Fossil fuel profits may plunge by two-thirds, says study

THE RISE of electric cars and other “clean tech”, including renewables and climate policies, could cut global fossil fuel profits by two-thirds, a report warns.

The study, from the financial think tank Carbon Tracker, warned that the fossil fuel industry was approaching terminal decline – a disruption it said was being hastened by the impact of Covid-19, which was driving falling demand for oil.

The world may already have seen peak demand for fossil fuels last year, 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.

At the same time, under the global Paris Agreement on climate change, countries have committed to cutting greenhouse gas emissions, most of which come from burning fossil fuels that drive up global temperatures.

The World Bank estimated in 2018 that the future profits from fossil fuels could be about £30 trillion. But if demand drops by two per cent a year as countries implement policies to tackle climate change, future profits could fall to £11 trillion, Carbon Tracker said.

The report’s author, Kingsmill Bond, said: “We are witnessing the decline and fall of the fossil fuel system.

“Technological innovation and policy support is driving peak fossil fuel demand in sector after sector and country after country, and the Covid-19 pandemic has accelerated this.

“We may now have seen peak fossil fuel demand as a whole.”

He said it was a “huge opportunity” for countries that import fossil fuels to save trillions of pounds by switching to a clean energy economy in line with the Paris Agreement.

“Now is the time to plan an orderly wind-down of fossil fuel assets and manage the impact on the global economy rather than try to sustain the unsustainable.”