A Critical Overview of Energy Companies’ Sell-off of Fossil Fuel Assets
The current urgency of climate change mitigation has led to the acceleration of emissions reduction targets by energy companies worldwide. As a result, many firms have begun to sell-off their fossil fuel assets to demonstrate their commitment to green credentials. However, such a sell-off has come under scrutiny as it only shifts emissions from one company to another, doing little to lessen the climate crisis. Vattenfall, a Swedish energy company, is an example of such a sell-off. The company sold its four most polluting power plants and several coal mines to Energetický a průmyslový holding (EPH) in 2016. The CEO of the company proudly proclaimed that they were “phasing out” emissions, but in reality, the company paid someone else to take them.
The Vattenfall-EPH Deal: A Strategic Decision
Vattenfall’s strategic decision to shift its business to renewables and lower its carbon exposure led to the deal with EPH. The Swedish government pressured the company to lower its carbon footprint by getting rid of its power plants and coal pits, which were responsible for losses of around $1.7 billion in 2015 alone. By selling its assets to EPH, Vattenfall cut its carbon emissions by 70 percent in one go. While this deal was beneficial to Vattenfall, it did little to lessen the climate crisis, as all the plants are still running and releasing close to the same amount of carbon dioxide. According to the EU data collected by the Europe Beyond Coal campaign, the plants produced 235 million tonnes of carbon dioxide in the four years following the sale, compared to 263 million tonnes between 2012 and 2015, when they were still owned by Vattenfall. This is a significant issue, as on a yearly basis, the plants make up roughly 8 percent of the entire emissions produced by Germany, Europe’s largest economy.
Energy Companies Sell-off of Fossil Fuel Assets: A Big Problem
Energy companies’ sell-off of fossil fuel assets is a big problem. Although many companies have closed coal plants and replaced them with cleaner alternatives, the plants sold off have remained on the grid for years. Europe’s ongoing shortage of natural gas has compounded the problem by raising electricity prices and making it cheaper for power producers to fire up their coal plants. According to Ember’s data estimates, coal still made up 15 percent of the EU’s electricity mix in 2021. This dynamic could persist for years if gas remains scarce. This is evident in the fact that the gas crunch means the continent’s remaining coal plants are running much more frequently, and at higher profits.
The Greenwashing Effect
Larry Fink, chair and CEO of BlackRock, has criticized energy companies for selling their assets instead of winding them down during last year’s COP26 climate summit in Glasgow. He lambasted such divestments as window-dressing and greenwashing. Climate campaigners have also criticized such sell-offs for merely shifting emissions elsewhere. Both Greenpeace and members of Sweden’s Green Party, part of the country’s coalition government, criticized Vattenfall’s deal with EPH.
In conclusion, although energy companies have divested more than $28 billion in assets since 2018, according to Wood Mackenzie, selling fossil fuel assets to achieve climate targets raises questions. This approach shifts emissions from one company to another, doing little to lessen the climate crisis. Vattenfall’s strategic decision to sell its assets to EPH to shift its business to renewables and lower its carbon exposure resulted in cutting carbon emissions by 70 percent. However, the plants sold off still release close to the same amount of carbon dioxide. The energy companies’ sell-off of fossil fuel assets remains a burning problem.