Managing energy crises in an age of climate disruption

There has been notable progress in curbing the supply of fossil fuels, but demand-side measures are lacking and the post COVID-19 recovery is looking like...

What happened

Show all news, opinion, videos and press releases matching →

Why it matters

A recent report by Goldman Sachs reached a surprising conclusion: Over the past eight years, financial markets have been increasing the cost of capital for big, long-term, high-carbon investments in sectors such as offshore oil and liquefied natural gas. But when it comes to renewable projects, the “hurdle rate” – the minimum rate of return required by investors – has been declining.

The difference is significant, translating into an implied carbon price of about $80 per ton of carbon dioxide for new oil developments and $40 per ton of carbon dioxide for LNG projects.

Capital markets seem finally to be internalising the message that high-carbon investments should carry a significant risk premium. This insight has not emerged spontaneously. It is the result of many years of in-depth research, targeted analyses by groups like Carbon Tracker and the Institute for Energy Economics and Financial Analysis, pressure from investor alliances, hard-hitting NGO campaigns, and divestment decisions by foundations, churches, universities, and pension funds.

This news brief is based on reporting published by Eco-Business on 2021-12-21. The original report is linked below.