Fossil Fuels vs Renewables in the Race to Net Zero

The race is on, proclaims the United Nations, to create a Net Zero economy (same amount of greenhouse gas /GHG emissions removed from the atmosphere as produced). The UN climate change initiative defines a roadmap with targets for over 20 key economic sectors, from aviation to steel production, to get to Net Zero carbon emissions and slow the pace of climate change.

Public conversations about Net Zero are usually about “fossil fuels vs. renewables” and the impact of each category on climate change. More renewable sources are needed, so it goes, and less reliance on traditional fossil fuels will help the nations of the world move toward fulfilling the promises made by almost 200 sovereign governments at the 2015 Conference of the Parties (COP) gathering, which resulted in the Paris Agreement with ambitious GHG emission reduction goals to be met by 2030.

Getting there is a huge challenge for public, private, and social sectors. The capital markets are a prime battleground for interests on both sides of fossils vs. renewables. Where is money invested – traditional or renewable fuel sources? Take major banks for example – what are the institutions financing in the context of the Paris Agreement?

Capital Monitor looked at 10 major global banks to examine what is being financed in the energy sector. The level of fossil fuel finance vs. sustainable lending was analyzed along with fees earned from green and fossil fuel bond deals compared against fossil fuel policy scores -- unveiling interesting findings.

Some of the banks had ratios for financing sustainable vs. fossil fuels as high as 16-to-1 and others had fees earned as little as half for sustainable vs. fossil fuels. Among the finds was that banks earning higher fees in their renewables financing activities had “more robust” approaches to their own corporate sustainability profiles. “They practiced what they preached,” says Capital Monitor.

When prices for oil and natural gas spike, as we have been experiencing around the globe in recent months, the public conversation often turns to the “profits” of the traditional players in the oil & gas sector and the increase in profits reported to investors. These profits have become “a moral question” for UN Secretary General Antonio Guterres.

High energy prices and higher emissions from fossil fuels will become the norm for too many countries, Guterres posits, saying the combined profits of the largest energy companies in the first quarter of this year are close to US $100 billion. He said, “I urge governments to tax these excessive profits, and use the funds to support the most vulnerable people through these difficult times.”

The Secretary General’s Global Crisis Response Group (GCRG) on Food, Energy and Finance suggests that governments find the most effective ways to fund energy solutions. They suggest publicly funded cash transfers and rebate policies to protect vulnerable communities everywhere, funded through windfall taxes on the largest oil and gas companies. At the same time, the brief urges a transition to renewable fuels.

In the good news category, Alaska Airlines launched a “sustainable fuel initiative” and is purchasing large amounts of sustainable aviation fuel (SAF). The chemical technology company it partners with, Twelve, plans to create its SAF using captured carbon emissions, water, and electricity as inputs rather than vegetable oil.

The airline formed another partnership with Microsoft to provide SAF credits to offset MSFT’s emissions generated from employee travel. Alaska Airline’s new program is aimed at “enabling its corporate customers to reduce business travel emissions through the purchase of SAF credits and to expand education and awareness about opportunities to improve business travel sustainability.”

We have fascinating details for you in this week’s “Top Stories” about the climate change challenges posed by the different types of energy sources used and the challenges posed to public and private sectors as we move toward the Net Zero economy.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.