Requiem for fossil fuels?

DESPITE some breakthrough at COP28 in Dubai, it seems that not everyone agrees that “fossil fuels have reached the beginning of the end.”

The US Energy Information Administration (EIA) warned that energy-related carbon emissions would continue to rise until 2050. The Organization of the Petroleum Exporting Countries (OPEC) has also predicted that “global oil demand will continue to grow out to 2045, albeit at a slower pace than in recent years.”

If the demand for fossil fuels continues, and if governments and enterprises continue to support and subsidize oil and gas exploration up to a point where there is more supply than needed, the price of gas and oil could go down. This situation could create a disincentive to switch to an electric vehicle or heating system. If this happens, there could be a risk that the world will not move fast enough to reduce carbon emissions in time to prevent global heating of 1.5 degrees Celsius above preindustrialized levels, a target suggested by climate scientists.

The UN Environment Program estimates that carbon emissions should fall by 9 percent every year to keep global heating below the 1.5 C target. In 2020, when global economies were at a standstill due to Covid-19, emissions fell 5.4 percent, only to rise again.

COP28 compromise

On Dec. 13, 2023, The Economist reported: “For the first time, the world has agreed to move away from the coal, oil, and natural gas that are the principal causes of global warming. The 198 parties to the UN Framework Convention on Climate Change (UNFCCC) agreed on a text that called for a transition away from fossil fuels ‘in energy systems, in a just, orderly, and equitable manner.’”

The 28th annual Conference of Parties (COP28) was held in Dubai, the United Arab Emirates, a leading petrostate, where Sultan Ahmed Al Jaber heads the national oil company. The Europeans proposed a total phase-out of fossil fuels, but this was rejected by the oil producers. Small island countries complained that they were not being heard. As a compromise, only “unabated” coal power will be phased down, allowing the “dirtiest fuel to continue burning as long as its emissions are captured at source.”

The Economist believes that “fossil fuels will likely remain part of the energy mix for decades to come … Although clean energy has made vast strides, it is unlikely to displace fossil fuels fully by 2050.” What also helped forge the COP28 compromise was an earlier agreement between the US and China, as “the two largest polluters and geopolitical rivals together pressed for restoring some language on fossil fuels into the deal, which helped steer recalcitrant petrostates towards agreement.”

Lisa Friedman of the New York Times covered the COP28. She reported that the Europeans, who are most vulnerable to climate-fueled extreme weather, pushed for a complete phase-out of fossil fuels. But major oil producers led by Saudi Arabia disagreed until they found a middle ground. Friedman believes that the decision was a compromise but an important one. She said, “Many leaders have said it sends the signal that the era of fossil fuels is coming to an end, which is something I could not imagine this body doing even five years ago.”

Friedman continued, “At the same time, it’s notable that it took 28 of these annual conferences on climate change before governments would be willing to name the elephant in the room — fossil fuels — the burning of which is the main driver of planetary warming.”

The COP28 deal calls for 1) an accelerated shift from fossil fuels this decade; 2) cessation of adding carbon dioxide to the atmosphere by 2050; 3) tripling the amount of renewable energy around the world by 2030; and 4) slashing emissions of methane, a greenhouse gas that is more potent than carbon dioxide, in the short term.

This agreement is perhaps a small step toward a cleaner planet. Definitely, it is not easy to translate the written word into a sweeping action that could benefit the entire planet. Poor countries affected by the ill effects of burning fossil fuels need some reparation, but that is another issue.

Implications

In his Dec. 19, 2023 column at the Philippine Star, Tony Lopez wrote, “Oil, coal and natural gas account for up to 80 percent of the world’s energy and 85 percent of Philippine energy. Sadly, fossil fuels also account for more than 75 percent of greenhouse gases (GHGs). Carbon dioxide accounts for 76 percent of total GHGs, methane 16 percent, and nitrous oxide 6 percent. Since 1970, GHG emissions have increased 70 percent.

Lopez noted that the basic agreement at COP28 is: “Transitioning away from fossil fuels, in a just, orderly and equitable manner, accelerating action on this critical decade, so as to achieve net zero by 2050 in keeping with the science.”

He said the operative word is “transitioning,” which could mean anything (there is no fixed timetable).

Perhaps I’m looking at the complex situation in a very simplistic manner. Fossil fuels have been in use for the longest time. Governments provide subsidies for the extraction and refining of fossil fuels. The subsidies are intended to protect consumers by keeping prices low. To provide fossil fuel firms with these subsidies, governments often have to increase taxes, resort to borrowing, or lower their spending. In many countries, these subsidies benefit households with higher incomes than poor families.

Globally, it is reported that fossil fuel subsidies are estimated at $7 trillion or 7.1 percent of gross domestic product in 2022, an increase of $2 trillion since 2020.

Removing subsidies would increase the prices of fossil fuels and increase the taxes on these items. These taxes could be used for better-targeted social spending, perhaps as a reparation to the victims of pollution caused by burning fossil fuels, which cause respiratory illnesses and even deaths. The surgeon general has determined that smoking is bad for health, and every day, many cities are filled with smog and smoke from factory chimneys and vehicles that use fossil fuels.

Unless we make fossil fuels uncompetitive in the market, they will continue to be in high demand, and the shift from fossil fuels to clean, renewable energy sources will be stunted. Why would people buy expensive electric vehicles if conventional vehicles use cheap oil and gas, whose extraction and refining are subsidized by governments?

If only governments would increase the subsidies for clean and renewable energy, then we could be closer to addressing the global heating that could turn the Earth uninhabitable sooner than we think.

Dr. Margaret Chan, former WHO director-general, once said, “Reform of global energy subsidies could reduce carbon dioxide emissions by more than 20 percent, cut premature air pollution deaths by more than one-half, and raise government revenues by nearly $3 trillion.”

If you think transitioning is expensive, try extinction!

Ernie Cecilia is the chairman of the Human Capital Committee and the Publication Committee of the American Chamber of Commerce of the Philippines (AmCham); chairman of the Employers Confederation of the Philippines’ (ECOP’s) TWG on Labor and Social Policy Issues; and past president of the People Management Association of the Philippines (PMAP). He can be reached at erniececilia@gmail.com.