The Will to Change: Private Enterprises Reduce Their Emissions

Summary: Global average temperatures have been at record levels month by month up to the time of writing (August 2016), and for most years since 2000.  When attention focuses on the U.S., the number of days in a year above 100ºF (37.8ºC) is forecast to grow dramatically, for example by 2060 and 2100.

Contrary to the operating strategies of large fossil fuel companies, we present here examples of two companies and an industry that embrace the changes demanded by the growing global warming crisis.  A large electricity generating utility, NRG Energy, is developing renewable energy sources as part of its electricity portfolio.  The American trucking industry embraces the regulations just issued requiring trucks to be more fuel efficient and to emit lower amounts of greenhouse gases.  Apple, following examples set by Walmart and Google, is contracting with renewable energy providers for long-term supplies of electricity to fulfill its growing needs.

When confronting the challenges of global warming American capitalism has to rediscover the positive entrepreneurial attitude that led to American expansion in the last two centuries.  Fossil fuel companies are resisting such change.  But the three examples presented here show what can be achieved when will prevails.  They illustrate the “can-do” approach that will successfully address global warming.

  

Global average temperatures in 2016, month by month, are higher than in recorded history for the same month in earlier years, according to the U. S. National Aeronautics and Space Administration.    Three of four recent heat waves yielding record high temperatures were caused at least in part by man-made global warming .

Temperature extremes in the U. S. are projected to increase drastically in the remainder of this century (see the graphic below)

Number of days in 48 states of the U. S. in each year in which the temperature exceeded 100ºF (37.8ºC) historically averaged from 1991 to 2010 (upper left), and projected for the case that no measures are in place to abate emissions of greenhouse gases, for 2060 (center) and 2100 (lower right).  In each map, NEUTRAL SHADING characterizes 0-5 days per year; TAN, 5-10 days; LIGHT ORANGE, 10-25 days; MEDIUM ORANGE, 25-50 days; and FULL ORANGE, more than 50 days.  The BOLD NUMBERS give the historical or projected number of days per year over 100ºF for the cities named.

Prepared by and adapted from Climate Central http://www.climatecentral.org/;

Source: The New York Times http://www.nytimes.com/interactive/2016/08/20/sunday-review/climate-change-hot-future.html. 

  

The data for the recent past in the upper left map show that the area around Phoenix, AZ and the southern plains are already very hot, as many Americans already know.  But if worldwide emissions continue unabated for the rest of the century warming of the climate will continue.  Climate Central projects that much of the U. S. will have more days over 100ºF in regions that are now relatively temperate.  By 2100 this trend yields projections for drastically hot climates in the California central valley, the southwestern desert, and much of the central Great Plains extending all across the South to the Atlantic coast.  These results reflect that projected global average temperature increases at any time are directly related to the additional amount of carbon dioxide (and other greenhouse gases, GHGs) in the atmosphere at that time.

Extremes of heat of the extent shown in the above graphic strongly suggest that agricultural yields may suffer seriously, and that human wellbeing may be severely affected.

Companies and industries grasp the need for reduced emissions.  NRG Energy is the largest independent electricity producer in the U. S.  The power industry emits the most GHGs, mostly as carbon dioxide (CO₂), of any sector in the economy, burning vast amounts of fossil fuels to drive generation.  In 2014 NRG was the fourth largest emitter in the power industry. 

David Crane became its Chief Executive Officer in 2003.  Although his earlier experience had been in the conventional power industry, shortly after taking over he undertook to transform a significant portion of NRG’s generation into renewable energy production.  He invested in the Ivanpah thermal solar plant in the California desert, and in a smaller solar panel farm in Massachusetts, as well as wind energy and electric car charging stations.  Mr. Crane stated “It’s the destiny of NRG to be a leader, to create a more sustainable and prosperous future while winning the fight against climate change.”  One year ago NRG set the goal of reducing emissions by 90% by 2050. 

The Ivanpah plant, however, encountered problems; it produced less power than expected, and a May 2016 fire in a major component damaged its ability to generate electricity.  NRG also faced competitive challenges from solar panels, whose price was falling more than expected. 

As a result, the NRG board and its investors lost faith in Mr. Crane, and he was replaced late in 2015 by the company’s Chief Operating Officer, Mauricio Guttierez.  Mr. Crane’s problems may have been due to his ambition to implement renewable energy too fast.  Indeed, Mr. Guttierez is continuing to steer NRG along a similar renewable path, but at a more measured pace.  In retrospect Mr. Crane’s vision served an important function, pioneering a positive culture in the company to expand the role of renewable energy in its operations.

