GIF COMMENT: Net Zero policies may come under pressure as profitability forces banks and energy giants to rethink rejection of fossil fuels

LONDON (ICIS)–Tell me what you think about Net Zero and I will tell you who you are – has become a zeitgeist of the energy sector and society at large in the past decade or so.

After all, “science has settled” on man-made climate change, the media have certified this as “fact” and activists in their teens and eighties never let us forget about the dangers with actions that scream louder than words.

Those who doubt the wisdom of the day have generally remained politically correct and silent.

Under pressure from environmentalists and politicians, industry heavyweights have been changing their strategies, brand names and allocation of resources towards green projects, which – after all – come not only with moral high ground but also hefty subsidies.

EIB’s REPowerEU+ initiative in July 2023 increased the bank’s original renewable energy financing targets by 50% to €45 billion until 2027 . “This additional financing is expected to mobilise over €150 billion in new green investments, helping Europe cut its carbon emissions to net zero by 2050,” the EIB statement said. Private banks have also been keen to distance themselves from the dirty business of fossil fuels that currently cover about 80% of global energy demand.

However, several headlines in the past few days have signalled that companies and banks may be cautiously changing their tune in order to deliver on their shareholders’ expectations.

In its Climate Change Statement in February Barclays’ bank pledged to “focus on clients actively engaged in the energy transition”. The bank had earmarked $1 trillion to Sustainable and Transition Finance by 2030. On 25 June, Barclays CEO CS Venkatakrishnan told Bloomberg the global economy cannot go “cold Turkey on fossil fuels”.  According to the article, Barclays is moving away from coal and oil, but Venkatakrishnan pointed out that “the reality is that for quite some time, fossil fuels will be with us” as he singled out natural gas as the transition fuel on the long path to cleaner energy.

Just two days later Reuters reported that investors are pushing BP to rethink its approach to offshore wind and oil and gas projects in order to improve the bottom line. BP told ICIS it may still consider bidding for offshore wind future opportunities but its ultimate focus is “on value, strict discipline, and meeting our investment criteria”. Environmentalists were quick to condemn BP for “choosing profits over people and planet” . But one could also argue that a job of a business is to make profit offering products that meet people’s needs. Those who speak in defense of fossil fuels do not deny concerns about the environment, they speak against catastrophizing those concerns to scare people into adopting green policies.

Alex Epstein, founder at Center for Industrial Progress and the author of two books on energy argues that “speculated climate changes would be slow and thus affordable to adapt to — while rapidly eliminating fossil fuels would make billions far poorer, including more endangered by climate.” One of Epstein’s main arguments is “climate mastery”. “Huge benefit we get from fossil fuels is the ability to master climate danger … which can potentially neutralize fossil fuels’ negative climate impacts.”

In his book “Is Reality Optional?” US economist Thomas Sowell said: “Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good.” Human florishing is not possible without affordable and reliable energy.

Let us chose what works.