As We Address Climate Change Everyone Has Responsibility

Climate change and greenhouse gas reduction efforts got front page headlines in the last week.  Those headlines pointed to three of the international energy companies, with ExxonMobil and Chevron hearing from their shareholders, while Royal Dutch Shell was dealt a precedent-setting ruling from the district court in The Hague. Many reports mentioned that as a result of shareholder activism and court action, these companies, as well as others in the energy industry, had been put on notice.

But there is another headline that should be forthcoming.  It should reflect that these companies are not alone. Climate change and related issues require coordinated communication and well informed and fact-based action.  Shareholders, lawmakers, and for that matter, all users of energy, are on notice as well.  They all have their own important responsibilities and obligations.

Most importantly, there is an immediate need to communicate a better understanding how we use energy, what energy sources drive our lives and economy today, and how realities of science and available technology will affect the transition timelines needed to meet climate driven emissions reduction targets. Despite some imposed mandates and an understandable and necessary level of urgency, transition will, in some cases, still take decades to achieve.

For example, let us look at the very closely linked transportation and power generation sectors.  Together they account for over half of all greenhouse gas (GHG) emissions.  Transportation, which accounts for close to 30% of all GHG emissions, sees automakers and consumers rightfully excited about the evolution of electric vehicle (EV) technology which is already helping to drive zero emission results. While they represent only about 2% of the U.S. vehicle fleet today, EVs are expected to grow as manufacturing facilities are built and existing facilities are converted to build new vehicle platforms.  This will be a long-term evolution process, even with growing mandates to eliminate internal combustion engines (ICEs).

There is another factor, as well, that must be considered. As EV demand grows, so does our demand for electricity. Electric power generation already accounts for roughly 25% of all GHG emissions.  Natural gas must continue to play a significant role in meeting ever growing reliable low carbon electric power generation needs. While the use of wind, hydro, and other renewables will grow and further assist in reducing GHG emissions, still more needs to be done, including further development and implantation of carbon capture, utilization and storage (CCUS) along with natural gas power generation.  The U.S. electric grid, already severely stressed, will need substantial upgrades to support the reliability that increased EV market penetration will require.  Hopefully, new infrastructure investment funding now under consideration in Congress will go a long way toward solving the grid reliability problem.  And we should not forget the need for new nuclear power generation capabilities, as well, without which GHG power generation emission targets are likely unattainable.

Simply put, even with likely exponential technology advances, these transitions will not take place overnight.  Even now automakers know EV battery technology and charging depend significantly on access to rare earth metals, most of which are now mined or processed almost exclusively in China and are fundamental to the manufacture of the batteries. That access will need to be developed domestically and it too will take time.  Recognizing those realities, automakers continue to develop advanced hybrid vehicle technology, combining EV and ICE power trains, along with the introduction of variable ratio high compression engines using low carbon high octane fuels and biofuels which will result in even more environmentally efficient ICEs. Those improvements, along with improved cylinder deactivation and sophisticated fuel ignition systems are also underway.  These developments ensure the use and long term viability of the ICE that is a necessity for motorists and will be coexisting with EVs for decades.

As with most objectives, aiming high is laudable.  America is establishing a leadership position in reducing the emissions that contribute to climate change.  That is an imperative. But to achieve objectives requires detailed planning. That planning must assess all the factors that will affect timelines and, most importantly, outcomes. Right now, it appears many factors, some obvious and others less so, are being missed.  As lawmakers, public officials, and investors consider next steps, they need to communicate and comprehend all the facts and factors as decisions are made and mandates are issued.

Transportation and power generation are the foundation of our lives and economy.  We must ensure that as transportation technology advances reliable power generation that is needed is affordable and available without interruption. A failure to do so will expose a failure to communicate and to accept the technical realities of the challenges that we are all working hard to address.  Most critically, any failures to accept the realities of the development timelines will adversely impact consumer confidence, economic growth, and may even threaten national security.  Those are responsibilities and obligations for everyone that must be considered without fail as we work together to address climate change challenges.

Mike Roman

Non-resident Senior Fellow, American Council for Capital Formation

President, CertainPoint Strategies, L.L.C.



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