Don’t Believe Trump — The fossil fuel era is ending, the real question is how fast
For those who care about climate justice, the actions of the Trump Administration, working in lockstep with Republican majorities in Congress, seem like a waking nightmare: rolling back important regulations designed to protect clean air and water; enabling fossil fuel corruption; pushing forward the Dakota Access and Keystone Pipelines; appointing Exxon’s former CEO to Secretary of State, and climate-denying fossil fuel sweetheart Scott Pruitt to the EPA; to name just a few.
Just over 100 days into the otherwise relatively ineffective Trump administration, analysis shows that one place where he and the Republicans have been ruthlessly efficient is rolling back environmental and scientific progress. There is no doubt, its been a rough few months watching a flurry of activity designed at promoting the fossil fuel industry agenda at the expense of indigenous rights, climatic stability, clean air, water, jobs and a thriving clean energy economy.
In the face of all these difficulties, something I keep reminding myself is that if you look behind the fossil fuel industry’s PR poker face, they are losing, bigly. That might sound out of place in the era of Trump, but for those paying attention, the writing is on the wall: the fossil fuel industry’s business model’s days are numbered. The real question is how long will they stay afloat for, and how much damage will they inflict before they go down.
Like a dying beast, the death throes of the fossil fuel industry are dangerous, they threaten to undermine our climatic stability, corrupt democracies, and do egregious harm, particularly to communities of color, indigenous communities, least developed nations, the global poor, and future generations. However, if we can contain the worst of the fossil fuel industry’s death throes, then the end of the fossil fuel era, and the emergence of a clean energy economy is closer than many expect, and certainly closer than the fossil fuel industry wants you to believe.
The Rapidly Emerging Clean Energy Economy
To get a sense of the rapid emergence of the clean energy economy, we can turn to a few recent reports, which sound loud death knells for the fossil fuel industry. The first comes from the widely respected financial advisory firm Lazard, which showed that in the US the average lifetime cost for utility-scale wind & solar generation is already cheaper than coal and nuclear. Trump’s promise to revive coal will fall flat in the face of this economic reality — it already is.
Economists at Columbia University examined the question of whether coal would come back if Trump rolled back regulations. They found that because EPA regulations were only responsible for 3–5% of coal’s decline, that coal simply wouldn’t be making a meaningful comeback. The competition from alternative energy is just too strong and demand for coal too weak. That’s probably why even West Virginia’s biggest utility told their coal mogul Governor, that coal just isn’t coming back.
Trump’s call for so-called ‘beautiful clean coal’ also had a rough encounter with economic reality. America’s flagship ‘clean coal’ power plant, equipped with carbon capture and storage, was just declared dead on arrival by its chief executive, as the plant simply cannot turn a profit burning coal. This follows a global trend, where hopes of carbon capture and storage are crashing on the rocks of economic reality.
As for ‘natural’ gas, Lazard’s analysis found that solar is already competitive with natural gas in a number regions of the U.S, and in many regions wind provides the cheapest energy around. Remarkably, Lazard’s calculations were made without including the federal tax credit for wind and solar. With federal tax credits in place until 2020 for wind and 2022 for solar, and the costs of clean energy rapidly declining, clean energy is set to economically trump fossil fuels.
At a global level the rapid advance of clean technology coupled with increasing action on climate change and air pollution could drastically undercut the fossil fuel industry business model, according to a report from Imperial College London co-authored by the Carbon Tracker Initiative. Their report showed that coal would likely be completed phased out of the global power sector by 2050, and natural gas might have a measly 1% market share, provided the world continues merely gradually ratcheting up climate policy and clean energy continues apace. If we act more ambitiously, that date could come much earlier.
As for oil, the Imperial College study shows that thanks in large part to the rapid development in electric vehicle and battery technologies, growth in demand for oil could halt as early as 2020. Then, by 2025, 2 million barrels of oil could be displaced per day. That’s about the same amount that caused the oil price collapse in 2014–15, which wreaked widespread havoc on the oil and gas industry, and brought about a record number of oil and gas company insolvencies.
Importantly, even if we continue to use fossil fuels for a while, the fossil fuel business model is premised on growth. As energy analyst Kingsmill Bond points out, reduction to that growth trajectory can have devastating impacts. In the coal industry, demand is only a little below its all-time peak, but because its business model was premised on growth, that reduction led to wide-spread bankruptcies and the collapse of coal stocks. Similar fates potentially await the oil and gas industry — that’s why they’re trying so desperately to halt the rapid progress in electric vehicles and clean energy.
What’s more the scenario painted in the Imperial College report relied on potentially conservative assumptions about the pace of clean technology development and climate policy. According to co-author Luke Sussams, “further innovation could make our scenarios look conservative in five years’ time, in which case the demand misread by companies will have been amplified even more.”
