The International Monetary Fund has issued a warning before a meeting of the Opec oil cartel that permanently low fossil fuels are choking off investment in renewable sources of energy and hindering the fight against climate change.
An assessment of the energy market from the IMF in an attempt to prompt action at the Paris climate change conference, Obstfeld and Rabah Arezki said: “Fossil fuel prices are likely to stay low for long. Nothwithstanding important recent progress in developing renewable fuel sources, low fossil fuel prices could discourage further innovation in, and adoption of, cleaner energy technologies. The result would be higher emissions of carbon dioxide and other greenhouse gases.” The IMF analysis studies showed that renewable energy will have to displace fossil fuels to a much greater extent in the future to avoid unacceptable climate risks. “Unfortunately, the current low prices for oil, gas, and coal may provide scant incentive for research to find even cheaper substitutes for those fuels.”
The world’s leading oil producers are preparing for the possibility of oil prices halving to $20 a barrel. Lord Browne, the former chief executive of BP, refused to rule out the possibility that oil could halve again in price when he was interviewed by Bloomberg TV. Hopes that Opec would announce production curbs to push prices up were dashed when the cartel met in Vienna last Friday, triggering the latest downward lurch in the cost of oil.
Saudi Arabia stood accused of trying to wreck the Paris climate summit in order to protect its future as one of the world’s largest oil producers. Behind the closed doors of negotiating sessions, however, the Saudis have strenuously resisted efforts to enshrine ambitious goals into the text of a Paris agreement. The Saudis objected even to the mention of 1.5C – a new more ambitious target for limiting warming now endorsed by more than 100 countries including vulnerable low-lying states and big polluters such as the European Union and US. The kingdom balked at the goal of decarbonising the economy by 2050. The Saudis have also objected to demands for periodic reviews of climate plans, according to accounts from negotiators and observers. Saudi delegates complain that submitting a climate plan before Paris was difficult enough. Saudi negotiators have also demanded that they should also be protected from loss of future oil income