The Guardian, a British newspaper, reports that the world’s biggest fossil fuel companies are planning dozens of oil and gas projects that would push global carbon emissions beyond the limits of the Paris climate accord.. The United Nations agrees, saying the world’s governments plan to produce more than double the amount of fossil fuels by 2030 than would be consistent with the 1.5 degree Celsius limit of warming above global warming. pre-industrial temperatures.
“These companies are actually placing multi-billion dollar bets against humanity to stop global warming,” says The Guardian. “…The allure of colossal payments in the years to come appears to be irresistible to oil companies.”
The International Energy Agency (IEA) says the path to net zero carbon by 2050 depends on no new oil and gas fields or coal mining beyond those already committed l ‘last year. Thus, most of the world’s underground fossil fuel reserves must remain there.
If oil companies can’t resist big new fossil fuel bets, governments and investors around the world must insist. Economic security is also threatened. Analysts have been warning for some time that the fossil fuel sector is creating a “carbon bubble” similar to the housing bubble that triggered the Great Recession.
As governments increasingly impose constraints on carbon pollution and the use of cost-competitive renewable energy increases, current supply-side investments in fossil fuels will be stalled. In other words, the industry will have to abandon new wells, pipelines and other infrastructure long before investors recoup their capital and expected profits.
When the bubble bursts, fossil fuel companies will likely appeal for bailouts like those the federal government gave to financial institutions during the Great Recession. American taxpayers have spent nearly $500 billion bailing out the financial sector. The main beneficiaries were large institutional investors.
It’s not too early for Congress to prevent a similar bailout of fossil fuel investors.
Oil companies and investors are well aware of the risks associated with new supply-side spending. HSBC, one of the world’s largest banking and financial services institutions, warned customers in 2015 of “the growing risks that their fossil fuel assets will become useless”. He recommended investors divest from fossil fuels.
Carbon Tracker, a UK think tank, warns that current high oil prices are encouraging overinvestment in production. He estimates that major investments in fossil fuels this decade could waste $530 billion in capital spending. “The oil industry has a $500 billion bubble problem,” says science and technology website Gizmodo. “The prices are skyrocketing. But if Big Oil takes the bait in pursuit of profits, it could end up screwing up.
Like other public servants, members of Congress have a broad fiduciary duty to manage the nation’s tax revenues “in a manner that is faithful to the public trust.” They would be failing in that duty if they approved another massive bailout to save an industry that took irresponsible risks. Instead, Congress could do some things immediately.
First, it should pass legislation banning the use of public funds to bail out fossil fuel companies and investors when their assets lose value. Private industries should not rely on the American people to be a safety net for reckless corporate behavior.
The same is true on a global scale. Carbon Tracker estimated two years ago that the global fossil fuel supply chain – power plants, vehicles, steel, cement and other fossil-dependent industries – was worth $32 trillion. He concluded that further investment in the supply chain was not worth it. The study co-author recommended instead that nations proceed with a “regulated exit from fossil capital” and prevent further investment in fossil fuels to “preserve the unsustainable”.
Second, Congress should finally stop subsidizing fossil fuels. Taxpayers have subsidized oil for over a century. Today, fossil fuel subsidies cost the nation more than $20 billion a year, or $662 billion a year if social and environmental costs are included. That’s over $2,000 a year for every American. Taxpayer subsidies make us all complicit in climate change.
Third, as the IEA points out, “Governments must provide credible step-by-step plans to achieve their net zero goals, building confidence among investors, industry, citizens and other countries.” Thus, Congress should direct the Department of Energy and the federal Global Change Research Program to lead the development of a U.S. roadmap to net zero carbon no later than 2050, building on the many transition plans already proposed by the IEA, think tanks, universities, advocacy organizations, national laboratories and national academies, as well as the regulatory approaches of other nations.
The roadmap should be underpinned by carbon-free and cost-effective energy resources ready for rapid deployment now. It should identify near-term research priorities for technologies that enable markets to rapidly and widely deploy clean energy. Examples could include:
- More efficient energy storage
- High voltage DC power supply
- advanced nuclear
- Substitutes for rare earth minerals
- Network security against hackers, saboteurs and electromagnetic pulses
- Renewable energies to produce green hydrogen, concrete and steel
Importantly, the roadmap should include a detailed exit ramp for fossil fuels based on the limits identified by science and including a moratorium on new supply-side investments.
If we don’t control greenhouse gas pollution, it will control us. If traditional energy companies aren’t voluntarily joining the transition to carbon-free energy, lawmakers, investors, and regulators should make them an offer they can’t refuse. This time it’s the planet that’s too big to fail.
William S. Becker is a former Central Regional Director for the U.S. Department of Energy who administered energy efficiency and renewable energy technology programs, and he also served as Special Assistant to the Department’s Assistant Secretary for Energy Efficiency and Renewable Energy renewable. Becker is also executive director of the Presidential Climate Action Project, a nonpartisan initiative founded in 2007 that works with national thought leaders to develop recommendations for the White House as well as House and Senate committees on climate policy and energy. The project is not affiliated with the White House.