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Shell Has Got Its Climate Policy Wrong: Economist Nick Stern

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By: MICHEAL KAUFMANPublished: May 29, 2015 

At the Guardian Business debate on divestment in Kings Place, London, prominent Economist Nick Stern said that Royal Dutch Shell plc (ADR) (NYSE:RDS.A) wants investors to bet against the world taking action on climate change. He said that the oil giant and other hydrocarbon companies were pulling in the wrong direction, on the progress that will be made in renewable technology in the coming two-three decades.

He was of the view that despite hydrocarbon companies like Shell saying that the policies that will keep global warming to 2C will not be adhered to, they had to tell those energy companies that their forecasts were wrong. He said that they had to try to get the people to make sure that those policies will be implemented.

He told The Guardian, “They do not believe the world will be wise enough to follow policies that can hold the world to 2C and are asking us to bet against the world … telling us that we won’t do what we’ve set out to do and that it is a safe bet to bet that we won’t….We have to try to show them that they are wrong and that we can get the world’s people to insist that we must follow those policies. We must try to build pressure to try to make that 2C assumption correct and the forecast of the energy companies wrong.”

Mr. Stern made those comments after an exclusive interview of Shell CEO Ben Van Beurden with The Guardian, in which he said that the company will keep seeking new oil reserves. Mr. Van Beurden also stated that the renewables were not financially feasible enough that more investment could be made in them.

David Blood, co-founder of Generation Investment Management with Al Gore, weighed in on the debate by agreeing with Mr. Stern that Shell and other oil and gas companies had got their calculations wrong. He believed that substitutes to hydrocarbon-based energy were increasingly becoming highly competitive in the industry. He further said that the fossil-fuel companies were wrong to believe that in the coming 20-30 years, solar, wind, and energy efficiency will not be enough to edge out hydrocarbons, keeping in mind the progress that has been achieved in technologies in the last couple of decades.

While opining on what would constitute an effectual divestment strategy, Mr. Stern said that it was not enough to only divest from fossil-fuel companies but it was also important to invest and hold stocks in those companies that were taking on the challenge of combating climate change. The founder of Ecotricity Dale Vince took the debate further, by appealing to consumers to also boycott fossil fuels in their everyday life on top of divesting from them. According to him, a boycott campaign together with a divestment campaign was required to undercut the demand for fossil fuels. He was of the view that today it was more possible than before to avoid fossil fuels with green electricity, electric cars, and gas.

Mr. Stern seconded his strategy and said that the best way to weaken fossil-fuel demand was to tax carbon and finish subsidies, thereby letting the people know the proper price of fossil fuels. Other participants at the debate however were less enthusiastic about the effect on fossil-fuel companies, a boycott strategy, or a US or UK divestment would have. The head of sustainability at Legal & General investment management, Meryam Omi told The Guradian that, “When we’re talking to extractive industries they don’t really care about the demand in the UK or Europe.” She was of the view that demand would fall regardless due to efficiency measures.

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