Yet, as the report’s authors point out, virtually none of big fossil fuel companies are planning for even the potentially conservative scenarios outlined in the report. Many, like Exxon, claim that oil will only peak 20 years later in 2040, and are planning (and lobbying) accordingly. The impacts on the fossil fuel industry’s bottom-line if they turn out to be wrong could be huge, creating tens of trillions of dollars’ worth of stranded assets — “assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities”.
Before we break out the champagne and celebrate victory on the climate front, it is important to keep in mind that these technological developments and current climate policy alone will not be enough to avert some of the worst impacts of climate change. Without significant policy development and further technological innovation, even the Grantham Institute’s somewhat optimistic scenario would put us on a path of 2.4°C above pre-industrial levels or more. Thus, we will need more ambitious policy action, faster clean energy roll out, and more changes to how we run our societies to ensure that we keep warming well below 2°C — and much more significant action to get anywhere close to the much safer goal of 1.5°C.
What the studies do make clear is that the fossil fuel industry is in trouble, deep trouble. Recognizing this, we can better understand and frame the recent spate of actions from the Trump Administration and Republicans as being reflective of an industry trying to hold back the tides of progress in a desperate attempt to protect their profits
Pipeline Politics and Desperate Infrastructure Scrambles
The coming decline of the oil industry is playing out in somewhat paradoxical ways in pipeline politics. Financial analysis from the Institute for Energy Economics and Financial Analysis (IEEFA) shows that the financial viability of pipelines like the Dakota Access and Keystone pipelines, are premised on the dubious assumption that oil demand will continue to increase, and that we will need more expensive oil from the Canadian tar sands and the Bakken shale.
If that premise turns out to be false, as it increasingly is, then those pipelines, and the oil reserves they are meant to service, face the risk of becoming stranded assets. This is creating a desperation to push through these projects through before it becomes clear they are economically unviable — even if doing so means potentially violating indigenous rights and breaking the law by not undertaking an adequate environmental review. Industry insiders have even admitted to pushing forward pipelines and company mergers, just to try and convince investors of the ongoing viability of the oil and gas industry. This may be too little too late, as oil companies are beginning to flee the sinking ship that is the Canadian tar sands.
With the window of economic viability rapidly closing on fossil fuel projects. This provides activists with an important opportunity. If they can prevent the build out of fossil fuel infrastructure long enough, the economic window may close on them altogether, & they may never get built. Doing so, prevents fossil fuel lock-in, buying desperately needed time for the climate.
We’ve seen this occur before in the coal industry. For instance, activists in the Pacific Northwest, fought off the building of coal terminals long enough such that the economic tides turned against them, rendering them economically unviable. Such smart activism has helped prevent the lock-in of harmful greenhouse gas intensive infrastructure, and earned the Northwest its reputation as the Thin Green Line, the place “where energy projects go to die”.
Inflated Bubbles, Overpaid CEOs, and Stranded Workers
One would think that the CEO’s of fossil fuel companies would see the writing on the wall and shift their business models to avoid incurring stranded fossil fuel assets. Instead, many are trying to create the illusion of ongoing profitability and are inflating the bubble further by investing in expansion despite the possible decline ahead.
Similar dynamics occurred before the collapse of the US coal industry. Before the onset of widespread bankruptcies, coal execs continued to talk up the ongoing viability of industry and to invest their company into further expansions. However, analysis of SEC filing shows that behind the scenes those same coal execs cashed in well over $100 million in stock options, often short-selling their own companies, providing pretty clear signs that they were betting on the decline of their own industry, all the while pretending in public that everything was hunky-dory.
Simultaneously, executive salaries and bonuses went up, seemingly to reward execs who drove their companies into the ground. For instance, Alpha Natural Resources gave their execs multi-million dollar bonuses, while laying off thousands of workers, and cutting the health, life insurance, and retiree benefits of the workers that remained. More broadly, as the US coal industry was crashing, CEO pay grew up to 5x faster than that of lower-paying jobs in the sector.
Revealing Trump’s faux-populism and false promises to coal workers, instead of helping coal mining communities as their industry slumps, Trump’s first budget proposal seeks to slash funding to key programs aimed at promoting economic development in coal regions, including the Appalachian Regional Commission and the Economic Development Administration. As analysis by the Center for American Progress shows, these programs have been key in supporting coal communities that have been left behind as mining jobs vanished. Gutting them as Trump plans to do, could further devastate coal communities.
