I was disheartened by the outcomes of the COP26 gathering. While there were some small wins (the mention of coal for the first time, for example and an agreement to meet again in 2022) there was little in the way of proposed actions that fully reflect the enormity of our climate emergency. Too many politicians think they can continue to push the problem to future generations to find a solution.
In the absence of rapid political action, it seems that business and financial institutions may yet be the key drivers for reducing global warming and weaning us off our long-term fossil fuel addiction. Unlike national governments, business and finance operate everywhere and have the power to make a significant impact on our climate with the decisions they make, particularly when customers and shareholders apply pressure.
Every week, we see large corporates making public commitments to achieving Net Zero across their activities, often long before the 2050 deadline. Businesses can choose to operate low-carbon buildings and factories around the world, leading the way on adopting new technologies and renewable energy.
And large-scale investment is already flowing away from fossil fuels. For example, oil giant Shell recently sold off its massive shale assets in Texas (for $9 billion) to reduce its carbon emissions under pressure from its shareholders. Big money is looking to a decarbonised future. Many financial reports show that the level of disinvestment in coal, oil and gas is having major impact on the amount of fossil fuels available on the world’s markets.
Although high finance may be a distant consideration for most of us, householders and businesses across the world are feeling the effects of these investment decisions. In the UK, rising gas prices have seen several domestic fuel suppliers go out of business. As a result, most of us will see higher gas and electricity prices well into 2022, as will business customers. The transition to a low carbon future feels painful right now.
The problem is that financial investment in fossil fuels is falling faster than demand. Money moves quickly, but most of us won’t swap our petrol cars or gas boilers for low carbon options for several years. We still need gas and petrol.
Many countries rely on coal to produce electricity. Reduced supply of these fuels (created by lower investment in extraction) means the world will face higher energy prices for some time to come. (It’s also not difficult to see that oil and gas producers also benefit from these high prices, particularly after the global shut-down in 2020 saw profits fall off the graph.)
This is where governments can act. We are at a tipping point. We don’t want to fall back on our fossil-fuel burning past, but the transition to renewable electricity and natural gas alternatives such as hydrogen is moving slowly. Governments need to take a firm stance and keep us moving forward with legislation if necessary, and financial support. This means help at the household level, as well as assistance for developing economies who must try to build their economies while carrying the additional weight of doing so on a low-carbon pathway.
Although spending money on the problem also adds to our current pains, it will make the transition quicker. Here in the UK, we also need to tackle the issue of our ageing housing stock now, instead of fudging around the issue or we will end up with huge numbers of households in fuel poverty as gas prices surge. Our government needs to be braver about shorter deadlines for switching to heat pumps, low-carbon heat networks and hydrogen.
We need to keep up the pressure, and rip of the plaster quickly. The longer we drag this out, the more painful and costly it will be.
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