Why Energy Policy Doesn’t Contemplate the Future
Frequent commenter “Shivrat” writes:
Great that solar investment is increasing so rapidly, and agreed that many challenges lie ahead, but would you say that a paradigm shift to renewables is inevitable in the long term? After all, something like 80% of oil is produced in 6 countries, and 90% of natural gas reserves lie in 3 countries, right? Given that global energy demand is set to increase by 50% in the next few decades, wouldn’t market forces seem to make it futile for anyone to resist (fossil fuels’) decline in the long term?
This is an excellent question – one that surprisingly few people ask. The basic answer is the short-term focus of most people and entities.
I happened to ask a friend who runs a very successful hedge fund why the stock price of the oil companies doesn’t take into consideration their ultimate demise. I pointed out that a company like Chevron, for instance, has a huge market cap based on an extremely specific skill set (oil exploration, production and distribution) and will not be able to diversify into clean energy – or anything else — to any appreciable degree. He laughed out loud! “Craig,” he grinned, “the attention of the stock market is measured in minutes, hours, days and weeks, not decades. What will happen in 2030 has no relevance here at all.”
Individual people are really no different, which is why we’re having such a problem focusing on global climate change. In fact, there are a number of different psychological issues that conspire against rationality here:
1) We have a huge “discount rate,” devaluing future pain against our immediate pleasure. Like drug addicts and teenagers, many of us behave as though the future doesn’t really exist.
2) We wrongly assume that the future will be pretty similar to the past, which, in this case, is dead wrong.
3) We have a limited capacity for disaster. When the nightly news brings us tales of woe from all over the globe, we eventually go numb.
4) Extremely aggressive, professional, and super well-funded public relations campaigns (like the ones being waged by the big oil companies) are extremely effective. Note the ever-increasing number of Americans who believe global climate change is a hoax, even though this concept flies in the teeth of more than 97% of climate scientists.
That’s my viewpoint, for what it’s worth. Thanks again for the excellent question.
