How Fossil Fuels Won (and Lost) a Thirty Years’ War
(Bloomberg Opinion) -- Thirty years ago this summer, James Hansen, then at NASA, provided landmark testimony to Congress about the links between fossil fuels and climate change. The U.S. was suffering one of its worst droughts ever and Yellowstone National Park was burning. Spurred to action, oil majors offered to help shepherd the world through a long, difficult energy transition. As the foremost repositories of energy expertise, and armed with big balance sheets and deep government contacts, they were natural partners in challenging an existential threat.
Everything after “burning” is fiction, of course. Despite studies linking fossil fuels to potential atmospheric changes stretching back at least six decades, the fossil-fuel industry spent a good deal of the past 30 years pushing back on efforts to curb greenhouse-gas emissions or in some cases muddying understanding of the threat. Some have shifted tack in the past decade; even Exxon Mobil Corp. publicly acknowledged its products contribute to climate change after the era of arch-opponent Lee Raymond passed in 2005.
But it may already be too late for the environment — the political one, that is.
The fossil-fuel lobby’s efforts have been wildly successful. Even as the scientific consensus on climate change has solidified and devastating evidence of its effects has started showing up on America’s shores (literally), partisanship trumps all. The Trump administration is busily trying to roll back regulations on emissions, backed up by a slew of federal judge confirmations. Senator John McCain, who died recently, actually supported action against climate change in his 2008 Republican presidential campaign. His party now hews more to the thinking of Senator Jim Inhofe of Oklahoma, chair of the Committee on Environment and Public Works, who once infamously tossed a snowball onto the chamber’s floor to show that, for all the talk of global warming, it was somehow cold outside (it was February).
Yet there is such a thing as overreach. This week, San Francisco hosts the Global Climate Action Summit, led by Michael Bloomberg, founder and majority owner of Bloomberg LP, and Governor Jerry Brown of California. Yes, I know, another climate summit. This one, though, isn’t the usual gathering of national governments like the one that produced the Paris Agreement in 2015. Rather, it’s a gathering of 4,000 or so city, state, business and civil society types aiming to push the U.S. toward implementing that agreement through sub-national efforts.
The bottom-up approach is catching. Activists have learned to target pipelines, with their localized tactics, to stymie oil and gas development, or at least make it more expensive. Several cities and states have attempted or are trying to sue oil producers, accusing them, like tobacco companies, of knowingly selling a harmful product. And some large investors are beginning to question the ethics or financial logic of owning fossil fuel-linked securities.
Meanwhile, when Coloradans go to the polls on November 6, they will also be voting on a ballot initiative that, if passed, would all but kill fracking in a state where oil production has more than doubled in the past five years. Plain old nimbyism was given a boost by a fatal explosion in 2017.
Having captured the citadel, the industry may not feel too concerned. Climate politics tend to move slowly, just as glaciers used to. And not only do we use a lot of fossil fuels, producing and distributing them employs many thousands of Americans.
But politics can be unpredictable, especially at the local level and in this more populist age. In Colorado, for example, the economic cost of shutting down a fast-growing industry is obvious. But if you think voters always carry a precise cost-benefit analysis into the polling booth, let me introduce you to a small island I grew up on called Great Brexit. And while we love the things that fossil fuels provide, that isn’t quite the same as loving the products themselves, a problem identified as far back as 1960 in Theodore Levitt's seminal paper Marketing Myopia.
The competitive landscape has also shifted. Fossil fuels still dominate the incumbent energy mix, but not growth. Renewable energy and adjuncts like vehicle electrification are not only growing fast and falling in cost, they are also sucking in dollars and talent. Even younger Republicans seem less jazzed about drill-baby-drill these days, according to Pew Research Center polling.
At an individual level, none of this matters. Collectively, though, it presents an amorphous risk to the industry’s “license to operate” — that unwritten contract with society that allows the wells to be drilled and the pipelines to be built.
Consider this week’s announcement from the EPA about rolling back regulations designed to prevent leaks of methane, which will save the industry an estimated $75 million a year. That works out to all of 0.7 cents per barrel of oil equivalent produced in the U.S. — and all so the industry can lose more of a product it is supposed to keep hold of and sell for money anyway. Folks, this is not a good look.
Nor, by the way, is this promotion that popped up on my Jetsetter travel app this week:
That’s right, it’s a curated list of terminal destinations such as the Maldives (pictured exquisitely above) and the Great Barrier Reef (“Worldwide jumps in carbon dioxide have contributed to the steady deterioration of vulnerable, slow-growing corals.”)
Turning encroaching aquatic doom into a brochure would suggest we have become inured to our fate, which might be seen as a victory for fossil-fuel advocates. It really isn’t, and not merely because they’ll have to get moving if they want to see the Maldives. Because it’s one more bit of evidence — strange and a touch cynical perhaps — of just how much we get what we are doing to ourselves. Fossil-fuel producers say they also get it but look to governments to act. However, the political well has been poisoned already. Too many in an industry based on science rejected or ignored inconvenient science, and something far less rational jumped into the gap.
Thirty years ago, it might have been possible for, say, an oil major to acknowledge the problem, point out we didn’t have ready alternatives, but also get involved in designing incentives and penalties aimed at fostering a transition over time. For example, a carbon tax based on conservative principles of apportioning costs fairly and minimizing overly prescriptive regulations is a no-brainer today and should have been back then. Instead, we’ve reached a point where the federal government wants to roll back decades of market liberalization and bail out coal-fired power plants in the interests of — and I quote the energy secretary — “freedom.”
Today, the industry’s credibility on this front is greatly diminished, and opposition to it has become both sharper and more diffuse. Of course, even as delegates debate in San Francisco, the reality is that the industry has won considerable gains these past two years. California, ground zero for this struggle, may yet face defeat even on once-untouchable things like its waiver to set its own emissions standards. Another victory for fossil-fuel producers? That’s corporal-level thinking. A general would wonder nervously if there could have been a way to avoid this war in the first place.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.
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