Climate of Optimism
We will solve the climate challenge because customers demand it, employees demand it, and investors demand it.
In addition to my teaching, research, and writing, I post on social media because it’s a way to reach an entirely different audience. And with some of the responses I get, it is easy to imagine a person like Munroe’s stick figure pounding on a keyboard or jabbing at a phone screen. It shouldn’t be a surprise really. Climate change and the energy transition—the subject matter of my typical musings—are topics that evoke a lot of emotion. As odd as it may seem, posts about nuclear energy and heat pumps consistently generate passionate reactions.
Last summer, I posted a simple comment on Twitter that (as the kids say) blew up, garnering more than 200,000 impressions. Someone asked his followers about a personal belief that people inside one’s own political circle would find ridiculous. I replied, “I believe with great clarity that we will, 1) solve the climate crisis, 2) faster than people anticipate and 3) remove CO2 from the atmosphere to get us to pre-industrial levels.”
My climate optimism—and the opinion that this best-case outcome is already baked in—provoked disbelief and a request for an explanation. Maybe that is understandable: The headlines are full of gloom, from nations failing to meet even their most watered-down emissions goals to the fires and floods that hint at what a future with an altered climate could mean. To me, though, the case is straightforward. We will solve the climate challenge because customers demand it, employees demand it, and investors demand it. Many (but obviously not all) policymakers at municipal, state, regional, and national levels are pushing for it, and those recalcitrant ones in opposition are slowly but surely losing hold.
It’s an argument that many people have a hard time accepting. Climate change seems like a challenge perfectly designed for humanity to fail. To fight it requires coordinated action of hundreds of nations and billions of people, all working toward a seemingly abstract goal that will only be reached decades from now. In a nation where some people don’t have the patience for instant ramen, that sort of delayed gratification seems alien.
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And yet, the world has faced difficult global challenges before and overcome them, from World War II and the Cold War to the thinning of the polar ozone layers. For instance, people tend to forget how intractable the Cold War was; By the 1970s, it seemed less like a resolvable conflict than a permanent state of world affairs. Both sides were unwieldy, multi-cultural coalitions that invested large chunks of their national incomes on weapons systems and prestige projects for decades on end. Given the demands, those coalitions could have splintered, but they held in place for more than 40 years until the fall of the Berlin Wall. Similarly, the growing hole in the ozone layer looked as if it were a fact of life in the mid-1980s, but then the nations of the world swiftly agreed to phase out production and use of the chemicals implicated in depleting ozone. There’s a long way to go in restoring the ozone layer, but the multinational commitment to stabilizing it and reducing the damage has been phenomenal.
Climate change is a multinational, multidecade problem and we can solve this one, too. The signs of progress are found in some surprising places.
Action Is Going to Happen, and Fast
Often, when people express the opinion that climate action will win out over denial or delay, they point to the salience of this issue with younger people. And it is true, at least in my experience, that concerns about climate change are often bifurcated by a generational divide. While older people can afford to be more skeptical and less concerned, people 50 years old and under—the people who will have to live with a warmer future—are more passionate about taking action.
Passion by itself isn’t enough. In my teaching, I have the great privilege and honor to work with students from around the world. They are in despair by the mess older generations are bequeathing them and are determined to fix it. And they will fix it: Believe me when I tell you they work hard, they’re smart, they’re focused. Importantly, they are starting to take leadership positions everywhere to have the power to act.
If the only evidence I had was the rising generations’ focus on the challenge, I might be less confident than I am. After all, the time to make the necessary changes is not in decades’ time, when the current generation of leaders have relinquished power, but now and in the next few years. To me the best indicator that action is going to happen—and fast—is that energy companies themselves are now pushing for change, somewhat quietly at the moment, but ever more noisily as it’s clear that this is what the markets are calling for.
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As a professor who advises a major clean-tech venture fund and spent three years serving as chief science and technology officer for ENGIE, one of the world’s largest energy companies, I get to see what the corporate world is doing. I also teach executive education courses for the energy industry and get to see what early- to mid-career engineers and business leaders want. I know the pressure they all are putting on their employees to reduce its emissions. For instance, ENGIE has pledged to get to net-zero by 2045 for not only its own direct emissions, but also all emissions upstream and downstream from its activities. (I bet they hit that target early.) Other companies, under pressure from regulators, investors, employees, and customers, will follow suit.
That pressure from investors is real. It is a growing trend for investors to include nonfinancial criteria for their investment decisions. These criteria include factors such as transparency, ethical operations, and fair labor treatment as well as sustainability. Investment determined by these environmental, social, and governance (ESG) criteria is anticipated to grow quickly. By one estimate, there will be $50 trillion worth of ESG assets by 2025, which is a third of the assets under management worldwide.
The result? It’s hard to get money for a coal mine in the United States, and it is becoming more difficult and more expensive to get money for new large-scale hydrocarbon production. Oil and gas companies know this, and rather than sit tight and watch as ESG investors abandon them, they are looking to pivot to opportunities that leverage their specialized skillsets for a low-carbon future.
Some of these businesses include advanced drilling and subsurface mapping for geothermal energy; carbon management through capture, utilization, and sequestration; hydrogen production, transportation, and use; and offshore capabilities for ocean-based wind and solar production.
