An industry inspired effort to muddy the waters or a real push to develop a low carbon future? The jury is out
Fossil fuel companies have historically offered strong returns, attracting fund managers (Pic: BP)
By Tom Burke
The Energy Transitions Commission was launched in Houston, Texas on Monday 28 September 2015. It is an initiative put together by Shell and McKinsey.
I was quoted online in the Financial Times on the Friday before the launch, describing the initiative as ‘ill-advised’. Let me explain why.
The purpose of the Commission is ‘to support energy decision-makers to meet the twin objectives of economic development and climate change mitigation.’
No-one could quarrel with the importance of this task, though one might wonder why this was only a matter for ‘energy decision-makers’. Energy is central to all our lives. Making a transition from high to low carbon energy has implications that go far wider than energy policy.
The world’s governments have accepted an obligation under the UN’s climate body to keep the climate within the 2C threshold of danger.
Should they fail then economic development will be delayed, damaged or destroyed for us all. Clearly, the world’s fossil fuel companies have a part to play, along with everyone else, in meeting this challenge. There is no doubting the value of creating a better informed public debate on how to do so.
Leadership?
Shell has been among the first of the fossil companies to respond to the urgency and gravity of limiting climate change to 2C. It has a better understanding than most of its peers about what is at stake.
No-one should doubt the importance of identifying whether there are pathways for fossil fuel companies to remain viable within this constraint. Why then my reservations about this initiative?
There are two principal reasons why it is ill-advised. Neither the model used to create the Commission, nor the process it has adopted to develop its findings command confidence. This would have been true prior to the recent revelations about Volkswagen. It is even more true now.
Credibility challenge
Large corporations are not trusted by the public or civil society. They are perceived to, and often do, put their commercial interests above the public interest.
Keeping the climate safe by eliminating carbon pollution is patently a direct threat to the future of fossil fuel companies. Faced with such a threat, any initiative primarily funded by the industry starts with a considerable credibility problem.
This is a difficult, but not insurmountable, problem. Unfortunately, the founders of this Commission have made no effort to solve it.
Rather, we are asked to take on trust the choice by Shell and McKinsey of how, on what terms and with whom to establish the Commission. I have no doubt the organisers mean well but that is not enough for confidence.
The ‘wise men’ model, and indeed all but one of this Commission are men of a certain age, of establishing authority is a throwback to the 20th Century.
The Brandt Commission on the global economy from 1977 and the Brundtland Commission on environment and development a decade later both helped start important global debates.
Group-think
But times have moved on. Authority of any kind is much less readily accepted. In a connected world a more informed and better educated citizenry expects to participate directly in global debates about its future. Through a vast array of civil society bodies it is well organised to do so.
There is no reason for anyone to doubt the independence or the integrity of the individual Commissioners. They are all people with long track records, predominantly in the established energy sector. As a group they are remarkably alike.
This creates an inevitable risk of group-think as their mutual respect for each other softens the edges of the acute debate between them necessary to tackle such a difficult set of problems.
This places a particular burden on the secretariat of the Commission. The Commissioners are busy people. The amount of time they will be able to devote to following the detail of the Commission’s work is, inevitably, limited.
Many of the Commissioners will, of course, have staff to support them personally. Even so, the scope of the Commission’s programme is so large – effectively advising nearly 200 nations on how best to build a carbon neutral energy system by the middle of the century – that much will depend on the knowledge and judgement of the secretariat.
Compromised expertise
It will be provided by McKinsey. This is a company with a great deal of experience in advising global corporations. It has been a significant thought leader in meeting the energy challenges of the 21st Century. It will undoubtedly bring a group of able and informed people to the task.
But, and this is a big but, McKinsey has an extensive set of other commercial relationships on a wide range of corporate issues with many of the companies represented on the Commission.
Fair minded people with any experience of the realities of the corporate world will find it difficult to take on trust that these relationships do not compromise McKinsey’s ability to provide the ‘trusted, authoritative fact-base on key debates’ to which the Commission aspires.
This is a very heavily contested space. The ‘facts’ are elusive and not widely agreed. Much of the debate is conducted on the basis of projections whose assumptions are unclear and whose significance is capable of a wide range of interpretation. The stakes are very high for the large, powerful companies involved. Trust is in short supply.
