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News Article

Fossil Fuel Giants Switch to Renewable Energy

By Cas Biekmann | Tue, 05/05/2020 - 12:58

Keeping a diversified portfolio is an advice that most investors and companies follow. In the case of fossil fuel giants, it would make sense to take renewable energy into account; it differentiates from oil and gas but overlaps with their core business. But the extent to which some fossil fuel giants are now embracing renewable energy stands out.

Royal Dutch Shell was reported by Fortune on April 16 to be the largest global energy company to commit to net-zero emissions by 2050. The company’s net-zero goal entails reducing every possible emission on their part. What cannot be reduced will be ‘offset’ by helping to fund a cut in emissions elsewhere. This can be done by preventing deforestation, for instance. Reuters, however, quoted climate groups arguing that offsetting should be used as a last resort and that absolute emission cuts should be the priority. Still, for a fossil fuel company, a complete cut is a fairly idyllic fantasy. Therefore, Shell has already purchased credits from conservation projects in Peru, the US, the UK and Indonesia.

The core of the plan relies on cutting back on Shell’s oil business. Instead, the Anglo-Dutch company will shift its focus to natural gas and further expand its already substantial renewables industry. Greentech Media quoted various authorities on how serious these plans are. Some climate activists, such as Greenpeace’s Richard George, have a wary response to Shell’s big plans, saying that “a credible net-zero plan from Shell would start with a commitment to stop drilling for new oil and gas.” Nevertheless, Shell’s commitment to renewables might even be boosted by COVID-19. Shell CEO Ben van Beurden said that the pandemic had not undermined Shell’s plans for the environment. Luke Parker, Vice President of Corporate Analysis at Wood Mackenzie, even went as far as to suggest that the pandemic and oil price crash would make fossil fuel companies more focused on a shift away from their traditional industry. An unprecedented slash in the company’s dividend last week will likely only add more fuel for its transition. While spending was cut, renewables remained largely untouched, reported Greentech Media on April 30.

Yet Shell was not the first to announce their shift. BP’s CEO Bernard Looney announced on April 30 that they would not cut spending on renewables either, despite suffering the same fate as Shell. Their plan to switch to renewables was announced in February 2020. Spanish oil company Repsol announced similar plans in late 2019. Even though BP showed its initiative more as an ambition rather than plans set in stone, its shift in February that came along with the arrival of Looney was arguably unexpected. Greentech Media quoted his predecessor, Bob Dudley, only 12 months earlier as saying the company could not be held accountable for how people use its products.

With Shell and BP leading the charge, along with Repsol and Equinor, a clear trend has emerged in the fossil fuel industry. How much of these plans can be done remains to be seen. A more diversified portfolio along with larger-scale investment from some of the most affluent companies worldwide can only boost lower emissions and stronger renewable energy and natural gas development.

The data used in this article was sourced from:  
Fortune, Reuters, Greentech Media
Cas Biekmann Cas Biekmann Journalist and Industry Analyst