Jakarta – Climate change is increasingly pushing fossil-based energy companies to face the reality that the transition to renewable energy can no longer be delayed, according to an ESG expert. Fluctuating global economic conditions and pressures from markets and environmental policies are accelerating the need for a shift to clean energy.
ESG expert and consultant at Green Network, Jalal, in a discussion entitled The Role of ESG Investment of Domestic Banks in Energy Transition Funding, Tuesday, 25 February, said that currently, many fossil energy companies are still enjoying huge profits due to soaring energy prices and demand after the Covid-19 pandemic.
“During the pandemic, energy demand dropped dramatically. However, when the economy started to recover, energy consumption increased again, causing fossil energy prices to soar. These companies made huge profits from this situation,” Jalal said.
However, although fossil energy companies are currently enjoying huge profits, Jalal believes that this trend will not last long.
“The climate crisis is getting worse, and eventually, these companies will not be able to continue to avoid the need to switch to renewable energy,” he added.
At the global level, political dynamics also influence the policies of energy companies. One example is Donald Trump’s policy as President of the United States, which weakens various climate regulations, making many energy companies delay the transition. “It’s not just about efficiency or transition, but also about how they utilise the political situation for short-term interests,” Jalal said.
The situation is similar in Europe, where major energy companies such as British Petroleum (BP) have cancelled their renewable energy production targets and refocused on fossil fuels. The European Commission even proposed removing some companies from the EU carbon regulation list, further slowing down the pace of the energy transition.
Jalal highlighted that Indonesia tends to follow a similar path in withdrawing from climate commitments. However, he remains optimistic that the energy transition will rebound in the long run. “This is just a temporary shock. Eventually, the higher cost of fossil energy compared to renewable energy will force companies to change,” he said.
Jalal explained that energy company leaders today are more orientated towards short-term profits due to market pressures. He said that many CEOs are judged based on quarterly performance, so they prefer to take quick profits rather than invest in the energy transition that takes a longer time.
Nonetheless, Jalal believes that climate change will increasingly force energy companies to adapt in the next few years. “Ultimately, they cannot continue to rely on fossil fuels. The climate crisis is pressing, regulations are tightening, and the market is starting to favour clean energy. We must be ready to face these changes,” he concluded. (Hartatik)
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