Nevertheless, the huge task of keeping the climate safe does require an informed and sustained engagement between the fossil fuel companies and the rest of society. Tackling a problem of this magnitude needs all of us to play a part – not just ‘energy decision-makers’.
Indeed, since we are all energy consumers we are all, in an increasingly important sense, energy decision-makers. An energy system compatible with a safe climate will not command the necessary investment if it does not also command wide public confidence.
Creating a group of like-minded Commissioner’s, selected by an obscure process, supported by a compromised secretariat is not obviously the best way to command public confidence. A difficult dilemma must first be resolved.
Dirty, dumb, dangerous?
Only corporations or governments can afford the required level of funding to pay for any such initiative on a global scale. But if they pay for it, understandably few civil society organisations will readily accept the findings.
If they do not pay for it, then it will not happen and the current dysfunctional debate will continue. This is a true dilemma. If the funding is accepted the value of the findings is lost. If the funding is not accepted there are no findings and so the value is lost anyway.
We have been here before. In the late nineties the global mining industry was widely considered to be dirty, dumb and dangerous.
If faced widespread opposition to its activities across the world. Demand for its products was growing but its efforts to meet that demand were increasingly impeded by opposition. It had no answer to the question ‘How can mining be sustainable?’
This was a far less difficult problem than the one currently faced by the fossil fuel companies as the world works to keep the climate safe. Nevertheless, lessons were learned that are relevant to the challenges the Commission intends to address but which its founders have overlooked.
Building trust
I was asked by Rio Tinto to advise the mining industry on how to meet this challenge. The result was the Global Mining Initiative which I created and helped to lead.
The centrepiece of the GMI was a shared analysis[1] of the issues facing the industry as it tried to define its contribution to sustainable development. Its purpose, much the same as the Commission’s, was to identify an agenda for action around which industry, government, international institutions and civil society could align their efforts.
This project faced the same dilemma as the Commission. If the mining industry paid for the analysis its findings would be compromised.
If industry did not pay for the analysis there would be no findings. Resolving this dilemma, as with all true dilemmas, required innovation and imagination. The result was the creation of an elaborate, and expensive, governance structure to safeguard the integrity of the analysis.
The willingness of the global mining industry to invest in these safeguards was a token both of its good faith and the seriousness it attached to the findings. The project dispensed with ‘wise men’ recognising that to be credible its findings needed to flow from direct dialogues between industry leaders and other social partners.
A dedicated secretariat was created supervised by a global assurance group with 25 members. Written charters governed the activities of the secretariat, the assurance group and the industry sponsors[2]. The dialogue ran for two years, involved four regional processes and a large number of workshops involving over 750 participants.
Elaborate and expensive though it was the results justified the effort. A tenth anniversary review of the project’s report found that it was exerting a continuing and beneficial influence on the activities of the mining industry and its relationship with society.
I know from experience what it takes to build trust in a global industry regarded with suspicion or even hostility. The fossil fuel industry comes into the climate change debate with a reputation at least as badly damaged as the mining industry.
Hence my conclusion that the establishment of the Energy Transition Commission in its current form is ill-advised. It faces a far more difficult challenge than the mining industry. The fossil fuel industry is already seen by many as working to minimise the collision between its future and the maintenance of a safe climate.
Without the kind of integrity safeguards described above, or some equally credible alternative, the findings of the Commission will not, and should not, command public confidence. This will reduce their impact on the wide range of decision makers involved in bringing about the energy transition.
The Commissioners have invested their personal reputations in this project. If it fails the integrity test those reputations will be damaged. Furthermore, there is a risk that the Commission’s work will be seen as an industry public relations campaign rather than a serious effort to play a part in tackling the most urgent problem facing the whole of humanity.
It is not too late to redeem the Commission. The magnitude and urgency of keeping the climate safe to permit development badly needs initiatives of this ambition. As now constructed it lacks sufficient integrity to make a positive contribution.
Indeed, there is a real risk that it will be widely seen as an industry inspired effort to muddy the waters. The first meeting of the Commission will be an opportunity to remedy its defects. Whether it is taken will say much about the founders intent.
[1] This was the Mining Minerals and Sustainable Development Project whose report, Breaking New Ground, and further details of how the project was organised can be found on the IIED website at www.iied.org/mining-minerals-sustainable-development-mmsd
[2] The details of how the governance structure was established and worked can be found in the website cited in the above footnote.
This article first appeared at tomburke.co.uk