The American trucking industry worked to prepare new fuel standards in collaboration with the Federal government and some environmental organizations.  Currently the nation’s truck fleet averages about 6 miles per gallon (39 liters per 100 km) of fuel.  Although trucks number only 5% of the vehicles driven they produce about 20% of the CO₂ emitted by transportation vehicles.  The industry was involved in the negotiations leading to the final rule, winning its support.  The rule imposes an improvement in efficiency of 25% over ten years, producing an estimate of US$170 billion in savings over that time and reducing fuel demand by 2 billion barrels in the useful lifetime of a tractor.  The costs of modifying the tractors to achieve this efficiency are recovered by the long-term savings in fuel use.  PepsiCo provides an example of corporate support for the rule.  Its chief executive said “The steps we have taken to boost efficiency of our fleet … have significantly reduced emissions while lowering our operating costs.  And we are committed to doing much more.”

This rule complements the Obama administration’s earlier rule governing passenger vehicles, whose fuel efficiency is to double over a similar period of time.

In its editorial on the trucking rule, the New York Times wrote “it is heartening, if not downright astonishing, to see an industry targeted by an aggressive rule to reduce GHGs welcoming that rule. It is also heartening to be able to provide proof … that regulators and industry can, in fact, produce a mutually acceptable result”.  The Times contrasts this case with the fierce opposition of the American electricity industry to President Obama’s Clean Power Plan, the rule intended to reduce emissions from large power generation plants.

Apple Goes Green.  The technology company Apple is on track to furnish most of its electricity demand in the U. S. from renewable sources – solar, wind and hydroelectric power, both in California (where its head office is located) and elsewhere in the U. S.  Its demand is growing rapidly, because not only is it building a new corporate headquarter campus and increasing the number of retail outlets, but importantly its power needs for cloud storage are growing rapidly. 

Like Walmart and Google, Apple has been granted federal recognition as a wholesale provider of electricity, permitting it to operate nationwide; in fact its main customer will be itself.  For example, about 50% of its needs will be provided by a 25 year contract with First Solar’s California Flats solar farm, now under construction.  Apple’s motivations are both environmental and economic; renewable energy provides carbon-free power, and its contract costs are highly favorable.  Google’s Gary Demasi, director of operations for data center energy and location strategy, praised Apple’s strategy, saying “Renewable energy, from a cost perspective, is now competitive with other forms of energy, much more so than it was a few years ago.”

 

Discussion

 

American expansion in the nineteenth and twentieth centuries, and its development into an economic power, were fostered by a positive attitude with respect to enterprise, a “can-do” culture that saw unmet needs, overcame obstacles and created successful enterprises in the private sector.   Machinery and technologies were invented, matured into widespread use, and perhaps declined as progress in allied fields overtook them.   But in the late twentieth century scientific investigations showed that certain technologies had dangerous or toxic side effects on society, demanding new creativity to overcome them.  But the industries in question, instead of rising to the challenge, sought to entrench themselves in the status quo, resisting change.  Instead of continuing with a “can-do” mentality, they adopted a “won’t change” mindset, overtly resisting change, seeking to continue reaping profit from their tainted technologies.  The conventional energy industry, based as it is on burning fossil fuels, is a prime example of the “won’t change” framework.  It promotes continued use of fossil fuels indefinitely, just as it has for more than a century.  It fails to concede the unintended harms wrought by use of fossil fuels on the global climate, and dismisses or belittles the damage foreseen by continued release of GHGs.

The three cases outlined here, NRG and its changing culture of developing renewable energy, the American trucking industry embracing the regulatory changes that will reduce GHG emissions, and Apple’s development of its own renewable energy sources, are all examples of a resurgent “can-do” operating culture in American enterprise.  This attitude is essential in addressing the worldwide crisis of global warming.  These companies and groups have embraced the existence of the problem and recognized that they can play a significant role in minimizing its future effects.  They shun the “won’t change” approach shown by many.  They accept the challenge that global warming confronts us with, and proceed enthusiastically with a “can-do” attitude.  The winds of change are at their backs.

© 2016 Henry Auer 

The Will to Change: Oil Companies Should Embrace Renewable Energy

Summary: Exxon’s scientists conducted extensive research in the 1970’s and 1980’s showing that use of fossil fuels produces greenhouse gases that warm the planet.  These results were accepted by the company’s management.  By the 1990’s, however, the fossil fuel industry changed its message.  It began a campaign to plant doubts in the minds of the public about the reality of manmade global warming and its effects.

Although many large American companies have prospered because they embodied an optimistic culture, a “can-do” spirit, by the end of the 20^th century the fossil fuel companies adopted a “won’t change” attitude.  They resisted the scientific reality of manmade global warming, seeking to continue their business model of producing fossil fuels to supply the world’s energy.

Yet objective climate science shows that continued atmospheric accumulation of greenhouse gases such as carbon dioxide will lead to large increases in the global average temperature.  In face of this threat the world needs to move rapidly toward a carbon-free energy economy.  The large fossil fuel companies can play a major role in this shift, were they to adopt a “can-do” spirit.  The technologies already exist, the labor market is waiting, and they have the resources to carry out this transformation while remaining profitable.

