By Alli Devlin
Fossil fuel divestment and ‘net zero carbon by 2050’ targets are now commonplace across the globe in the race to reduce greenhouse gas emissions. Leading actors within the private, public, and civil sectors have realised that without a substantial commitment to climate change mitigation, their social licence to operate is jeopardised. Since the 2015 Paris Agreement, 33 global banks have divested a value of $1.9 trillion from coal, oil and gas. The European Union has committed to reducing its greenhouse gas emissions to zero by 2050, and more than half of UK’s universities have started transitioning to low carbon futures.
Loudly proclaimed and widely hailed moves by states and organisations to divest or shift away from fossil fuels are often hiding significant shortcomings—when you examine the small print. False promises and insufficient consideration of the socioeconomic consequences of transitioning are both deeply flawed approaches.
Case A: BlackRock
Earlier this year, BlackRock set a new bar for financiers in announcing that they were divesting from fossil fuels and prioritising sustainability. In Chairman Larry Fink’s letter to the CEO, it was stated that “greater transparency on questions of sustainability will be a persistently important component of every company’s ability to attract capital.” The irony of this statement was fully exposed soon after, with the release of information indicating that the divestment excluded all passive assets—that is, an incredible 73% of total assets. In addition, BlackRock excluded all assets that generated less than 25% of their revenue from thermal coal. These crucial details, completely omitted during the initial divestment announcement, undermine the validity of the claim by the world’s largest asset manager to be a sustainability leader. It also tarnishes the reputation of the divestment movement itself.
Case B: Ecuador
Ecuador never claimed to be slashing fossil fuel subsidies in the name of climate change, however the price hikes and civil unrest that followed were a clear demonstration of the importance of energy security and fair pricing. In October 2019, thousands took to the streets to protest against the government’s austerity measures, which increased the price of petrol by 25% and diesel by 100% almost overnight. Without simultaneous subsidies in renewable fuel alternatives, 11 days of nation-wide violent protests ensued, killing at least 7 people and injuring thousands. Under intense pressure, President Lenín Moreno was forced to withdraw from Decree 883, the $4.2 billion arrangement with the International Monetary Fund, that raised the fuel prices. Continual supply of affordable energy is imperative in the transition to low carbon economies. Divestments from fossil fuels cannot be supported without complementary investment in renewables.
The divestment movement is working, holding individuals, communities, organisations, and governments responsible for their actions. Mining companies are threatened by cleaner alternatives, and debt levels are building in the capital-intensive industry. In fact, eight US mining companies have filed for bankruptcy in the past year.
We need to push for divestment strategies with greater transparency, and we need strategic, future-proof planning, supported by simultaneous investments in renewable alternatives and green jobs. Equitable transitions should be at the heart of the divestment movement, seeking not only divestment from fossil fuels, but also a shift from an extractive to a regenerative economy, in which a high quality of life is accessible to all.
The Climate Justice Alliance emphasises the social aspect of change, saying that, "the transition itself must be just and equitable; redressing past harms and creating new relationships of power for the future through reparations." The European Union’s Just Transition Mechanism, through which it will invest €150 billion in supportive programmes is a means of ensuring no one is left behind. The Mechanism will provide regional funding to industries and workforces which will face the greatest challenges during the transition, directly addressing the social and economic challenges of combatting the climate crisis.
Due to humanity’s deep dependence on energy, we cannot remove a power source without replacing it. For some countries and regions, early investments have led to 100% renewable electricity generation and offer a model for the world. Costa Rica and Iceland run predominantly on hydro and geothermal whilst Tasmania, Australia’s most southern state, just reached the 100% target mainly on hydro and wind, and Scotland is very close to doing the same. A country’s geography, geology, consumption patterns and political leadership are key factors influencing the divestment landscape. Countries like India and China, in contrast to the above, are still highly dependent on coal-powered electricity due to their large natural reserves, enormous populations and economic dependence on fossil fuels. The challenge is immense in these regions, and the decarbonisation pathway for each will be unique.
Divestment from fossil fuels is an inevitable component of reducing greenhouse gas emissions and securing a net zero carbon future. Phasing out coal, oil and gas, and the unsustainable systems that define these industries, requires scaling up renewable alternatives and empowering the community to lead the needed change. The process of transitioning is complex. We must ensure that humanity and clarity are the foundations of decision making.
Image under Creative Commons license by user CoCreatr on Flickr.
OCS Media Team
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