Businesses thrive on certainty, even as they make judgments in a constantly changing world predicated on imperfect information. Decisions are made today about where to invest and how much to invest based on the best information available to predict where the market is headed.
For the fossil fuel industry, these investment decisions have been made more difficult by recent developments, including the dramatic change from resource scarcity to resource abundance, the globalization of the natural gas industry and significant demand destruction in many oil and gas markets. But in this sea of uncertainty, the energy industry has been thrown a life-line, and it is called the Paris Agreement.
The Paris Agreement is an information-rich document that tells us how 196 countries – today it’s climbed to 198 – intend to modify their energy usage to “hold the increase in global average temperature to well below 2 degrees C above pre-industrial levels.” That’s not a guess – it’s a commitment. For businesses, that’s a roadmap: the world told us with a certainty that in order to meet that goal – for the foreseeable future – they must buy forms of energy and means of production that emit less carbon and are more energy efficient.
Through the Paris Agreement, the world is telling fossil fuel businesses that old thinking and outdated business models must be reexamined: why invest billions exploring for oil in increasingly remote places that we know will never be cost-competitive with existing sources of supply, when instead the Indian government wants 100 gigawatts of solar by 2020? The market has moved. Countries like China, India, Britain, France and Germany are planning to ban the future sale of fossil fuel vehicles. This creates an enormous opportunity for American businesses that develop smarter and faster ways to decarbonize our economy.
They asked Willie Sutton why he robbed banks and he said “because that’s where the money is.” We should all be the Willie Suttons of the post-Paris world: because it’s where the business opportunities are today, and it is where they’re going to grow tomorrow.
Lord John Brown at British Petroleum used to say that to survive BP had to stand for “beyond petroleum.” People used to laugh. After Paris, no one’s laughing any more.