By March 9, 2017 Read More →

Trump leads resurgence of fossil fuel Fossils, but their cause is doomed

Saudi Arabia

Saudi Arabia’s Energy Minister Khalid al-Falih addresses a news conference after a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, December 10, 2016. REUTERS/Heinz-Peter Bader

Embracing energy transition will give first movers like Saudi Arabia significant head start

The election of Donald Trump has emboldened climate change opponents – fossil fuel Fossils, if you will. Unfortunately for the American President, he and his energy booster buddies – including his many fellow travellers in Alberta like Brian Jean and Jason Kenney – are already losing the battle.

US stocks

U.S. President Donald Trump speaks at his election night rally in Manhattan, New York, U.S., November 9, 2016. REUTERS/Carlo Allegri.

Now, if all you read are the headlines, the impending defeat of the Fossils may not be apparent.

For instance, North American Energy News published a story Wednesday about Trump EPA head Scott Pruitt saying, “he is not convinced that human-activity-caused carbon dioxide is the main cause of climate change” and “he is looking for Congress to weigh in on whether CO2 is a harmful pollutant that should be regulated.”

Former Stephen Harper finance minister Joe Oliver  – a Bay Street executive, not a climate scientist, and lately a contributor to Rebel Media, the disgraceful Canadian version of Breitbart News – is in the pages of one of Canada’s most respected business papers questioning the link between rising CO2 levels and global warming, and suggesting that higher temperatures will be beneficial for humankind.

These are just two examples of the newly resurgent Fossils pushing back against the environmental policies of former president Barack Obama in the United States and current prime minister Justin Trudeau in Canada.

saudi arabia

Brian Jean, Wildrose Party leader.

But let’s step outside North America politics and media for a moment. What are leaders in other oil producing countries saying?

Saudi energy minister Khalid Al-Falih delivered a major speech at CERAWeek in Houston on Tuesday. Nestled in his comments on over-production, demand, and oil prices were several observations about the changing nature of energy technology. Despite having the world’s largest oil reserves, the Saudis are under no illusions that their supply and cost advantage will last forever:

“As for the evolution of the global energy mix, the costs of alternatives like renewables and electric vehicles are declining as their technologies and performance improve. But we all know that energy transformations are complex phenomena that take considerable time to unfold. [emphasis added] In the future they will claim a greater share of a growing global energy market—and we welcome their contributions…”

Here is a sampling of comments from the CEOs of super major oil and gas corporations:

“Social, political and geographical conditions differ from country to country. So the energy transition is likely to play out in a different way in different places…The pace of the transition will differ too. In some places it will be relatively fast, in others relatively slow,” Shell CEO Ben van Beurden said in a major speech to the Norwegian Parliament last August.

“Statoil is committed to developing its business in support of the ambitions of the Paris agreement. We believe that being able to produce oil and gas with lower emissions while also growing in profitable renewables will give competitive advantages and provide attractive business opportunities in the transition to a low carbon economy,” said CEO Eldar Sætre in the introduction the Norwegian state oil major’s 2030 climate roadmap.

As I have argued in numerous columns, the energy transition that the global economy is embarked upon is probably only five to 10 years old.

Jason Kenney, leadership candidate for the PC Party of Alberta.

The fact that electric vehicles or solar power generation or utility-scale battery storage are considered novelties by the Fossils is not evidence the energy transition doesn’t exist. Not at all.

The evidence confirms that the adoption of clean energy technologies has just begun. They are at the very bottom of the diffusion S-curve, which means that only Innovators – risk takers willing to pay a very high price premium for promising new technology – are buying them.

Such as rich folks paying over $100,000 to have the latest Tesla Model S with Ludicrous Mode, for example.

But the evidence also confirms that clean energy technologies are already moving up that S-curve. Why?

For a number of reasons, including declining costs, rising value, public policies (including subsidies, in some cases), significant capital invested in basic science and commercialization, changing public attitudes, better marketing by manufacturers, and so on.

We know from studies of technology diffusion that these are the pre-conditions for new technologies to eventually become dominant in the market (which I define as roughly 70% to 80% marketshare). And the scientists, academics, analysts, and industry executives I regularly interview agree that clean energy technologies will eventually push fossil fuels mostly out of the market.

That might not happen until 2100 or later, but it will happen.

Around the globe, political and industry leaders recognize this inevitability. Everywhere it seems except Trump’s United States and  Alberta’s political opposition.

Those attitudes need to change. Not because of the politics, but because of clean energy technology, which  is on the march and cannot be stopped. Throughout modern history, the technological imperative has changed politics, but politics has never blunted the force of technology change.

The technology is already transforming the energy industry, as Al-Falih clearly acknowledges in his CERAWeek speech:

“At the same time, I want to add that as an industry we must invest more to minimize the environmental impact and carbon footprint of fossil fuels. Such investments will make petroleum use more acceptable and more sustainable in a period of significant technology shifts and growing concern over climate change.”

That is the trend that cannot be denied: decarbonizing oil and gas as much as possible while encouraging and adopting clean energy tech as it becomes competitive.

Pretending the energy transition hasn’t started – as the Trump Administration and Messrs. Jean and Kenney regularly do – will only put the USA and Alberta (assuming Jean or Kenney form government in 2019) further behind Saudi Arabia, the Netherlands, Norway, and other enlightened energy producing jurisdictions.

Perhaps far enough behind that they will never catch up.

Posted in: Markham on Energy

1 Comment on "Trump leads resurgence of fossil fuel Fossils, but their cause is doomed"

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  1. Dave Goodall says:

    Many years ago when I was a college student, there was a business example posed to us. Roughly at the turn of the last century, railroad company executives were faced with a growing problem. Automobiles and trucks were taking a minuscule part of their profits. At some point, because cars and trucks didn’t need a rail stop in every town, they could watch their business being usurped by the interlopers, they had to make a decision. “Are we a railroad company, or are we a transportation company, capable of taking a person, box, large machine or all the tonnage of materials to build our new state of the art automobile factory.” Their auto factory was going to be next to their shipyard to enable them to ship their cars overseas, and the mail being carried on their trains could be carried on their new fleet of aircraft. Businesses always change, not all companies do. Somehow, someone always forgets that innovation is always started and developed by people who know nothing about it. They start in their cellar because the wife threw them out ov the dining room. Later, they go out to the garage. Oil companies control a commodity that has a foreseeable and inevitable end. What if oil companies spent half of their lobbing budget on renewable energy sources and removing their carbon footprint now. The results are clear. Carbon footprints shrink, the ability to hire the experts on renewable energy sources and labs and later factories, reduced flack about lobbying and carbon emissions and building the industry that will slowly replace your current operations.

    These things are true in just about any inevitable change that some people really don’t want. Faced with the inevitable, I have three options. I can spend my energy and resources trying to alter the future that will be. I can sit in the corner, pouting and whining about unkind fate, begging for forgiveness for past sins. I also have a third choice that should be promoted by movers and shakers and people of action. I can help it happen, and because I already have a business that will maintain me through the toughest times, I will prove to the world that my business as an energy producer makes it possible to get it done and profitable, as quickly and economically as it can be done. “Global Sustainable Co., formally Global Oil and Gas Co. has been working on this for decades and we’re about to turn our auto factory into a solar panel plant”.

    There was a time when businesses and businessmen and women had integrity, honesty, honor, and understanding. I miss those days, but I’m glad I had the opportunity to see them. People mock me because I don’t get it. Those days are gone. If they’re gone it’s because we drove them away. Shame on us!