  

Exxon’s Own Research on Global Warming.  As the issue of manmade global warming gained prominence in recent decades, scientists at Exxon carried out research on the phenomenon in its own laboratories.   This program was extensive enough that it led to about 50 publications in peer-reviewed scientific journals.  An Exxon scientist involved in this work told his corporate superiors that their company should embark on measures that would reduce emissions of greenhouse gases (GHGs).   

By the end of the 1980s, however, the corporate view on warming reversed sides.  The company sought to raise doubts about the reality of global warming.  As the United Nations-sponsored negotiations leading to the Kyoto Protocol, limiting emissions from developed countries, came to fruition, Exxon and other fossil fuel companies opposed the treaty, undertaking extensive lobbying efforts.  When the time came to consider the Protocol in the U. S. Senate in 1997, the vote to take up the treaty for debate failed unanimously.

Promoting Doubt about Global Warming.  From that period to the present, fossil fuel companies have engaged in a campaign that seeks to raise questions about global warming in the minds of citizens, leading them to doubt its reality and especially of its manmade cause.  This tactic had previously been used advantageously by the tobacco industry in its struggle to dissociate smoking from its harmful effects on smokers’ health (Naomi Oreskes and Erik M. Conway, “Merchants of Doubt”, Bloomsbury Press, 2010).  Indeed, some of the same personalities, having seemingly authoritative backgrounds in science, appeared in both battles.  Such doubt results in reduced pressure for change such as abandoning the extraction of fossil fuels that emit carbon dioxide, an important GHG. 

“Can-Do” Optimism.  This writer pointed out in the preceding blog post that the optimistic, “can-do” spirit that drove the growth of the U. S. during the nineteenth and early twentieth centuries has faded somewhat.  Now, many powerful industries, including the fossil fuel industry, when faced with indisputable scientific evidence indicating that they should change their operations, resist stubbornly.  They do this by promoting doubts about the scientific findings in question, and by adopting “won’t change” attitudes. 

Simplified historical sketches are presented below of three large American corporations.  The first two are considered “can-do” companies here. They have confronted technological changes in their industries and adopted new business plans to adapt to them.   The third one is ExxonMobil.

International Business Machines (IBM) was founded in 1911 when three companies combined to form the Computing-Tabulating-Recording Company, IBM’s precursor.  The company wrote “[f]rom the beginning, IBM defines itself not by strategies or products—which range from commercial scales to punch card tabulators—but by forward-thinking culture and management practices…”.  This culture informed the company’s development of new apparatuses that, for example, contributed logistics enabling the Social Security Act of 1935, a major piece of anti-Great Depression policy, to function.  In the post-war years IBM expanded by developing electronic computers, which permitted it to become an important international company. In the following decade IBM responded to new challenges by expanding its mainframe computer systems, leading to five-fold growth in income.  From 1971 to 1992 it overhauled its business model to adapt to the growing trend toward personal computing, but even so confronted difficulties created largely by its own successes.  As use of the internet has expanded, IBM has moved away from hardware to provide software and computing services.

General Electric (GE) was founded in 1889 by Thomas Edison based on his electric lamps, electric generators and motors, and power distribution.  Over the years, it developed or acquired businesses such as radio broadcasting, railroad and aircraft locomotion, electronic computing, finance, and medical diagnostic technology.  The list of its acquisitions and divestments is extensive, and was responsive to the changing business environments the company’s operations encountered.  Finance, for example, was intended to provide funds for purchasing its products, but portions have been sold off in recent years.  Additionally, as an outgrowth of its generation technology, GE manufactures industrial-scale wind turbines.

ExxonMobil began operations shortly after oil was discovered in Pennsylvania in 1859.  John D. Rockefeller formed Standard Oil in 1870 to harvest the oil; at that time the principal refined product was kerosene.  The company grew rapidly, operating in many states and abroad, but was forced to break up its units by two antitrust decisions of the U. S. Supreme Court, in 1892 and again in 1911.  Nevertheless, the separate companies prospered and many recombined again to form a smaller number of Standard companies.  In this period, as the number of automobiles powered by internal combustion engines grew gasoline production surpassed that of kerosene. 

Over the following decades, the various Standard Oil companies focused on extracting petroleum, refining it to yield gasoline, and distributing it at retail.  They also produced lubricating oils, petrochemicals and other products as years passed.  A principal Standard Oil company adopted the brand “Esso” (pronouncing the letters “S” and “O”) in 1926, which was changed to Exxon in 1972.  Exxon merged with Mobil, itself another Standard Oil company, in 1999 to become ExxonMobil.  ExxonMobil is now the largest non-state producer of petroleum and its products in the world.

