Report: Fossil energy investment commitments fall short of climate change impacts

Jakarta – Fossil fuel companies are still not optimally contributing to efforts to limit global temperature rise, a key focus for averting climate catastrophe, according to a recent report from the International Energy Agency (IEA).

The report reveals that these companies’ investments in oil and gas are still twice as high as investments in environmentally friendly renewable energy.

According to the IEA, the fossil energy sector accounts for only 1% of total global investment in green energy. This special report was released a week before the UN climate change summit (COP28) in Dubai on November 30.

The IEA encourages the oil and gas industry to show real commitment by balancing its investments between clean energy and fossil fuels. IEA Executive Director Fatih Birol stated that the fossil energy industry is at a “watershed moment” to make major decisions about its role in the climate crisis. Despite the adverse impacts of the climate crisis, the industry continues to operate without social and environmental responsibility.

The IEA asserts that if governments fulfil their national energy and climate pledges, fossil fuel demand could fall by up to 45% by 2050.

“If climate policies are accelerated to limit global warming to 1.5 degrees Celsius, fossil fuel use could even decline by more than 75% in the same year,” Birol said in an official statement.

Birol mentioned that the increasing public anger towards the fossil fuel industry is understandable, along with the awareness of the link between extreme weather events and carbon emissions. He emphasised the importance of these industries showing their commitment, especially in the face of public pressure.

According to the IEA, oil and gas companies only allocate about 2.5% of their capital to clean energy technologies, such as renewable energy and electric vehicles, while 97.5% remain with traditional businesses.

The IEA suggests that this split should be at least 50% for clean energy, and companies should take steps to reduce emissions from their fossil fuel production.

In the past five years, oil and gas companies reported annual revenues of nearly USD 3.5 trillion, with a big jump in 2022. Last year, oil and gas companies reported annual revenues of USD 4 trillion, up from an average of USD 1.5 trillion in recent years, according to Birol as quoted by Reuters. According to him, these countries can no longer rely 90% of their economies on oil and gas as demand will fall.

About half of these revenues are paid to governments and 40% are returned to investment. Despite this, the IEA notes that only about 10% is left for shareholders or debt repayment. (Hartatik)

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