How to Defeat the Science Deniers: Even Wingnuts Learn That Reality Is Good Business
The unexpected furor and back-pedaling over Indiana’s anti-gay “religious freedom” law has already highlighted a problem for the entire 2016 GOP field of hopefuls. Right-wing assumptions turned out to be woefully out of line with emerging changes in social attitudes, and establishment politicians were caught completely off-guard. But what if there’s even more of that to come on a very different subject—climate change?
The process may not ripen fast enough to affect the 2016 election, but a wide range of recent developments are altering the policy landscape around climate change—everything from falling profits (even outright losses) in the fossil fuel industry to falling costs and booming investments in renewables. There’s the growing salience of extreme weather climate-change impacts on people’s everyday lives, from Hurricane Sandy to California’s record-breaking drought, and a rapidly-growing climate divestment movement.
There’s even a fierce battle brewing in Florida between the Koch brothers and a free market Tea Party group pushing for solar power—a clear sign that, as with gay marriage, there is no longer just one single monolithic conservative position.
This ongoing shift is far from a done deal, and there’s still plenty of confusion and denial out there, reflected in a recent Media Matters report that most major media ignore global warming’s role in recent severe winter snowstorms, but the trends are more in synch than not, and as with the unexpected Indiana RFRA firestorm, the cumulative impact of those multiple trends has the potential to surprise. Considering how depressing the decades-long gridlock on climate-change has been, that can only be viewed as a sign of great hope. The long-term climate impacts remain grim, and there are no guarantees here, but there is hope.
Climate Progress blogger Joe Romm recently drew a direct parallel (“Boycotting States: The Future For Climate Activism?”) focusing specifically on the necessity of the state-level struggle. He highlighted Senate majority leader Mitch McConnell’s mendacious threat to the global community, invoking state-level opposition to EPA greenhouse gas regulation—and the key role of casting it as a moral struggle.
“McConnell, the Kochs, and their pro-pollution allies, have taken the climate fight to the states. So the climate community will have to step up its game the way the LGBT community has,” Romm argued.
The LGBT community didn’t win by asking by for people to “accept gay marriage by holding their moral noses,” he pointed out. They won because “they set out to change change people’s minds about what is moral,” and that’s “the lesson that the gay revolution holds for any progressive movement,” particularly the climate action movement to save our planet’s future.
It’s a very important argument, and the profile of the moral dimension is being raised significantly by the divestment movement. But this only highlights part of the rapidly changing dynamics of this struggle.
The first trend is rising problems for the fossil fuel sector, which can be seen on at least three fronts: (a) financial and (b) physical/technological, which are tightly intertwined, and (c) political, where pre-existing problems, both climate-related and otherwise, come to the fore as fossil fuels lose their position of dominance. These problems are most severe for coal, the dirtiest and most deadly of the fossil fuels.
As noted recently in the Economist, whole countries are turning against coal, and “producers face prolonged weakness in prices.” More specifically, “The Dow Jones Total Coal Market index has fallen by 76% in the past five years.” It went on say:
High-cost deep mines in the rich world are worst-hit: in America 24 coal companies have gone bust in the past three years, and one-sixth of the remaining capacity loses money. But even Australia, whose low-cost opencast mines play a role akin to Saudi Arabia’s in the oil market, is jittery.
Coal’s problems aren’t just limited to the U.S., so there’s simply no way to spin this as “Obama’s war on coal,” as Republicans are wont to do. This a global problem for a global industry that’s at the heart of causing global probllems for everyone else.
To be more specific: A look at the situation in China—the world’s biggest coal consumer—found multiple indications of declining demand, and increasing pressure to continue cutting back. Meanwhile, in the U.S., “coal now struggles to compete with natural gas, which has fallen by 80% in price since 2008,” while European consumption—which soared after Germany decided to close its nuclear-power plants—is now being eroded by gas and renewables. Worldwide, “two-thirds of coal-fired power plants proposed worldwide since 2010 have been stalled or cancelled,” according to a report from Coalswarm, an environmental think-tank, the Economist‘s story continues, “In 2014 the world added more generation from windpower than coal. Overall, Europe and America have already cut coal-fired generation capacity by over a fifth in a decade. The output of American coal mines dropped to 1993 levels in 2013.” The only remaining global bright spot for the coal industry is India, where consumption isn’t projected to peak until the 2030s. But China’s recent history tends to cast even that in doubt.
Political pressure is another big concern. “Overall, coal kills around 800,000 people a year, most of them poor,” the story notes, adding that “Campaigners reckon 80% of the world’s coal reserves must stay in the ground if the planet is to stand a chance of keeping global warming under 2ºC by 2050.” It then cites the beginnings of a regulatory squeeze in Germany and America, along with the divestment movement, which it notes “is under way in many universities,” before adding, “The World Bank no longer invests in coal-fired plants. Last year Norway’s sovereign-wealth fund dumped its holdings in more than 50 coal companies worldwide.”
