Fossil fuels are definitively the new tobacco
Former hedge fund manager, host of CNBC’s “Mad Money” and investment guru Jim Cramer declared in January of last year he was “done with fossil fuels… we’re in the death knell phase. They’re tobacco.”
Not everyone was so sure about this at that time — but now there’s no disputing it. Fossil fuels are definitively the new tobacco, and we are witnessing a historic moment in real-time: The end of the fossil fuel age. Here are the latest markers of the fossil fuel industry’s accelerating implosion.
As I’ve highlighted previously, but is worth repeating, the International Energy Agency, an international body of energy experts and economists, put out a landmark report three weeks ago laying out a roadmap to get to Net Zero by 2050, in hopes of limiting warming to 1.5 degrees Celsius, which is the goal set forth in the Paris Agreement. To do so, the report spells out that there must be no new investments in fossil fuel development. “If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now — from this year,” said Fatih Birol, the IEA’s executive director.
Not a good look for the fossil fuel industry, but a report is a report. What’s actually happening in the industry though? A lot, it turns out.
On May 26, three oil giants, Shell, Exxon and Chevron, all took some pretty significant blows. A Dutch court found Shell’s contribution to climate change to be criminal, threatening human rights through its investments in fossil fuels and ordered it to reduce its emissions by 45 percent by 2030.
That’s right. A government finally declared that being in the business of wrecking the planet is a crime. This is an incredible precedent, albeit decades too late.
Exxon now has three seats on its board occupied by climate activist investors, thanks to some clever activism and investors across the board from Black Rock to State Street to Vanguard voting against the company, in an effort to take the reins and steer the ship towards climate sanity.
Chevron also had to face the music when 61 percent of shareholders voted to reduce emissions of the products it sells.
That’s the latest news. But how’s the industry doing over a longer period? Tell me if you heard this one: The fossil fuel industry lost $123 billion over the past decade — underperforming by 52 percent compared to a baseline world equities index.
According to NextEra Energy CEO, Jim Robo, “there is not a regulated coal plant in the country that is economic today, full period and stop.” And Bloomberg reports that natural gas is falling out of favor with investors and utilities faster than coal, with its looming risk of $100 billion in stranded assets, due to its inability to compete with declining clean energy costs. Keep in mind, solar energy is now the cheapest electricity in history and it’s only getting cheaper.
And as more car companies, not just Tesla, but the Fords and GMs of the world, make commitments to selling emissions-free vehicles, and our biggest utilities like Xcel Energy commit to 100 percent carbon-free energy, you’re not likely to see these trends change direction any time soon. Last year over 80 percent of all new electricity generating capacity built around the world was clean energy, 91 percent of which was solar and wind. The ship has sailed. Elvis has left the building.
But it’s not all economics, although that helps. It’s also about social license. For decades, the tobacco industry sought to cast doubt in the public’s mind about the studies that linked smoking cigarettes to cancer. They hired fancy marketing consultants to craft clever messages to make it seem to the public like the science was uncertain. Of course, they knew they’re product was killing people. Instead of stopping, they just lied about it.
So, when the public found out burning fossil fuels caused climate change, the fossil fuel industry followed the tobacco industry’s example. They literally hired the same consultants who worked for the tobacco companies to run the same playbook. Of course, they had been doing their own research on climate change since the 1960s and knew very well about their product’s impact on the planet.
While this bought them some time, the truth has caught up with them.
Over the past decade, diverse coalitions of activists have protested oil and gas pipelines being built around the world like the Dakota Access Pipeline fight at Standing Rock, the Enbridge Line 3 pipeline being protested right now, and the TransCanada Keystone XL pipeline, which after a decade of delays has finally been put to rest by the Biden administration revoking its permit.
And while these fights didn’t stop the oil giants in their path, they made each new pipeline that much harder to get approved, delayed the oil from flowing, sometimes indefinitely, and posed financial risks to these companies that are now too great for many investors to stomach.
Coupled with the fossil fuel divestment movement that appealed to the conscience of investors around the world resulting in nearly $15 trillion flowing out of fossil fuel investments, you can see that the fossil fuel industry’s social license to operate is being revoked.
Of course, not everyone cares about the moral implications of a business. At a Berkshire Hathaway meeting last month Warren Buffet explained that he didn’t think Chevron was an evil company, and then went on to explain that he basically doesn’t care about the moral implications of his investments. This included investing in tobacco, meatpacking and the like proclaiming that “if you expect perfection in your spouse or your friends or companies you’re not going to find it.” So, I would assume it was for purely financial reasons then, that he sold over half his shares in Chevron two weeks ago. After all, people are likely to look to the Oracle of Omaha for investing advice rather than moral guidance.
Whether you’re listening to the IEA, the climate scientists, the outcries of activists, or whether you only care about dollars and economic indicators — the writing is on the wall.
Andreas Karelas is author of the book “Climate Courage: How Tackling Climate Change Can Build Community, Transform the Economy, and Bridge the Political Divide in America” published by Beacon Press. He is also the founder and executive director of RE-volv, a nonprofit climate justice organization that helps fellow nonprofits across the country go solar. Follow him on Twitter: @AndreasKarelas.