Like tobacco in the latter half of the 20th century, the fossil fuel industry has spent decades attempting to delegitimize science. In some advertising in the 1940s and 1950s, cigarettes were even promoted for their health benefits. For decades, tobacco companies denied the connection of smoking to cancer. Today, one billion people still smoke, and seven million people die every year from the health impacts of tobacco. There is no question that the fossil fuel industry has long understood the causal relationship between burning fossil fuels and climate change. They also understand the devastating environmental and health impacts of petrochemicals. Just as a billion people on the planet are addicted to tobacco, nearly all of us are addicted to fossil fuels. And the energy from fossil fuels is central to our way of life. I am writing these words on a computer powered by electricity still generated from fossil fuels. Fossil fuel companies are expert at translating their economic power into political power and have contributed to creating the ideology of climate denial. They practice a cynical and dangerous form of advocacy, and for a long time, their political and economic power has prevailed. For many years, fossil fuels have dominated the world’s energy system.
But those days are gradually ending. Solar, wind, geothermal, and battery technologies are advancing rapidly, and the fossil fuel industry has about one more generation to live. The nations that are fossil fuel powerhouses in the Middle East know this and they are doing everything they can to rapidly diversify their economies. The fossil fuel industry will eventually be mainly devoted to manufacturing chemical feedstocks, and its damage will be limited to toxic chemicals and plastic pollution. The reason for this is simple and has to do with the basic business models and cost structures of fossil fuels and renewable energy. Fossil fuels are plentiful beneath the earth’s surface but are finite and require increasingly advanced and expensive technology to extract from the earth. Each time we extract these fuels, we reduce the supply of a finite resource. When we extract fuel from the planet, we spend money and damage ecosystems. We then must transport it to the place where we burn it. The transport and burning of the fuel also costs money and pollutes.
In contrast, all forms of renewable energy transform energy from the sun—which, in practical terms, is free of cost and infinite—the sun will likely outlast our species. Capturing this energy does not directly pollute. It does not need to be mined, pumped, or transported. We capture the energy with solar cells, wind turbines, and other forms of renewable energy and store it in batteries. In some, but not all cases, it is transmitted but not transported by the electric grid. All these renewable technologies pollute when they are manufactured, but all these forms of pollution and the technologies of renewable energy are subject to technological innovation based on human ingenuity. That innovation and ingenuity is far from finite. Pollution from renewable energy technology can and will be reduced over time and, in any case, is far cleaner than fossil fuels. The costs of renewable energy, like the costs of computing, will continue to go down as technology advances.
The cost of renewable energy is already lower than fossil fuels, and the cost of renewable generation and storage continues to go down. Fossil fuels are getting more expensive, and their price is subject to the vagaries of international politics and trade since many nations must import fossil fuels. The sun shines everywhere, the wind blows everywhere, and the issue of intermittency is being addressed through advances in battery technology. The pace of the diffusion of renewable energy technology will reflect costs, benefits, convenience, and the recovery of sunk costs. We see this with electric vehicles. Many people have capital invested in their cars with internal combustion engines, and they will continue to drive them in the years to come. Eventually, the quality, costs, and convenience of electric vehicles will convince them to get rid of their clunker and invest in the new technology. It is impossible to predict the pace of the transition since it depends on the pace of innovation, price, and consumer attitudes. We each have personal experiences with technology transitions. Think of the transition from landlines to smartphones. Or broadcast television to cable TV to streaming video. The smartphone has displaced the landline, and streaming video on the internet is replacing cable television. People, particularly businesses, still have landlines, and some people still have cable television, but these technologies are dying. That will be the fate of fossil fuels.