Summing up, the Economist concludes:
The biggest danger for the coal miners is that capital ceases to flow their way. Investors can cope with a cyclical business, but the fear now is of a structural shift, in which China follows the rich world in beginning to phase out coal, India increasingly produces its own, and a plentiful supply of cheap gas keeps prices low everywhere. If so, new coal-mining investments would risk becoming stranded assets, and older deep mines would be even more uneconomic than now. Carbon Tracker, a non-profit group, reckons that more than $100 billion-worth of planned capital spending risks being stranded by 2035. A prospect as black as a miner’s lungs.
The Carbon Tracker Initiative describes itself as “a team of financial specialists making climate risk real in today’s financial markets,” adding, “Our research to date on unburnable carbon and stranded assets has started a new debate on how to align the financial system with the energy transition to a low carbon future.” The reference to unburnable carbon highlights a primary problem of fossil fuel industry denial: ignoring the fact that the vast majority of carbon fuel reserves can never be burned, if civilization is to survive. This “unburnable carbon” is a particular example of a broader financial phenomenon, that of “stranded assets,” assets of any form that for whatever reason can no longer be productively employed.
Business concerns about climate change aren’t new. But CTI represents a much more aggressive, pro-active presence making rock-solid business arguments against the fossil fuel status quo. The fact that an organization like CTI even exists is a telling sign of how much things have changed—and how much more they’re likely to change in the years to come.
Despite CTI’s warnings, at first glance, things don’t look nearly as bad for the oil companies. They’re only facing a relatively recent price plunge, for which a number of causes have been blamed. But author Michael T. Klare (Resource Wars, Blood and Oil, The Race for What’s Left) recently honed in on “The Real Reason Behind the Oil Price Collapse,” which he described as “the complete collapse of Big Oil’s production-maximizing business model,” and that’s a very serious matter indeed, which suggests a broad dovetailing with the arguments CTI is making.
As Klare explains, a decade ago, Big Oil faced a world of declining proven reserves, rapid growth in China, India and elsewhere, and growing pressure for alternatives based on concerns over global warming. Their response was a profit-maximizing strategy based on going after hard-to-reach, more expensive reserves (which Klare himself dubbed “tough oil”). The strategy worked wonderfully, as long as the price of oil remained high. “This meant that no fossil fuel reserves, no potential source of supply—no matter how remote or hard to reach, how far offshore or deeply buried, how encased in rock—was deemed untouchable in the mad scramble to increase output and profits.” This is what lead to deepwater drilling, of the kind that BP Deepwater Horizon blow-out made infamous, as well as Canadian tar sands, and Artic oil fields. But as the price plummeted, “the very strategy that had generated record-breaking profits has suddenly become hopelessly dysfunctional.” As Klare explains:
The production-maximizing strategy crafted by O’Reilly and his fellow CEOs rested on three fundamental assumptions: that, year after year, demand would keep climbing; that such rising demand would ensure prices high enough to justify costly investments in unconventional oil; and that concern over climate change would in no significant way alter the equation. Today, none of these assumptions holds true.
Demand is still rising, but not nearly as fast the model expects, and needs it to. Instead of 103.2 million barrels a day in 2015, the level projected a decade ago, consumption is expected to be only “only 93.1 million barrels,” Klare notes. “Those 10 million ‘lost’ barrels per day in expected consumption may not seem like a lot, given the total figure, but keep in mind that Big Oil’s multibillion-dollar investments in tough energy were predicated on all that added demand materializing, thereby generating the kind of high prices needed to offset the increasing costs of extraction. With so much anticipated demand vanishing, however, prices were bound to collapse.” Which is why this recent price crash isn’t likely to end any time soon—and why large quantities of “tough oil” will remain untouched. Prices aren’t projected to reach $73 again “until 2020.”
The collapse of their business model comes at a time when pressures to deal with global warming are growing. Despite Big Oil’s massive spending to sow confusion and doubt, “more and more people globally are starting to worry about its effects—extreme weather patterns, extreme storms, extreme drought, rising sea levels and the like—and demanding that governments take action to reduce the magnitude of the threat.”
These policy shifts in turn will further reduce future demand, making it even harder to restore the “tough oil” business model. Government actions may be woefully inadequate compared to the magnitude of the problem geophysicallly, but they can still be sufficient to threaten Big Oil’s agenda “[H]owever inadequate the response to the dangers of climate change thus far, the issue is on the energy map and its influence on policy globally can only increase. Whether Big Oil is ready to admit it or not, alternative energy is now on the planetary agenda and there’s no turning back from that.”
