I'll admit it, I can be a naive optimist from time-to-time. Recently, I've had some good cause to be.
Whether it's oil companies leaving ALEC, coal executives lamenting the death of coal, the Rockefellas divesting from fossil fuels, or large-scale solar and wind becoming competitive with dirty energy, positive, clean energy headlines have been coming thick and fast.
However, as John Laumer rightly pointed out in my post about the aforementioned coal executive, we're not exactly witnessing the wholesale collapse of fossil fuels. Here are a few things to keep in mind.
Coal, oil and gas are not the same thing
With Chinese coal consumption faltering, and many of the costs of coal production going up, there's good reason to believe that the coal industry is in some serious trouble. One of the reasons, however, is the fact that it is increasingly competing with cheap natural gas. And, because they can power up and power down fairly rapidly, natural gas power stations integrate better with renewable sources of energy.
Divestment could decimate coal, while leaving oil and gas untouched
Whether it is Stanford divesting from coal, or Universities divesting from all fossil fuels, efforts to put financial pressure on carbon-intensive industries have been stepping up of late. But even with major investors rethinking their stance, we're still talking about a trickle when it comes to the overall size of the energy industry. Coal, however, is both a much smaller piece of the pie, and a significantly riskier bet for investors. A recent report on divestment from Bloomberg New Energy Finance (BNEF) puts it like this:
"Significant divestment from coal would be much easier than significant divestment from oil and gas. Listed coal companies are small enough in aggregate that investors could divest and re-invest without unbalancing portfolios. Oil and gas companies are too large, and too widely held, for divestment to be easy or fast."
Where will all the money go?
Finally, while there is much talk of shifting our money from fossil fuels to renewables, we don't yet have a place for all that money to go. As the same BNEF report mentioned above explains, there simply aren't enough clean energy projects out there yet to suck up all the money that goes to oil and gas currently. That's not to say it can't happen, but it's going to take some time. In the meantime, says BNEF, investors wanting to move their money to the cleaner side of town should consider investments in other industries that are actively involved in building a low carbon future including IT and the building/real estate industry, although each of these sectors come with their own sets of challenges.
So we are not out of the woods yet, but significant changes are afoot. And as we all (should) know by now, change is not linear nor is it predictable. May we live in interesting times.