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