The Trump administration’s mid-August announcement of its Clean Power Plan replacement — the so-called Affordable Clean Energy Rule — is a moment that calls for matching audacity with audacity.
Rejecting efforts to reduce the fossil fuel emissions from power plants driving climate change, the administration’s proposed rule is designed to extend the life of the coal industry, and in the process, cause as many as 1,400 additional premature deaths a year.
September marks the 10th anniversary of the global financial crisis, providing the perfect context for a bold climate change approach. The parallels between what led up to the financial crash then and the crisis building in the energy sector today is telling.
Fueled by an unsustainable frenzy of financial speculation, particularly in the real estate sector, enabled by deregulation and influence-buying, financial institutions created a toxic environment that blew up on September 15, 2008. When it seemed that there was a new institution falling into collapse every day, the US government turned to those who created the problem in the first place to lead the way out.
That’s when the term “quantitative easing” entered the mainstream vocabulary. By pumping trillions of dollars into the economy, the Federal Reserve was able to buy assets of failing financial institutions, providing them with the parachute for a soft landing and a floor below which the economy would not fall further.
There are many reasons to question the outcome; look no further than the increased entrenchment of “too-big-to-fail” institutions and even wider wealth disparities between the top 1 percent and the remaining 99 percent. But there is still a lesson here that can be applied to today’s fossil fuel crisis.
Like the financial industry, the fossil fuel industry has also created (and continues to expand) a toxic “bubble” inside the financial market. This “carbon bubble” takes the shape of massive fossil fuel reserves and infrastructure that will no longer be needed if we act to avoid the worst effects of climate change. That means fossil fuels won’t provide the financial returns investors expect.
The industry publicly dismisses this as speculation as it tries to brush away any constraints to its business model related to addressing climate change. But a study published by Nature Climate Change in early June concluded that “whether or not new climate policies are adopted,” market trauma is in store. With an estimate of up to $4 trillion in global wealth already constrained by the rise of low-carbon technologies deployed as a result of past policies and investment decisions, fossil fuel-exporter nations like the United States will be the biggest financial losers.
In many ways, we can already see how by looking at the US coal mining industry. Since 2010, this sector has been facing a significant decline, with 271 coal-fired power plants (more than half of the country’s fleet) retired or scheduled to retire. But coal is far from the only industry affected. Even the fracking industry, which has brought US once again to the list of top oil and gas producers, is accumulating a loss of $280 billion since 2007.
Whether we like it or not, a federal bailout is already coming their way. So far it has taken the shape of aggressive deregulation — first with a promise to pull the country out of the Paris climate agreement, and now most recently with a rule that enables states to not regulate greenhouse gas emissions from coal-fired plants at all (but enables the federal government to intervene if states regulate the coal industry too much). Even a “true” bailout, in the form of a flawed “nationalization plan,” is being considered by the Department of Energy, taking advantage of a Cold War-era law to require grid operators to buy energy generated by coal facilities.
This shows the fossil fuel industry is well aware of the financial crash it faces ahead, and is setting the table for a massive industry bailout. It’s time to question its terms. What the industry is angling for, and what the government is poised to offer, is a guarantee that “business as usual” can go on indefinitely, even if that requires intervention under a “national security” frame.
To avoid a rerun of the 2008 bailouts, we need a robust policy alternative to successfully stabilize the climate and the economy. “Green New Deal”-style proposals that implement “structural changes to our political and financial systems in order to alter the trajectory of our environment,” such as the one in New York congressional candidate Alexandria Ocasio-Cortez’s platform, are important, but we also need to prepare for a potential downward financial spiral in the meantime.
A straightforward answer to the climate and financial challenges facing the nation is a federal buyout aimed at winding down, not propping up, the fossil fuel industry. By using the same monetary tool we used in the past, quantitative easing, the federal government can create the needed money to once again prevent the country from entering an economic depression. The difference is, instead of a bailout in which fossil fuel companies can continue concentrating wealth and power, the federal government would acquire the majority of fossil fuel companies’ shares and, most importantly, secure control and decision-making power over the future of the noxious assets already in those companies’ hands. By giving intervention a new purpose, the government would secure for citizens — not the fossil fuel industry — a floor below which we cannot fall and a foundation upon which we can build a more sustainable green economy.