Last year was the first time in recorded history that the global surface temperature of the planet exceeded 2.0°C above the base level (1850-1900) of the Intergovernmental Panel on Climate Change (IPCC). Also, more than 90% of the world's oceans have suffered heat wave conditions, glaciers have lost the most ice on record, and Antarctic sea ice has dropped to by far the lowest level ever measured.
Last month (May - trans.) marked a full year of record high global temperatures, and May 2024 was ranked as the warmest May in history. Ocean temperatures also reached record levels, remaining so for 14 months in a row, according to data and scientists from the National Centers for Environmental Information (NCEI) of the National Oceanic and Atmospheric Administration (NOAA). . According to “Overview of the global annual temperature ranking” (“Global Annual Temperature Rankings Outlook”) by the National Center for Environmental Information, there is a 50% chance that 2024 will rank as the warmest year on record, and a 100% chance that it will rank in the top five.
The current trend of carbon dioxide emissions (the main cause of global warming and climate change) suggests that by the end of this decade the average surface temperature of the Earth will undoubtedly exceed 1.5°C above the base target level set at the UN Climate Change Conference held in 2015 in Paris. Indeed, without much more drastic action, carbon dioxide emissions will reach at least 1.8°C above baseline by the middle of this century or sooner. UN Climate Change Executive Secretary Simon Steele said the planet is on its way to “perniciously high” rise in global temperatures in the amount of 2.7°C since the industrial age.
What to do? Many technologies are proposed to control the emission of carbon dioxide, and even to capture the existing one and remove it from the atmosphere. Moreover, the desire to "gradually abolished” production of fossil fuels and to replace the so-called renewable energy sources (wind, solar energy, hydropower, etc.) is a call to the gathering of "existing forces", presented at the last UN Conference on Climate Change, COP28. Investments in clean energy are now nearly double those in fossil fuels.
However, it is still not enough. Fossil fuel production is not being phased out fast enough, and renewable energy sources are not replacing fossil fuels fast enough. The International Renewable Energy Agency estimates that an average of 1,000 GW of renewable energy capacity needs to be built globally each year by 2030. But the world's clean energy plans (and they're just plans) are still nearly one a third less than what is needed to reach that figure.
According to the Climate Policy Initiative, in order to reach the required level of investment, global climate change funding will need to increase to around $9 trillion annually by 2030, up from just under 1,3 trillion during 2021-2022.
These funds are simply not forthcoming. In 2022, rich countries finally met their goal of transferring a paltry $100 billion in climate change financial aid to poorer countries - two years later than promised. Moreover, over the past decade, public funds have underpinned most of the growth in climate change-related transfers to poorer countries. Government aid or multilateral development bank financing nearly doubled between 2013 and 2022, from $38 to a total of $83 trillion. But according to the Organization for Economic Co-operation and Development (OECD), private financing was "persistently low", at just $21,9 trillion in 2022.
Even that public funding is overestimated. The reason for this is that part of the money is taken from existing foreign aid budgets, and part of what counts as climate finance includes funds that are primarily allocated to development projects like health and education, with purely marginal climate benefits. According to Oxfam's “Shadow Report on Climate Finance 2023 („Climate Finance Shadow Report 2023”/Oxford: Oxfam GB, 2023), if all these things are taken away, then only 21-24,5 of the 83 trillion dollars will remain in the name of purely climate finance, without related projects.
Why was the climate goal not achieved? Why are the necessary financial resources not coming in? The problem is not in the cost of renewable energy sources. The prices of renewable energy sources have fallen sharply in the last few years. The problem is that governments insist that private investment should be behind the drive towards renewable energy. But private investment only occurs if the investment is profitable.
The problem is profitability - in two ways. First, average profitability is at a low level globally, so investment growth in general has similarly slowed down. Second, ironically and paradoxically, lower investment and lower GDP growth will slow the growth of carbon dioxide emissions by reducing fossil fuel energy use. A recent study of 18 countries that managed to "peak and reduce" their carbon emissions between 2002 and 2015 found that one key driver of this process - responsible for an average of 36% of the drop in emissions - is reduced energy use partly as a result of "low GDP growth of around 1%" (Corinne Le Quéré et al., „Drivers of Declining CO2 Emissions in 18 Developed Economies,” Nature Climate Change 9, br. 3 (Mart 2019): 215). As the GDP growth rate approaches zero, absolute decoupling of growth from carbon emissions becomes more feasible (Enno Schröder i Servaas Storm, „Economic Growth and Carbon Emissions: The Road to ‘Hothouse Earth’ is Paved with Good Intentions,” International Journal of Political Economy 49, br. 2 (2020): 153-173).
