How to fix Climate Change: Nationalize Big Oil


Big Oil and Gas companies need to stop obfuscating their climate change intentions and their fight to preserve asset value. If they don’t, nationalize them.

One can’t be anything but excited about kids skipping school to fight for action against climate change.

In the face of such youthful determination, sits an intransigent and vested “Big Oil” (and companies in other industries), unable or unwilling to change for the sake of the kids.

And we let them do it. Weak-kneed, compromised politicians, and a network of organizations and companies sustaining the economic status quo, are all but forcing the rest of us to demand radical change to address climate change.

It’s not like there is a shortage of good policy ideas, either.  Unfortunately, as Professor Tim Wu, professor at Columbia University, and author of The Curse of
Bigness: Antitrust in the New Gilded Age,states, the advocates of bold policy ideas are almost uniformly unable to articulate simple resolutions to complex problems.

Climate change, of course, is anything but simple.  Merely calculating the amount of carbon disgorged each year into the biosphere is a feat worthy of a Nobel Prize.  Predicting its impact is exponentially more difficult, as is finding and operationalizing the fixes.  

If Professor Wu is right, we will only find politically acceptable solutions to climate change when most people can understand and support what is being proposed, and how it will affect them.

Massive support is required, not just because of the size of the problem.  It is needed because climate is the single biggest threat to the status quo of vested economic interests which have proven time and again, that they will fight against reason to protect their assets and ways of doing business until, it seems, the water is lapping at their doors.

To understand the basis of their intransigence is critical.

Companies want to protect their productive assets until they can be replaced, which in some cases will take decades.  Assets are things that can be sold and / or produce income for companies.  The average oil refinery, for example, can cost up to between US $5 billion and US $15 billion to build, and has an average life of several decades.

Those are big numbers.  To make it more personal, take a car for example.  Good financial practice suggests depreciating your car to the point where purchasing a new one makes more sense than maintaining your old one.  This means you would want to keep your car for 10 to 12 years or so (if well maintained).

With companies, it’s similar, but a bit more complex.  

Companies make enormous investments in both fixed assets – machines, fleets of cars, buildings, patents, etc.  They also invest in process assets – or unique ways of organizing production, sales, distribution, etc..  Companies also consider employee assets, which manage fixed and process assets;  employee experience in a given industry often is difficult to replace. Then finally, there are resource assets, include, land leases, timber rights, exploration rights etc. Together, fixed, process and employee assets constitute the value and income-generating motor of any company.

Big Oil’s fight to protect their assets: understandable, but inexcusable

Asking a company, and its shareholders, to give up assets, or to devalue them before their productive life is over, is like asking your neighbor to stop using her car tomorrow.  She might do it if you are willing to pay her the asset value of her car, but otherwise, why would she give it up?

Big Oil has aggressively protects its carbon emitting assets.  Understandable but inexcusable given energy contributes about 50% of all carbon emissions. This makes Big Oil is the most ‘vested’ of vested interests when it comes to climate change.  The industry has, in fact, been quite unable to adapt to the reality that (most) remaining oil and gas reserves need to stay in the ground.

Exxon’s decades-long cover-up of valuable climate change information is a point of proof.  We all now know Exxon knew, from their very own climate change research, the dangers of oil and gas extraction to the environment as early as the mid-1970s.

The question is not if Big Oil has buried other secrets at the expense of an healthy biosphere, but how much and what other information has been secreted away?

Worse, Big Oil’s knowledge of the dangers they pose to humanity (and all other species) has frequently been deflected by ‘good’ intentions.

Last year, for example, Shell was congratulated for setting ‘ambitions’ long-term targets to halve emissions of carbon dioxide by 2050!  How they did this straight-faced, while understanding the impending peril of climate change, is proof of preference for ‘vestedness’ over responsible action.

Shell also recently announced it would tie director bonuses to carbon “emissions management.”  Great!  This means directors might try to meet emission goals.  Unfortunately, the bonus scheme only becomes effective around 2025, five years before the IPPC report predicts carbon emissions will cause irreversible ecological damage is to occur.  

Influence Maps claims the world’s five largest publicly-traded energy companies have spent over $1 billion since the Paris climate accords were announced in December 2015. The group’s most recent report found that these companies have been flouting their climate credentials at the same time they were lobbying governments in order to secure and even expand their fossil fuel projects.

Leon Kay, Triple Pundit

The insanity doesn’t stop here. Despite worldwide revenues of over $2 trillion Big Oil receives more than $400 billion in subsidies annually from various public sources. Considering Big Oil has an estimated annual worldwide profit of around $160 billion, one might be tempted to conclude a private and public conspiracy at work.

Who can cheerlead for this lot?  Not me.  Not anymore.

You see, the corporate sustainability & responsibility (CSR) movement, including myself, once hyped any positive action on climate, biodiversity or social equality etc..  We thought incremental change would get us where we needed to go.  We also truly believed we could cajole, embarrass, invest and / or guide companies into improving their negative environmental and social impacts.

CSR: A Mile Wide and an Inch Deep

I am afraid to report limited success.  Any honest assessment of CSR will find some change.  But just as it is with Big Oil, positive change is far broader (e.g., a veneer slapped many leading brands) than deep (i.e., affecting real change).

The evidence in this science-challenged era is clear.

  • There was more carbon spewed into the atmosphere in 2018 than any year in human history (this after three years of decline).
  • There is no decline in the amount of plastics polluting our seas and oceans.
  • There is no decline in the loss of natural habitats such as forests, marshlands, or prairie lands.
  • There is no decline in the rate of lowering water tables.
  • Etc. etc.

