In 2014, when the price of oil last crashed, the world\u2019s governments had no agreement in place to fight climate change. The following year leaders signed the Paris accord. Green investments have soared since then. Some $1.2tn has been poured into renewable energy, and global electric vehicle sales reached 2mn last year. Bloomberg NEF expects as much as $10tn poured into clean energy by 2050. The accord also marked a cultural watershed, with emissions targets now policed by a growing environment movement that\u2019s shaping politics from Germany to India. In a sign of the times, activist Greta Thunberg and Tesla Inc founder Elon Musk are now two of the most famous people in the world. So when this week Saudi Arabia and Russia joined in a price war that wreaked havoc on global markets already rattled by the coronavirus, it looked like the major oil-producing nations reasserting their supremacy in the short term. Instead, it may prove to be another step in a longer-term trend towards ending oil\u2019s power to hold the world to ransom. The price of a barrel of oil remains an important economic indicator. But the relentless push to move away from fossil fuels suggests that its geopolitical impact is likely to be softer than in the past, with the imperative to combat global warming assuming its place. \u201cThe impact of the oil price on broader economic growth has been decoupling ever since the 1980s,\u201d said Shane Tomlinson, deputy chief executive officer at environmental think tank E3G. \u201cWe could see exceptional movements in the oil price in the next few months, but I don\u2019t think that changes the fundamental need to address climate change.\u201d Oil\u2019s fall to some $35 a barrel from $55 just last week has major implications for addressing climate change. Low prices incentivise more use of oil; it squeezes the budgets of oil companies, putting clean-energy projects in doubt; and some governments feel pressured to prop up struggling oil companies. All that drives up emissions, which is bad news for global warming. However, if low prices are sustained this time, there might be big positives for fighting climate change. Renewable energy is a more mature industry than five years ago. As it becomes a less risky investment, it has attracted big investors who are showering a lot of cash and building some projects that rival the capacity of conventional power plants. At the same time, oil exploration is becoming less viable economically, with an increased risk that even those projects that go ahead no longer yield good returns and with worries about stranded assets growing. \u201cNow it doesn\u2019t make sense to reduce your investment in renewables if the oil price crashes,\u201d said Mark Lewis, head of sustainability at BNP Paribas Asset Management. \u201cIt\u2019s more logical to reduce your investment in oil.\u201d That reality points to a broader change in investor sentiment since Paris that aff ects companies and governments alike. A number of large investors have come together under groups such as Climate Action 100+ to demand companies put sustainability at the heart of their business models, and that isn\u2019t likely to change. Tesla has eff ectively become a proxy for how the green economy is viewed by investors. Musk has demonstrated that a mass-market electric car is viable, prompting all the major carmakers to follow his lead. He\u2019s building his latest plant outside Berlin, in a show of his intention to take the fight to the heart of Europe\u2019s leading luxury car producer. Tesla is after all the world\u2019s second-most valuable carmaker by market value after Toyota Motor Corporation. For governments worldwide, pressure for policy measures has mounted as the issue increasingly resonates, in part due to the kind of direct action and media campaigning espoused by Greta Thunberg. Low oil prices off er one reason to heed that voter call, since it\u2019s a good time to end fossil-fuel subsidies or to raise taxes on consumption of fossil fuels. Such a move can also help avoid the sorts of destabilising anti-government protests seen in France, Iran and Ecuador when energy-price increases were proposed. It could even be done in a way that \u201cprotects or even benefits poorer households and communities,\u201d said Helen Mountford, vice president of climate and economics at the World Resources Institute. The goal of reaching out to \u201cleft-behind\u201d communities is a dynamic driving policy from the post-Brexit UK to South Africa and swaths of Latin America that suff ered waves of unrest late last year. During the last down cycle, between 2014 and 2016, when oil briefly dipped below $30 per barrel, India cut annual fossil-fuel subsidies from $29bn to $8bn and even raised taxes on consumption. Some of the money raised was diverted to renewable-energy subsidies, after setting an ambitious goal to deploy as much as 175GW of mainly solar and wind power by 2022 \u2014 about twice the power generation capacity of the UK. \u201cMany countries are pursuing electrification and decarbonisation to make them less dependent on the volatility of oil markets,\u201d said Adnan Amin, former director general of the International Renewable Energy Agency. \u201cThis kind of event will only reinforce that momentum.\u201d Also since 2014, the power of Opec\u2019s 14 nations to shape the market has been weakened by the impact of US shale production. (Opec\u2019s Vienna base is home to an Austrian government that now includes the Greens as junior coalition partner.) The US \u2014 which is not a member of the group \u2014 became an oil exporter again on the back of its shale revolution, surpassing Russia and Saudi Arabia in 2018 to regain its status as the world\u2019s biggest producer. President Donald Trump has cheered America\u2019s energy resurgence as an example of taking back control. However, the collapse in oil prices weakens the shale industry\u2019s ability to pump at a profit and even pushes some of the producers toward bankruptcies, adding to economic uncertainty surrounding the virus that may hurt Trump\u2019s re-election bid, says Amin. Since Trump unilaterally pulled the US out of the Paris agreement, it could yet tilt the presidential race in favour of a candidate more in favour of climate action. In Brussels, meanwhile, European Commission President Ursula von der Leyen doubled down on European Union plans to achieve climate neutrality by 2050, despite the emergence of what she called \u201cunforeseen challenges.\u201d \u201cToday it\u2019s no longer the question if there will be a European Green Deal or whether the EU will become climate- neutral but the question is how we\u2019re proceeding and how far-reaching will the transition be,\u201d Von der Leyen said on Monday. That stance is understandable given that EU citizens say they want the bloc to focus on tackling climate change and preserving the environment as its No 1 priority, according to a recent Eurobarometer survey for the European Parliament. \u201cClearly we cannot ignore what\u2019s going on globally,\u201d said EU Environment Commissioner Virginijus Sinkevicius on Bloomberg TV. The global \u201cclimate emergency didn\u2019t go anywhere.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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