Exxon set up its Solar Power Corporation in 1973 to make solar photovoltaic cells.  After determining that solar would not become profitable until 2012 Exxon sold Solar Power off in 1984.  (Mobil also had a solar venture from 1974–1994.)  From 1970 to 1986 Exxon ran a nuclear fuel preparation company.  Wikipedia (as of August 2016) lists no other non-fossil fuel ventures for Exxon.

In 2002 ExxonMobil, General Electric and others formed the Global Climate and Energy Project at Stanford University to develop new energy technologies emitting greatly reduced greenhouse gas emissions.  It intended to invest more than US$200 million over 10 years.  As of 2015, 46 research institutions worldwide are participating.  In 2009 ExxonMobil and Synthetic Genomics Inc (SGI). began research in their algae biofuels program.  Unfortunately, the project did not provide positive results and ExxonMobil cut back its support severely in 2013.   The company also established an energy research program with the University of Texas (Austin) Energy Institute.

Two “Can-Do” companies.  IBM and GE are categorized here as “can-do” companies.  Their histories embody a spirit of optimism, confronting the challenges of changing times and overcoming them to continue as successful ventures with new products.  IBM especially had troubles, and is currently dealing with yet more rapid change in information technology.

Energy demand is high and increasing, especially in countries of the developing world.  As their economies grow, the need for energy supplies grows in pace with their economies.  Their populations are becoming more affluent, entering the middle classes.  The most populous developing countries are China and India, and their demand for energy has been growing dramatically in recent decades.  In addition, whereas China’s population is relatively stable, that of India is growing rapidly.  In many developing countries including India, energy demand is fed both by growth in economic activity and by increasing populations.  The world’s population, now more than 7 billion people, is expected to grow to 9 billion by about 2040.

The fossil fuel industry has not had to overcome industry-wide challenges in order to grow.  The long-term worldwide demand for fossil fuels has never been in doubt (barring a few short-term hiccups and the current decline in demand for coal in the U.S. and Europe).  Commercial pressures in this industry have come primarily from within to improve its core technologies, rather than from a need to reinvent the companies by formulating new business models.  The large size of this industry and the confidence that demand for its products would stretch indefinitely into the future has led to its seeming complacency. 

ExxonMobil is actively resisting change.  In order to continue defending the role of the industry in the global economy, ExxonMobil and other fossil fuel companies are digging in their heels, resisting pressures for change coming from the need to minimize further warming of our planet.  As outlined above their attitude is one of resisting change, and of mobilizing their considerable financial resources and political influence to create doubt and oppose the need for change.  This may be changing, however.  Six non-U.S. oil companies and ExxonMobil have recently endorsed a price on carbon.

Total accumulated GHGs dictate how much warming (on average) Earth will undergo.  As manmade carbon dioxide and other GHGs continue accumulating in the atmosphere, the projected further increase in global average temperature rises accordingly.  This is shown in a chart from the Fifth Assessment Report (2013) of the Intergovernmental Panel on Climate Change, below:

Dependence of the projected change in global average temperature from about 1870 to 2100 (vertical axis) on the total amount of manmade carbon dioxide (as the main GHG; horizontal axis) foreseen from four emission “scenarios”, starting in 1890.  Circles represent each decade.  BLACK, historical data to 2010.  DARK BLUE, LIGHT BLUE, ORANGE, and RED represent projections for successively less stringent limits on emissions, from almost complete of emissions by 2050 to no meaningful limitation at all.
Source: Intergovernmental Panel on Climate Change, Fifth Assessment Report http://www.climatechange2013.org/images/report/WG1AR5_SPM_FINAL.pdf

The graphic makes clear that the increase in the total accumulated manmade carbon dioxide concentration in the air governs the change in global average temperature.  Only by minimizing future emissions using the most stringent constraints possible (DARK BLUE line and dots in the chart) can humanity keep further increases in global average temperature as small as possible.

The fossil fuel industry needs rapidly to change its business model. In the 1970s-1980s Exxon understood the threat from global warming.  But by the end of the 20^th century it and rest of the fossil fuel industry were sowing doubts about manmade global warming and resisting the need to change.  Even so, the reality shown in the image above is that continued extraction and burning of fossil fuels moves the world further along the trajectory of higher atmospheric carbon dioxide and higher global average temperature, to the detriment of all humanity. 

 

There is no avoiding the imperative to abandon further extraction, and to begin at the present time to decarbonize the world’s energy economy.  Many needed  technologies already exist, the labor force awaits the coming job opportunities, and the large international fossil fuel companies have the resources to undertake these changes.  What’s missing is the will to change their business models.  The world looks to them to adopt the “can-do” spirit that drives capitalism, leading to new sources of revenue and profit, by creating a decarbonized economy.

© 2016 Henry Auer