Saturday, January 30, 2016

Drop in Oil Prices Complicates Effort to Combat Climate Change

Replacing fossil fuels with renewable energy to combat climate change will require trillions of dollars in investment.  Cheap prices for fossil fuels are making that transition a bit more complicated.

Oil Prices Take a Plunge (Credit: Click to Enlarge.

Let's hear why all the pledges in Paris last month at a gathering of many nations to curb carbon emissions will be hard to make good on.  Moving to an economy built on clean energy will be expensive.  And, as NPR's John Ydstie reports, cheap prices for fossil fuels are making that transition a bit more complicated.

JOHN YDSTIE, BYLINE: Yesterday at the United Nations in New York, more than 500 big investors, from huge pension funds to giant banks and insurers, gathered at a post-Paris conference.  They were urged to use some of their trillions of dollars in assets to fund investments in clean energy.  Mindy Lubber of the research and advocacy group Ceres, an organizer of the conference, welcomed them.


MINDY LUBBER:  It is an honor to have you here.  It is this audience that can make a difference in the future of history.

YDSTIE: But being remembered as the people who saved the world from climate change will be expensive.  It's estimated it will require investments totaling in the tens of trillions of dollars over the next 15 years, most of that from private investors.  Again, Mindy Lubber.


LUBBER: And I think what we're seeing investors say, and certainly what we're trying to articulate here at our investor summit at the U.N, is that the risks of being invested in coal companies and in high fossil fuel companies are risks that may no longer make sense.

YDSTIE: Indeed, the stocks of big coal companies have collapsed in the U.S. as government emissions regulations have made coal plants untenable.  Here's one of the big investors at yesterday's conference, Brian Moynihan, the CEO of Bank of America.

BRIAN MOYNIHAN: If you go back five or so years ago, our coal financing has dropped in half, and our alternative/new energy source financing has gone up six times.  We're not alone in this in our industry, but down by half and up by six times is a pretty good move.

YDSTIE: BofA has committed a $125 billion dollars to clean energy investments over the next several years.  Coal, which is cheap and plentiful, has been sidelined by government regulation in many developed countries, but another cheap, plentiful fossil fuel has emerged to replace it, natural gas.  It is surpassing coal as the main fuel for electrical generation in the U.S.  Dan Yergin, a leading energy expert at IHS says even with a dramatic decline in the cost of solar generation, gas is still very competitive.  But again, government policy has given renewables an edge.  Many states require utilities to produce a certain percentage of their electricity from clean energy.  And, Yergin points out, the federal government recently renewed tax credits for wind and solar.

DANIEL YERGIN: Because of the tax credits, the amount of wind and solar that's built will be more than twice what it would have been otherwise, so government policy is a very important part of this picture.

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