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Oil companies are reluctant to give up the big profits that fossil fuels bring them

MICHEL MARTIN, HOST:

At this year's climate talks, major oil companies are under a lot of pressure to invest more money into green energy. But so far, such investments are a tiny slice of how they spend their cash. NPR's Camila Domonoske looks at one big reason why.

CAMILA DOMONOSKE, BYLINE: Imagine that you are an oil company with a big ol' pile of cash to invest each year - so big you could swim in it...

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR: (As Scrooge McDuck, grunting).

DOMONOSKE: ...Like Scrooge McDuck.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR: (As Scrooge McDuck) Ah.

DOMONOSKE: The International Energy Agency says, to be on track with the world's climate goals, you would need to put half that money - half of it - into clean energy projects by 2030.

(SOUNDBITE OF COINS JINGLING)

DOMONOSKE: Right now, the oil industry's plunking down just 2.5%.

(SOUNDBITE OF COINS LANDING)

DOMONOSKE: Some oil companies argue they just don't know much about wind or solar, but another reason is pretty obvious - the world uses a lot of fossil fuels in cars, trucks, airplanes, factories, and producing that oil and gas is really profitable right now. Dan Pickering, an energy investor and consultant, says based on where oil prices have been most of this year, you - and remember, you're a big oil company - you'll make 20- to 50% on oil and gas projects.

DAN PICKERING: The same dollars invested in a renewable project might be generating in the 5- to 10% range.

DOMONOSKE: Now, renewables pay off in lots of ways - less pollution, better for the climate - and according to experts, clean energy could reduce the huge economic costs of climate change and save millions of lives. But, Scrooge McDuck, there's no column on your spreadsheet for those benefits. There is a very important column for returns. As for why oil and gas makes so much more than renewables, Rebecca Fitz is with Boston Consulting Group, and she says, in a word, risk.

REBECCA FITZ: Oil is, like, the quintessential risk business.

DOMONOSKE: Renewables are lower risk, lower reward, and that has some advantages. A lot of money is going into wind and solar from companies that like low and steady. But fossil fuel companies are built different. Profits boom and bust depending on the price of oil, which is pretty high right now.

FITZ: When everything pays off, it's a good business. When it doesn't, it's a horrible business.

DOMONOSKE: Another difference - the oil industry is really big, while renewables are still in the growing phase with growing pains. Andrew Logan is with the sustainable investment group Ceres, and he says, eventually, over time, renewable returns will look better - a lot closer to oil and gas.

ANDREW LOGAN: I think we're hoping that investors will take the longer view - right? - and sort of look past the next six or 12 months.

DOMONOSKE: A lot of investors are not great at this, he admits. BP recently made a big push to renewables but slowed down after shareholders balked. Other oil giants are staying away from wind and solar. Dan Ammann runs ExxonMobil's Low Carbon Solutions unit.

DAN AMMANN: From our perspective, you know, the business we're building here will need to compete for capital, you know, relative to the other businesses of the corporation.

DOMONOSKE: That means his climate-minded projects have to return about as much money as Exxon makes on average on oil and gas. So instead of wind and solar, he's placing bets on things like hydrogen. And Exxon still plans to invest the vast majority of its money in fossil fuels. Amena Bakr covers OPEC for Energy Intelligence. She says once green energy is more profitable, oil producers will pour money in.

AMENA BAKR: But until then, yeah, unfortunately, this is how the world works. Everyone wants to make profits.

DOMONOSKE: And not just any profits - big profits - because wind and solar do make money - just not as much as oil right now.

Camila Domonoske, NPR News. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Camila Flamiano Domonoske covers cars, energy and the future of mobility for NPR's Business Desk.