In sharp contrast to the problems facing the fossil fuel industry, most renewables face an increasingly bright future. Moreover, the future is a lot closer at hand than most people realize. Key to understanding what’s afoot is the concept of “grid parity,” the cost point at which renewables can generate power at least as cheaply as buying power from the electric grid.
In Janaury 2014, German investment bank Deutsche Bank’s 2014 Outlook report for the solar industry reported that “Solar is currently competitive without subsidies in at least 19 markets globally and we expect more markets to reach grid parity in 2014 as system prices decline further.” These were mostly country-level markets in a given sector, such as “Germany, Residential,” Germany, Industrial” and “Mexico, Commercial,” but also included “California, Residential.”
Wind power is also advancing rapidly as an option. On a worldwide basis, “onshore wind-generation costs are competitive with those of the fossil-fuel sources,” while in Denmark, where wind is particularly advantageous, wind power could soon be half the cost of fossil fuels.
The smart money is no longer bound up in fossil fuels, and the political divide is no longer sharply drawn between money on one side and saving the planet on the other. Much as unexpected business pressure caught social conservatives in Indiana off-guard with their anti-gay “religious freedom” act, a similarly unexpected shift is already starting to materialize in the energy realm.
In fact, the power of specific leading-edge good examples can only be expected to accelerate the process. For example, on March 23, MSNBC’s Chris Hayes reported that Costa Rica had generated 100% of its electricity for the year so far from renewables–geothermal, hydro, wind, and solar. The country hopes to go completely carbon-neutral by 2021.
In addition to the falling profitability of fossil fuels and the growing momentum of renewables, there’s a third changing business dynamic to consider: The response of the broader business community, which has long suffered from bearing the externalized costs of fossil fuels. Such costs come in a variety of forms, some of which impact other business more obviously than others. These include specialized government treatment (subsidies, tax credits and exemptions, the costs of Middle East military operations) as well as health impacts, and damage due to climate change. Given that most powerful industries benefit from government actions which socialize their costs in various ways, there’s not much appetite for challenging fossil fuels on this ground. Industrial health impacts are similarly uninteresting to most businesses. But the insusance industry directly bears the costs of climate change as they show up in the form of property damage due to increased frequency and severity of extreme weather events, as well as long-term trends such as rising sea levels. And they, in turn, have to manage those costs somehow, which ultimately means that all other businesses must share in paying these externalized costs.
The first to begin noticing and responding to this were large-scale insurance underwriters, known as reinsurance companies, such as Munich Re and Swiss Re. Ross Gelbspan called attention to the rising insurance costs of global warming as far back as his 1997 book, The Heat Is On. Taking note of these costs, reinsurers began the long-term process of integrating them into their business models as best they could, and educating the primary insurers with whom they did business.
It has been a long, slow process, but it’s finally beginning to produce noteworthy results. Last year a Forbes op-ed by Ken Silverstein “Rift Widening Between Energy And Insurance Industries Over Climate Change,” illuminated some of the relevant dynamics in this area. He first cited weather-related loss figures from Munich Re and Swiss Re, before turning attention to a Standard & Poors report, “Climate Change Is A Global Mega-Trend For Sovereign Risk,” looking at economic risk for entire countries. The report noted there were two mega-trends which had “emerged to dominate public discussion on global economic risks” since the turn of the century. “The first, global aging, is comparatively well-understood and the consequences relatively clear,” it explained. However, “The second, the impact of climate change, is far hazier and the potential outcomes much more challenging to predict.”
Silverstein then moved on to point out both a general lack of active engagement by insurers—noting that “only 23 of the 184 insurance companies that the investor network Ceres surveyed [in 2012] say that they have a comprehensive strategy to deal with climate change”—and the cutting edge of those that are taking action:
Not all carriers are “passive.” This past week, Farmers Insurance Co., a unit of the Zurich Insurance Co., filed suit against the city of Chicago for its alleged failure to prevent flood-related damages that it says are associated with climate change. It maintains that city officials are aware of the potential fallout from climate-related weather and yet they have done nothing to mitigate such events. As a result, it paid out millions in claims a year ago tied to storms in the city.
If the entire insurance industry took this advice—which, after all, is in their economic self-interest—it would clearly have an enormous impact. Just as every company has an energy bill, they also have insurance as well, and they’re likely to have a more personal relationship with their insurance provider than with their energy provider(s). As clean energy becomes cheaper, fossil fuels remain troubled, and insurers start speaking out more about climate risks, the entire business community will become increasing ripe for the same sort of massive attitude shift that we’ve seen around LGBT rights in recent years.
This brings us to a fourth area impacting business dynamics, the growing divestment movement, the main focal point where moral arguments enter the equation. The divestment movement is commonly marked as begining only in 2010, when Swarthmore College called on its endowment fund to sell all shares in fossil fuel companies. It received a major visibility boost in a 2012 Rolling Stone story by 350.org founder Bill McKibben, and 350.org quickly devoted a major effort to promoting the movement.
