Ukraine war gives impetus to climate backsliders

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LONDON, Feb 24 (Reuters Breakingviews) - Climate change may be one key casualty of the Ukraine war. After Russia’s invasion, Western politicians may push for more renewables long term, but they also need more dirty energy today. Investors, lured by high crude prices, will struggle to punish polluters.

The Ukraine conflict coincides with a broader battle. At November’s COP26 summit, big polluters like China generally dodged making much tougher decarbonisation pledges in favour of further action in 2022. But a post-pandemic demand surge has also seen fossil fuel fans calling for fresh oil and gas supply to ease high prices.

In the short term, war could shift power towards the green advocates. Europe in particular will need to reduce its dependence on Russian gas. With crude futures now at the highest since 2014 amid fears that Russia could limit exports, the pressure to use renewable sources and technologies, such as electric vehicles, will grow. Wind players Orsted (ORSTED.CO), Vestas Wind Systems (VWS.CO) and Siemens Gamesa Renewable Energy (SGREN.MC) all rose over 10% on Thursday trading.

Yet wind farms and solar parks take time to build, and battery cars need charging networks. In the meantime, energy prices must come down and security of supply needs a quicker fix. U.S. Republican Congress members are pushing to restore the Keystone Pipeline between Canada and the United States. Germany’s economy minister has pledged to build up coal and gas reserves, and build new gas terminals for imports. Fossil fuel outfits Aker BP and Lundin Energy (LUNE.ST) were the other big risers in Europe’s STOXX 600 Index on Thursday.

Given the noise environmental, social and governance investors increasingly make, you’d expect they’d choose clean over dirty energy. In recent years, investors have poured money into funds that focus on ESG criteria. Yet such funds have performed badly in recent months. High oil prices may make companies like Shell , whose shares rose as much as 4% on Thursday, a safe haven. The longer the war drags on, the more investors and politicians may struggle to stay virtuous.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

CONTEXT NEWS

- Brent crude rose 7% on Feb. 24 to $103.53 per barrel as of 1520 GMT, amid fears that Russia’s invasion of Ukraine may disrupt exports from the country.

- Shares in fossil fuel producers rose on Feb. 24, even as the broader stock market sank. North-sea oil developers Lundin Energy and Aker BP rose around 6% each, as of 1520 GMT. Shell was up around 1.4%. The broader STOXX Europe 600 index was down around 3.5%. Orsted, Siemens Gamesa Renewable Energy and Vestas Wind Systems all rose over 10%.

Editing by George Hay and Karen Kwok

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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