2024’s Focus on Near-Term Profits
By Ron Bousso
LONDON (Reuters) – Major European energy companies have intensified their focus on near-term profits in 2024, effectively slowing or reversing their climate commitments. This trend is unlikely to change in 2025, according to industry observers. The reduced investment in renewable energy projects by oil and gas majors reflects broader shifts driven by geopolitical factors, rising energy costs, and the evolving priorities of governments around the world.
The Context: A World Rethinking Its Energy Path
The decline in investments by oil companies like ExxonMobil and Chevron into clean energy projects stems from several key developments. Following Russia’s full-scale invasion of Ukraine in 2022, global energy costs surged. This environment has led governments worldwide to reconsider and sometimes delay their ambitious climate policies, opting instead for measures that prioritize economic stability over rapid decarbonization.
Europe’s Energy Transition Faces Challenges
In Europe, the pace of renewable energy adoption has been uneven. Companies such as BP and Shell have significantly scaled back their investments in wind and solar projects. For instance, BP, which had aimed to achieve 50 gigawatts of renewable power by 2030, now intends to spin off nearly all its offshore wind assets into a joint venture with JERA, a Japanese energy group. Shell has largely ceased new offshore wind projects, exited power markets in Europe and China, and weakened its carbon reduction targets.
Geopolitical Disruptions and High Oil Prices
According to Rohan Bowater, an analyst at Accela Research, geopolitical tensions like the Ukraine invasion have dampened CEO incentives to prioritize low-carbon transitions. High oil prices and shifting investor expectations further complicate the situation. In 2024, BP, Shell, and Equinor reduced their low-carbon spending by 8%. Shell emphasized its commitment to becoming a net-zero energy company by 2050, while Equinor noted that its offshore wind projects have faced significant headwinds from inflation, supply chain bottlenecks, and operational challenges.
The Impact on Climate Efforts
The oil companies’ retrenchment poses a challenge for efforts to mitigate climate change. Global carbon emissions are projected to reach a new high in 2024, with temperatures already setting records. In 2025, the Paris Agreement’s 1.5°C target may face increasing pressure as fossil fuel subsidies and cheap oil prices bolster renewable energy alternatives.
A World at Odds: Clean Energy vs. Economic Stability
The shift toward near-term profits by oil companies contrasts sharply with global efforts to accelerate climate action. In some cases, this approach has led to a divergence between policy goals and investment priorities. For example, Shell’s decision to halt new wind projects in Europe aligns with its broader strategy of reducing green investments. However, the company remains committed to achieving net-zero targets by 2050.
The Road Ahead
As the energy landscape continues to evolve, the interplay between economic stability and climate action will remain a critical focus for companies and governments alike. The retrenchment of investments in renewable energy projects by major oil firms underscores the challenges posed by geopolitical instability and rising energy costs. Despite these headwinds, there is growing recognition that abrupt decarbonization efforts are not only unfeasible but also economically detrimental.
Conclusion
The shift in focus among European energy companies highlights broader trends in the energy sector. While some companies continue to prioritize renewable projects, others are pursuing strategies that emphasize short-term profitability over long-term sustainability goals. This divergence has far-reaching implications for global climate efforts and the trajectory of energy innovation.
