Global state-owned oil companies ‘bet on missing climate targets’

Global state-owned oil companies risk ruining Paris’s climate goals by continuing to invest hundreds of billions of dollars in fossil fuel exploration projects, a report warned.

One-fifth of the $ 1.9 trillion in investments over the next decade will not pay off if countries succeed in reducing their carbon emissions to limit warming to “well below” 2 degrees Celsius, according to to the Paris Agreement.

The Natural Resource Governance Institute (NRGI) think tank, which published the report, says this means governments are betting on a slower transition to green energy. It’s a gamble that could see state-owned oil companies, many of them in developing countries, squandering some $ 400 billion on oil and gas projects.

The NRGI estimates that oil prices – which are now recovering from a drop during the pandemic – should be kept above $ 40 a barrel if countries are to avoid large net losses on their investments.

In addition, failure to make these investments could trigger economic crises in the developing world that could require bailouts that “will cost the public dearly” and lead to greater inequality, warns report co-author David Manley.

NRGI says its “Risky Bet” report is the first to weigh the “major implications” resulting from spending plans by national oil companies which it believes would often be better off investing that money in education, health and safety. diversification of their economies.

Oil companies owned by African and Latin American countries, which have higher poverty rates, carried the greatest level of risk, according to the report.

Inexplicable

Public entities are not subject to the same scrutiny as their publicly traded counterparts, even though they are economic giants that control at least $ 3 trillion in assets and produce roughly two-thirds of the world’s oil and gas.

Analysis published by the review of the International Monetary Fund Finance and development called for greater transparency in the governance of state-owned oil companies, arguing that they are not held to account for their management of vast public resources.

Like their private counterparts, state oil companies should be forced to assess and disclose their plans for the green energy transition, he said.