Clean tech growth will hurt fossil fuel profits, report warns

The rise of clean tech such as renewables and electric cars in line with climate policies could cut global fossil fuel profits by two thirds, a report warns.

The report from financial think tank Carbon Tracker warned the fossil fuel industry is approaching terminal decline, a disruption that is being hastened by the impacts of Covid-19 driving falling demand for fuels such as oil.

The world may already have seen peak demand for fossil fuels in 2019, the analysis said. The consequences of this would send shockwaves through the global economy, hitting companies which extract, supply and use fossil fuels as well as the financial markets invested in them and countries reliant on exports.

Renewables are outperforming fossil fuels on cost for generating electricity in much of the world, and electric vehicle batteries are comparable with the cost of conventional car engines, the report said.

The World Bank estimated in 2018 that the future profits from fossil fuels could be about £30 trillion.

But if demand drops by 2 per cent a year as countries implement policies to tackle climate change, expected future profits could fall to £11 trillion.

The shift could threaten “petrostates” whose economies are highly dependent on fossil fuels, such as Saudi Arabia, Russia, Venezuela and Nigeria.

The decline poses a significant threat to global financial stability, with fossil fuel companies making up a quarter of the total value of global equity markets.