By Steven Cohen, Ph.D., Director of the M.S. in Sustainability Management program, School of Professional Studies
With extreme weather events pummeling Florida and much of America’s Southeast and more and more people understanding the destructive power unleashed by our warming planet, you’d think the fossil fuel industry would move to a more subtle form of advocacy. But not these guys. In a fascinating report in the Washington Post last week, Evan Halper and Josh Dawsey wrote that:
“An influential oil and gas industry group whose members were aggressively pursued for campaign cash by Donald Trump has drafted detailed plans for dismantling landmark Biden administration climate rules after the presidential election, according to internal documents obtained by The Washington Post. The plans were drawn up by the American Exploration and Production Council, or AXPC, a group of 30 mostly independent oil and gas producers, including several major oil companies. They reveal a comprehensive industry effort to reverse climate initiatives advanced during the past nearly four years of Democratic leadership… The policy plans, contained in documents distributed to a wide group of company executives at AXPC board meetings in April and August, also call for a repeal of more than a half-dozen executive orders that lie at the center of the Biden administration’s efforts to combat climate change. Taken together, the group’s goals amount to a monumental rollback of some of the most aggressive federal tools for cutting emissions… The agenda contrasts with the public pledges several AXPC members have made to their investors and customers to support aggressive regulation of methane and align with the 2016 Paris agreement on climate change, which aims to cut global emissions enough to limit warming to 1.5 degrees Celsius.”
The pace of the transition from fossil fuels to renewable energy depends on several factors. Public policy is one of those factors. Government procurement, investment, and incentives can accelerate the transition. Even more important is the development of technologies that improve the efficiency of generating electricity from solar-based sources and storing that energy. Those technological advances are well underway even though they have not quite arrived. When they do, they will accelerate the competition with fossil fuels already underway and drive them from the energy marketplace. Renewable energy is already cheaper than fossil fuels, but because of sunk costs and old habits, it will still take a generation for our economy to decarbonize. The business model and technology of fossil fuel use require constant fuel extraction and transport before energy can be generated. In contrast, solar, geothermal, and wind power require a one-time installation of energy generation and storage technologies. Once in place, the power generated by the sun is free and does not require costly extraction and transport. With improved technology and lower costs, the cost differential will only grow. The fossil fuel energy business is dying, and the only question is how long it will take to die.
The need for increased sources of energy for computing, communication, and the development and use of artificial intelligence provides motivation for consumers of energy to figure out ways to reduce the cost of energy. Despite my deep reservations about the safety of nuclear power, we are already seeing companies like Microsoft, Google, and Amazon considering large-scale investments in nuclear power generation. They are searching for alternatives to fossil fuels and demonstrating the economic clout of energy consumers. These companies have also attempted to translate their economic power into political power by resisting efforts to regulate their own operations by fighting efforts to break up their monopolies and near-monopolies. But these tech giants have not engaged in energy politics, even though their need for lower-cost energy is growing.
In many respects, the interests of these energy consumers do not line up with the interests of the fossil fuel companies. While they seem to share their anti-regulatory ideology, most energy consumers are subject to the costs of climate change and have no reason to oppose government efforts to reduce greenhouse gas emissions as long as it doesn’t drive up the cost of energy. Amazon, with its vast and complex shipping and logistics operations, is vulnerable to the impact of climate-accelerated extreme weather events and has the capital to invest and benefit from the long-term cost savings generated by solar power and electric vehicles.
You’d think a dying industry would focus its attention on transitioning to a more sustainable business, but these fossil fuel companies seem to believe that politicos like Donald Trump can slow down the transition to renewable energy. If the only reason for the transition was climate policy, they might be correct. But the movement away from fossil fuels is also based on issues of cost and the reliability of supply. The war in Ukraine and the conflict in the Middle East both influence fossil fuel prices and the availability of supplies. These uncertainties and the centrality of energy in the modern economy also drive the search for energy alternatives.
It is also important to understand that while the United States is an important player in the energy transition, we are far from the only game in town. Although the transition is taking place slower than climate advocates would prefer, it is well underway. According to a recent report by Giulia Petroni of the Wall Street Journal:
“Clean-energy sources are set to grow at a faster pace than global energy demand by the end of the decade, becoming the largest source of energy in the mid-2030s, the International Energy Agency said…cleaner forms of energy—solar and wind in particular—are poised for rapid growth. This will result in peak fossil-fuels demand before 2030 and bring their use down to 58% of total demand in 2050 from 80% last year. “Continued progress of transitions means that, by the end of the decade, the global economy can continue to grow without using additional amounts of oil, natural gas or coal,” the IEA said in its latest report on Wednesday. Investments in renewables are forecast to reach $850 billion in 2030 from around $680 billion last year, with total renewables capacity worldwide increasing more than two fold.”
The International Energy Agency’s projections are based on current government energy policies and do not factor in the possibility of technological breakthroughs. My view is that the policies are likely to change over the next quarter century, in part due to extreme weather-induced destruction and in part due to advances in renewable energy and battery technologies. Moreover, private corporate behavior will be driving the demand for energy innovation, largely supplanting the role played by government.
The Washington Post’s piece on the oil industry’s effort to reverse climate policy also noted that large oil companies like ExxonMobil and ConocoPhillips give lip service to supporting climate goals while continuing business as usual. The Post’s Halper and Dawsey conclude their report by noting that:
“Independent monitoring groups say the companies are not living up to their pledges. The think tank Carbon Tracker published a report card in March that found all the major oil and gas companies were far off track in meeting the Paris targets. ExxonMobil and ConocoPhillips received among the worst grades.”
These American fossil fuel companies can play political games as much as they like, but they are still on the wrong side of technological history. They will be replaced by companies that go all in on the transition to new technologies. Companies that resist the march of technology will end up like Blockbuster Video or Kodak. In contrast, consider Netflix. They started as a company that mailed movies on discs to your home. They dropped the disc mailing service to concentrate on streaming, and then while continuing to stream, they saw that the real money would be made in the “creative software” business of entertainment production. That would enable them to expand the customer base of their streaming business. Each step of the way, they adapted as technological change modified their business model. The fossil fuel companies are looking to Donald Trump to save their business. All he asked for was a billion dollars upfront in campaign contributions. They’d be better off becoming energy companies participating in the transition to renewable energy. In the long run, hydrocarbons will be used for plastics and chemicals, and future generations will be amazed we burned such valuable finite resources instead of using the sun to supply energy.
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.
