10 February 2013

Do we need a Plan B for the fossil fuel industry?

by Graeme Taylor

Is their any future for the oil and coal industries without doing what they do now: burning the stuff? In Global Warming's Terrifying New Math, Bill McKibben argues that:
We have five times as much oil and coal and gas on the books as climate scientists think is safe to burn. We'd have to keep 80 percent of those reserves locked away underground to avoid that fate. Before we knew those numbers, our fate had been likely. Now, barring some massive intervention, it seems certain.

     Yes, this coal and gas and oil is still technically in the soil. But it's already economically aboveground – it's figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony. It explains why the big fossil-fuel companies have fought so hard to prevent the regulation of carbon dioxide – those reserves are their primary asset, the holding that gives their companies their value. It's why they've worked so hard these past years to figure out how to unlock the oil in Canada's tar sands, or how to drill miles beneath the sea, or how to frack the Appalachians.
     If you told Exxon or Lukoil that, in order to avoid wrecking the climate, they couldn't pump out their reserves, the value of their companies would plummet. John Fullerton, a former managing director at JP Morgan who now runs the Capital Institute, calculates that at today's market value, those 2,795 gigatons of carbon emissions are worth about $27 trillion. Which is to say, if you paid attention to the scientists and kept 80 percent of it underground, you'd be writing off $20 trillion in assets. The numbers aren't exact, of course, but that carbon bubble makes the housing bubble look small by comparison. It won't necessarily burst – we might well burn all that carbon, in which case investors will do fine. But if we do, the planet will crater. You can have a healthy fossil-fuel balance sheet, or a relatively healthy planet – but now that we know the numbers, it looks like you can't have both. Do the math: 2,795 is five times 565. That's how the story ends.
I agree with his logic. Because corporations, governments, investors and pension funds will do everything possible to avoid bankruptcy, efforts by environmentalists to simply shut down fossil fuel production will inevitably meet enormous resistance. For this reason it is hard to imagine any scenario in which preventative action will be taken in time to prevent catastrophic climate change.
     McKibben then concludes that because the pollution caused by the oil, gas and coal companies will destroy most life on Earth, they are our enemies. While I understand his frustration, I believe that his analysis is incomplete, with the result that he is making serious theoretical and strategic mistakes.
  • His theoretical error is to analyse the fossil fuel industry in isolation from the rest of the global industrial political economy: in reality ending the use of fossil fuels will stop most existing industrial processes. We cannot create an environmentally sustainable economic system without completely transforming our wasteful, polluting pyrotechnical system to one based on renewable, recyclable, non-polluting processes. This will require a whole-systems paradigm shift — of not only the energy sector but also transportation, manufacturing and consumption. The political and economic power of the fossil fuel industry comes from its essential role in maintaining the industrial economy: because poverty is not an acceptable option, almost everyone on the planet wants the global industrial system to continue growing and will oppose policies that threaten economic collapse.
  • His strategic error is to position the environmental movement in opposition to the fossil fuel industry. This win/lose approach fails to give the industry and its investors any alternative other than to directly or indirectly oppose environmental initiatives. This is a particularly inappropriate strategy given the relative strength of the two groups and the (ultimately common) need for a rapid resolution to the problem.
We are likely to be more successful if, instead of trying to force the energy industry to write off $20 trillion, we provide constructive alternative uses for their assets — ones that support the development of an environmentally, economically and socially viable global system.
     We need to put "Plan B" — a strategy for creating a sustainable fossil fuel industry — on the global agenda. It will work if:
  1. Technologies are developed to utilise hydrocarbons as feedstocks to manufacture fully recyclable products in non-polluting (e.g. non-aerobic) processes. Carbon based products (e.g. plastics, fibres, carbon nanotubes) could then be used to create much of our built environment and transportation infrastructure.
  2. While these technologies already exist (e.g. steam-methane reforming), they need to be refined and scaled up to commercially competitive levels.
  3. Using fossil fuels to produce manufactured products should add value in three ways:
    • instead of burning coal, oil and gas, it will be more profitable to use them to produce finished products;
    • through creating recyclable products, the life of finite resources will be greatly extended; and 
    • the (ultimately catastrophic) environmental, health and social costs of pollution will be avoided.
  4. An emergency approach is taken to developing and scaling up the new technologies (similar to that of war mobilisation).
  5. An international regime of sanctions and rewards is used to encourage industries and consumers to make the transition from polluting to non-polluting products.
Dr Graeme Taylor is the coordinator of BEST Futures (www.bestfutures.org) and the author of Evolution’s Edge: The Coming Collapse and Transformation of Our World, which won the 2009 IPPY Gold Medal for the book “most likely to save the planet”.


