Demand for fossil fuels set to decline as investors consider world’s fuel choices at COP21

As the word’s decision makers are preparing to gather at the COP21 climate talks in Paris, investors consider the long-term prospects and risks of the fuel choice made in power generation and other industries.

Allianz, Europe’s biggest insurer, has said in support to COP21 that it will reduce its coal investments and double its renewables spending from about EUR2bn (US$2.1bn). The move is to “send a signal to our branch and to capital markets,” said Allianz’s chief investment officer, Andreas Gruber, in a ZDF television interview. Other financial institutions who have sizeable investments in coal are also considering their position.

As a result, demand for fossil fuels could be set for a decline, according to non-profit think tank Carbon Tracker. If the world meets the UN target of limiting the rise in global temperature to less than 2 degrees Celsius, believed to be the tipping point that results in catastrophic effects of climate change, hydrocarbon producers risk US$2.2trn by investing in products for a contracting market. No new coal mines are needed, oil demand will peak around 2020 and growth in gas will disappoint industry expectations, Carbon Tracker Initiative said in a report.