OPINION: The US is set to become a learning laboratory on how a country fast-forwards into a lower carbon future.
New President Joe Biden has re-set the commercial compass with his plans for a $1.9 trillion post-Covid “green” revolution.
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We support a strategy to tackle rampant climate change, which ultimately threatens all of us with extinction.
But we also recognize that a Washington-directed move to cut oil and gas subsidies and drilling on federal land can bring winners and losers.
Biden has always talked about the need for a “just transition”. Now, it is important to flesh out exactly how this will work.
Biden's clean-energy pledges include creating jobs in "climate-smart agriculture, resilience, and conservation, including 250,000 jobs plugging abandoned oil and natural gas wells and reclaiming abandoned coal, hardrock, and uranium mines."
For Biden’s climate-change plan to succeed, he needs to bring on board his worried critics as well as his cheerful supporters.
Otherwise, he risks getting the kind of reaction we have seen from Gregg Abbott, governor of oil and gas state Texas, who wants to take Biden to court.
As one of the state’s top media outlets, the Houston Chronicle, said in an editorial, Abbott’s “head in the sand” reaction is not just unimaginative, it’s dangerous.
“Houston-centered energy industry can either lead an orderly, decades-long transition away from fossil fuels or risk oblivion as fast-moving market forces and rising climate catastrophes limit its choices,” argued the paper.
Texas produces a significant portion of US oil and gas. Fortunately, it also already has a major wind and solar sector.
But transition certainly raises difficult issues. Moves to shut down coal mines and cancel new oil-pipeline projects, such as Keystone XL, cause direct and indirect job losses.
Vast new employment opportunities should arise in renewable energy projects and the production of electric vehicles.
But the jobs may not be created in the same places, and not every oil worker can morph into a wind or IT technician.
Equally, oil and gas workers are proud of their industries and will not necessarily adopt a new culture of renewables and electrons with ease.
Jobs can go quickly, but deeper change takes time.
The US has a troubled history of leaving “rust belt” communities behind. This legacy gave impetus to a political backlash and the rise of disruptive, divisive populists such as Donald Trump.
The Political Economy Research Institute at the University of Massachusetts Amherst has predicted the oil industry will contract by 20% in the next decade and 95% from 2031 to 2050.
The natural gas industry may be sheltered from change up to 2030 but then decline by 75% to 2050, it estimates.
'Total transformation' required
States such as Colorado and New Mexico have created “just transition” offices, but federal funding is needed to do this more widely.
One way to create jobs out of the old economy is through remedial work on old oil wells.
Many workers also will be needed to make American homes more energy efficient.
But there is no going back. As Fatih Birol, executive director of the International Energy Agency, said on 13 January: “Nothing short of total transformation of our energy infrastructure is required.”
Meanwhile, French oil major Total has just bought into a huge solar project outside of Houston while Equinor and BP are pursuing big US wind projects.
European oil companies are leading the charge in the US and local ones need to catch up. Energy transformation is needed for everyone, but it needs to be accompanied by a just transition.
(This is an Upstream opinion article.)