As divestment from emissions-heavy fossil fuels and boycotting of the oil sector gain traction in both the public and private sector, a major backlash is brewing around the United States. Lawmakers in more than a dozen red states around the nation are attempting to push through laws that would pull funding from state-run and large financial institutions that take steps to decarbonize their own investment portfolios. In short, the message is simple: “if you divest from coal and oil, we divest from you.”
While there are many economies and communities reliant on fossil fuels in the United States whose current livelihoods are under threat from divestment trends, the latest movement to keep it in the ground may in fact be too little, too late according to experts. Just a couple of weeks ago, the International Energy Agency (IEA) issued yet another warning that if the world has any chance of avoiding the most devastating effects of climate change, the world’s remaining fossil fuels need to remain unextracted. "The pathway to net zero is narrow but still achievable,” Fatih Birol, the executive director of the IEA was quoted by Reuters last month. “If we want to reach net zero by 2050 we do not need any more investments in new oil, gas and coal projects."
These calculations are built on the baseline as agreed upon by the Intergovernmental Panel on Climate Change (IPCC), the world’s premiere body of experts on global warming, as well as the 2015 Paris Agreement on climate change. According to experts, avoiding the very worst effects of catastrophic climate change will necessitate capping the Earth’s rising temperatures to 1.5 degrees Celsius above pre-industrial averages. Keeping warming to 1.5 degrees (ideally) or 2 degrees (unfortunately more realistically) will require the global community to reach net zero greenhouse gas emissions by just 2050.
All of this is to say that divestment, while divisive, is urgently necessary to reach that goal. “To achieve net zero, global investment in fossil fuel supply should fall from $575 billion on average over the past five years to $110 billion in 2050, with upstream fossil fuel investment restricted to maintaining production at existing oil and natural gas fields,” a Reuters report summarized.
The Biden administration, which has centered climate change as a foundational part of its platform with prominent climate-change advocate John Kerry at the helm, has put a lot of pressure on U.S. banking institutions to help reduce greenhouse gas emissions and decarbonize their lending and investment portfolios. Republican state treasurers, on the other hand, have vocally criticized this approach and have now galvanized to divest from divestors. Altogether, the republican treasurers leading this charge “collectively control hundreds of billions worth of assets,” Axios recently reported.
One of the most vocal state treasurers among the 15 that are ready to put their weight behind defending fossil fuels from divestment is that of West Virginia, a state that still relies on coal, one of the most emissions-intensive fossil fuels and therefore public enemy number one for climate activists, for a huge portion of the state economy. Other states included in the movement include North Dakota, Kentucky, Pennsylvania and Oklahoma, all of which depend on fossil fuels to a large degree to keep their economies afloat. These 15 state officials sent an open letter to John Kerry last Tuesday stating their intention to pull state funding from fossil fuel divestors and their overall stance against the federal government’s efforts to downsize the domestic fossil fuel industry.
While President Biden has made no shortage of enemies in coal and oil country, however, his presidency has overall been surprisingly good for the oil and gas sector. And while the clean energy transition will be anything but smooth and painless for states like Texas and West Virginia, the shift is inevitable. The world is heading in a cleaner, greener direction, peak oil is likely already upon us, and the sooner the United States gets on board, the better. While it must be acknowledged that coal and oil country deserve jobs as much as any of us, holding onto fossil fuels will not guarantee job security for much longer.
By Haley Zaremba for Oilprice.com
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