Recently, the CEO of Chevron, John Watson, came in for criticism from environmental activists and climate change advocates for stating that “fossil fuels are here to stay” and that “climate change might even prove positive for Chevron, if it spurs more the planet to shift from coal to natural gas.” His remarks were factually accurate, so why the criticism?
The Wall Street Journal stated that his views set him “apart from his oil industry counterparts.” The CEO of Shell tried to capitalize on Mr. Watson’s statement by saying, “ We believe absolutely that climate change is real. Not all oil companies do that.” That was not a very cleaver or subtle dig at Mr. Watson, who never said that climate change was not real. Indeed, no one with any intelligence could make such a statement.
Clearly, Mr. Watson was making a statement that is in Chevron’s best interest. His job is to earn returns for shareholders for investing in Chevron. He was simply following Adam Smith’s dictum that it is not from the benevolence of the butcher or baker that we get our daily food but from the pursuit of their own self interest. That is how a market based economy is supposed to work. If Mr. Watson had distorted the truth or intentionally mislead, criticism would be justified but he was telling the truth.
In its most recent Energy Outlook, the Energy Information Administration (EIA) shows fossil fuels–oil, gas, and coal– remaining the dominant sources of energy through 2040, in spite of a decline in the use of coal and energy policy actions intended to discourage their use. The picture is much the same internationally. In its international Outlook, EIA forecasts that energy consumption will increase by 48% with growth occurring mainly in the developing world as a result of population and economic growth. It forecasts that in spite of rapid growth in renewable energy, “fossil fuels (will) still supply more than three-quarters of world energy use.”
Pretending that last December’s Paris Agreement on climate change will somehow lead to a significant reduction in fossil energy use or its greenhouse gas emissions is not a sound foundation for either economic or energy policy. Basing policy on illusions will simply result in continued failure of climate initiatives, as has been the case since the Kyoto agreement in 1997, and the waste of scarce resources that could be more effectively allocated to stronger economic growth and advances in technology.
Advances in our understanding of the climate system and its complexity should be a cause for increased humility and reflection. A paper by Professor J. Ray Bates, a former NASA scientist and now on the faculty of the University College Dublin, concludes that climate models have systematically overestimated climate sensitivity because they underestimate the amount of heat reflected back into space from the tropics. And research from the European Center for Nuclear Research (CERN) has reinforced Svensmark theory about cosmic rays and climate change and suggests that past cloud cover was much greater than assumed. This means that assumptions about the impact of greenhouse gases on global temperatures have been over-estimated.
The assumptions of climate advocates that have not been confirmed by new knowledge and empirical evidence are strong reasons for skepticism and for changing the prevailing climate paradigm to reflect greater uncertainty and advances in knowledge. Planning that is based on a higher level of uncertainty would have a shorter time horizon and more policy options.
Telling the truth about fossil fuels may be seen as politically incorrect by some but it is consistent with the Boorstin view that we need to restore our ability to test the image by reality rather than continue to do the opposite.