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16 July 2020

$150 billion down the fossil fuel toilet from G20 nations

A report from Energy Policy Tracker shows that among the G20 nations, at least $150.8 billion has been promised by various government departments to fossil fuels as part of the Covid-19 recovery effort, considerably more than the $88.6 billon that has been promised (so far) to cleaner energy.

The count has been put together by Energy Policy Tracker, an organization made up of many smaller organizations and six in particular, effectively clean energy policy groups based in the US, Canada, the UK, Sweden and Japan, along with the US Columbia University, and it takes in about 251 policy statements made by G20 governments around the world in the last three months.

It is clear that no-one wants the lights to go out in the middle of the coronavirus outbreak, and that the lack of electricity usage and personal travel, has led to a gutting of global oil prices and a fall in usage of coal and natural gas in generation, and to some extent further curtailment of renewables.

What is really required here is an orderly transition, and if coal and gas generators cannot make any money right now, they could all be out of business by winter, when they may be at their most needed. Otherwise it would be like switching off fossil fuels before replacement renewables were in place, leading to economic chaos.

This report was led by the IISD (International Institute for Sustainable Development) based in Canada; the IGES (Institute for Global Environmental Strategies) from Japan; Oil Change International an advocacy group focused on exposing the true costs of fossil fuels; Overseas Development Institute (ODI) is an independent, global think tank based in the UK, but global in reach, and the Stockholm Environment Institute (SEI) based in Sweden and Columbia University in the US.

The count has gone back as far as the start of the pandemic and a total of $267.10 billion has been offered to support different energy types through new or amended policies

This incudes $120.56 billion for unconditional fossil fuels through 129 policies (those which do not rely on the fossil fuel company making changes in the future) and at least $30.25 billion where some kind of condition has been placed on fossil fuels. This has been matched by $16.41 billion for unconditional clean energy and $72.22 billion for clean energy conditional on some outcome or other. A further $27.66 billion has been set aside for other energy projects which don’t fall into either the fossil fuel category or clean energy, presumably nuclear.

What seems to be expected here is a hue and cry over money wasted on fossil fuels, but more to the point the idea of giving fuel companies money without strings attached. One of the best outcomes for renewable energy would be if oil companies decided they wanted to be the future renewables firms, and they piled into the market through acquisition and joint projects – and this could have been forced on the community at this juncture, so this is seen as a missed opportunity.

But if you are the national airline, the national oil or gas company or the biggest coal plant in a given country, you probably feel you have a sufficiently large negotiating advantage with all the jobs you carry, and tax you pay, and you can avoid signing up specifically for change. You also have the idea that the country cannot do without your “baseload” electricity contribution. You are not helpless in a negotiation.

By energy type, the G20 has committed at least $126.91 billion to oil and gas most of it unconditional and another $10.20 billion to coal.

Launching almost simultaneously with this report is another entitled “Fools Gold,” from the Europe Beyond Coal campaign, which follows the fortunes of coal investment, not from governments, but from large financial organizations. It is one thing for government to protect jobs and their economy, but quite another for investors to invest money in coal, expecting to get it back. Reading a balance sheet with wasting or stranded assets in it, is tough to do.

This report took a close look at eight European financial institutions with the most significant ties to eight significant coal utilities in Europe that are responsible for half of all EU coal. In particular the Norwegian Government Pension Fund, has invested €1.5 billion in shares and bonds, and as an institution is the most exposed. Others include Crédit Agricole, Allianz and Deutsche Bank, which takes the total investment in coal up to €5.0 billion.

UniCredit has large outstanding loans totaling €2.8 billion and so too do BNP Paribas, Barclays and Société Générale. In total the report says the exposure is some $7.9 billion in a fast closing window to get out of the coal business.

Beyond these deals, BlackRock is also highlighted as being in trouble, as the world’s largest coal investor along with the Japanese megabanks, based on older investments still live.

BlackRock’s investments in the eight European coal power utilities total €7 billion on its own with the Mizuho Financial Group, Sumitomo Mitsui Financial and Mitsubishi UFJ all found with loans on their books with European coal corporations with €1.9 billion signed between November 2018 and December 2019, so not so old.

The interesting issue is how do the governments and these investors get from where they are now – in hock to the fossil fuel industry – to where they want to be, encouraging them to try their hand at renewables.

It is the ability of these major energy organizations to twist the hand of their respective governments and banks that is precisely why we want them to be involved with renewables.  They attract money, so bring them to the other side.

What most renewables people worry about is whether instead of the politicians convincing the fossil fuel firms to get out of dirty fuels, they use the leverage this money gives them to “explain” to their political masters, why they should not legislate against fossil fuels. That’s the fear, where the tail wags the dog ferociously.