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Many may be shocked that Big Oil could play such a critical role in the preservation of the climate. However, past actions may not be excused. It is worth considering how fossil-fuel interests might be rehabilitated to combat global warming.
There are only three decades left to make significant changes in the world, given international commitments to net-zero greenhouse gases emissions by 2050. It is essential to have a healthy dose pragmatism.
It might not be enough to allow new technologies to develop. Consumers will be reluctant to switch from familiar fossil fuels to untried or inconvenient new technologies with limited infrastructure – even if they are cheaper.
The same goes for new fuel infrastructures. They will not be competitive unless they reach scale. Existing infrastructures will also enjoy scale-related cost benefits unless there are enough users to migrate to the new technologies.
Breaking the cycle is both an economic and technological challenge. One way to overcome this challenge is to harness the enormous infrastructure and resources of fossil fuel industries.
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Accelerating net zero targets
History has shown that new technologies are more popular because they are cheaper and more convenient than the ones they replace. Large vested interests could be crucial to the development of the infrastructure.
For example, railways and canals in industrial revolution Britain were not designed for ordinary travelers. They were built by industrialists looking for more cost-effective transportation options.
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A Recent studyI wrote an article on transitioning towards net-zero emissions for transport and other sectors. However, another solution was presented that may be surprising: repurposing existing fossil fuel supply chain and infrastructures to supply low to zero-emission fuels.
This could be a more affordable way to move to net zero than building new infrastructure.
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The hydrogen alternative
Certainty is the key to any viable solution. Vehicle buyers are at risk of choosing a technology that doesn’t work or being replaced by one.
Electric vehicles (EVs), however, are a good example. They were competing against both steam and fossil fuel vehicles in the race for the horse’s replacement, until they were outclassed by FFVs at the turn of 20th century.
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Hydrogen must be made from renewable resources, not coal, in order to be truly clean.
Modern EVs have been able, despite a less-than ideal start in replacing FFVs. environmental footprint. However, the major carmakers in Japan, EuropeAnd ChinaWe are actively looking into alternative clean technologies. HydrogenThe most likely candidate.
Hydrogen technology has advanced at a rapid pace, making it perhaps as accessible as EVs ten years ago. It’s not inconceivable that EVs could be displaced, given the ability of hydrogen to fuel heavy transport, aviation and shipping.
Hydrogen might ultimately All transport fuels and many industriesIt has important scale advantages.
Adaptation is key to affordability
In practice, hydrogen would be transported inside. Modified gas networksMost likely, distributed throughout Existing and new petrol stations. It Could be madeUse renewable electricity to make water or natural gas with carbon emissions from manufacturing, captured and stored in depleted oil fields.
Recent Californian studyIt is predicted that hydrogen produced from renewable electricity will be priced at par with existing fuels by the end of this decade.
ToyotaAnd HyundaiAlready, hydrogen-powered consumer cars have been released. New Zealand imported its first hydrogen car recently. Hydrogen-powered truck. Both are also developing infrastructure for hydrogen refuelling. LocallyAnd Global.
Hydrogen combustion vehicles look promising, under developmentThis raises the possibility of retrofitting existing FFVs with hydrogen fuel cells (just like FFVs were). Converted to run on natural gasAfter the 1970s oil price shocks
This could substantially reduce the cost of replacing New Zealand’s 3.5 Million private vehicles with low-emissions alternatives – an unavoidable challenge in decarbonising transport.
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Managed markets solutions
Why would fossil fuel companies invest in clean energy? Because they consider it to be sufficiently profitable in comparison to the alternatives.
They could instead of selling off many of their assets to switch to electricity generation and distribution to benefit from the transition to electric vehicles, they could repurpose some of their valuable assets and resources to produce and distribute hydrogen or any other clean fuel.
Fossil fuel companies could be assured of playing a key role in the transition if governments picked a winner among competing clean technologies – but this would be politically hazardous.
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Although oil companies are looking at a low carbon future, they haven’t made big investments yet.
You can use this approach to avoid these risks. franchise biddIng – a much-used policy tool that replaces competition inMarkets that are competitive For markets.
This approach would allow governments to plan for reductions in fossil fuels and then auction off a monopoly rights to develop a clean-energy alternative. This right would be limited in time and subject to price oversight and performance standards.
Monopoly rights allow for economies of scale. Critically, vehicle manufacturers and buyers, fuel manufacturers and infrastructure investors can be confident they are not investing in the “wrong” technology – they all know the way forward.
Efficiency and equity
Governments can avoid the political risks of choosing a winner by auctioning the monopoly rights. The auction proceeds could be used to fund clean vehicle adoption or conversion of existing vehicles to cleaner fuels.
An auction can also induce parties to participate in an auction even if they would prefer that no new technologies emerge. If you are faced with the prospect that you might own a declining technology while your competitor has the right to build the next one, winning an auction would seem like the worst thing.
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Due to their highly developed infrastructures, large balance sheets, and skilled workforces, fossil fuel companies should have a significant head start in winning such an Auction.
They could also facilitate a smoother transition from fossil fuels to cleaner ones since they would manage both the supply and demand.
It doesn’t matter if fossil fuel companies win or not, a franchise-bidding sale allows for a net-zero transition to transport. This is done more quickly, efficiently, and equitably.