Can we even wonder why children and youth are protesting in the streets?  Or why the Extinction Rebellion is disrupting London traffic with non-violent action?  Or why a few bold politicians like Alexandra Ocasio Cortez brave the immature conservative smear campaigns by proposing radical climate fixes (that Fox News laughably claims will steal American’s hamburgers)?

Kids… are unafraid of change

Why do kids get it, and adults don’t?  It’s because like hitting random buttons on an app to see what happens, they are unafraid of change. They also don’t complicate their understanding of the evidence – floods, droughts, hurricanes, fires, and losing animals is all bad.

Dare I say that the problem is equally simple for adults to see:  insidious, intransigent vested interests obfuscating and undermining the truth to their economic advantage.

If all this doesn’t work, vested interests stall through litigation.  And if they lose, no big deal, they settle out of court with no admission of guilt.  Settlements are usually financially manageable. Some companies even build fines and such into their long-term financial models.  It happens in every industry. Prude Pharma, Volkswagen, Exxon, a variety of big banks, Walmart, etc., all inflicted irrefutable harm on individuals, communities and habitats, got caught, and were slapped with largely symbolic fines.

My question?  After all the purposeful lying, deceit and damage: why do we allow such companies to operate?

Said Mary Robinson former Prime Minister of Ireland, in a recent interview with The Guardian, “We have entered a new reality where fossil fuel companies have lost their legitimacy and social license to operate.”  She says exploration for new reserves must end, given that most of existing reserves must be kept in the ground if global warming is to be tackled.

If we care about the environment, the answer must be: they don’t deserve to operate. And the law is on our side.  We have every right to withhold licenses if the common (not the vested) good is threatened (a company’s must renew its annual operating license, which can be revoked at the discretion of the issuing government).

So, as recommended by Professor Wu, my solution to climate change is quite simple.

Companies act for the common good or forfeit the their right to operate and seize their assets on behalf of humanity and all other species.

In other words: nationalize Exxon.

The cost: a mere $150 billion (or about 1% of US GDP).  Better yet, nationalize all energy companies dealing in oil and natural gas (at a cost of about $2.5 trillion or 3% of the world GDP).

For those companies that are already publicly owned, call Larry Flint at Blackrock and all the other so called impact investors’ bluff  (after all, they only manage US 12 trillion or so). If they truly want to make an impact, they need to make offers to buy public firms that simply cannot be refused. Cost a lot? Yes, but ultimately not much at all considering the cost of the damage and hardship unabated climate change would cause.

Nationalize Big Oil: A Climate Deal at Twice the Price

Government(s) wouldn’t keep the assets. They are terrible at business and innovation, and history shows them not to be good at managing reliable energy provision.  Rather, Big Oil assets should be sold off or gifted to clean energy companies with board participation from leading climate change non-profits. The singular goal of these companies would be to rapidly and radically transform all energy assets from carbon to non-carbon emitting sources by 2030.

So what?

This is a simple, and perhaps the most rapid course of responsible action.  Yes, it would cause great outrage and rending of hair.  But don’t listen to that noise.  Rather than ‘end of the world’ claims vested interests are sure to make, it would be the end of their entitlement and the beginning of a new, braver new world.

Ok, while my policy prescription is simple, the reality would be a good deal messier.

Anyone who’s worked for a large business knows behind the façade of pristine conference rooms and reception areas, chaos and indecision are the norm.

What’s a little more?

America has been a country of heroic action since its formation. So why is it so afraid of taking radical steps to solve climate change and become a true 21st Century hero?  If this is not something heroic to aspire to, I am not sure what is.

And yes, jobs would be lost at least initially. But the proven employment generating capacity of clean energy would soon more than compensate for any losses.

And yes, we must show some compassion for people who work for Exxon, Shell and the like.  But not much.  Like tobacco executives who misled public for years peddling a deadly product, employees at energy firms know what they are into.  

“Smoking kills people, and tobacco companies that tried to confuse the public about that reality were being evil. But climate change isn’t just killing people; it may well kill civilisation. Trying to confuse the public about that is evil on a whole different level. Don’t some of these people have children?”

Paul Krugman, New York Times

One might be tempted to say, again, so what?  Besides, I suspect many will later thank us for the courage of our intervention: oil, it seems, is proving a worse addiction than Oxycontin.

And yes, conventional economists will cry about this or that lost economic and financial value.  They will say incremental change allowing companies to depreciate their assets is the only responsible course of action.

This is demonstrably a narrow, regressive, and incorrect view of what constitutes value (e.g., a healthy environment in which to live is now clearly more important than material wealth and growth of GDP ).

Protecting toxic assets can have few possible positive outcomes

This argument is also intellectually disingenuous.  Any economist worth their salt knows protecting toxic assets can have few possible positive outcomes. Far from being responsible, economic obfuscation is complicit with Big Oil hiding their climate evidence or protecting their assets to humanities detriment.

Simply put, economists protecting the ‘economic value’ of Big Oil is accessory tokilling us, and that has to change.

So yes, there would be sacrifices.  Radical action demands it.  Waiting around for Shell to devalue its assets by 2050 makes no sense.

Will there be sacrifices made for forcing energy companies to change?

Yes, many, and some of which will be quite discomforting to you, to me, and, most keenly, to vested interests.

But I will guarantee you this, the sacrifices made for busting up Big Oil will be miniscule compared to those will have to make if radical action is not taken in the next two or three years.


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