Fossil fuel divestment is changing the energy landscape. Read more about this radical niche and its impact on deep transitions.
“Fossil fuels are choking humanity.”
- António Guterres (Secretary General, United Nations)
The world is striving to limit global warming to 1.5° C to escape the extreme ramifications that the crisis imposes. That will require the world to cut emissions at least by 45 per cent by 2030. It calls for a rapid shift to cleaner and ethical energy sources while actively divesting from fossil fuels. While it will not happen overnight, a deep transition must be advanced.
Divestment from fossil fuels signifies pulling out stocks, bonds, and other financial instruments from companies that extract fossil fuels. There is a simultaneous shift in investment in climate solutions in the process. Schot and Kanger (2018) define a Deep Transition as a series of connected and sustained fundamental transformations of a wide range of socio-technical systems in a similar direction.
A deep transition takes place in waves that deepens over time but is not a deep transition in itself, and it is the overall change process. Schot and Kanger also highlight the significance of niches in the context of long term transition processes. Moreover, the divestment from fossil fuels as a sustainability transformation requires a fundamental change of production, distribution and consumption patterns.
The need for fossil fuel deep transition
To ensure a habitable planet radical shifts within all existing systems is a necessity. According to current global commitments, global emissions are set out to increase by 14 per cent over this decade. At least 60 per cent of oil and fossil methane gas and 90 per cent of coal must remain unextracted to keep within the carbon budget. The present emission trajectory indicates that the 1.5° C target’s carbon budget will be exhausted in ten years. The catastrophic reality is that humanity’s dependence on fossil fuels is already damaging vulnerable groups. Individually and institutionally there is a need to divest and simultaneously transition to global ethical energy means.
Deep Transition: Emergence, Acceleration, Stabilisation And Directionality
Two complementary approaches can be adopted for the transition and development of connected systems for a long drawn period: the Techno-economic Paradigm theory (TEP) and the Multi-level Perspective on socio-technical transitions (MLP).
The Techno-economic Paradigm theory focuses on long waves: 40 to 60 year long cynical variations in economic growth. TEP stresses upon the clusters of interrelated technological, organisational and institutional innovations as drivers of these waves. At present, there is a transitory period bridging two Deep Transitions. There is a gradual investment in renewable energy. There is a decentralised generation of power from multiple sources, eco-targeted finance, circulation of resources and resource efficiency within the circular economy. While certain drawbacks can be pointed out in the approach, Multi-level Perspective makes up for them.
Multi-level Perspective focuses on explaining large-scale and long-term shifts of 50 years or more – from one socio-technical system to another. A shift from fossil fuel-based energy systems to renewable ethical ones through an institutional transition explicitly points at the MLP approach. The essential components making up the multi-level framework are niches, socio-technical regimes and socio-technical landscape. New rules emerge and gradually become aligned into rule-sets in spaces called niches. Therefore, a Deep Transition can be considered a process by which some rules emerge, come to be aligned to each other and diffuse to various systems, thereby obtaining differing degrees of scope and durability.
A Deep Transition: Case for Fossil Fuel Divestment
In 2011, the way for fossil fuels divestment was paved on campuses in the United States. The upsurge was inspired by campaigns in the 1970s to force political change in South Africa by striking out financial support for apartheid funding companies. The divestment has since taken off from university campuses and has reached investors, religious groups, NGOs, media houses and others. Prior to the COP26, it was reported that institutions representing an unprecedented total of $39.2 trillion worth of assets have now committed to some form of fossil fuel divestment.
The divestment argument is based on a moral and financial foundation. The fossil fuel usage is leading to irreversible climate change which exacerbates the inequalities. Moreover, fossil fuel investments might become futile when governments reach closer to fulfilling their climate commitments.
Over the years, the discourse against fossil fuel divestments have captured the attention of investors, driving away from the ultimate goal of energy transition. It is argued that fossil fuel divestment marginalises the poor and developing countries. While the nations must get a fair chance to develop sustainably, fossil fuels are still drivers of climate change. Moreover on the financial front, it is argued that someone else will eventually invest making the divestment a pointless green political gesture. The aim of divestment is to dismantle the legitimacy of the fossil fuel business model which has a colossal impact on the people and the planet. Subsequently, it is the reputational damage that can have serious financial consequences.
There are still significant investments in fossil fuels, and subsidies still exist. However, a considerable shift in energy use and extraction has impacted further investments. This shift varies across regions and countries. Schot and Kanger, along with others, believe that this upsurge might lead to the second deep transition, which will unfold in the coming years. Techno-economic paradigm theory and Multi-level Perspective approach, along with a strong theory of change that the global society sets, will play an imperative role in fossil fuel’s deep transition.
It is yet to be seen how various approaches can facilitate a shift from a linear resource-intensive economy based on fossil fuels to a circular waste-free economy based on organic materials and from an individual towards collective consumption.
References
Ramirez, R. C. (2021a, September 8). Majority of fossil fuels must stay in the ground to limit warming below critical threshold, study shows. CNN. https://edition.cnn.com/2021/09/08/us/fossil-fuel-budget-climate-change-study/index.html
Ramirez, R. C. (2021b, October 5). Why ending our dependence on fossil fuels is so challenging. CNN. https://edition.cnn.com/2021/10/04/us/oil-spill-fossil-fuel-dependence-climate/index.html
Rapid Transition Alliance. (n.d.). Leaving the burning building – the rapid spread of fossil fuel divestment. https://www.rapidtransition.org/stories/leaving-the-burning-building-the-rapid-spread-of-fossil-fuel-divestment/
Saenz, E. (2021). Report Warns Time is Running Out to Affect Climate Change, Indiana Dawdles on Fossil Fuels. Indiana Environmental Reporter. https://www.indianaenvironmentalreporter.org/posts/report-warns-time-is-running-out-to-affect-climate-change-indiana-dawdles-on-fossil-fuels
Schot, J., & Kanger, L. (2018). Deep transitions: Emergence, acceleration, stabilization and directionality. Research Policy, 47(6), 1045–1059. https://doi.org/10.1016/j.respol.2018.03.009
Stand.earth. (2021, November 13). 1485 institutions with assets over $39.2 Trillion have committed to. https://www.stand.earth/divestinvest2021