Even Trump’s attempts to eliminate Obama’s Clean Power Plan may leave coal workers further stranded. Part of Obama’s efforts included the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative. The initiative aimed at providing economic and workforce development programs and resources to assist communities and workers that have been affected by job losses in the coal industry. This formed part of the POWER + PLAN which would have leveraged $8 billion in investments for coal communities. Trump’s attempts to unravel Obama’s legacy, will thus leave coal workers high and dry, while economic forces continue to drive the decline of their industry.
Unlike places like Germany where more robust social security nets and just transition plans help fossil fuel workers, fossil fuel execs and the Trump Administration have no qualms with leaving fossil fuel workers high and dry. America’s relatively thin social safety net deepens worker vulnerability, and increases resistance to change. Unless Democrats & climate justice advocates reckon with this reality and provide a robust plan to transition fossil fuel industry workers into the new economy, they will continue to face worker resistance.
Fortunately, funding a just transition does not have to break the bank. Researchers at Michigan Technological University and Oregon State University showed that by investing between $180 million to $1.8 billion one could retrain and switch the vast majority of U.S. coal miners to solar jobs. Even the higher end of the cost estimate of $1.8 billion is just 5% of the annual US fossil fuel subsidies, or 0.3% of the US defense budget.
Un-levelling the Economic Playing Field
Along with foisting the costs of taking care of their workers onto society, fossil fuel execs are desperately trying to protect their profits by distorting the economic playing field, and shifting their financial, social and environmental costs onto society.
The coal industry is losing so poorly it is fast becoming one of the most expensive forms of energy globally. So, to cut costs, Republicans recently repealed regulation which prevented the coal industry dumping waste into rivers. Trump signed the bill into law, allowing the coal mining industry to once again freely pollute water ways, foisting their damaging costs onto society. Shortly after, the U.S. House of Representatives passed a resolution to undo a rule which limits venting, flaring, and leaking of methane pollution from oil and gas operations on public lands. If successful, it will allow oil and gas companies to spew methane pollution freely, while wasting $100s of millions of taxpayer-owned gas.
As former Councillor to President Obama, John Podesta, summarizes, “since taking office, President Trump has signed more than seven executive orders, presidential memorandums, and bills that roll back environmental protections and prioritize giveaways to the fossil fuel industry. That number is expected to jump even higher in the coming days with an anticipated executive action aimed at undoing the Clean Power Plan, lifting a coal moratorium on public lands, throwing out consideration of climate change in federal decision-making, and making it easier to release the potent global warming pollutant, methane”.
These actions are just the beginning of a fossil fuel industry and Koch Brothers sponsored plan to foist even more of the costs of fossil fuel production onto society. Already, the International Monetary Fund estimated that in 2011 the global fuel industry was subsidized $4.9 trn per year, with $550 bln being direct financial subsidies, and the rest being social costs often in the form of human health, life, climatic stability, clean air and water. Those societal costs will only go up if the Trump Administration and Republican party have their way.
For all their talk of free markets, Trump and the Republicans are doing their utmost to make us pay a heavy cost to protect the profits of a failing industry, and they are not satisfied to do so on US soil alone. On the same day that the Senate appointed Exxon’s former CEO to Secretary of State, the House approved a resolution killing requirements for fossil fuel companies to disclose payments to foreign governments.
The resolution was passed by the Senate a few days later, and became the first bill that Donald Trump signed into law. Repealing the regulation opened the doors for oil & gas companies to corrupt foreign governments, without so much as having to disclose it. It was almost as if Trump was paying homage to how foreign oil interests, i.e. Russia, helped him win his election.
He paid more direct homage to Russia by appointing Exxon’s former CEO Rex Tillerson to America’s top diplomatic position, Secretary of State. Tillerson, who had received a Russian Order of Friendship from Putin for his work with Russian oil interests, was quick to act on the shared interests of Russia and Exxon.
The day after Tillerson was appointed, the US began to ease its sanctions on Russia — sanctions which Exxon’s previous lobbying made relatively easy to remove. Doing so provided a foot in the door towards lifting sanctions which have prevented Exxon from partnering with Russia to develop oil and gas fields worth $100s of billions. Barely trying to conceal his conflict of interest, Tillerson’s first stop as top diplomat was to Russia.
Selling the Carbon Bubble
Here is the kicker, Tillerson is far from being the successful oil man that Trump paints him out to be. By making bad bets on high oil demand and continued fossil fuel dominance, Tillerson drove Exxon into decline. Last quarter ExxonMobil posted their worst profits in thirty years. Their future prospects aren’t much better either. As IEEFA director of finance Tom Sanzillo argues, Exxon is on a “trajectory of shrinkage” with “revenues down, profits down, payments to shareholders down, debt up, and cash scarce”.
