Voices
Thanks for the Memories, Fossil Fuels, but Now It's Time to Change
For the past 250 years, fossil fuels have been the primary driver of development and growth. Burning fossil fuels has provided us with outstanding progress and opportunities, and I for one am grateful to the many generations of men and women who have so sincerely labored in this sector.
However, unbeknownst to all those generations of laborers is that this progress has also put increasing pressure on our planet. We now know that we have precipitated the imbalance of the earth's ecosystem and its vital life cycles. Fossil fuels have brought us this far, but now it's time to change.
In our daily lives we take coal, oil and gas for granted; they seem a permanent fixture of our economy, making it difficult to realize that they represent only one period in our history. With astonishment we read about the effective transition from whale oil, which was once the main driver of the economy in the 1700s. We will tell our grandchildren equally fantastic stories about the move beyond fossil fuels in the 21st century. At some point, the internal-combustion engine will be much admired in a museum devoted to that technology and its fuels. It will take decades for this to happen entirely, but I believe we will look back at today as the turning point in which we have made that future inevitable. This is not because we will run out of oil, but because we will, and have already, found better alternatives.
New innovative cost-effective sustainable technology is the essential reason why we can now contemplate the phase out of fossil fuels. The drop in costs of renewable energy, such as solar and wind, has been dramatic -- solar has dropped 75 percent in the last five years alone -- and this will continue exponentially, as the world needs to accelerate the provision of reliable energy in so many areas with deficient or entirely without energy, and upgrade aging infrastructure in areas currently served. We are also seeing huge drops in the costs of electric transportation. In many instances the three-year costs of ownership of an EV is the same as that of a liquid-fuel car; maintenance costs are also already surprisingly low, and the positive health impacts surprisingly high. BMW has said they will produce their last internal-combustion car in 2025, and with VW reeling from Diesel-gate and moving toward EVs, they just may transpire as the frontrunner in future mobility.
At the same time that alternative technology is improving, the costs of fossil-fuel recovery are really beginning to climb. Until the recent price drop and cut back in capex, the oil industry had increased exploration investment by 180 percent in 2000-2014, but this had translated into an increased supply of just 14 percent. Most of this new oil came from unconventional sources. This is driving exploration in more expensive and remote places that are creating greater risk. The U.S. and Norway have recently decided to freeze Arctic-drilling permits until 2017. The decision of Shell to withdraw from the Arctic was another acknowledgement of that reality. At a cost so far of $8bn and a falling oil price, is this really the best use of shareholder money? Moreover, the rapid decline in the stock prices of coal companies globally is also heralding the end of coal as a viable source of energy.
All this has led to one of the biggest turning points we are currently experiencing -- investors are deepening their understanding of the risk they face from investments whose returns are increasingly questionable. This has already translated into capital reallocation on a massive scale – $2.6 trillion to date.
Greater scrutiny will be cast on how fossil-fuel companies will be able to fare in a world that is addressing climate change. Some in the sector understand the shift, and are starting to embrace shareholders' resolutions on climate change to test whether their business models are compatible with the pledge by the world's nations to limit global warming to 2 degrees C. Others, however, are not acknowledging the shift and won't escape scrutiny, as evidenced by the recent subpoena to Exxon Mobil for potential consumer and securities fraud over climate misinformation. It is just as foreshadowing of the type of liability that Mark Carney has already foreseen.
We are witnessing a remarkable shift, that is moving us to a common global destination, generating a new political and economic reality: whether it is the G7 pledging to eliminate fossil-fuel subsidies, India committing to a renewable future, the U.S. refusing to approve the Keystone pipeline, or China accepting and taking serious action on the fact that their polluted cities can be green and clean once more. We are seeing a unique ambition that has already been delivered by countries in the lead up to COP 21 – now from more than 160 countries – to transform their economies, limit the use of fossil fuels and adapt to the climate-related disasters. Fossil-fuel subsidies and the energy transition will be high on the agenda of the G20 meeting this week.
These trends will interact in a way that collectively adds up to the turning point I started with. The declining costs of technology and the rising costs of fossil-fuel recovery have helped increase the space for more ambition and create the political moment in which genuine and transformative change is possible. This cycle is now well established and it will only increase.
I believe that a test of our collective sanity is how we respect the environment on which we ultimately depend. We will look back in 50 years at 2015 as the moment when the world finally got serious about transitioning beyond fossil fuels.
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christiana figueres