Countries are wasting money on energy sources they already know are history

by Maria Mendiluce*

With many countries facing an emerging fuel price crisis, the world has received a stark reminder of how important energy is to our everyday lives, and also how important government decisions are in keeping us well served, writes Maria Mendiluce.

With around 70% of the global economy now committed to net-zero greenhouse gas emissions, the urgency of exiting coal and completely phasing out fossil fuel subsidies is crystal clear.

And yet, many countries are still subsidising — or even investing further into — fossil fuel sources like coal despite broad agreement on their looming obsolescence.

We know that to limit global temperature rise to a maximum of 1.5?C, we need to halve emissions by 2030. The UN secretary-general called the latest IPCC report a “code red for humanity,” and every government that committed to the Paris Agreement understands this well.

Despite this, G20 Environment Ministers recently failed to agree to phasing out coal in a preparatory meeting ahead of their annual summit. Even worse, global coal demand in 2021 is set to rise by 4.5% and approach its 2014 peak, with more than 80% of the growth concentrated in Asia (and China alone projected to account for over 50% of the global growth).

It makes no long-term sense to continue pumping money into an asset that is already destined to eventually have no value — a stranded asset. Rather, governments should support businesses to look for growth industries and innovation to invest in.

Continuing to channel money into subsidising fossil fuels is the equivalent of Kodak sticking with film cameras, Nokia choosing not to go into smartphones, or Blockbuster sticking with DVDs in shops rather than diversifying into on-demand streaming platforms.

This is why more than 600 companies around the world are calling on the G20 to end new coal power development and financing and to phase out coal-fired power generation by 2030 for advanced economies, and 2040 for other countries. The G20 represents approximately 90% of global GDP and almost 80% of global trade and greenhouse gas emissions.

The rationale for this call is very clear: Coal emits around 980 grams of CO2 per kilowatt hour (kWh), 2.5 times more than the most efficient natural gas generation (380g/kWh) never mind the zero emissions from renewable energy.

Additionally, businesses are calling to end fossil fuel subsidies by 2025 and put a price on carbon that allows businesses and consumers to understand and manage the “true cost” of goods and services.

The IMF estimates that 70% of the $6 trillion going to global fossil fuel subsidies is from “under-charging” for fuels’ associated environmental costs. With carbon prices factored in, renewables are already the most competitive energy sources.

Together, the businesses backing this call represent over US$2.5 trillion (£1.8 trillion) in revenue — almost equivalent to the entire GDP of the UK or India. They also employ more than 8.5 million people worldwide. Signatories include Unilever, Netflix, Volvo Cars, BBVA and Natura & Co, and they span sectors from power and transport to fashion and construction.

Individually and collectively, they are demonstrating businesses’ desire to transition away from carbon-intensive ways of operating and making a plea to governments to support them in doing so.

Sometimes governments move slowly, but under a “code red” situation, this is not the time for further delays. The G20’s absence of clarity could be disastrous for business. Conversely, if the G20 sets the course for the future, the rest of the world will have no option but to follow.

Companies are eager for action, seeing the race to halving emissions by 2030 as an opportunity. Many have already started ambitious decarbonisation plans for their companies, and many are committing to purchasing 100% renewable electricity.

What’s more, recent research calculated that the global energy transition could save hundreds of thousands of premature deaths and create up to 65 million jobs worldwide within the decade.

Simultaneously, sales of electric vehicles are on track for exponential growth — registering a 43% year-on-year increase in 2020 globally. With the right policies and infrastructure in place, they could take over the market in just a few years. The potential for innovation in other sectors like housing and even consumer goods is profound.

As companies pledge to reduce their own emissions, more and more will eventually stop making or buying products in countries that continue using fossil fuels as the dominant energy source. They will start to invest more in countries transitioning to cleaner energy sources as businesses strive to meet their own emissions reduction targets.

This is pragmatism, not idealism. This is real leadership and real business. It is time to get serious about climate.

*CEO of the We Mean Business Coalition, a group of seven non-profit organisations

**first published in: www.euractiv.com