Can the Fossil Fuel Industry Change its Spots?

A major difficulty with the climate change debate in Australia is that we have never had an honest discussion about climate change and its real implications.

Image by Christopher Wright

This blog is a summarised version of a paper written and presented by Ian Dunlop, for the Climate Change and Climate Politics Workshop, co-hosted with SEI and The Balanced Enterprise Research Network (BERN).

Last week Ian Dunlop presented a paper at the Climate Change and Climate Politics Workshop. With his extensive experience in energy resources, infrastructure, and international business, and interest in the interaction of corporate governance, corporate responsibility and sustainability, Dunlop’s paper asked: “Can the fossil fuel industry change its spots and where are we going to go in the shift toward carbonisation?”

A major difficulty with the climate change debate in Australia is that we have never had an honest discussion about climate change and its real implications. We have already experienced around 1.2 degC warming compared to pre-industrial levels. We have another 0.5 degC built into the system because of inertia in the global climate system. Two degC is now viewed as very dangerous. Three degC would result in outright social chaos, and four degC would see a disintegrating global community. We are currently on track for four degC.

The objective of the 2015 Paris climate agreement is to hold global temperature increase to “well below two degC above pre-industrial conditions and to pursue efforts to limit the increase to 1.5 degC”.  However, the commitments that participating countries made in Paris would result in a 2.7 – 3.5 degC increase. Thus we have a very long way to go to reach the Paris objectives.

 It is clear from the evidence that climate change is occurring faster and more extensively than expected, largely human-induced. Sensible risk management would have accepted the evidence and taken action long ago. However, our leaders have chosen not to do so, many still contesting whether we even have a problem. This procrastination may well mean that we have passed climate tipping points at the level of warming we are presently experiencing, let alone the additional amount that is coming through the system.

We have left it too late to address climate change via a gradual transition to a low-carbon world. If we seriously intend to avoid its worst impacts, we must take emergency action, akin to moving the economy onto a war footing. Market-based solutions are important, but they will not be sufficient to achieve the extent of change required in the limited time available. Substantial regulatory reform will be essential.

Climate tipping points are the great concern of climate scientists – these are the points where the climate flips rapidly, and irreversibly, from a relatively stable climate state to one that is far less conducive to human development and indeed survival.  This now seems to be happening for example in the Arctic and parts of West Antarctica.   In managing these risks, we cannot assume that climate change is a relatively minor issue as our government and the fossil fuel industry are doing and that we have plenty of time to deal with it.

The climate-induced changes that we are going to see by the middle of this century will fundamentally alter the global economic system. Politics, whether left or right, cannot prevent these changes – they are beginning now, and we are already seeing the impacts, globally and locally.

Population and economic growth since World War Two has resulted in humanity becoming the dominant global force. Global Footprint Network analysis shows that humanity in aggregate needs the biophysical capacity annually of 1.6 planets to survive.  If the world’s population lived at Australian levels, we’d need 5.4 planets, compared to 4.8 planets at US levels and three planets at European levels. This makes Australia one of the most selfish and unsustainable societies on earth, to a large extent due to our unnecessary reliance on fossil fuels when we have arguably the world’s best renewable energy resources which we have only just started to use. As climate change escalates, Australia cannot sustain this position and have any international credibility.

Climate and energy are inextricably linked.  Carbon budget analysis tells us that to have a realistic chance, say 90%, of staying below a two degC temperature increase, we should not be burning any more carbon from today, full stop. It’s not going to happen of course, as carbon emissions continue at record levels, and we need some fossil fuel to build the low-carbon economy.  But we have to wean ourselves off fossil fuels as fast as possible, and that means no new coal, oil or gas investment, particularly mega-coal mines like the Adani Carmichael proposal in Queensland.

In contrast, the fossil fuel industry argues that as the global population will increase rapidly, to alleviate poverty economic growth is essential. That growth requires energy, making a massive expansion of fossil fuels ‘inevitable’ as other renewable sources can’t meet this demand.

Recently Prime Minister Malcolm Turnbull adopted the industry mantra: ‘Global warming is important, but it’s secondary to growth.  Innovations like Carbon Capture and Storage (CCS) will handle any global warming impact.’ Similar claims have regularly been made over the last 25 years as the fossil fuel industry tries to stave off its inevitable demise. On their view of world energy development, in the next 25 years, we are going to consume around 70% of all fossil fuels consumed since the Industrial Revolution in a world with no carbon budget. That is quite simply suicidal

The corporate rationale is that companies will reduce their emissions, but they can’t take wider leadership until governments set clear low carbon policies. As governments are unlikely to take such action anytime soon, the fossil fuel industry is justified in continuing “business-as-usual.” This completely ignores the real climate risk, and also the fact that renewable energy technologies and related energy storage facilities are rapidly becoming cheaper than their fossil fuel competitors, undermining the fossil fuel business model.

Economic growth as we have known it since WW2 can no longer be sustained and the global economy will have to be rebooted to a completely different sustainable footing. Thus the political argument around climate and energy policy in this country has become totally irrelevant to addressing the real problems which now confront us.

Likewise, the fossil fuel industry stance is untenable.  The industry has no choice but to change its spots.  The question now is whether it chooses to reinvent itself and constructively seize the opportunities the low carbon world offers, or it’s continued intransigence hastens its demise.

Ian Dunlop is an engineer from the University of Cambridge (UK), MA Mechanical Sciences, he is a Fellow of the Australian Institute of Company Directors, the Australasian Institute of Mining and Metallurgy and the Energy Institute (UK), and a Member of the Society of Petroleum Engineers of AIME (USA).  He has wide experience in energy resources, infrastructure, and international business, for many years on the international staff of Royal Dutch Shell.  He has worked at senior level in oil, gas and coal exploration and production, in scenario and long-term energy planning, competition reform and privatization. He chaired the Australian Coal Associations in 1987-88. From 1998-2000 he chaired the Australian Greenhouse Office Experts Group on Emissions Trading which developed the first emissions trading system design for Australia.  From 1997 to 2001 he was CEO of the Australian Institute of Company Directors.  Ian has a particular interest in the interaction of corporate governance, corporate responsibility, and sustainability.