This isn’t conjecture on my part. Last summer, a multibillion-dollar exploration and production company from the oil and gas sector called me to get some insights. In their words, they see five to six years of activity left for them, not two or three decades. For them, speed is critical: They want to make oil and gas better, make money making oil and gas better, then use that money to get out of oil and gas entirely.
Some European oil and gas companies, such as Ørsted, have already made the change. Formerly known as Danish Oil and Natural Gas, the company is now the world’s largest developer of offshore wind power. Others such as Equinor (formerly known as Statoil, the state-owned oil company of Norway) are in transition now.
I also get phone calls or e-mails at least once per week from representatives of huge entities—corporations you recognize, multibillion-dollar companies, some of the most important hydrocarbon families in American history—asking about how to catch up with the energy transition. As one caller put it, “The train left the station.” These third- and fourth-generation fossil fuel families don’t want to be the ones that lose the family fortune clinging to a legacy. They want to be part of the future and understand that the future is low-carbon. They feel tardy and in a hurry.
Significant levels of investment are already flowing, quietly, and even more is about to flow loudly for renewables, storage, carbon capture utilization and sequestration, hydrogen, new infrastructure, and more. The amount of money is phenomenal. To my eye these trends are irreversible. It’s an avalanche that has already started and can’t be stopped or turned back.
The Only Question Is Who Will Lead
I work with a $2-billion cleantech venture capital fund, helping them to screen technologies and identify entrepreneurs. From that seat I can’t help but feel optimistic: There are a lot of great ideas out there. Wind and solar have fallen in price so much in the last decade or two that in some situations it is less expensive to build new zero-carbon generating assets than to keep existing—and already paid-for—coal plants up and running. Without breaching a nondisclosure agreement, I can tell you other technologies, such as novel ways to produce hydrogen, batteries with innovative chemistries, clever electrified transportation technologies, and large-scale thermal storage, are poised to make the same kind of impact. We just need to clarify the market rules, open up the spigot of investment, then watch them go.
Pundits who look at the trajectory of carbon emissions over the past several decades and throw up their hands in despair should look at the environmental problems of the 1960s, 1970s, and 1980s, things like the persistent smog of Los Angeles, the flammable Cuyahoga River in Cleveland, acid rain falling on the eastern United States, and the ozone hole. At first, riled-up citizens were at loggerheads with industry leaders, while policymakers sat passively by. In time, however, solutions were found and reclamation could begin. Today, each of those environmental crises is markedly improved.
We will reclaim the atmosphere to its pre-industrial greenhouse gas composition, too. That means going beyond net-zero emissions. We need to go carbon-negative—by taking CO2 out of the atmosphere—to clean up 200 years of emissions. Pollution in solid and liquid forms led to the creation of waste management industries and water and wastewater treatment systems in the United States that are worth a few hundred billion dollars annually and employee hundreds of thousands of people. Climate restoration will compel the building of an atmospheric carbon management industry that will generate jobs and grow the economy.
But what does my climate optimism mean for today’s fossil fuel companies? It depends on whether they have the capacity to work with, rather than against, the energy transformation.
On the one hand, electricity companies, renewables, materials companies, data, and mining will thrive. Remaking our economy is a multitrillion-dollar opportunity to clean up our act, and companies in these spaces will play a big part and that.
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Conversely, demand for coal will be reduced to critical needs, primarily metallurgical and material purposes such as making steel, carbon filters, and cement. A few coal companies can survive on that, but the days of coal serving as the dominant fuel for the world’s power grid are over.
Oil and gas can have a great future, I believe, but only if the industry chooses to leverage its expertise for cleaner options (including oil and gas, if their emissions are managed either at the point of emission or elsewhere in the atmosphere).
It is true that there are some American domestic independent oil and gas companies that are holding out against this tide. They will struggle to get financing or to recruit and retain talent. The best young workers out there have options, and from what I have seen, they would rather choose to work for a tech company that pays better, has a net-zero pledge, and whose shares are gaining value rather than working for a company that they perceive to be part of the problem and has declining market capitalization.
The decline in share prices isn’t theoretical. Over the past 10 years, Standard and Poor’s Oil & Gas Exploration & Production Select Industry Index has witnessed an annualized decline of 6.67 percent. That compares to an annualized increase of 6.84 percent for utilities and an annualized increase of 12.26 percent in the S&P 500, suggesting that the woes with oil and gas aren’t a problem with the energy industry at large.
Ultimately, companies want to make money, and the oil and gas sector has not been a money-maker or value-creator in recent history the way it had been for the century before that. As oil and gas companies’ stock prices stagnate, employees delay retirement, keeping payrolls top-heavy and making it harder for companies to replenish their workforce with fresh ideas.
Climate solutions are coming fast because customers demand it, investors demand it, and employees demand it. The pathway is clear and baked in. Companies that ignore these pressures do so at their peril.
The only question now is which companies—and which countries—will lead. The United States can still lead. Texas, a state whose identity is tightly bound to the petroleum industry, could still lead. The countries and companies that move the fastest and smartest will make a lot of money. The deniers and laggards will lose. As an American and a Texan, I hope we don’t side with the laggards.
But even if Texas and the nation stupidly pass up the climate action opportunity, someone in the world will still solve it. That much is clear. Believe me, we’ve got this. The swiftness of action to halt and reverse the climate crisis will be stunning. And it gives me hope.
That’s why I am a climate optimist.
Michael E. Webber is the Josey Centennial Professor of Energy Resources at the University of Texas in Austin.