12 December 2020 marked the fifth anniversary of the Paris Climate Agreement. If we want to put the world on track towards delivering the action needed , South African public finance institutions must start to address a fundamental issue: plans to continue financing and even expanding finance of oil and gas extraction.
There is a graph that’s making the rounds on climate Twitter. It shows how, despite the many treaties and agreements reached over a period of decades to address the climate crisis, carbon dioxide concentration in the atmosphere keeps growing (almost) exponentially.
It’s a sobering reminder that, five years after the landmark Paris Agreement on climate change was signed, we’re still worse off than we were back then, and our chances of reversing course keep getting slimmer.
The urgency of the climate crisis requires nothing short of an immediate and forceful response. Such a response entails initiating a rapid and well-managed decline of oil and gas investments: our existing reserves of these fossil fuels are several magnitudes larger than what our remaining carbon budget would allow us to safely burn.
Yet, there are only a handful of first movers — governments that have announced or implemented plans to stop oil and gas extraction, and none of them are major producers.
Let’s be clear, what we’ve witnessed in the five years since the Paris Agreement was signed is, simply put, a colossal failure of leadership.
A report recently released by UN Environment and other leading research institutions, provides a measure of just how big this failure is. According to this 2020 Production Gap Report “to follow a 1.5°C-consistent pathway, the world will need to decrease fossil fuel production by roughly 6% per year between 2020 and 2030. Countries are instead planning and projecting an average annual increase of 2%, which by 2030 would result in more than double the production consistent with the 1.5°C limit”.
It’s relevant to note how those figures were exactly identical when last year’s report was released. Nothing has changed in the meantime.
To mark the fifth anniversary of the Paris Agreement, the United Kingdom, as hosts of the next climate conference of the parties (COP), along with the UN Secretary General convened a COP26 “launchpad” event, with the stated intention to provide a platform for national governments to show their climate leadership.
We can expect more pledges to be announced, including more promises to reach “net zero”. Unless countries start reducing the production of oil and gas in the immediate future (when it would matter the most), however, their “net zero” commitments will mean relying on unproven and contested technologies such as carbon capture and storage and carbon dioxide removal later this century. This a dangerous and morally unacceptable gamble that governments must not take.
The global financial system, its key players and, more importantly, public regulators such as central banks, have kept fuelling the crisis too by pouring trillions into oil and gas, as well as coal. According to the Banking on Climate Change 2020 report, banks have provided $2.7-trillion in financing to fossil fuel companies since the Paris Agreement’s adoption, with the annual amount increasing each year since 2016.
Indeed, the eight largest oil companies, some of which have made “net zero” pledges, are planning sizable expansions of their operations to 2030.
Despite the reluctance of national governments, banks and regulators to accelerate the transition away from fossil fuels, this transition is on the cards and well under way. The oil and gas industry knows it will have to phase out production, but they have chosen to use their considerable influence to slow down this process as much as possible.
So what does this mean for South Africa? We need to take action now. Currently our public finance institutions, the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA) are still financing fossil fuel projects, and considering new ones. While their work to finance renewable energy is laudable, we can’t pretend that that means every new fossil fuel project is not a nail in the coffin of a safe climate. They are! We need them to commit publicly to not finance these projects.
With Covid-19 altering how we act and think, recovery efforts should seize this opportunity to re-shape our economies in such a way to accelerate green and social investments rather than fossil fuel development. Research however, has shown that the opposite is happening. This is despite strong evidence that the economic benefit of green stimulus packages far outweigh fossil fuel investments.
The non-profit organisation 350Africa.org has shown some ways a just recovery could be achieved in South Africa through its report No Going Back To Normal researched by the Institute for Economic Justice and released together with the Climate Justice Coalition.
There is an urgent need to reverse the trend of oil and gas production increase, and ensuring a sizable year-on-year decrease instead. Stopping the financing of these projects is critical.
Five years from now, when we look back and celebrate the 10th anniversary of the Paris Agreement, our societies and economies will need to be already well on their way to having phased-out oil and gas production. The time to start is now.