Big Oil and Climate Change

Originally published by John McFarland.

The cover story in The Economist this week is titled “Crude awakening – The truth about Big Oil and climate change.”  It comes in the wake of the introduction by a group of new Democratic Congress members of a proposed “Green New Deal” to tackle climate change.

When I began my career some forty years ago the effect of carbon emissions on the earth’s climate was not a matter of concern. The focus was on cleaning up our water and air – under the Clean Water Act and the Clean Air Act. And those acts have had a big impact on our environment. Although burning fossil fuels contributed to air pollution and pollution from fossil fuels has been greatly reduced, the emissions regulated and reduced did not include carbon dioxide, which was not considered harmful to the environment. Remember catalytic converters? They have greatly reduced emissions of harmful chemicals, but not CO2.

The world has now come to the realization that climate change is real. A poll by Yale University late last year found that 73% of Americans agree. Extreme climate events in recent years have contributed to that change of opinion.

Yet the world’s dependence on fossil fuels is not receding. World demand for oil continues to grow by about 1-2% a year. CO2 emissions in the US, the second-largest polluter on the planet, are now rising again. ExxonMobil  says that global oil and gas demand will increase by 13% by 2030. It intends to spend more than $200 billion over the next seven years to develop its reserves.

My career has been built on representing mineral owners in transactions designed to extract oil and gas from the earth. The success of the US in developing its oil and gas resources is, I believe, in large part due to the fact that most mineral rights in the US are in private hands and the extraction industry is led by private enterprise rather than government-owned industry.

Yet the fact that the oil and gas industry in the U.S. is in private hands also hinders our ability to deal with climate change. Investors want returns.  The International Panel on Climate Change, an intergovernmental climate-science body, says that oil and gas production must fall by about 20% by 2030 and about 55% by 2050 to limit the earth’s temperature rise to less than 1.5 degrees centigrade above its pre-industrial level. According to The Economist, “It would be rash to rely on brilliant innovations to save the day. Global investment in renewables, at $300bn a year, is dwarfed by what is being committed to fossil fuels. Even in the car industry, where scores of electric models are being launched, around 85% of vehicles are still expected to use internal-combustion engines in 2030.”

The Economist advocates a carbon tax:

The key will be to show centrist voters that cutting emissions is practical and will not leave them much worse off. Although the Democrats’ emerging Green New Deal raises awareness, it almost certainly fails this test as it is based on a massive expansion of government spending and central planning …. The best policy, in America and beyond, is to tax carbon emissions, which ExxonMobil backs. …. Work will be needed on designing policies that can command popular support by giving the cash raised back to the public in the form of offsetting tax cuts. The fossil-fuel industry would get smaller, government would not get bigger and businesses would be free to adapt as they see fit–including, even, ExxonMobil.

Weaning ourselves from fossil fuels will not be easy.  Carbon is the building-block of the world’s industry, our society, our culture. It makes possible the freedoms and comforts we enjoy in transportation, communication, technology, leisure, entertainment, food production, medicine, and many other modern advances. It permeates the modern world, and our appetite for it is insatiable. But if we are smart, I believe we can limit CO2 emissions and still enjoy the benefits of carbon.

Solving global warming will require a renewal of faith that government can solve problems. The deadlock in our federal government does not bode well for that prospect. We would do well to remember that our federal government had a big hand in cleaning up our water and air. Climate change is a world problem and solving it will require cooperation among the governments of the world. The US has historically been a leader in climate science and research. It should reclaim that leadership.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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