Energy and Fossil Fuels: The End of An Era

By reading international newspapers over the last twelve months, one can interpret emerging signals about prospective investment in fossil fuels such as coal, but also oil and gas. And the prospects are not good. On May 27, the largest sovereign fund in the world, Norway's, announced it would sell all its stakes in companies making at least 30% of their revenues or their energy from coal. We are talking about sales of financial assets worth over 4 billion dollars. A week before the insurance company AXA, which manages more than one billion dollars in funds, had also communicated its intention to sell coal-related assets for a market value in excess of 500 million dollars.

In the last months, the heirs of Rockfeller's Standard Oil have taken a similar position, while both the World Bank and the European Investment Bank have adopted more stringent guidelines for funding investment in coal-powered plants. Other fossil fuels are also involved. Some the world's largest energy utilities, such as GDF-Suez and EON have recently stated they will no longer invest gas-powered electricity plants (at least in Europe), in order to focus on renewable energy sources and other services. The Guardian, a British newspaper, has launched a press campaign asking the two largest charities in the world, the Gates Foundation and Wellcome Trust, to divest their holdings in the world's top 200 fossil fuel companies in five years. Similar requests are increasingly made to their own universities by students (sometimes successfully, viz. the cases of Oxford and Stanford).

Some of these companies seem to have taken notice energy trends are changing. On May 31, Europe's six largest oil companies, including ENI, BP, Total and Royal Dutch Shell have joined efforts in the Oil and Gas Climate Initiative and sent a letter to the UN asking to be allowed to help national companies design a plan for the introduction of a global carbon price, in order to counter climate change. Not everybody is on board, though. For instance, US oil companies fat with shale gas and oil-thru-fracking profits have taken a more conservative stance, by refusing to join the initiative of European competitors. For instance, Chevron squarely rejected the idea, saying consumers want lower energy prices, not the cost of CO2 emissions being added to fuel prices. The climate is changing due to the increase of CO2 concentration in the atmosphere because of the burning of fossil fuels to produce energy. However, also the financial climate is changing for companies active in the extraction and combustion of fossil hydrocarbons. It remains to be seen whether the latter change will be able to counteract the former.