  1. This thesis is a little light on detail. If you are going to call Bill McKibben naive your argument better stack up pretty damm good. Graham Taylor's proposition is fairly a new one for me, with the exception of existing hydrocarbon-to-product uses, like artificial fertiliser which is bad for soils in any case, so I'd want to see this fleshed out a whole lot more.

    Would it be 'economical' to turn coal into '100% recyclable products' the way it's currently 'economic' to burn to produce electricity under any future renewable energy senario? I guess I need to be reading his book.

  2. Say, most things on Climate Code Red seem pretty spot on, but this article seems a bit wacky. It may be OK as a technical thought bubble, but not OK as an attack on say McKibben, I don’t think.

    It ignores a couple of things, or has them wrong.

    1). Using the carbon for things other than combustion doesn’t resolve the short term issues of the fossil fuel companies. Not only do they need to have the stuff used, it needs to be used ASAP!! Delaying production of a fossil resource by say even 7 years makes it pretty worthless on their books, given the discount rates that are used. Sure, this “build everything out of carbon” plan described in the article below would allow the fossil fuel companies to keep the resources ON their books as an asset, but their value would still crater.

    2). Re “the (ultimately common) need for a rapid resolution to the problem…” Sorry, there is not and will never be a common need to resolve the problem! Saving civilization is an issue with a time frame greater than say 7 years. Corporate profits have time frames < 7 years if not often < 4 quarters. Other than a few mines being flooded and a few sea walls needing to be built around ports, why would fossil fuel companies care about global warming? Think of all the cheap labour available with all the refugees. And greater use of air conditioning means more power sales. And so on…

    So I don’t see the world saying, “...hey don’t use iron for that train track, use carbon! Carbon is more expensive than steel, but it will keep the fossil fuel companies happier if you don’t use steel! And don’t use concrete for that road, use plastic! (Oops, forgot about the iron and concrete lobbies!)“

    It’s carbon capture and storage by another name isn’t it. So Graeme Taylor is actually suggesting that we should ’mobilise as if for war’ to save the fossil fuel companies’ assets?? Wacky! Just my anonymous opinion.

  3. Whether McKibben's problem is naivety or something else I can't say - I don't know him. But his maths is certainly careless:- 2,795 is 5 times 559, not 565.

    His strategic analysis seems equally unreliable:
    - in choosing to promote 350ppm as the safe stabilization goal when, due to the timelag from ocean thermal inertia, we won't even see the warming and climate destabilization from the 350ppm we had in '86 until about 2016 -
    - in choosing to ignore the analytically critical difference between US and other developed nations' conduct on climate since 2000, despite essentially identical fossil-fuel dependence -
    - in choosing to ignore the relevance of the vastly greater sums of non-fossil corporations' future profitability now obviously at risk due to climate destabilization -
    - in promoting a disinvestment campaign whose mechanism for transforming fossil corporations' conduct not even its supporters can identify -
    - in choosing to focus peoples' efforts on other tertiary issues - such as Keystone, where even outright success would only marginally delay the damage and have no wider effect on US policy -
    - in avoiding any focus on US obstructionism and its bipartisan policy of a brinkmanship of inaction with China, that aims to crush its bid to displace US global economic dominance.

    (For a progress report on the predictably genocidal outcome of the bipartisan US policy that McKibben ignores, see:
    "Food Security: Near future projections of the impact of drought in Asia" in the 'reports' section at www.lowcarbonfutures.org )

    By promoting the futile goal of 350ppm and by proposing that a carbon budget of 565Gts from FFs provides a scientifically safe limit, McKibben also encourages people to ignore the plain fact that mitigation by Emissions Control alone is not remotely commensurate with our climate predicament.

    Consider: we now face both the loss of the cooling Sulphate Parasol with the decline of fossil fuel use, and also the warming from major feedbacks - of which at least 6 out of 7 are evidently already accelerating - and which would be allowed perhaps 70 yrs of continuous anthro-warming (being the period of emissions decline plus the 30yr timelag) for their interactions to become mutually self-reinforcing and accelerate beyond any feasible mitigation.

    Moreover, serial global crop failures seem increasingly likely within the next two decades, predictably generating geo-political destabilization that is likely to crash the close global co-operation that is essential for commensurate mitigation efforts.

    Whether wittingly or not, McKibben is thus providing exactly the sink for dissent that the Obama White House needs to maintain the bipartisan US policy without popular opposition and without rising demand for official action. My courteous inquiries when he's posted at Grist have got no response, so it is for those who've put these issues to him to say whether he's acting out of naivety.