The Great Decarbonisation [1] will be epoch defining. Human civilization’s relationship with energy will move from burning fossil fuels to harnessing natural renewable energy and the implications of the required changes will be profound.
Two hundred years ago the industrial revolution kicked into gear: the factory system, globalised trade; intercity and intercontinental travel by steam; mass availability of iron and steel; and cheap textiles. Much of these innovations were underpinned by coal. From the middle of the 19th century onwards coal, oil and gas were truly king, providing the lion’s share of primary energy in most industrialised countries. Many modern institutions and companies were founded during this period, as well as many of our modern ways of life, but things need to change. Energy used for heating, transportation, industry, and electricity production contributes 60% to GHG emissions [2,3] and need to be quickly curtailed and eventually halted all together in order to prevent the most damaging effects of climate change.
Moving from one epoch to another throws up some interesting historical quirks, which neatly illustrate that a once in a two hundred year event is actually taking place as we speak. Below are four news stories involving some of the pioneers of the fossil fuel age and how they are adapting to the renewable energy future.
Rockefeller Investment Funds Gets Out Of Oil
John Davidson “J.D.” Rockefeller is credited with inventing the modern oil industry. He was a thrifty and entrepreneurial bookmaker who in the final years of the American civil war got into the business of refining oil. At the time kerosene was the primary product sold, which was principally used for lighting not transport.
During the Reconstruction Era demand for oil-based products boomed and Rockefeller acquired other companies and reinvested profits, growing his company, Standard Oil, into the world’s largest company. Through these ventures and other investments Rockefeller arguably became the wealthiest man in modern history and at one point controlled 90% of world oil business [4].
Although Standard Oil is long gone, many of its successors are still with us – for example, ExxonMobil, Chevron, BP America. Since his death J.D. Rockefeller’s wealth has been controlled by his descendants, many of whom put his money to use via in philanthropic funds.
In 2014, one such fund, the Rockefeller Brother Fund, stated that it was to divest from fossil fuels and re-invest in clean energy technologies [5]. Furthermore in 2016, the Rockefeller Family Fund decided to do the same [6]. The Rockefeller name is firmly entwined with the exploitation of fossil fuels, and therefore to see the two drift apart is a profound example of how the world is changing.
Shell Cuts Its Dividend For The First Time Since WWII
Royal Dutch Shell was formed in response to Standard Oil’s dominance, through a merger of Royal Dutch Petroleum Company and The Shell Transport and Trading Company in 1907, and by the late 1920s Shell was producing 11% of the world’s crude [7].
After WWII the company continued to grow by exploiting new resources and building a fleet of tankers to transport crude around the world. It became geographically diverse, owning wells and refineries all around the world, as well as being commercially diverse, owning upstream and downstream assets. This meant it was relatively resilient to localised geopolitical and economic shocks. Due to this perceived stability, Shell (as well as its old rival BP) became a solid investment favourite, paying out regular and reliable dividends to their stockholders [8]. Under the mantra “Never Sell Shell” the stock was held by many pensions, investment trusts, and other investors, who were looking for stocks with a near-guaranteed yield [9]. (In 2019 BP and Shell’s combined dividend represented 24% of the FTSE 100s combined dividend [10]).
However, as the green revolution continues apace, Shell’s medium-to-long term outlook is far from assured and investor pressure is building for Shell to react to the climate crisis. This, coupled with the COVID-19 pandemic and following worldwide drop in demand for crude oil, forced Shell re-evaluate its dividend, decreasing it – from 47p to 16p per share – for the first time since 1945 [10]. That was an impressive run with nearly three-quarters of a century of either maintaining or increasing the dividend.
Mercedes Benz Ceases Development of New Internal Combustion Engines
Mercedes Benz owner, Daimler AG, can easily trace its roots back to the birth of the internal combustion engine. In fact it can trace itself back to two separate innovators of the internal combustion engine: Gottlieb Daimler (who worked with Nicolaus Otto) to produce a 4-stroke engine [11] and Carl Benz who developed the 2-stroke engine as well as what is now recognised as the first automobile – the Benz Patent Motorcar [12].
Since the 1880s the predecessor companies of Daimler AG have been continuously developing and refining the design of the internal combustion engine. However, in late 2019 it was reported that Daimler AG are no longer developing any new internal combustion engines and are shifting their focus on to electric vehicles [13]. Therefore, over 100 years of unbroken R&D and engineering improvements, which date back to the very birth of the internal combustion engine, will come to an end.
UK Electricity Sectors Stops Burning Coal
Since 2016 there has been a constant stream of news articles tracking the demise of electricity generation from coal in the UK. It is well documented that coal has fallen from 40% share of electricity generation in 2012 to just above 2% in 2019 [14, 17]. However, on the 9th May 2016 the UK grid was without coal power for the first time since 1882, and over the subsequent years the consecutive lengths of time without coal has grown [15]. As of 9th June 2020, the UK grid has had a full 2 months without coal [16]. It must be noted that the drop in total electricity demand due to COVID-19 must also be taken into account in this instance, but the number of coal free days has been increasing steadily since 2016.
The reason the UK’s drop in coal use is historic is because the UK’s place in the world was founded on coal. The industrial revolution was turbocharged by coal use touching every part of the economy [18]. So for it to no longer play a part in the UK’s economy is historic.
Conclusion
These four news stories above highlight that times are changing. All involve stalwarts of the fossil fuel age who are adapting to a new energy landscape. By themselves the stories are not going to bring about widespread use of renewables, but together they clearly highlight the direction in which we are heading.
References
- https://greenfinanceguide.com/blog/the-great-decarbonisation-2020
- https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions
- https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data
- https://www.philanthropyroundtable.org/almanac/people/hall-of-fame/detail/john-rockefeller-sr
- https://www.bbc.co.uk/news/world-us-canada-29310475
- https://www.theguardian.com/environment/2016/mar/23/rockefeller-fund-divestment-fossil-fuel-companies-oil-coal-climate-change
- https://www.shell.com/about-us/our-heritage/our-company-history.html
- https://www.moneyobserver.com/news/never-sell-shell-blow-uk-equity-income-funds-oil-major-cuts-dividend-first-time-over-70-years
- https://citywire.co.uk/investment-trust-insider/news/trusts-tremble-as-shell-and-bp-dividend-threat-intensifies/a1349117
- https://uk.reuters.com/article/us-shell-results/shell-cuts-dividend-for-first-time-since-world-war-two-idUKKBN22C0TK
- https://www.daimler.com/company/tradition/founders-pioneers/gottlieb-daimler.html
- https://www.daimler.com/company/tradition/founders-pioneers/carl-benz.html
- https://electrek.co/2019/09/19/daimler-stops-developing-internal-combustion-engines-to-focus-on-electric-cars/
- https://poweringpastcoal.org/profiles/united-kingdom
- https://www.carbonbrief.org/analysis-great-britain-hits-coal-free-electricity-record-amid-coronavirus-lockdown#:~:text=Coal%2Dfree%20record,coal%20plants%20switched%20back%20on.
- https://www.bbc.co.uk/news/science-environment-52973089
- https://www.carbonbrief.org/analysis-uk-low-carbon-electricity-generation-stalls-in-2019
- https://ourworldindata.org/death-uk-coal