Bill de Blasio, Mayor of New York City announced yesterday the New York would not only be divesting away from fossil fuels but planning to sue a number of oil and gas companies for damages from natural disasters enhanced by climate change. The move by New York would make it the first US city to divest from fossil fuels. By 2022, the $189 billion New York pension fund will stop investing in oil and gas projects, redistributing funds elsewhere.
So what does this mean for Oil and Gas Projects?
The majority of oil and gas projects are multi-million (or even billion) dollar projects and need investment to get the project off the ground. This often comes from large investment funds like the New York pension fund or in the form of loans from banks, but it is becoming increasingly costly to invest due to the rising costs of drilling in more unconventional areas.
Reports by Carbon Tracker, a group that has monitored the changing prices of fossil fuels and renewable energy, predict that over the next couple of years that solar and wind will, on average, be cheaper to produce than oil and gas. There are already a great number of energy auctions that have seen solar and wind energy sold for a fraction of the price of the oil and gas equivalent.
Norway, the holder of the world’s largest pension fund, announced it would no longer invest its $1 trillion pension fund into fossil fuels just a few months ago. The Scandinavian nation has also since announced plans to explore for oil in the Arctic Ocean despite the divestment announcement.
The Adani Carmichael Coal Mine in Australia is struggling to get the investment due to huge public pressure. A number of Australian banks have withdrawn investment and an investor is yet to be found before the project can begin. As investments in oil and gas continue to drop, there will no doubt be an increasing number of projects that struggle like Adani.
Why Sue Fossil Fuel Companies?
The impact that fossil fuels are having on the environment and on climate change is clear to see in the science and we need to act upon that quickly. The New York City Mayor argues that the five big fossil fuel companies must pay for their role in the damaging climate change, which to a point he is right. But suing them isn’t the way to go.
We still rely on oil and gas massively. Whilst renewable energy grows and the battery technology to store that energy develops, oil and gas fill that space. We need to move faster towards renewable energy but that doesn’t stop our continued need for fossil fuels. Thinking that we can stop using fossil fuels right away is unsustainable and would lead to economic and social collapse.
Many fossil fuel companies recognise their role in contributing to climate change, and a lot of them are investing their own funds into clean energy. They are taking their role in the environment much more seriously in recent years and, as with the Adani Coal Mine, are finding it much harder to develop projects because of a lack of funding.
I’m not saying not to sue oil and gas companies. Those that deny climate change and continue to pump dangerous levels of CO2 and other greenhouse gases into the atmosphere are creating a polluted environment that future generations will inherit should be sued. Those that cause mass environmental damage like BP (Deepwater Horizon) should be and were rightly sued. But suing them because they exist and are still functioning as a company when billions of people around the world discourages change.
The economic viability of continued fossil fuel use is limited. The falling costs of renewable energy and the instability of fossil fuels will force through an energy transition. It won’t be quick enough if left to naturally transition to remain under the Paris Agreement’s limit of 1.5℃, which is why divestment is so important. Divestment encourages alternate investment.
Divestment encourages alternate investment.
The biggest fossil fuel companies have the funds to increase the growth of renewable energy, they just need the economic encouragement to do so. The move by New York to divest their pension fund from fossil fuels is exactly the right way to go, and with hope it will encourage other US cities, and countries around the world, to divest from fossil fuels and invest in the future of renewable energy.