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There are at least four reasons why companies, asset managers, individual investors and governments should avoid fossil fuels.
- Those are unacceptable risks. Coal, oil and natural gas are dead industries. They are threatened by international commitments to end carbon pollution, competition from cleaner and cheaper renewable fuels, and climate scientists’ conclusion that most of the remaining underground reserves must remain there. I’m here.
- Fossil fuels are sacrificing our social license to operate. Businesses must work in a socially acceptable manner in order to obtain and maintain a social license. They must maintain the ongoing support of their stakeholders and the communities in which they operate. But pollution from power plants and vehicles still puts her 40% of Americans at risk of breathing. Additionally, an upcoming government report concludes that the United States is warming 68% faster than the planet as a whole, and that climate change is causing “widespread and worsening” disasters in all parts of the country.
- Fossil fuels cannot compete with renewable energy. They regularly damage the economy with price and supply shocks. Taxpayers defer more than $20 billion in tax revenue each year to support fossil energy production.
Furthermore, “subsidies have substantial fiscal costs (leading to higher taxes/borrow or reduce spending), promote inefficient allocation of economic resources (hinder growth), and contribute to pollution (climate change and local air pollution cause premature deaths.) The IMF notes.
For this reason, more than a third of the world’s publicly traded companies are committed to net zero carbon pollution by 2050, the Paris Agreement goal. In addition, around 300 asset managers have committed to allocate funds in line with this target.
These commitments are paying off. Analysts report that renewable energy and energy efficiency have dominated global investment in the power sector in recent years. By contrast, investment in oil, gas and coal remained below pre-pandemic levels in 2019.
Nevertheless, several Republican governors and attorneys general appear to be bullying companies and investment managers into keeping or investing in fossil fuels. Some are threatening to withhold pension funds from companies that do not invest in fossil energy by ending contracts. They also ridicule and punish companies that adopt climate-friendly policies known as ESG (which refers to environmental, social, and governance). ESG obliges companies to pay attention to social and environmental issues.
For example, Florida Governor Ron DeSantis (R) has openly mocked companies with ESG policies. Florida is withdrawing his $2 billion retirement fund from prominent asset manager BlackRock, citing its involvement in ESG-type investments. He, a Republican, has 19 state attorneys general accusing BlackRock of “collusion” for participating in global climate change initiatives.
In Congress, five Republican senators reportedly informed the nation’s largest law firm that joining “climate cartels and other unwise ESG schemes” would put them at risk.
The Kentucky Attorney General has issued a document identifying companies participating in Climate Action 100+, an initiative in which some of the world’s largest corporate greenhouse gas emitters are taking action to mitigate climate change. are reportedly trying to obtain
However, according to a Bloomberg analysis, environmentally and socially conscious investing is a profitable growth sector that “shatters traditional investment benchmarks.”
Deloitte, a professional services firm, says its ESG policies are responsive to client demands and “the goals of most stakeholders, including leaders, employees, customers, investors, communities and regulators.” increase.
Deloitte predicts that demand for “ESG-aligned investment strategies” will continue to grow. By 2024, ESP policies will apply to more than half of professionally managed assets, and by 2023 more companies will prioritize this type of reporting.
Interestingly, the Republican “Woke War” reveals that some Republicans are two-sided on these issues. On the one hand, they say they believe market forces, rather than government policies, should shape the economy. Free market capitalists say government energy subsidies are distorting market signals.
Meanwhile, both Republicans and Democrats have been staunch supporters of fossil fuel subsidies for more than 100 years.. Republicans in the 117th Congress ignored President Joe Biden’s budget proposal to end some tax cuts for fossil fuel producers. Eliminating them would have saved the taxpayer $121 billion over the next decade.
To be fair, the government also subsidizes renewable energy, and the oil crisis has been going on since the 1970s. Most recently, the 2022 Inflation Reduction Act includes his $325 billion tax incentives for solar, wind and other renewable resources over the next decade. But climate change mitigation is so urgent that federal support for zero-carbon energy is needed to accelerate market adoption faster than market forces alone can.
It is easy to understand the reluctance of oil companies to walk away from trillions of dollars worth of technically recoverable oil and gas reserves. But climate scientists warn that most of these reserves must remain underground if climate change is not to be irreversible. Fossil energy companies and their investors need not go bankrupt if they look to infinite reserves of technology-recoverable solar, wind and water. Scientists expect the sun to continue burning for another 5 billion years.
These Republican governors and attorneys general are working on the antithesis of free market capitalism. They are willing to use thug tactics, strategies of coercion, and seem to veer toward social extortion.
True free-market capitalists would conclude that if fossil fuels cannot maintain their social license and appeal to investors, they no longer belong in America’s energy portfolio.
William S. Becker A former U.S. Department of Energy Central Area Director who managed the Energy Efficiency and Renewable Energy Technologies Program, he also served as Special Assistant to the Assistant Secretary for Energy Efficiency and Renewable Energy. Becker is also Executive Director of the Presidential Climate Action Project, a bipartisan initiative founded in 2007. This initiative works with national thought leaders to develop recommendations for the White House, House and Senate Committees on Climate and Energy Policy. This project has nothing to do with the White House.
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