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Science And Economics, Not Politics, Will Strand Fossil Fuels

by Hal Harvey:Most of the world’s coal, oil, and natural gas will remain buried underground forever…

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Technology, economics, and state policy will increasingly force fossil fuels to remain where they belong: in the ground.

America’s post-election recalibration is nowhere as poignant, and consequential, as on climate change: If we lose the next four or eight years without serious action, the inexorable mathematics of carbon accumulation push a safe climate future far from reach. Fortunately, while President-Elect Trump may try reversing climate policy, other forces are reducing emissions without pause. Technology, economics, and state policy will increasingly force fossil fuels to remain where they belong: in the ground.

The reality is most of the world’s coal, oil, and natural gas will remain buried underground forever, no matter who occupies the White House. There’s a term for this economic inevitability: stranded assets.

Energy efficiency and clean energy costs are dropping below fossil fuels, making the free market a growing tailwind in our fight to save the climate. Businesses have developed product plans and manufacturing lines for super-efficient technologies, and they loathe to change. Many of America’s flagship companies—Google, Levi’s, Starbucks, Walmart, and hundreds of others—are building or buying renewable energy. Neither their CEOs nor employees are eager to change this.

The coal industry is discovering how these forces strand fossil assets, as all but one American coal company is now bankrupt. Coal-dependent European utilities have seen their market capitalization drop by 75 percent or more. Coal is getting whipped in the marketplace by stunning cost drops of efficiency, solar, and wind over the last five to 10 years.

Oil is harder to displace than coal. It almost exclusively powers transportation because it’s energy dense and easy to move and burn. But burning oil releases carbon dioxide and toxic pollutants, fueling efforts to displace it with efficient vehicles and clean electricity. Every major carmaker has announced a serious electric vehicle program: Mercedes promises 10 electric models, VW will invest $4.5 billion in new EVs, and Toyota plans mass EV production by 2020. California’s Tesla may have marked the way, but all the other automakers are following.

States can accelerate the process: Consider California’s 1.5 million by 2025 EV goal, or the EV charger pilot programs being pioneered by our utilities. The transition will be bumpy, but it’s unwise to bet against this trend. EVs will first strand expensive oil, like tar sands and deep-sea reserves, then more accessible sources.

Fracking has unlocked bountiful affordable natural gas, crucial for chemical and industrial processes, and ideal for heating our homes—except for its contribution to climate change. Gas emits half the CO2 per unit of energy as coal, but if it leaks even three percent, anywhere in the line from exploration to production to distribution to use, the climate benefit is negated and it’s just as bad as coal. But gas, too, is facing a soft market, with low prices and many idle drilling rigs.

Technology trends—originated by policy, but many now driven by market forces—drive the carbon-rich to carbon-free transformation. Solar prices have dropped more than 80 percent since 2008, and wind by more than half. New LED lighting uses 85 percent less energy than conventional lighting technologies. These improvements do not have a reverse gear. While fossil fuel commodity prices fluctuate, causing economic booms and busts, technology costs are generally irreversible.

New data shows U.S. power plants have already reached the Obama Administration’s Clean Power Plan (CPP) 2024 emissions reduction goals, and another 15 percent of America’s remaining coal plants are already scheduled to shut down—many states politically resisting the plan are nonetheless slipping into “accidental compliance.” Even if President Trump tries to rescind the CPP, fossil fuels are getting bested by clean energy, sector by sector, and are increasingly stranded assets.

This transformation poses a dilemma for free-market advocates who also want to continue burning coal. They must choose between propping up an obsolete dirty fuel with state support, or taking advantage of technology. The dilemma is already showing up, as some conservative states establish special tariffs just so coal plants may run longer. It’s all a bit Soviet.

Beyond technology trends, remember most American energy policy is set by states. Governors, legislatures, and regulators determine whether a utility buys green or brown power, and whether it invests in energy efficiency. States set building codes and appliance standards, and on the future of vehicles, every state can choose to either follow federal or California fuel efficiency standards. Several states have indicated they will forge ahead on the clean energy path regardless of federal action. Turns out the new economics of clean energy are contagious.

None of this is an argument to be Pollyannish about the impacts of a decimated Environmental Protection Agency or U.S. Department of Energy. Either would be painful and costly. But clean energy economics and good state policy both show that failing to get on board with clean energy requires snubbing both science and market forces. That’s never a good bet.

Source: Renewable Energy World

 

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