It’s not just the world automotive industry that’s grappling with rapid changes brought about by the need to reduce the effects of climate change.
The world’s fossil-fuel extraction, refining, and delivery industries are also faced with the reality that two centuries of burning their core products hurts the planet and has already exacerbated weather patterns.
It’s clear that coal extraction and use will be largely done within a few decades.
But the oil and natural-gas industries have argued that their products are indispensable for uses as diverse as generating electricity, powering vehicles, and making plastics.
The rise of plug-in electric cars seems set to change the energy-consumption balance for vehicular transport over the next 25 years.
Now the World Bank, long a major financier for large industrial projects all over the world, has said it will no longer fund exploration for fossil fuels.
The change, announced last Tuesday at the One Planet Summit on climate change held in Paris, is blunt:
The World Bank Group will no longer finance upstream oil and gas, after 2019.
The sole exception applies to financing upstream gas in the very poorest countries, which will be considered only if the poor benefit from energy access and the project fits within that country’s commitments to reductions in carbon emissions under the Paris Agreements signed last year.
For context on the announcement, we turned (as we often do) to a longstanding source in the fossil-fuel industry who prefers to remain anonymous.
We asked how much impact the change in World Bank policy would have on the global oil and gas industry.
“For international oil companies that fund their own share, not much,” said our source.
“But, those companies like the political risk cover that the World Bank or any countries’ Export-Import banks provide, in case things go badly.”
The World Bank announcement said nothing one way or the other about continuation of funding for development of electric power generation and electrical distribution grids, which our source suggests is key.
“That’s often where oil and gas companies want cover, to ensure the gas is sold to an end user that pays full price for it.
If the World Bank funds those kinds of projects that expand or guarantee a market for electricity generated from natural gas, at least, “the funds continue to flow to oil and gas companies in many (though not all) cases,” the source pointed out.
It seems likely that international funding for electricity development and distribution will indeed continue to flow, from the World Bank and other international finance bodies.
The cost of electricity from renewable sources continues to fall, and is now competitive in some areas with the highest-efficiency modern combined-cycle natural gas plants.
That suggests that funding for generation may be the next area for climate action.
Will we see funding for electric power limited only to renewable sources at some point in the future? Stay tuned.
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