Exxon, like much of the fossil fuel industry, is sitting on the precipice of major financial worries. The oil industry has saddled itself with $2 trillion worth of long-term debt, which requires much higher fossil fuel demand and prices to recoup. With the rapidly emerging clean energy economy, that debt and the assets it was used to purchase look increasingly like a noxious financial bubble waiting to burst. Recognizing this, the Group of 30, a financial advisory group run by executives of the world’s biggest banks, issued a warning late last year that the global oil industry has expanded on the basis of an unsustainable debt bubble.
As Alex Esteffen forcefully highlights, a large part of the role of Tillerson, the rest of Trump’s Administration and Republicans, is that of snake-oil salesmen. They are trying to sell the world on the idea that fossil fuels will continue to dominate, in the hope of keeping the carbon bubble afloat long enough to drain as much profit out of it as they can. Our role, as people who care about climate justice, is to expose that bubble to the light of day and ensure those fossil fuels stay in the ground.
A Global Chinese-Led Clean Energy Resistance
The actions of the Trump administration should put to rest any doubt that Trump and the Republican party has sold its soul to the fossil fuel industry. With the aid of a small collection of milquetoast and corrupt Democrats, the Republican Party has begun to push forward a radical fossil-fuelled agenda which, in the words of Noam Chomsky, truly makes it “the most dangerous organization in world history”.
However, far from putting America first, the Trump administration may well be stifling America’s greatest economic opportunity. Clean energy is growing 12x faster than the rest of the US economy, with solar alone providing 1 in 50 of every new job last year, and employing a quarter of a million people. Tesla made more profits in a quarter than the entire fossil fuel industry combined.
For all his talk of winning and beating China, Donald Trump may well be handing leadership on the greatest economic opportunity of our lifetimes to them. China recently announced they will be investing over $360 billion in clean energy by 2020. Trump’s America First Energy plan, on the other hand, failed to even mention solar, wind, batteries or electric vehicles, instead pegging America’s future to the fossil fuel industry and economic fantasies like clean coal.
China’s climate leadership also positions it to further its role as a new global superpower. At the latest UN climate conference the world made it clear that despite Trump’s promises to withdraw from the UN climate talks, they will continue to forge ahead toward a clean energy future. With global political alignment around climate action, US intransigence helps China assume the leadership mantle of the 21st century. America on the other hand is set to face significant political backlash, particularly if Trump ill-advisedly chooses to withdraw from the Paris Agreement, or, as Trump’s budget proposes, he removes US funding for all international climate programs.
Across the world, investment funds worth over $5 trillion have committed to divest from the fossil fuel industry. Now that the US administration has made it clear that its interests and that of the fossil fuel industry are one and the same, the sabres are rattling to apply the same logic of boycotting, divesting and sanctioning against the US itself — a strategy which helped bring the Apartheid regime to its knees, making it a doubly fitting move given the dangerous rise of White Nationalism that ‘President’ Bannon, sorry Trump, is helping to stoke.
Winning the Resistance?
In the end though the resistance is far from won and the Trumpenreich could do some real damage to global climate efforts. Now more than ever, the world needs to stand up against Trump and his coterie of Republican shills. The time left to avert the worst of climate change is dangerously short, and while the rapid emergence of clean energy economy and a sprawling global climate movement gives us a glimmer of hope that we might be able to act in time, doing so is far from guaranteed.
Times like these call for great moral courage. For innovative and powerful resistance, driven by a bold vision of a more equitable and prosperous clean energy future. As it becomes harder to influence federal policy, the US climate movement will have to rely more on “direct obstruction and economic pressure through strikes, divestment, delay and bold acts of civil disobedience”. Positive action will increasingly have to move to the state and local levels. Then, in the wake of Trump, we will have to ramp up ambitious action at the federal level, such as the 100 by 50 Act proposed by Senators Sanders, Merkley and Markey.
In the meantime, the global community will once again need to pick up the slack created by slowed American climate action, and play robust political offence to hold America’s feet to the fire and keep it from derailing progress. That is no easy task, and it certainly represents a significant injustice, that America, the world’s largest historical carbon polluter and second largest current polluter, won’t be making aggressive emission reductions. However, the injustices that would be created by the world taking this as an excuse to fail to act on our shared global climate mandate will be much, much graver.
It will arguably be humanity’s greatest shared failing if we sit back and allow a dying industry to usurp the clean energy transition in order to protect their short-term profits, profits which accrue to so few. But, if we successfully pull off the resistance, we can seize one of the most important moments in global history, hopefully avert climate catastrophe, and create a much more prosperous and equitable clean energy future in its stead. In the words of Wes Jackson, “we stand at a moment in history unlike any other”.
About the author: Alex Lenferna is a Fulbright Scholar at the University of Washington, pursuing a PhD in philosophy focusing on climate ethics and justice. He is a first generation South African whose family hails from the small island nation of Mauritius.