In 2022, global coal consumption reached 8.3 billion tons, already hitting 4.7 billion by June this year: a clear upward trend.
Anglo-Swiss multinational mining and commodity trading company Glencore recently acquired various business sectors of another major player in mining, Canadian company Teck Resources, in a $9 billion deal. All of this occurred as the price of metallurgical coke rose to around $380 per ton in recent months, rebounding from the 2022 peaks where it exceeded $550.
China and India dominate coal consumption, accounting for over 50%, while Europe’s consumption is declining due to decarbonization goals. Except for Germany, where the political decision to close nuclear power plants has led to a 7% increase in coal consumption for electricity production in recent years. Germany and Poland confirm their position as the largest coal consumers in Europe and, at the same time, the largest CO2 emitters. Between the two countries, 9 coal-fired power plants account for 50% of carbon dioxide emissions in our continent.
New investments are not limited to coal.
The International Energy Agency (IEA) predicts that investments in oil and gas extraction will grow by 11% in 2023, with total investments of around $530 billion. Analysts at Wood Mackenzie forecast additional investments of $180 billion in Exploration & Production (E&P) by 2025 to extract oil reserves equivalent to 27 billion barrels. In light of this, it’s no surprise that oil companies like Shell and BP have slowed down plans to abandon traditional activities, having experienced significantly lower returns on investment from renewable sources (about half) compared to hydrocarbons.
Significant investment flows in the fossil fuel sector are emerging, with predictions of oil demand exceeding 100 million barrels per day by 2023. China and India continue to be protagonists in fossil fuel consumption, while Europe and the West, driven by sustainability-oriented policies, risk being dragged down into a vortex of economic stagnation, making the economy increasingly vulnerable and fragile.
How are ESG green investments faring?
In recent weeks, there have been reports of financial difficulties for major companies in the offshore wind energy sector, such as Siemens Energy and Orsted. Electric vehicle production has also experienced a slowdown from Ford and General Motors, while some governments, like the British and Canadian, have taken a more cautious stance on reducing carbon emissions.
In this context, it’s not surprising that financial markets have responded by adjusting prices of green sector stocks, considering the uncertainties and geopolitical risks currently influencing international scenarios.
Among the most liquid Exchange Traded Funds (ETFs) specialized in the green sector, the quotes of the iShares Global Clean Energy (a fund replicating the performance of the S&P Global Clean Energy Index, consisting of around 100 companies active in the renewable energy sector) have recorded a 34% decline since the beginning of the year, indicating significant weakness. In the same period, the S&P 500 (gold standard for index comparisons) has registered a 16% increase.
The slowdown in the financial sector’s support for renewable energy is reflected not only in the negative performance of the most liquid green index on the market but also in the reduction of private bond issuances tied to such energies. In 2021, global bonds worth $608 billion were issued, while in 2022, the figure dropped to $541 billion, and it is expected that 2023 will close below this figure, around $510 billion.
The contribution of fossil fuels to the world.
In the 90s, global energy needs were met by 87% from fossil fuels (39 oil, 27 coal, 20 gas), 5% from nuclear, 6% from hydroelectric, and 0.01% from photovoltaic and wind. Currently, fossil fuels contribute 84% (33 oil, 27 coal, 24 gas), 4% from nuclear, 6% from hydroelectric, and 3% from photovoltaic and wind (1% and 2%, respectively).
While renewables have grown by a factor of 300 over thirty years, mainly through public subsidies, energy transition won’t occur through legislative decrees but with sustainability and cost-effectiveness across the entire supply chain.
We must be aware: the world cannot survive without fossil fuels. Oil is not only needed for fuel production but also for road asphalt, the production of plastics and synthetic products we use daily, making genuine progress in society. From oil, paradoxically, turbine lubricants are derived, requiring about 300 liters per wind turbine. If we are to meet green deal targets, Italy alone would need 10,000 turbines in the coming years, amounting to 3 million liters of lubricant. In conclusion: without oil, no wind energy.
What has enabled progress and changed the world is the 24/7 availability of energy, only achievable through fossil fuel, nuclear, hydroelectric, wind, and photovoltaic plants. However, with their intermittency, wind and solar power cannot guarantee continuity.
