If you want to know what addressing climate change will really be like for business and investors, then take a look at today’s electricity and energy markets. Driven by climate policy, technology development, business innovation, NGO campaigns and investment risk analysis, creative destruction is inflicting itself upon the sector with a vengeance – and the process has just begun.
Value is being destroyed at an incredible scale with just one example being European utilities losing $750 billion in market cap in recent years. Another is the huge losses in value for coal companies and the cancellation of a large number of new coal mining projects around the world as the forecast growth in China and India evaporates. As I argued in my last Chronicle, Carbon Crash Solar Dawn, this is not a temporary market blip but a fundamental shift. Company strategies and business models that have been working for generations are collapsing. In parallel we see the creative side of the process, with new industries being built, entrepreneurs flourishing and massive wealth being created. Now the market is working, as it should, allocating capital to the places where risk and return are best aligned. It is at once a beautiful and brutal process to observe. Continue reading
I think it’s time to call it. Renewables and associated storage, transport and digital technologies are so rapidly disrupting whole industries’ business models they are pushing the fossil fuel industry towards inevitable collapse.
Some of you will struggle with that statement. Most people accept the idea that fossil fuels are all powerful – that the industry controls governments and it will take many decades to force them out of our economy. Fortunately, the fossil fuel industry suffers the same delusion.
In fact, probably the main benefit of the US shale gas and oil “revolution” is that it’s keeping the fossil fuel industry and it’s cheer squad distracted while renewables, electric cars and associated technologies build the momentum needed to make their takeover unstoppable – even by the most powerful industry in the world.
How could they miss something so profound? One thing I’ve learnt from decades inside boardrooms, is that, by and large, oil, coal and gas companies live in an analytical bubble, deluded about their immortality and firm in their beliefs that “renewables are decades away from competing” and “we are so cheap and dominant the economy depends on us” and “change will come, but not on my watch”. Dream on boys. Continue reading
It’s easy to understand why there’s widespread support for politicians and others who argue we shouldn’t talk about climate change in the middle of a bushfire emergency.
When you’re fighting to keep your house, grieving over the loss of a loved one or putting your life on the line to protect others lives and property, people talking about climate policy or how these kinds of events will become more common and more severe is very uncomfortable.
This very human response should be understood and people who are suffering loss, or fear of it, should be treated with sensitivity. That’s an argument about how we talk about it, but certainly not a reason to avoid doing so. This is actually the perfect time to talk about climate change and about climate policy – it couldn’t really be better.
This is where it gets really interesting. Since I first engaged in the climate debate in the late 1980’s it’s all been fairly slow and predictable. Environmentalists argued for action, big business resisted and government acted as the referee, deciding the policy winners.
As I look around today however, I see a shift underway from ‘environment vs business’ to ‘business vs business’. The global impact on both policy and investment decisions could be revolutionary.
While there has always been some big business advocacy for climate action it has, with a few exceptions, been largely driven by companies’ sense of social responsibility rather than their immediate economic interest. Businesses have called for action and CEO’s have signed on to joint statements, all with genuine intent. But it has always lacked the urgency and resources indicating a core business issue.
This hasn’t cut it in the debate because those businesses opposing action see it as a fight for survival and therefore approach their opposition in a far more aggressive, strategic and well resourced way. In a fight between corporate responsibility and companies fighting for economic existence, the latter will always triumph. And in this lies the key to why the current shift is so important. Continue reading
There are signs the climate movement could be on the verge of a remarkable and surprising victory. If we read the current context correctly, and if the movement can adjust its strategy to capture the opportunity presented, it could usher in the fastest and most dramatic economic transformation in history. This would include the removal of the oil, coal and gas industries from the economy in just a few decades and their replacement with new industries and, for the most part, entirely new companies. It would be the greatest transfer of wealth and power between industries and countries the world has ever seen.
What a privilege it is to be alive in these times, in such a significant period in human history. It’s not always easy to see moments of great historical importance when you’re in the middle of them. Sometimes they’re dramatic, like the fall of the Berlin Wall or the landing on the moon. But more often the really big ones appear, from within them, to be unfolding in slow motion. Their actual drama and speed then only becomes clear in hindsight.
That’s how it will be with this. But in the end we’ll look back at this moment and say, yes, that’s when it was clear, that’s when the end game began. The end game of the industrial revolution.
Hang on, you’re thinking. The industrial revolution? With its belching smokestacks, dirty industry and steam engines? You thought we left that behind long ago, right? You look at your smart phone, robots on Mars, the rise of Facebook and Google and think ‘we’re well past all that’. Isn’t this the age of knowledge, when we’re all hyper-connected in a 24/7 information rich economy? Think again.
Hiding behind those entertaining devices, information overload and exciting new companies, the real bulk of the economy is still being driven by those dirty belching smokestacks and is still being shaped by those who inherited the economic momentum of 19th century England – the coal, oil and gas industries. Look at any list of the world’s 20 largest companies by turnover and you’ll see around three quarters are either producing fossil fuels, trading them or converting them into transport or energy. So I’m afraid the proverbial belching smokestacks still underpin our economy. But they are now in terminal decline. Yes, after 250 years, their time is coming to an end – and faster than you, or they, think.