Fossil fuels are ingrained in the global energy mix and companies continue to discover and develop oil and gas fields at locations around the world.
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LONDON — The CEO of Standard Chartered believes it’s “ridiculous and naive” to think fossil fuel production can be immediately halted without any consequences, stating that while it might be good for the climate, it would have other negative effects.
In comments made during an interview with CNBC’s Geoff Cutmore at the City Week forum in London on Monday, Bill Winters acknowledged most people would subscribe to what he called a “just transition.”
“Those are two really important words … just means fair, it also means implementable,” he said. “And transition means transition — it means it takes some time.”
“The idea that we can turn off the taps and end fossil fuels tomorrow, it’s obviously ridiculous and naive,” Winters said. “Well, first of all, it’s not going to happen and secondly, it would be very disruptive.”
It would be good for climate change, Winters went on to state, but “bad for wars, revolutions and human life because you’d have … havoc.” The “ultimate divestment option” needed to be taken off the table, he argued.
Winters’ comments come at a time when use of the term “just transition” has become increasingly common in discussions related to climate change, energy, the environment and sustainability.
The topic is a complex one and the term itself has been defined in a number of ways. The environmental group Greenpeace, for example, has described it as “moving to a more sustainable economy in a way that’s fair to everyone — including people working in polluting industries.”
A major bank with a presence in 59 markets, Standard Chartered is listed in London and Hong Kong. It has laid out plans to hit net-zero carbon emissions from its financed activity by the middle of the century.
According to Standard Chartered, its total on and off balance sheet net exposure to the oil and gas industry was just over $20.65 billion in 2021.
From A to B
Achieving any sort of meaningful change in the planet’s energy mix represents a huge task.
Fossil fuels play a crucial role in developed and emerging economies and companies continue to discover and develop oil and gas fields at locations around the world.
Any transition to an energy system and economy centered around renewables and low-carbon technologies will require a vast amount of money.
Alongside the huge levels of expenditure required, this kind of shift will also radically transform the way billions of people live and work.
For his part, Winters said “we’ve got to transition” but posed the question of how this could be best achieved.
“How do you balance that,” he said. “What’s the … best way to get from point A to point B while ensuring that you’re bringing as many of the emitters of the world along with you?”
It did no good to “put a system in place where people just check out,” he said, going on to explain how he viewed the reality of the situation on the ground.
“In many of the markets, in emerging markets that Standard Chartered serves, if we tell them that … one, we’re about to screw you and [two] you’re going to have to pay for it well, they’re going to say fine … we’re not going to be part of that system.”
This served nothing, Winters said. “Rather, we … need to bring them along in the most constructive way — oil companies are part of that.”
“Some of the biggest funders of both the technology changes that we’re talking about and the protection of existing carbon sinks are the existing fossil fuel producers,” he said.
“Why would we not allow them to redeploy some of their shareholder capital — and in fact, a lot of their shareholder capital — into the things that can make a big difference? I for one would support that at every opportunity.”
A big debate
Winters’ remarks will raise eyebrows and provoke disquiet from climate activists and campaign groups who are pushing for an abrupt end to the fossil fuel era.
They also come as high-profile bodies such as the International Energy Agency are addressing the role fossil fuels should play going forward.
In 2021, the Paris-based organization said there should be “no investment in new fossil fuel supply projects, and no further final investment decisions for new unabated coal plants.”
Alongside the IEA, the United Nations’ Intergovernmental Panel on Climate Change’s latest report has also weighed in on the subject of fossil fuels.
“Limiting global warming will require major transitions in the energy sector,” the IPCC said in a news release accompanying its publication.
“This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen),” the IPCC said.
Commenting on the report, U.N. Secretary General Antonio Guterres pulled no punches.
“Climate activists are sometimes depicted as dangerous radicals,” he said. “But the truly dangerous radicals are the countries that are increasing the production of fossil fuels.”
“Investing in new fossil fuels infrastructure is moral and economic madness,” Guterres said.
“Such investments will soon be stranded assets — a blot on the landscape and a blight on investment portfolios.”