Energy Transition Investing is Caught in Traps
12.08.2023 By Tank Terminals - NEWS

December 8, 2023 [Reuters]- How to get the world off coal, gas and oil is the perpetual question at every United Nations climate change conference. This year’s COP28 in Dubai is no exception, although 118 countries did pledge to triple renewable energy capacity by 2030.

 

The summit is grappling with the added complication of being presided over by Sultan al-Jaber, the CEO of Abu Dhabi National Oil Company. Just before the gathering he asserted there is “no science” behind demands to phase out fossil fuel. He has since, though, acknowledged that ditching such power sources is “essential”. That will be a relief to those working to finance what has become known as the energy transition.

This necessary shift to renewables faces a roughly $18 trillion funding gap in the decade to 2030, per the Boston Consulting Group and the International Energy Agency. Such a large number can seem overwhelming, but while Jaber was defending his remarks on Monday, a practical example of how to reduce carbon emissions was coming unstuck in Australia: Brookfield Asset Management’s (BAM.TO), A$20 billion ($13 billion) attempt with private equity partner EIG to buy power generator and retailer Origin Energy (ORG.AX). The failure of this deal has ramifications for the broader effort to help the corporate world make the leap.

The concept of the energy transition – and transition investing – isn’t new. Some claim Jimmy Carter coined the idea in a 1977 speech while U.S. president; Breakingviews first used the phrase in 2013. It’s one of a raft of climate-focused terms including sustainable investing and environmental, social and governance investing. The idea appeals to outfits like Brookfield Corp (BN.TO) and its separately listed asset management business as it allows investment into carbon-intensive industries to help wean them off fossil fuels.

 

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