By October 2013, a study from the University of Oxford took note of its rapid development. The study identified a common development pattern in divestment campaigns, involving three waves: the first focused on “religious groups and industry-related public organizations,” the second focused on “universities, cities and select public institutions,” and the third on the “wider market” such as public pension funds. The report noted that, “From the perspective of the three waves of divestment the fossil fuel campaign has achieved a lot in the relatively short time since its inception in 2010: six colleges and universities have committed to divest, along with 17 cities, two counties, 11 religious institutions, three foundations and two other institutions.” A year and a half later, that list has grown significantly, with more than 2 dozen institutions of higher education, most prominently, Stanford University, scores of cities, topped by the three most prominent cities in the Pacific Northwest, Seattle, Portland, and San Francisco, a long list of religious institutions, and a growing number of foundations.
Even the heirs of America’s first family of oil, the Rockefellers, joined the divestment movement in September 2014. “John D Rockefeller, the founder of Standard Oil, moved America out of whale oil and into petroleum,” Stephen Heintz, president of the Rockefeller Brothers Fund, said in a statement. “We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.” Although framed in hard-headed business terms—which the trends cited above fully support—the announcement was inextricably implicated in the divestment movement, with its strong moral basis. It thus served as a perfect example of the new kinds of synergies that are emerging in the fight against global warming.
In mid-March, when The Guardian announced its own divestment campaign commitment, with a call for the Gates Foundation and the UK’s Welcome Trust to join the movement, it discussed both the moral and pragmatic concerns, citing the risks of leaving the fossil fuel market too soon vs. too late, and then said:
This [contrast of financial concerns] is why the divestment movement has changed from being a fringe campaign to something every responsible fund manager can no longer ignore. How could they, when even the governor of the Bank of England, Mark Carney, has warned that the “vast majority of reserves are unburnable” and the bank itself is conducting an inquiry into the risk that inflated fossil fuel assets pose to the stability of the financial system?
When the president of the World Bank, Jim Yong Kim, urges: “Be the first mover. Use smart due diligence. Rethink what fiduciary responsibility means in this changing world. It’s simple self-interest. Every company, investor and bank that screens new and existing investments for climate risk is simply being pragmatic”?
Once the moral and financial arguments begin to converge like this, it’s difficult not to see the whole nature of the debate changing radically in the near future, and the divestment movement acts as a catalyst to intensify the forces of convergence—and to challenge the continued presence and influence of the fossil-fuel industry in elite institutions, typified by the Koch’s involvement in the museum world, recently challenged by “An Open Letter to Museums from Members of the Scientific Community” which expressed concern “that the integrity of these institutions is compromised by association with special interests who obfuscate climate science, fight environmental regulation, oppose clean energy legislation, and seek to ease limits on industrial pollution.” The letter went on to be quite specific:
For example, David Koch is a major donor, exhibit sponsor and trustee on the Board of Directors at the Smithsonian’s National Museum of Natural History, and the American Museum of Natural History. David Koch’s oil and manufacturing conglomerate Koch Industries is one of the greatest contributors to greenhouse gas emissions in the United States. Mr. Koch also funds a large network of climate-change-denying organizations, spending over $67 million since 1997 to fund groups denying climate change science.The letter concluded by saying, “we believe that the only ethical way forward for our museums is to cut all ties with the fossil fuel industry and funders of climate science obfuscation.” Thus far, the letter has fallen on deaf ears, as Joe Romm recently explained (“Smithsonian Stands By Wildly Misleading Climate Change Exhibit Paid For By Kochs”) but the mere fact that this battle is now being fought against a super-wealthy donor is itself a sign of the growing momentum against climate denialism.
There are other facets of convergence taking place in connection with the divestment movement. A good entry point for seeing this is another recent Guardian story, “Top academics ask world’s universities to divest from fossil fuels.” The story is about a statement issued by Academics Stand Against Poverty (Asap), a global group of about 2,000 researchers who study poverty and development. “At this moment in history, it is paradoxical for universities to remain invested in fossil fuel companies,” they wrote. “What does it mean for universities to seek to educate youth and produce leading research in order to better the future, while simultaneously investing in and profiting from the destruction of said future? This position is neither tenable nor ethical.”
If these were the only synergies I could point to, they might easily be ignored. Academics working on poverty are not exactly the most powerful institutional actors around, even when they do manage to speak in concert like this. But the combination of other factors in flux makes the situation very different than it would otherwise be—at least potentially. Throughout history there are moments when those who’ve long been in the shadows suddenly gain a chance to significantly shape the direction of history. We have just witnessed another such a moment with the RFRA fight in Indiana, and there’s a very real possibility that something similar could happen very soon in the battle against global warming as well. When it does, don’t say you haven’t been warned.