At the recent United Nations-sponsored Climate Summit, U.N. General Secretary Ban Ki-Moon stated, “Now is the time for action.”
We can all agree that climate change poses a significant challenge for the world. The question, then, is what sort of action should be taken?
One proposal that is being pushed – with a full-throated endorsement from Mary Robinson, Ban Ki-Moon’s special envoy on climate issues – is a movement to get large institutional investors to divest their holdings of companies involved in producing fossil fuels.
For one thing, divestment represents a diversion from the real search for technological solutions to managing climate risks that energy companies like ours are pursuing. The industry-driven natural-gas boom in the United States is Exhibit A in this regard.
Fossil fuel benefits …
Domestic natural gas production has risen more than 25 percent since 2008 thanks to our industry’s innovations, and natural gas reserves are up more than 25 percent as well. These additional supplies have helped displace a significant amount of coal for power generation, leading to a reduction in U.S. energy-related greenhouse gas emissions to levels last seen in the 1990s.
No government program or mandate brought about this progress. Now compare what has happened in the United States to Europe, where a more bureaucratic approach to emissions reductions and other climate policies has undermined investment and innovation, and largely failed to curb emissions. Those currently calling for divestment should celebrate what our industry has done, not condemn it.
President Obama certainly celebrates our industry’s accomplishments. His all-of-the-above strategy hails the fact that the United States, since 2005, has reduced emissions more than any other nation on earth.
And in his speech last week at Northwestern, the president noted how increased domestic oil production has strengthened our energy security. Furthermore, he pointed out, growing natural gas production has helped spark a manufacturing renaissance in a nation where, a decade ago, manufacturing was thought to be in decline.
On top of that, it’s worth pointing out the critical contribution our industry makes to the American economy every day. According to PricewaterhouseCoopers, the oil and gas sector supports 9.8 million jobs – that’s 5.6 percent of total U.S. employment. In 2011, the industry’s total impact on U.S. GDP was $1.2 trillion, or 8 percent of the U.S. economy.
… and energy scale
In the ongoing discussions about how to address the risks of climate change, it is important to recognize how the radical recommendation of the divestment movement – that society stop using fossil fuels altogether – would immediately jeopardize the basic standards of living for billions of people around the world. And it would preclude the billions more in developing nations who are seeking to reach modern living standards from ever doing so.
That’s because there are no scalable alternative fuels or technologies available today capable of taking the place of fossil fuels and offering society what those energy sources provide.
“Scalable” is the key word in that sentence. The divestment movement completely ignores the enormous size of global energy needs today (and in the future) and therefore fails to understand the inability of current renewable technologies to meet it.
Renewable energy sources such as wind, solar, biomass, and hydropower accounted for just 13 percent of the world’s primary energy supply (and only 3 percent of fuels for road transportation) in 2009, according to the International Energy Agency. Most of renewables’ contribution came from biofuels and hydropower. Wind, solar, and geothermal energy provided just 1.3 percent of global energy.
Renewable energy has a contribution to make, but it looks to be a relatively small one.
Now consider that global energy demand is expected to grow nearly 35 percent by 2040 as developing nations advance and billions of people join the middle class. The nearby chart shows quite clearly the challenge inherent in scaling up technologies to meet a demand that is itself scaling up rapidly.
Renewable sources will need to see fantastic growth just to maintain or slightly exceed their current share in the energy mix. (And don’t forget that until some unforeseen breakthrough in battery technology occurs, natural gas must remain on call as a backup for intermittent renewable sources like wind and solar for generating electricity.)
Most estimates suggest that wind, solar, and geothermal will make up no more than 4 percent of the global energy supply by 2040, while the combined share of biomass and hydropower will remain about the same as today. All told, renewables’ contribution to the global energy mix in 2040 is expected to be about 15 percent – not much more than today.
Meanwhile, experts at the International Energy Agency, the U.S. Energy Information Administration, and elsewhere have all concluded that fossil fuels will continue to meet about 75 percent of global energy needs well into the middle of this century.
Given these numbers, it’s difficult – if not impossible – to see how, in the next several decades, renewables could replace fossil fuels.
That point is never seriously addressed by those advocating divestment. They merely say “no” to fossil fuels. But to not use fossil fuels is tantamount to not using energy at all, and that’s not feasible.
I expect those who advocate divestment themselves continue to use fossil fuels as their main sources of energy in their day-to-day lives – automobiles, trains, planes, electricity, petrochemicals, thermoplastics, modern pharmaceuticals … and the list goes on.
Energy and progress
The chief reality this movement ignores is that access to reliable and abundant sources of energy is the linchpin for societal progress. Energy is modern life.
Over the past century and a half, mankind on the whole has lived richer, healthier, cleaner, freer, and more prosperous lives than were lived throughout the entire course of human history. That began when the Industrial Revolution harnessed large-scale energy resources for the betterment of society.
The modern world in which we live – and that many often take for granted – is a world of electricity, transport, trade, labor-saving inventions, and profoundly improved health. It has been made possible by the widespread use of energy.
Wealthier and healthier
This point is so obvious and so fundamentally true that it is often overlooked. It should not be.
World Bank official Rachel Kyte perhaps says it eloquently:
Access to energy is absolutely fundamental in the struggle against poverty. It is energy that lights the lamp that lets you do your homework, that keeps the heat on in a hospital, that lights the small businesses where most people work. Without energy, there is no economic growth, there is no dynamism, and there is no opportunity.
Though the bulk of humanity is far richer and healthier than at any time in history, there are places on earth where the way people live is little different from the subsistence levels of the past.
There are lessons to be learned here: Almost every place on the planet where there is grinding poverty, there is also energy poverty. Wherever there is subsistence living, it is usually because there is little or no access to modern, reliable forms of energy.
The energy poverty numbers are as staggering as they are heartbreaking – 1.3 billion people lacking electricity, and 2.7 billion people using wood, charcoal, or dung for cooking fuel. The World Health Organization estimates that millions die each year just from air pollution caused by the use of pre-modern energy sources in people’s homes, such as open fires for cooking or heating.
A moral imperative exists – for policymakers as well as large energy companies – and it is to seek economic ways to expand the use of modern energy sources to the billions of people around the world currently living without them, and to do so in a manner that safeguards our environment.
That’s what we will do at ExxonMobil. At the same time – as we have been doing for over a century – we will continue to invest in research to develop technology that makes our energy future better. I’ll blog more on that topic in the weeks ahead.