Climate Changes Everything: The Coming Revolution in the Energy Industry

Abstract

Guest editorial The Oscar for best performance in 2007 might as well have gone to climate change. Rarely has a single issue so dominated the political debate and the public imagination. Al Gore not only took home an Academy Award for An Inconvenient Truth; he also won the Nobel Peace Prize (together with the Intergovernmental Panel on Climate Change, or IPCC). Climate change topped the agenda of nearly every political summit, from the G8 to the European Council, culminating in the Bali Conference that set the stage for the next Kyoto. The IPCC's report on climate change dealt a one-two-three punch to unbelievers, establishing, once and for all, incontrovertible evidence that carbon emissions pose an imminent threat. The Bush administration overcame its disbelief, while OPEC featured environmental issues at a rare summit in November 2007. And then in December 2007, in Bali, nearly 200 countries overcame initial skepticism to agree on ambitious landmark targets for a new global climate accord. The convergence of concerns about climate change and energy security during the past two years has allowed us to move past the tipping point of awareness to the transformative stage of action. Informed individuals around the world now feel that it is up to them to help save the world from environmental catastrophe. They are busily screwing in fluorescent light bulbs, buying hybrid cars, taking shorter showers, and "greening" their homes by double-glazing windows, putting seals on doors, and sealing gaps in floorboards to cut down on energy use. At the supermarket, they are beginning to scan "carbon labels" that have begun to appear on products like Pepsi and Walker's potato chips, which detail the amount of carbon dioxide generated in making the product—from growing the raw ingredients to disposal of the packaging. Many consumers are even tracking their personal carbon emissions on websites like mycarbonfootprint.eu, and buying carbon offsets through programs like the Conservation Fund's GoZero initiative. In the Netherlands, the "Friends of the Earth" is running a campaign called "Not with My Money" in which people are urged not to use financial institutions that invest in oil or coal energy. Ordinary people, in short, have understood that for the first time in history, every individual can be an agent of change in addressing the world's greatest challenge. Big Oil was the protagonist of the 20th century; individuals are the stars of the 21st. Consumers understand that reduced demand is potentially the largest source of supply. It is their drive toward efficiency—enabled by end-use technologies that sip rather than chug energy—that must be at the heart of the new energy era. Business also gets it. Companies are creating new products whose production and use reduce carbon emissions and fossil fuel consumption. The critical challenge for them will be to do this while at the same time producing better products. They will have to deploy hope and aspiration as marketing tools, rather than fear and deprivation. The smartest companies will understand that this is the only way they can be sustainable. The more stubborn ones, ultimately, will go out of business. Dinosaurs, after all, can't dance. This process of creative destruction will lead to winners and losers, which is only natural in a free market.