#BTColumn – Energy movements: May round-up

Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today Inc.

by Stefan Newton

The International Energy Agency recommends ending investments in fossil fuels

On 18 May 2021, The International Energy Agency (IEA) in its “Net Zero by 2050 Report” outlined a far-reaching roadmap for decarbonizing the energy sector. The Report calls on governments to halt investments in fossil fuels, including far-reaching recommendations to end, after 2021, all new coal mines, coal mine extensions, new oil and gas field explorations, and new unabated coal plants beyond those already committed.

Additionally, the IEA’s Report recommends that more finance needs to be directed into transforming global energy systems’ dependence on fossil fuels towards renewable sources. These IEA recommendations are notable because the agency has traditionally been a supporter of fossil fuels.

Thus, the Net-Zero by 2050 Reports marks a radical shift in priorities for the IEA. IEA scenarios are considered definitive by many governments and often form the basis for energy policy. Consequently, such a shift in the IEA’s priorities is a major moment for countries to reassess their plans for removing fossil fuels from their energy mix.

Climate activists have praised the value-added from the IEA’s Net Zero Report. Unsurprisingly, the Net Zero Report has not been without pushback from Member States of the IEA. Japan and Australia have already indicated their disagreement with the Report’s recommendation of fossil fuels and coal phase-outs. Other critics view the Report as not considering the risk to future energy security and the future role of carbon capture and storage technology.

A landmark victory for climate change litigation

Also in May, big oil companies suffered a major defeat in Milieudefensie v Royal Dutch Shell. The class-action suit was filed in April 2019 on the behalf of more than 17,000 Dutch citizens who argued that Shell was threatening human rights by continuing to invest billions in fossil fuel production.

The Hague District Court held Shell liable for its contribution to climate change and ordered Royal Dutch Shell to reduce the CO2 emissions of the Shell group by net 45 per cent. In 2030, compared to 2019 levels, through the Shell group’s corporate policy.

In its sweeping decision, The Hague District Court expressly detailed the devastating harms of global warming, the necessity to restrict warming to 1.5 degrees Celsius below pre-industrial levels, the significant contribution that fossil fuels and major corporate producers make to global warming, and ruled that Shell has an individual obligation to reduce its own emissions on a rapid time scale.  Climate change activists have heralded the judgment as a reckoning day for big oil companies.

It is expected that the judgment will have a rippling effect for litigation against fossil-fuel companies. Climate change activists plan to build on this precedent by taking other fossil-fuel companies in other countries to court.

The case is groundbreaking in two respects. First, the case gives an important indication that corporations must now abide by the goals of the Paris Agreement. It has been repeatedly noted that the achievement of the Paris Agreement’s ambitions requires an all-hands-on-deck approach, where states and corporate actions must unite to reduce global emissions. Secondly, human rights have been traditionally formulated as obligations for States, not private parties.

In this case, in paragraph 3.3 it was accepted that a private company has positive obligations “to prevent dangerous climate change for the protection of mankind the human environment and nature”. The court cited the UN Guiding Principles on Business and Human Rights in reaching this conclusion. Thus, the case recognises that private companies are human rights duty bearers, and further cements the UN Guiding Principles on Business and Human Rights as having the force of international law.

ExxonMobil loses proxy battle to climate activist

The last week of May was a historic one for another oil giant, ExxonMobil. The company lost a high stakes proxy battle, led by activist hedge fund Engine No 1. Engine No 1 is pushing for a profound change to ExxonMobil’s business structure. On Wednesday 26 May, 2021 ExxonMobil’s shareholders voted to change its board of directors, to a new board comprising at least two members from Engine No.1.

Charlie Penner, the leader of Engine No 1, says Exxon is a high cost oil provider competing with OPEC countries, in a world that will demand less oil. Accordingly, the company needs to position itself for success. Climate change campaigners view the successful proxy battle as a new era for Wall Street’s approach to climate change.

Fred Krupp, president of the Environmental Defense Fund notes that the proxy battle “sends an unmistakable signal that climate action is a financial imperative, and leading investors know it and are demanding change.

This is a watershed moment for the oil and gas industry. It’s no longer tenable for companies like ExxonMobil to defy calls to align their businesses with decarbonizing the economy”.  The change in directors spells imminent changes for ExxonMobil’s business structure.

John Kerry’s optimism on climate technology sparks controversy

Technology’s relevance to curbing climate change has also been a major source of optimism and controversy in May. On 16 May, 201 John Kerry; the USA Climate Envoy, when pressed about the USA concrete plans on emission reductions stated that “I’m told by scientists that, 50 % of reductions we have to make, to get to net-zero by 2050 or 2045 are going to come from technologies we don’t yet have”. He further added that people don’t have to give up their quality of life to cut emissions.

Kerry’s statement has been met with mixed reactions. The UK’s former chief scientist, Professor Dave King a leading voice in Mission Innovation- a global initiative working to accelerate clean innovation responded by highlighting the importance of regulatory measures to bring the new technologies rapidly into the marketplace, but also the need for lifestyle changes.

Julian Allwood, professor of engineering and the environment at the University of Cambridge states “It’s virtually impossible for new energy infrastructure technologies to have a significant effort on global emissions in the time we have left to act”.

Professor Allwood further cautioned that with every new energy-infrastructure technology so far, it has taken 30-100 years from invention to 5 % penetration of existing markets. Institution of Mechanical Engineers Spokesperson Dr. Jen Baxter agreed Kerry’s time frame for scaling up new technology “seems very optimistic”, adding that carbon reductions should depend on existing technologies and new lifestyle choices, like a shift to public transport, rather than putting faith in options that are still being developed.

On the harsher end of criticism, UK Wildlife Trust CEO Craig Bennet called Kerry’s comment “frankly ridiculous”. The jury is still out on the issue and only time will provide an answer to Kerry’s technology prediction.

Stefan Newton is a United Kingdom Chevening Scholar. Stefan is a graduate of The University of the West Indies Faculty of Law, American University Washington College of Law, and Queen Mary University of London Centre for Commercial Law Studies. This article presented the most significant energy and climate-related developments in May 2021.