In the third of our Corporate Leadership in the time of Corona series, Jonathon Porritt looks at the way companies in the energy sector are either digging in to protect their current positions, or explicitly hoping to transform global energy markets.
There’s one hell of a struggle going out there. For lovers of Star Wars, tracking this battle couldn’t be simpler, in terms of the Evil Empire of Fossil Fuels seeing its hegemony challenged by an insurgency of sun-worshipping ewoks and a new generation of story-tellers whose narrative more and more matches the mood of young and old alike.
It is, of course, rather more nuanced than that. But the stakes couldn’t possibly be higher. As governments around the world gear up for launching massive recovery programmes, transitioning their economies from ‘survive’ to ‘revive’, every dollar that ends up backing one side is a dollar lost to the other side. As a result, ministers the world over are on the receiving end of increasingly intense lobbying from businesses on both sides of the debate, resulting in a very mixed picture.
For those hoping for an ultra-low-carbon recovery, it hasn’t gone well so far. According to Bloomberg New Energy Finance, more than half a trillion dollars has already been promised to carbon-intensive businesses, much of it coming from central banks. The European Central Bank is committing more than €200 billion to Europe’s fossil fuel industries, including mega-rich multinationals like Shell and Total, as well as several coal companies. Even the Bank of England (which developed a strong climate-smart position under its former governor, Mark Carney) is actively splashing billions of pounds on airlines, car manufacturers, oil and chemical companies. With no strings attached.
It’s even worse in America. There were no references to climate change, let alone any conditions, in its $2.2 trillion coronavirus relief package reinforced by a further promise from President Trump himself for a $25 billion bail-out to the airline sector. The level of support that has been promised for the renewables industry is minimal, despite the fact that 20% of the jobs in the clean energy sector have already been lost.
In April, after a prolonged stand-off with indigenous communities in the State of Odisha, two new coal mines operated by the coal giant Adani were opened up, by contrast, estimates for new investment in India’s solar and wind industries over the next five years have been slashed. In Indonesia, plans for ramping up clean energy have been dramatically curtailed, and the hugely powerful coal industry is pressuring the government to ease all royalty payments. If these early signals are an indication of how governments (and their central banks) hope to rescue their shattered economies, the consequences will be dire. It could even result in a less sustainable and climate-friendly recovery than that which followed the financial crisis back in 2008.
12 years on, however, things are very different. As climate chaos has intensified all around the world, the low-carbon insurgency has grown massively in terms of share of GDP, new jobs generated, combined market capitalisation and dollars invested – and, as a consequence, political influence.
Hardly a day passes without another high level statement from multinational companies urging governments to get serious about accelerated decarbonisation initiatives. Just a week ago, on World Environment Day, more than one thousand large companies (with annual revenues of more than $4.5 trillion) signed up to a new UN-backed ‘Race to Zero’ campaign, guaranteeing to publish detailed action plans before next year’s Conference of the Parties as to how they will get to net zero emissions by 2050. This would represent a 38% increase on the commitments made just a few months ago at least year’s Conference of the Parties.
On the same day, 100 large companies involved in construction and the built environment committed to making their buildings ‘net zero by 2030 or sooner’ – an initiative that would reduce greenhouse gas emissions by more than 3 million tonnes a year if delivered.
Positive business pressure is clearly influencing governments’ recovery programmes. Roughly a third of the German government’s astonishing €130 billion stimulus package is focussed on low-carbon measures, with a similar package emerging in France. The EU’s ‘Next Generation’ €750 billion recovery programme – the most substantive and sustainability-focussed intervention that has emerged anywhere in the world at this point in the coronavirus crisis – is even bolder, with a massive €40 billion set aside for ensuring a ‘just transition’ for countries still heavily dependent on coal. That kind of approach is going to be even more critical in the USA, where the campaign for a ‘just transition’ now takes on an extra dimension as state governors and city mayors have to rethink their whole approach to racial equality after the death of George Floyd.
The UK Government itself is under growing pressure from business to restore its somewhat tarnished climate credentials, by going for broke on a new ‘green industrial revolution’, including some of the ‘hard stuff’ that policy-makers have been loath to engage with before now. For instance, Britain’s five gas networks have just launched a new Zero Carbon Commitment, calling for a huge new investment programme to help spur the UK’s economic recovery and create thousands of jobs in the process.
There’s no doubt that we’ll see a lot more of this kind of business leadership over the next few months, driving forward a ‘transform trajectory’ rather than defaulting to the status quo. Even in countries where the federal government (as in the USA and Brazil) has shown no interest, progressive companies can help fill that gap. In the US, for example, tech giant Intel has just declared a 100% renewable energy commitment, plus a massively ambitious goal of helping to address a number of global challenges.
So, the battle lines are drawn. There is literally ALL to play for over the next couple of months.