By Camila Domonoske, NPR
31 May 21readersupportednews.org
his week's news was nothing short of astonishing.
A court in the Netherlands issued a landmark ruling
against Royal Dutch Shell — an oil company already pledging to cut its
carbon emissions to net zero by 2050 — ordering it to act faster.
At Chevron's shareholder meeting, investors voted to
demand that the company reduce its contribution to climate change. The
demand was short on specifics, but investors made it clear that it was
not enough to use renewable energy to power oil and gas operations: Real action on climate change means selling less oil.
And a much bigger shareholder revolt took place at Exxon Mobil. Activist investors took on the giant and won, delivering a stinging rebuke to the company's management.
The hedge fund Engine No. 1 placed two new directors
on the board of what was once the world's most influential oil company —
to prepare it for a world that might stop burning oil and gas.
These events shook the oil industry to its core,
upending assumptions about the future of the fuel that powers the global
economy.
But this moment has been a long time coming. The
scientific consensus that burning oil and gas is driving climate change
has been firmly established for decades. For just as long, activists
have wielded this scientific evidence in a fight against the world's
massive oil and gas giants. They have sued in courts around the world.
They have picketed. They have held die-ins.
And they've used the tools of business, arguing that oil and gas is a bad long-term investment.
In a world where governments are determined to tackle
climate change, a lot of oil and gas investments might never pay off —
they'd become "stranded assets," and companies would lose money.
Activists have presented this financial logic to
corporate leaders. They have submitted shareholder proposals. Sometimes
they've even won incremental victories.
But they've never had a week like this.
So what changed?
"What's different about this moment is that now we
have technologies that are cheaper, cleaner and better, and so the
market is recognizing that oil and gas are no longer indispensable,"
argues Fred Krupp of the Environmental Defense Fund. "The argument that
used to be somewhat theoretical about stranded assets is now very
tangible and real."
The cost of building new wind and solar power has fallen dramatically. Electric appliances and heat pumps could conceivably replace natural gas in homes.
And after Tesla proved that battery-powered vehicles didn't have to be
glorified golf carts, the entire auto industry is racing to pivot toward
electric vehicles.
Meanwhile, governments around the world — particularly
in Europe and China — have been promoting green technology through
increasingly aggressive incentives and penalties. Outright climate
denial, while still prevalent in countries like the United States, is no
longer in the political mainstream.
And more and more investors,
including giant, influential money managers like BlackRock, are
focusing on climate change. Some groups cite moral reasons, while others
focus on the bottom line.
"The biggest risk for us as investors is assuming the
status quo and not seeing those risks or those technology disruptions
that are around the corner," says Aeisha Mastagni of CalSTRS, the
retirement fund for teachers in California. The group was a high-profile
backer of the shareholder revolution at Exxon.
"I don't know what the price of oil is going to be
tomorrow. I don't know exactly when the world's going to transition,"
she says. "But I do know that change is coming and Exxon Mobil needs to
change with it."
This sense of impending change has reached some oil CEOs and boards of directors.
"Certainly in Europe, there has been a real awakening
on the part of a growing number of directors," says Karina Litvack, who
serves on the board of directors for the Italian energy company Eni and
co-founded the World Economic Forum's Climate Governance Initiative.
"We're certainly not there with everybody, but ...
directors are aware of the urgency and the complexity and the scale of
the climate challenge," she adds.
Increasingly aggressive carbon targets in Europe put
pressure on American companies to follow suit; meanwhile, as the Dutch
court decision against Shell shows, the bar continues to be raised in
Europe.
All these forces have converged to create a remarkable moment of reckoning for oil and gas giants.
This week's dramatic news does not suggest that the fight over climate change is over.
In the sometimes-perverse lexicon of corporate
America, the idea that the world will wage a successful battle against
climate change is a "risk." Specifically, it's called "transition risk."
If the world decides to tackle climate change and
transitions away from oil and gas, then a wide array of companies will
need to adapt or go under. It may or may not happen, but if it happens,
it will carry costs. So from a corporation's point of view, it's a risk.
Exxon Mobil has repeatedly argued that the odds of this happening were so low that it didn't merit planning for it.
Based on the investor revolt this week, Wall Street clearly thinks that a substantial shift away from oil and gas is possible.
Proxy advisory firms, companies that issue
recommendations on how investors should vote on shareholder proposals,
even used the word "inevitable." And since beliefs about what's possible
can shape what's politically viable, this is no small development.
But there's no consensus on when this change would happen.
The oil industry points out that cutting production
too early — before the world's demand for oil has actually decreased —
would cause price spikes and shortages that would fall somewhere between
disruptive and disastrous.
And for demand to drop quickly enough to ward off the
worst effects of climate change would require massive investments in
renewable power, widespread adoption of electric vehicles, lifestyle
changes to cut energy demand, the political will to make disruptive
policy changes and international cooperation among rivals and outright
enemies.
The world is not currently on track for that kind of transformation.
In short, the fate of the climate is profoundly
uncertain. But this week's boardroom and courtroom decisions point to an
expanding sense of what's possible.
A massive shift away from fossil fuels is a prospect that Big Oil can no longer rule out.
Are these folks looking for more oil, or are they just pretending the air they breathe is not becoming increasingly fouled by our dependence on fossil fuels?