However, on the other hand, lower prices of renewable energy sources reduce the profitability of such investments. Solar panel manufacturing is experiencing a severe drop in profits, along with solar farm operators. This reveals the essential contradiction in capitalist investment between cost reduction through increased productivity and investment slowdown due to falling profitability.
This is the key message of another great book, Price is not the problem: Why capitalism will not save the planet British Christopher (Brett Christophers, The Price is Wrong: Why Capitalism Won’t Save the Planet; London: Verso, 2024). Christophers argues that the cost of renewable energy relative to energy derived from fossil fuels is not an obstacle to meeting investment goals to limit global warming, but rather the profitability of renewable energy compared to the profitability of fossil fuels:
"In the case of renewable energy sources, the main decision-makers are energy companies, other producers and - especially - financial institutions, whose decisions on whether or not to invest investment capital, and at what price, ultimately determine whether solar farm projects and wind parks pass or not. What, we can therefore ask, is the most important question in the minds of such financiers when investment proposals from producers of renewable energy sources are presented to them? That's the next question: will I get my money back and at an acceptable level of earnings? The basic answer to this question is, of course: generally, only if the project is profitable."
Christophers shows that in a country like Sweden, wind energy can be obtained very cheaply. But the cheapening of costs also reduces the possibility of earning. This contradiction has given a wind to fossil fuel producers' arguments that oil and gas production cannot be abruptly stopped. Peter Martin, chief economist at Wood Mackenzie, explained it differently: “The higher cost of capital has great consequences for the energy and natural resources industry", and higher rates "they disproportionately affect renewables and nuclear power due to their high capital endowment and low profit rates. "
As Christophers points out, the profitability of oil and gas production has generally been far greater than the profitability of renewable energy sources, and this is why in the 1980s and 1990s the largest oil and gas companies without much thought stopped their first investments in renewable energy sources almost as soon as they are launched: "The same comparative calculation equally explains why the same companies are switching to clean energy today at a speed no faster than a snail's pace. "
Christophers quotes Shell CEO Vael Savan's response to a question about whether he thinks lower profits from renewables are acceptable to his company:
"Let me be, as it seems to me, categorical on this point. We will strive for high profits in every business we enter. We cannot justify the pursuit of low profits. Our shareholders deserve to see us fighting for high profits. If we can't achieve a double-digit profit rate in a business, we need to take a hard look at whether we should continue with that business. Of course, we will try to strive for lower and lower and lower carbon dioxide emissions, but it has to be profitable. "
Because of this, economists at JP Morgan Bank concluded that "the world needs to 'face reality' about the transition from fossil fuels to renewable energy", stating that it is likely to require "generation” in order to reach the goal of zero emissions. At JP Morgan, they believe that changing the world's energy system "isa process that should be measured in decades or generations, not years.” That's because renewable energy investments "currently yield below-average returns."
The major fossil fuel producers push this point ad nauseam. Last October, the CEO of oil production company Chevron told the Financial Times (Engl. Financial Times): „You can think of different scenarios, but we live in reality and we have to redistribute capital to meet the needs of the real world." Four out of five directors of corporations believe that "that the possibility of extracting an acceptable profit from the projects is the main obstacle to the elimination of carbon dioxide from the energy system. ""We should discard the fantasy of phasing out oil and gas and instead invest adequately in oil and gas as realistically assumed demand dictates.", says Amin Naser, CEO of Saudi Aramko. "You can advocate for green politics and NGOs all day long, but those are the facts. I think this message is beginning to be understood", says Liam Malon, head of the sector for exploration of oil deposits and oil extraction in Exxon Mobile.
It should come as no surprise that JP Morgan is a leading financier of fossil fuel projects. The bank has backed fossil fuel businesses with $101 billion in 2021 and 2022, compared to $71 billion given to low-carbon businesses. In a report by climate change organizations, which calculated that the world's largest banks have provided $6,9 trillion to the oil sector in the past eight years since the signing of the Paris Agreement, JP Morgan Chase, Mizuho Bank and Bank of America are listed as the largest financiers of the fossil fuel industry. fuel in the previous year.
Christophers concludes: “If private capital, circulating in the market, is still unable to decarbonize the world's electricity production fast enough with all the help it has received and continues to receive from governments, even with technology prices falling as much and as fast as if they are, then it is an obvious sign that the capital is not created for that business. "
Instead, Christophers argues that if we are ever going to achieve accelerated reductions in carbon dioxide emissions, then "comprehensive public ownership of renewable energy sources appears to be the most sustainable model." I would add that public ownership of fossil fuel producers is also needed to ensure accelerated transition.
Meanwhile, the planet continues to warm at an alarming rate.
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