies, the British were assertive when it came to sustainability. Instead of 40 percent less fossil fuels in 2030, BP is now targeting 25 percent less. Since that announcement, the share price has risen about 15 percent.
Shell’s low stock market value is also important, compared to its American rivals such as Exxon Mobil and Chevron. There is considerable public criticism of the scale of Shell’s sustainable investments. Shell executives were even taken to court by various shareholders this week. And this is not the first case.
But Shell is much more ambitious than the Americans when it comes to investing in renewable energy. However, the business to which this renewable energy belongs is making much less money.
“The stock market is about profit”
“There is a lot of talk about making the economy more sustainable, but the stock market is all about making short-term profits,” says Hans Stegeman, chief economist at Triodos Bank. “This is a very cynical priority that does not help achieve global climate goals. Unfortunately, we see this in the financial markets.”
“Big investors from the US, China and the Middle East: We went into stocks to make money,” says analyst Corné van Zeijl of asset manager Actiam. “American oil companies are more interesting to them then.”
Oil demand is expected to decline only slowly over the next decade. Even if all current climate ambitions and targets are met, there will still be 93 million barrels per day in 2030. This is due to the current World Energy Outlook of the International Energy Agency (IEA). If you look at actual policy on paper, you’ll see that demand is pretty much the same as now, about 100 million barrels a day.
The third scenario in the map below shows what it takes to emit net zero CO2 by 2050. This means that for all the co2 that enters the atmosphere, the co2 must also leave the atmosphere. Net zero CO2 emissions by 2050 are required to keep global warming under some control.
Energy expert Lucia Van Geuns of HCSS says that target has already fallen out of favor given the demand for oil.
“We don’t name the scenarios for nothing,” says Van Geuns. “They are by definition imprecise, but at least until 2030, the global economy will continue to be heavily dependent on oil. Our dependence on oil and gas will not disappear in ten or twenty years. Impossible.”
This isn’t just a shoehorn for the climate. According to Van Geuns, the level of investment in new fossil resources is in line with the net zero carbon emissions scenario. According to the IEA, oil supply will therefore be lower than demand in 2030. “This means the oil market will remain tight for now,” says Van Geuns.
Meanwhile, large European investors are paying more and more attention to whether a company considers climate and other responsible investment criteria. The absence of this could be a reason for selling, as the civil servant fund ABP did recently: Around 9 billion euros in shares in fossil energy companies were sold.
According to Van Zeijl, Shell is therefore “in a dilemma”. Investors who care little about the climate prefer Exxon Mobil and Chevron, which are more interested in oil and gas; At the same time, Shell is still too fossil-based for climate-conscious investors.
Shell’s relatively low stock market value is not without risk for the company. It makes the shell potentially vulnerable to a buyer. “There may come a bad day when Exxon says: I’m going to issue new shares, get another financing and wipe out Shell,” van Zeijl thinks. “I wonder if this benefits sustainability.”
social unrest
Given the crucial role played by fossil fuels and corporations on the one hand, and the possible failure of climate targets on the other, the question arises whether the feared catastrophic climate change can still be averted.
“This is a very difficult question,” Stegeman says, but the chief economist is beginning to see things change. “Social unrest is on the rise. You can see that in the charges against Shell this week and also in the many demonstrators on the A12.”
Source: NOS
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
