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Banks should finance low-carbon climate-resilient projects, not big fossil fuel infrastructure that is not even cost-effective anymore, UN Secretary-General António Guterres’ said during a climate meeting this week.
While praising the major economies that have committed to net-zero emission targets, Guterres’ stressed that under current commitments, the world is still headed to “a disastrous temperature rise of 2.4 degrees by the end of the century.”
“We can no longer afford big fossil fuel infrastructure anywhere. Such investments simply deepen our predicament. They are not even cost-effective,” Guterres’ said in his speech at the 2021 Petersberg Climate Dialogue on Thursday.
Fossil fuels have already become more expensive than renewable energy projects, the UN Secretary-General said.
“So we need the shareholders of multilateral development banks and development financial institutions to work with the management of these banks on funding a low-carbon, climate-resilient development that is aligned with the 1.5-degree goal,” Guterres’ noted.
He also called for putting a price on carbon.
“We stand indeed at the edge of the abyss. But if we work together, we can avert the worst impacts of climate disruption, and use the recovery from the COVID-19 pandemic to steer us on a cleaner, greener path,” Guterres’ said.
Meanwhile, Australia’s bank Macquarie said on Friday it had reduced its limited remaining equity and lending exposures to the coal sector, and all exposure to coal is expected to run off by 2024, in the latest pledge from a bank to stop financing certain fossil fuels.
Deutsche Bank said last year it was ending financing for new oil and gas projects in the oil sands and the Arctic region effective immediately.
In the United States, Goldman Sachs said in December 2019 that it would decline to finance new Arctic oil exploration and production and new thermal coal mine development or strip mining. Wells Fargo and JPMorgan have also said they would stop financing new oil and gas projects in the Arctic.
By Tsvetana Paraskova for Oilprice.com
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If, hypothetically, financing isn’t forthcoming, then the world will face in a few years a destructive oil and energy crisis that could lead to a collapse of the global economy, huge unemployment and long queues of people waiting for charity kitchen food. The people would then be worrying about where the next meal will be coming from and not about a temperature rise of 2.0-2.4 degrees which may and may not happen by the end of the century.
With due respect to the Secretary-General, he must be ill-informed to claim that fossil fuel infrastructure anywhere isn’t even cost-effective and that fossil fuels have already become more expensive than renewable energy projects. The global oil industry is the most efficient and most profitable industry in the world. It has always been at the cutting edge of technology.
I would respectfully suggest to the Secretary-General that rather than urge banks to halt fossil fuel infrastructure financing, he should instead applaud the global oil and gas industry for its huge investments in renewable energy and its sterling efforts of cutting emissions in their operations.
Oil and gas will continue to drive the global economy throughout the 21st century and probably far beyond. Nothing can change this reality.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London