Talk of the end of the fossil fuel era is still a fantasy, as evidenced by scant bank financing for clean energy, far less than for carbon-emitting fuels.
Banks are still convinced of the importance of environmentally polluting fuel projects, as they see them as an urgent necessity to keep pace with global energy requirements.
In this context, banks granted 81 cents to finance subsidies granted for clean, low-carbon energy supplies, for every dollar they spent on fossil fuels in 2021, according to a recent report prepared by the network.bloombergAmerican News.
Expensive investments
Banks will need to be more assertive about their commitments in order to meet their climate targets, according to information collected by the specialized energy platform.
Many climate scenarios indicate that to reduce the rise in global temperatures to 1.5°C above the pre-industrial average, the world would need to invest $4 in renewable energy for every $1 invested in fossil fuels by the end of the decade (2030). ).
Energy experts analyzed data collected by the “Bloomberg” network from one thousand and 142 banking institutions, related to what it called “the exchange rate of energy supplies”, with the aim of assessing whether banks are mobilizing their funds in favor of advancing the real economy, and reaching the target temperature of 1.5 degrees Celsius.
The following graph – prepared by the specialized energy platform – shows the annual support for fossil fuels globally:
Financing of $1.9 trillion
In the year before last (2021), the total value of financing allocated to energy supplies touched $1.9 trillion, more than $1 trillion of which went to fossil fuels, while $842 billion was allocated to low-carbon energy projects and companies, according to the report issued on Tuesday, February 28. (2023).
The bank financing rate of 81 cents per dollar was lower than the rate of investments in global energy supplies of 90 cents per dollar, which jumped from about 45 cents per dollar between 2011 and 2015.
“While fossil fuel investments can be expected to resist the disruptions from Russia’s invasion of Ukraine, the underlying economics of low-carbon energy supplies means that the latter’s growth will be sustainable,” said John Murray, CEO of BloombergNEF.
Morey pointed to the 15% increase last year (2022) in investments in low-carbon energy supplies.
Individual bank funding rates vary, with Royal Bank of Canada having a ratio of 0.4, JP Morgan at 0.7, BNP Paribas (1.7) and Deutsche Bank (2.2). According to numbers compiled by Bloomberg.
For his part, a spokesman for “JP Morgan” said that the bank provides financing in the energy sector, adding that it aims to provide $ 1 trillion for green initiatives by 2030.
The results of that report were largely in contrast to the results of a study published by environmental groups in January (2023), which stated that the share of bank financing allocated to renewable energy had shrunk.
The following graph – prepared by the specialized energy platform – shows the decline in emissions from combustion of fossil fuels for electricity generation in Europe in 2020:
little share
Renewable energy projects need generous financial support so that the world can phase out fossil fuels, but global banks have not yet played their part in this regard – at least not yet.
Renewable energy accounted for only 7% of the total $2.5 trillion of total bank loans and bonds issued for energy activities during the period between 2016 and 2022, according to what was stated in a report released by the Foundation. Fair Finance International (Fair Finance International) along with other environmental institutions.
This small percentage translates into only $178 billion, which went to renewable energy activities, compared to $2.3 trillion for fossil fuel production, according to the report, which was followed up by the Energy Research Unit.
Increase in renewable energy financing
The rate of bank loans and bond subscriptions for renewable energy increased from 7% in 2016 to 10% in 2021, before falling to 8% in the past year (2022), which means that there has been no significant change in the support of international banks for renewable projects during that period.
The total annual amount awarded by global banks in the field of renewable energy increased to $34.6 billion in 2021, from $23.2 billion in 2016.
Meanwhile, fossil fuel financing has risen at significant rates, stabilizing the share of clean energy.
Banks still see an urgent need to finance fossil fuel projects in light of global energy needs.
Banks confirmed their granting of support to companies that follow the path of energy transition, pointing out that renewable energy companies often benefit from private and government funding.
It is noteworthy that the International Energy Agency had mentioned in a report issued in the middle of last year (2022), stating that clean energy investments could reach $1.4 trillion in 2022, out of the total global spending on energy, amounting to $2.4 trillion.
related topics..
Also read..
