You may have noticed the ongoing campaign The Guardian is leading against the Gates Foundation and Wellcome Trust. They are trying to make them commit divesting from the top 200 fossil fuel companies within five years and to immediately freeze any new investments in those companies.
This is without a question the right thing to do but is it too idealistic?
It’s not impossible to replace coal with renewable resources, but it’s not a nice picture in a portfolio. You have no dividends from renewable energy, no long-term profitability, and renewable energy controls no resources, next to the fact that it can easily be disrupted.
A significant amount of research and development on renewables is actually done by the firms that fund managers invest in. If they divest from those firms, that will automatically decrease the number of projects in the field of renewable energy.
On one hand, we have this situation: recently five new solar plants were built and connected to the UK’s National Grid. This was done by a German company and the project has enough capacity to power 20,000 homes. The CEO of the company added that they are planning to have great success in our market and are planning other projects, among the 165MW of projects already completed in UK.
Also, in the UK, for example, the Labour government has announced that they will commit Britain to decarbonise its electricity supply by 2030 in order to give businesses certainty to invest. In turn, those businesses can create a million green jobs over the next decade and invest in green technology and infrastructure to power Britain’s economy into the future.
When you look at it from that side, it really seems that a project with the purpose of keeping fossil fuels in the ground might actually be realistic in the near future.
On the other hand, though Labour government is coming off as green, idealistic, inspiring, it seems to be acting “brown”. Previously, they have actually “lobbied for a third runway at Heathrow, pushed a new coal power plant at Kingsnorth and left office with renewables contributing just 5% of energy supply,” according to the Secretary of State for Energy and Climate Change, Ed Davey.
Supply will try to satisfy the demand and demand for coal is not decreasing. It will be a profitable hobby for many more years from now for investors.
We are heading for cleaner resources, but with baby steps. There is still a huge demand for coal and as long as there is such a high level of demand and it’s a more profitable market, we will see the response in investments in that aspect.
If we take into consideration the fact that China, the world’s biggest energy consumer, is cutting down on coal in order to fight pollution, we think of it as a vast improvement. Conversely, India has a great potential of becoming the biggest importer of thermal coal. Their coal imports could be even higher than China’s by 2017, as it plans to increase its generating capacity by 60% by 2019. Coal India Limited, which supplies more than 80% of the nation’s coal said they will double the output to about one billion tonnes in five years. One victory, one defeat, sounds like progress?
This fight against the proverbial windmill which “Keep it in the Ground” is taking has to be considered on a global level. The fact that the UK (or any other country, for that matter) are making progress means nothing if there are still new markets for coal opening up and increasing. After all, the ultimate goal for all of us is the same and it cannot be reached on an individual level.