Published on 11 February 2019

CSR

PG&E electric: the first bankruptcy linked to climate change

The recent bankruptcy of energy giant Pacific Gas & Electric Company (PG&E) is a very concrete illustration of climate risk. Suspected of being at the origin of the fires that devastated California last November, the company alone is paying a heavy price for its poor consideration of climatic impacts on its activity in an increasingly drought-stricken region.

A transmission tower located in the middle of the 'Camp Fire' could have potentially come into contact with a high-voltage line, causing sparks that ignited nearby vegetation.
Josh Edelson / AFP

"The first climate-change bankruptcy, probably not the last," wrote the Wall Street Journal on 18 January. The American daily newspaper reacted to the announcement just days before Pacific Gas & Electric (PG&E) announced its bankruptcy. The American energy giant, who supplies half of all California homes, is accused of causing the huge forest fires in the state last November, killing 86 people and destroying 14,000 homes.

Deliberate defiance

One of the company’s towers may have come into contact with a high-voltage line, causing sparks that ignited nearby vegetation. An investigation is under way and already 750 complaints have been filed against PG&E, the main culprit of this disaster. The company estimates the amount of compensation claimed at $30 billion.

"It is clear that 'Camp Fire' is a result of PG&E's deliberate disregard for public safety," accused Butte County, which has lodged a complaint against the operator for failing to maintain vegetation near their power lines. It must be noted that claims were not judged in the county’s favour. The company has also been implicated in the 2017 fires (that left 40 dead) and was sentenced after a 2010 gas explosion in San Francisco (8 casualties) due to poor maintenance of their networks.

Many responsible, but only one will be found guilty

This first-of-its-kind case study illustrates the imminent danger that climate change poses to businesses, though many still consider it a minimal risk. PG&E is paying a heavy price for not anticipating the massive fires, as similar incidents related to climate change have risen in recent years. For example, an informed company could have buried all or part of its network lines, cleared the areas around transmission towers or installed sensors to detect the start of a fire.

Of course, PG&E is not the only actor responsible. Droughts, poor maintenance of forest stands, and urban sprawl into forest areas have all made “Camp Fire” an extraordinary event with disastrous consequences. But in the eyes of California justice, PG&E is solely at fault if it is discovered that they started the fire.

This case could serve as a wake-up call for companies and investors around the world to better consider climate risk. "When this carbon bubble bursts, we'll see huge reverberations across our financial system. Climate change is a such a systemic risk that it touches every area of our lives," said Beau O'Sullivan, spokesperson for ShareAction, a British organisation advocating for responsible investment. The question now on everyone's mind: who will be next?

Concepcion Alvarez, @conce1


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