High risk, low return: Investment in non-renewable energyDominic Bryan

603 billion US Dollars. That was the amount of money invested worldwide into the oil and gas industry in 2021, according to the IEA. As the world turns to greener alternatives for basically every aspect of life, non-renewable energy sectors, such as oil, gas, and coal are still perpetually being propped up by investments. Investing in these industries drives down their cost of production and enables them to produce cheap fuel source, a staple for the modern economy. At the same time however, it poses an ever-threatening risk of climate catastrophe. So, does the return of investing in non-renewable energy outweigh the risk?

Risk #1: Climate catastrophe. It is well established that usage of non-renewable energy such as fossil fuel and coal produces harmful chemicals that damages the environment. Not only that, the method to draw these elements from the ground are also environmentally harmful, polluting the land, water, as well as the air around these extraction points. The negative externalities brought by non-renewable industries to the global environment are very significant. By investing in these industries, they are able to expand their operations, which will worsen the negative externalities to the environment.

Risk #2: Indigenous mistreatment. A famous example of this is when oil extraction in the Amazon jungle significantly worsens the lives of indigenous people who live there. Oil spills contaminate the water which they use for drinking and bathing and poisoned the animals that become their food source. This story began in the 1970s and is still continuing to this day. Investment in non-renewable industries will not only sustain this mistreatment, but it could also potentially increase the rate at which indigenous communities are being mistreated.

Return #1: Reduced costs. However, this issue is not just black and white. So far, coal and gas are far in the lead when it comes to electricity production, and the next source, hydropower, does not even come close to coal and gas. To simply remove investment from coal and gas would be devastating for the economy. It would significantly increase the cost of electricity, which in turn will increase cost of production, and making everything more expensive. This will have regressive income on society, especially on low-income consumers.

Return #2: Job source. Although oil companies may cause destruction of local livelihoods, they can also be a source of jobs and income for the local communities. Oil companies are more interested in hiring locals to operate their extraction site for multiple reasons: cheap labor, zero transportation costs, better knowledge of the area, and many more. These provide a stable source of income for people in these indigenous communities.

At the end of the day, if we look more closely, although oil companies might provide a stable job source, some companies may actively poison their own workers from pollution and contamination while providing them with minimum health and environmental compensation. Considering all these factors in mind, governments worldwide can start slowing down investments on non-renewable while gradually increasing investments on renewable energy to resolve the energy crunch issue which potentially drives prices up.