Climate activists correctly mistrust fossil fuel companies because these companies are continuing to use their economic power to buy-off political and even educational institutions. Climate activists want universities to divest their endowments from investing in fossil fuel businesses. I continue to view the use of divestment as a misapplication of a strategy that was useful in the battle against apartheid in South Africa but is in general an over-used, ineffective, and symbolic tactic. Rather than focusing on divesting from fossil fuels, we should advocate investing in renewable energy and decarbonizing university facilities. One would hope that the professionals investing endowments are smart enough to avoid investing in a dying industry. The fossil fuel industry continues to fight climate regulation and the effort to decarbonize our energy system. One issue I am interested in is the possibility that the organizational capacity of fossil fuel companies could be utilized to manage the transition to renewable energy. These companies have scientific, managerial, and financial expertise but have shown little interest in anything but the short-term profits they generate from extracting and selling fossil fuels. Can they be motivated to redefine themselves as energy companies and transition away from fossil fuels?
The picture at this point is far from positive. While it is not clear that fossil fuel companies can lead decarbonization, electric utilities, a critical consumer of fossil fuels, seem to be much more interested in transitioning. They don’t own the fossil fuels; they are fossil fuel consumers. As consumers, they have a clear economic interest in lower-cost energy, and while they have sunk capital costs in facilities that burn fossil fuels, as these facilities age, they can be replaced with renewable energy. The European (and now global) electric utility Enel appears to be attempting to decarbonize. According to their website:
“The energy transition is a process already under way and is now unstoppable. We at Enel are at the forefront in driving the change towards a sustainable energy system in line with the UN’s SDG 13 (Climate Action), which is at the heart of our strategy. This is an ambitious goal that we aim to achieve by pursuing a virtuous journey along two pathways. Underpinning the entire process is the growth in our production from renewable sources, which has already overtaken production from fossil fuels. Today, with around 59 GW of installed renewable capacity, we are the world’s leading private Group in the field of renewable energies and we plan to reach around 75 GW by 2025. At the same time, we are progressively reducing the contribution from coal until it is completely eliminated: the closure of all coal-fired plants, which was originally planned for 2030, will now be completed ahead of schedule, in 2027. We are also transforming plants that use other technologies into innovative, modern and efficient energy centers, using renewable sources and batteries for energy storage. In some cases natural gas is used as a temporary source in order to ensure the stability of the energy system.”
While Enel is progressing in its effort to decarbonize, electric utilities in Spain and Portugal seem to be outperforming Enel. According to Kevin Leung of the Institute for Energy Economics and Financial Analysis:
“Italian utility Enel S.p.A. (Enel) reported its preliminary 2023 full-year results. The company showed a significant decrease in the share of thermal production to 27% in 2023 from 39% in 2022, resulting from a more than one-third decline in thermal output. Simultaneously, the share of renewable energy production (including hydro) increased to 61% in 2023 from 49% in 2022. These are likely to drive a significant reduction in the company’s emission intensity. But whether this is enough to meet its 2023 sustainability-linked bonds (SLBs) performance goal remains uncertain…It’s worth noting some more advanced players show more favourable trajectories in emission intensity reduction. For example, Portuguese utility EDP reduced its 2023 scope 1 and 2 emission intensity by 50% year on year to 81gCO2e/kWh and has a target of 8gCO2e/kWh by 2030. Spanish utility Iberdrola’s emission intensity was 77gCO2e/kWh in 2023, with a target of less than 10gCO2e/kWh by 2030.”
In sum, the corporate capacity needed to organize decarbonization will likely come from companies that use energy rather than those that produce it. In part, by becoming producers of energy. When Enel or Walmart utilize solar arrays to generate electricity, they are cutting their cost of energy and are also becoming their own energy supplier. The fossil fuel companies will shrink as demand for their product shrinks. The organizational capacity and economic motivation for decarbonization will come from electric generators and other companies that now use fossil fuels. They will do this to reduce costs and improve the reliability of energy supplies. This will have the added benefit of reducing greenhouse gas pollution.
Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of Columbia School of Professional Studies or Columbia University.
About the Program
The Columbia University M.S. in Sustainability Management program offered by the School of Professional Studies in partnership with the Climate School provides students cutting-edge policy and management tools they can use to help public and private organizations and governments address environmental impacts and risks, pollution control, and remediation to achieve sustainability. The program is customized for working professionals and is offered as both a full- and part-time course of study.
