With essentially no policies to reduce emissions from the 4.5 million fossil fuel vehicles on our roads, New Zealand is bumbling along as addicted as ever to fossil fuels 

Opinion: Prime Minister Chris Hipkins has just made fossil fuel companies very happy. He’s supporting their profitable business-as-usual by extending the cut in fuel excise duty and permanently axing the biofuels mandate for vehicles.

He also hopes he’s making voters happy by keeping petrol and diesel as cheap as possible. But if he thinks he can postpone climate action to some distant time when it will be easier and cheaper to act, he’s showing ignorance of the escalating climate crisis and the speed with which cost-effective solutions are developing – not to mention a lack of political will to act, which will lose Labour votes in October’s general election.

His actions leave New Zealand with essentially no policies to reduce emissions from the 4.5 million fossil fuel vehicles on our roads, as my Newsroom colleague Marc Daalder reports.

This is music to the ears of our main suppliers of fossil fuels – multinationals ExxonMobil, BP, and Australian-owned Z Energy. Supplying more petrol and diesel dominates the strategies of all three, leaving clean energy initiatives as minor elements of the multinationals, and mere greenwash in the case of Z and its parent Ampol.

“We are working at pace to ensure we can support EV drivers on-the-go and are on track to have the capacity to charge more than 40 EVs across our network simultaneously by March,” says Mike Bennetts, Z’s chief executive.

Yep, that’s right – a magnificent 40 cars or so charging at once on Z forecourts across the length and breadth of New Zealand.

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Exxon and BP, along with all other multinational oil and gas companies, have just reported prodigious profits thanks to Russia’s invasion of Ukraine hiking fuel prices. They have three big ideas of how to spend their windfall profits: sharply higher dividends, ditto share buybacks; and more investment in fossil fuels. Investing in clean energy remains a minority activity for them.

Exxon, for example, reported full year profits of US$57.5 billion, from which it will spend US$30b on dividends and buybacks this year and next; and US$20b-25bn on capital expenditure a year, of which only US$3.4b will be on low emissions projects.

Last year Shell handed more money back to shareholders than it invested in future energy, dirty or clean. Its total capital expenditure was US$24.8b, of which only US$3.5b was on renewables. It forecasts a similar split this year.

As for BP, in May 2020, Bernard Looney, soon after he took over as chief executive, pledged to keep BP ahead of the global energy transition curve. “I think it’s very clear to any of us that society wants a different energy solution.”

This week, though, he reversed strategy. He said BP was increasing its investment in fossil fuels. This will slow the decline in its oil and gas production in 2030 to a quarter of 2019 levels. In 2020, he said the decline would be 40 percent. His latest rationale: “Governments and societies around the world are asking companies like ours to invest in today’s energy system.”

That’s flat-out wrong. Last year global investment in low-carbon energy transition totalled US1.1 trillion. For the first time, that matched the investment in fossil fuels, according to a report by BloombergNEF.

For oil companies, though, it’s all about the price of crude oil, currently about US$80 a barrel – two-and-a-half times the price it was when Looney made his 2020 green pledges. So, no surprise BP’s latest full-year profits of US$27.7b were the highest in the company’s 114-year history.

Yet, for all this renewed enthusiasm for their traditional products, oil companies have sharply different views on the future of fossil fuels. Exxon is the outlier. It believes the world will consume more crude oil in 2050 than it does today, according to its October 2022 projections of global energy demand.

But the US market for vehicle fossil fuels is already declining. It was 8.78 million barrels a day last year, down 6 percent from the record high before the pandemic. Last month, vehicle miles travelled were 90 percent of early 2020 levels. Also, cars are on average a third more fuel efficient than they were in 2004, the Environmental Protection Agency says.

BP, in contrast, projects a 25 percent decline in crude oil consumption by 2050 in its latest annual energy study released last month. Far more than Exxon, BP is hedging its bets. This year its investment in green energy will account for 30 percent of its capital expenditure, up from 3 percent in 2019.

Yet, fossil fuel companies should note that electrification of transport was the standout category in the BloombergNEF report. Including spending on electric vehicles and related infrastructure, it totalled US$466b – up 54 percent on the year. It came close to overtaking renewable energy investment as the largest category.

Global investment in energy transition. Source: BloombergNEF
Global investment in energy transition. Source: BloombergNEF

Nuclear power, which flatlined, was the only sector that failed to set a record. In contrast, hydrogen was a surprise – it attracted the least investment of US$1.1b, or 0.1 percent of the total. However, that was a tripling over the past three years, reflecting the fast-growing interest in it by the private sector and by governments via supportive policies and some financial commitments.

Moreover, the geopolitics of this spending on low carbon technologies is very revealing. China accounted for US$546b, nearly half the global total. The US was a distant second at US$141b, with Germany third. Members of the EU accounted for US$180b of investment.

Meanwhile in New Zealand we bumble along as addicted as ever to fossil fuels.

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