If you missed the headlines around divestment from fossil fuel investments, don’t blame yourself. These series of small, definite moves against investment in fossil fuels was just a trickle till recently, blamed mostly on ‘green’ outliers, but recent events are fast turning this into a definite pattern. Divestment got its first big headlines in a while when the Pope, no less, called the heads of leading fossil fuel firms to do more to fight climate change.
Soon after last week, came the news of the decision by the Church of England to sell its investments in firms that have not ‘aligned’ themselves to the Paris agreement on climate change, or more simply, not done enough to act on the Pope’s advice. With almost $15 billion worth of investments in the industry, the Church of England is neither a small, nor an investor with little influence.
Yesterday came the news of the Irish parliament voting to divest from all fossil fuels, as far as the country’s sovereign fund goes. Ireland thus became the first country to make the decisive move, beating Norway, where its central bank had recommended last year to stop any further investments in the fossil fuel industry. Coming from the largest oil producer in Europe with a $ 1 Trillion sovereign fund, the move was considered a clear marker of the future.
And the future seems to be here. In the US, early into the new year, on January 8th, New York state had also announced to divest fossil fuels and related investments from its pension funds. A lead likely to be taken up by an increasing number of states, as momentum gathers. That meant an impact of $5 billion straightaway. Chicken feed for the giant global energy industry based on fossil fuels, but along with other moves now, all adding up.
To add insult to injury, states in the US, be it New York or Rhode Island, have slapped lawsuits against leading oil firms for willfully ignoring knowledge of the harm fossil fuels were doing, and causing warming in their regions.
All of these actions might seem like straws in the wind, but the message they send is quite clear. That despite the compulsions of energy dependence on emerging economies like India and China, or the friendly incumbent in the form of the US president, the global energy industry faces an increasingly hostile business environment. It will take just a few more disasters, natural or otherwise, for the tide to turn decisively, and force an acceleration of the commitments, both serious and piecemeal, that are already being made by business and even countries. Expect Europe to lead, with possible surprises from China, where the communist party government has shown an urgency no one expected when it comes to switching to renewables and more.
For India, that places a smooth transition increasingly at risk, perhaps natural in a world where uncertainty is spiking with every year. Perhaps nothing demonstrates this better than the state of its ‘national’ power firm, NTPC, which was almost exclusively coal-fired until recently. It has struggled to deliver returns to investors, even as plants face shutdowns without the usual outrage, with renewables filling in some of the gaps at least. In fact, the whole ‘traditional’ power sector based on thermal or coal-fired, is in trouble today, racked by multiple challenges of expensive fuel, pressure from environmental groupings, and falling demand for their power. By one estimate, close to 550 thermal coal projects have been cancelled or lie unutilised since the past seven years, thanks to power that was too expensive, and in fact, now undercut by renewables. More projects are likely to be cancelled as the price of renewables continues to fall
It will require this country to stay with its energy plans for now, but keep adding on the ability to be flexible too. A tough ask for its notoriously slow and arrogant bureaucracy, but the power to choose may go away very soon.