Fossil fuel risks to force new strategies on energy firms | Inquirer Business

Fossil fuel risks to force new strategies on energy firms

/ 12:10 AM November 18, 2021

Many energy firms will need to review their strategies for the coming year as the aftermath of Glasgow COP26 is expected to firm up risks for fossil fuels, particularly coal, according to the Economist Intelligence Unit (EIU).

The EIU said in its Industries in 2022 report that threats to players with fossil fuels in their asset base were coming from rising commitments to green financing as well as governments that were spelling out their carbon emission reduction goals more clearly.


These energy companies will need to undertake an urgent review of their strategies in 2022, as governments and investors ramp up pressure to cut carbon emissions—possibly resulting in canceled plans for new projects and divestment of existing ones.

“While renewables and energy-saving technology are attracting increasing flows of green financing, emissions targets will also drive divestment,” the EIU said.


The report added that with the drive to stop funding for coal gathering steam, “governments and private financiers will therefore be wary of approving new auctions or projects, and some may even cancel planned projects.”

Situation in PH

In the Philippines, the Ayala group is on a path to be coal-free by 2030, but subsidiary AC Energy Corp. wants to divest its last remaining coal-fired power complex by 2025.

Also, the Abotiz group has announced intentions to not pursue any new coal projects, partly in recognition of difficulties to secure financing but also as a step to bolster renewable energy assets in their portfolio.

“Despite the improving outlook for energy consumption, many companies will need to undertake an urgent review of their strategies in 2022, as the energy transition accelerates and governments try to fulfill pledges made at the UN climate conference in Glasgow in late 2021,” the EIU said.

“Many countries will also pass stricter regulations promoting renewables growth, imposing carbon taxes or encouraging electrification of transport in the year ahead,” it added.

The EIU predicts that coal divestment will gather pace as funding dries up. For one, the European Investment Bank intends to stop investing in coal projects starting next year.

Also, the Asian Infrastructure Investment Bank has hinted that it may act similarly in relation to coal-fired power plants.

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TAGS: fossil fuels, Glasgow COP26
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