You know the world is changing when the American Petroleum Institute finally capitulates and signals its support for setting a price on carbon emissions, thus lending support to the global effort to curb climate change. Of course, API, one of the most powerful trade associations in Washington, came to this point kicking and screaming. It has long earned its daily bread by supporting the fossil fuel industry through good times and bad, as well as through honest and duplicitous times. It would decry tax incentives for renewable forms of energy, while insisting the oil giants, the most profitable companies in the world over the years, sorely needed billions of dollars in tax breaks to help spur exploration and development and lower prices at the gasoline pump. Naturally, oil prices did nothing but rise for many years, and the tax breaks turned out to be nothing more than a taxpayer-funded giveaway.
Not exactly American free-market economics at work.
Please note that API did not offer to give up tax breaks in return for stripping tax breaks from companies in the renewables space. The massive imbalance was quite to API’s liking, and the liking of its membership. What’s more, API was not exactly a fancier of the “all of the above” approach to the U.S. energy matrix until the cost of solar and wind power plummeted and became competitive alternatives to fossil fuels.
Now, between that and corporate and government policies to move away from fossil fuels, API sees the handwriting on the walls of the coal mines. We cannot forever burn fossil fuels, any more than we could have built today’s economy on the back of a wood-burning industry.
Is still boggles the mind that there are so many industries utterly transformed by tech innovations, yet the energy business is still dominated by oil and gas, resources discovered way back in 1859 in Titusville, Pa. Granted, fracking was an innovation that unleashed billions of barrels of oil trapped in the nation’s crust, but we are still burning the same dirty old fuel and polluting the air to the tune of 7 million worldwide deaths per year, according to World Health Organization estimates.
Not that solar and wind are new technologies either. Remember that it was President Jimmy Carter who put solar panels on the roof of the White House way back in 1976, only to have them scornfully torn out by the Reagan administration four years later. The manufacture of windmills in the United States dates back to 1854. The fact that they’ve become less expensive and more energy productive doesn’t exactly represent an energy revolution.
There are plenty of problems with renewable technologies as well. We have no truly clean form of energy these days, one that does not leave a nasty aftermath, such as radioactive waste, air pollution or dangerous metals in soil — and potentially in drinking water.
Somewhere out there on the horizon is a truly revolutionary energy breakthrough. We wait for scientists to bring it to fruition. At this stage I’ll place my chips on nuclear fusion, a technology that would allow for massive energy production with zero pollution. Unlike nuclear fission, our current nuclear technology, fusion would be free of radioactive waste at the end of the process. No more harmful toxins such as carbon dioxide or other greenhouse gases, no radioactive waste. Fusion promises to be a green and sustainable form of energy that, in theory, would be inexhaustible.
There are government research projects and startup companies at work on the technology. This is not to say the world would use a singular form of energy production, but nuclear fusion could certainly become the dominant one. Then again, there could well be some other giant technological breakthrough that isn’t currently part of the conversation.
In the meantime, oil and gas isn’t going away anytime soon. Legacy industries tend to die long, slow, agonizing deaths, and often attempt to block the innovations of successor industries.
I’m sure the wood industry decried the advent of oil and gas, and solar and wind purveyors would fight efforts to bring nuclear fusion to the fore. There is certainly a technology that lies beyond nuclear fusion, and fusion interests would likely be prepared to wage a pitched battle as well.
The point is we need to favor innovation; we need to stop treating the status quo as patriotic and new innovations as acts of sedition. The tech industry learned a long time ago that if you don’t make yourself obsolete, someone else will do it for you. The energy industry could benefit from the embrace of that credo.
Mike Consol (email@example.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.