In the Philippines, the current administration has actively pushed for the expansion of the fossil gas industry, claiming it is a transitional energy source while waiting for renewable energy (RE) to mature to meet the nation’s energy demands.
Elsewhere in the world, global coal demand reached an all-time high in 2022 and is projected to stay at similar levels in the near-term. This was significantly driven by the Russia-Ukraine conflict, which affected the supply of gas from Russia to European countries that forced the latter to increase their reliance on coal. The three largest coal producers, China, India, and Indonesia, all hit new highs in coal production last year.
This is not to mention that at the most recent climate negotiations in Egypt, nations failed to scale up the ambition to reduce human-induced greenhouse gas emissions, which largely comes from the burning of fossil fuels. This is despite the need to enhance current solutions due to the worsening impacts of the climate crisis, which would greatly impact vulnerable nations such as the Philippines.
Even with these recent developments, there are still a few notable signs for optimism regarding fossil fuel divestment.
An inevitable decline
The traditional energy sector dependent on coal, oil, and gas remains on a long-term decline. This can be attributed to several factors, including the growing urgency across different sectors to deal with the climate crisis, as highlighted through numerous extreme weather events that left many nations, including the Philippines, devastated in the past decade.
Yet it should be noted that the climate crisis has now become a financial issue as well. Many market trends have favored the boom of RE, backed by the recognition by more companies that sustainability generates profitability. For instance, technological innovations on the power and transport sectors favor the growth of solar and wind energy use.
Petrochemical industries (i.e., plastics production) are also losing ground as the worldwide calls to address plastics pollution are more amplified.
To counter this, the fossil fuel industry has increasingly banked on carbon capture and storage (CCS) to remain relevant in the sustainability sphere. However, many of these technologies remain at the demonstration level, backed by the pronouncement of scientists that they do not work at scale. Without promising results, financers would lose confidence that these corporations can overcome the many associated risks, including potential social and environmental impacts.
With crisis comes opportunities; this may also apply to the economics of the global energy sector. The Russia-Ukraine conflict has undeniably impacted prices of fossil fuels, which has brought about higher inflation on energy products and other commodities in the Philippines and other developing countries.
On one hand, the high fuel prices impact food and energy security, create budget deficits, and worsen trades imbalances that slows down economic growth of developing nations. On the other hand, the net income of global oil and gas producers reached USD4 trillion in 2022, double the amount from the previous year, largely driven by the Russia-Ukraine conflict and its ramifications on a global economy that refuses to significantly reduce its dependence on dirty energy.
Without a sound financial argument, fossil fuel industries are now relying more on political tactics to try to maintain its current hold on the global economy.
The right side of the coin
Currently, there are two emerging narratives for the energy sector: one that depicts RE as the clean alternative on the rise, as the energy of the future; and one that shows fossil fuels as still being necessary for decades to come. This is an unsustainable set-up for which sooner or later, the world must pick the right side of the coin.
With the long-term decline of the fossil fuel sector comes the weakening of arguments against divestment from dirty energy. This strategy is not intended to make financers and investors lose profits, but rather to protect them from losses of asset values, to be triggered directly and indirectly by the impacts of the climate crisis and other issues.
Advocates of fossil fuel divestment must now recognize that the battleground is shifting from financial to political. While arguments to counter the dismissal of divestment based on the financer’s unwillingness to deviate their portfolios away from coal, oil, and/or gas must remain part of calls and actions, they must also turn their attention to influencing governments to avoid prolonging their nation’s addiction to fossil fuels.
The previous statement is especially critical for countering the policymaking direction of the Philippine government that continues to shy away from fully investing in RE and, instead has found its latest distractions in the form of gas and even nuclear energy.
It must be emphasized that fiduciaries have the obligation to take action upon recognizing any risk. Investment strategies need to diversify to effectively address risks related to climate and other issues, but the message remains crystal clear: sustainable development is impossible without an urgent and just transition away from fossil fuels towards RE.
Nevertheless, given these global circumstances, it would be a surprise if the Philippines does not see more banks make stronger commitments to divesting from coal for 2023.
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John Leo is the Deputy Executive Director for Programs and Campaigns of Living Laudato Si’ Philippines and a member of the interim Secretariat of Aksyon Klima Pilipinas. He is a member of the Youth Advisory Group for Environmental and Climate Justice under the UNDP in Asia and the Pacific.