Ever since the Industrial Revolution took off in the 18th century, vast quantities of fossil fuels have been used to power the economy and deliver unprecedented affluence to billions of people.
Fossil fuels are organic matter made from the remains of flora and fauna subjected to immense pressure and heat deep within the Earth over millions of years. Petroleum, coal, and natural gas are major fossil fuels.
During the Industrial Revolution, fossil fuels seemed to be the ideal energy source.The coal fed steam engine replaced firewood and charcoal as primary energy sources. There seemed to be an inexhaustible supply of coal available from coal mines.
Since the early beginnings of the oil industry in the mid-19th century, petroleum has risen to global prominence. The development of drilling technology for oil wells in mid-19th century led to mass- consumption of petroleum fuel to generate electricity, to generate heat and to power automobiles, ships and airplanes.
The usage of fossil fuels has been increasing in step with economic growth. Fossil fuels were the seed for the birth of a new industrial civilization that transformed our world. Fossil fuels can be classified as a first generation energy source found deep in the earth.
2. Global Warming
As the use of fossil fuels increased over time it became obvious that the vast increase in its use led to a huge increase of Green House Gas (GHG) emissions. According to the International Panel for Climate Change (IPCC) it is very likely that manmade GHG emissions are responsible for global warming.
The historical CO2 content of the earth’s atmosphere was 280 ppm. This level of CO2 provided a natural greenhouse effect conducive for sustaining life on our planet. In 2013 the average global level of CO2 had risen to 400 ppm.
It is forecasted by the IPCC that a rise of the CO2 level to 500 ppm would endager life on our planet, as the warming of the atmosphere exceeds 2 degrees C and temperature runaway effects caused by positive feedback loops set in.
Although many countries are reducing the fossil fuel intensity of their electricity production, the transport sectors and in home heating, the pace of transformation is to slow to have any chance of avoiding the danger zone indicated by the IPCC in her many studies in recent history.
Due to geo-political and economic inertia and many conflicts of interest, the much needed rapid transformation to more environmentally friendly, decentralised and affordable energy technologies has not (or only partly) been happening.
The statistic below indicate the percentage of coal used today to generate electricity. In China 78% of electricity production is based on the use of coal.This has polluted most of the large cities in China, creating significant health problems and social unrest. Coal is the cheapest source of energy, but causes the most environmental pollution.
3. The Carbon Bubble
A recent study by the organisation Carbon Tracker indicates that there is a growing carbon bubble, that cannot be managed if there is no urgent switch to new energy technologies.
The Carbon Tracker Initiative concludes that:
1. 75% of all known fossil fuel reserves cannot be burned if the maximum allowable limit of a two degrees Celsius warming of our planet is respected and adhered to.
2. The impossibility of burning 75% of the existing fossil fuel reserves means that the shares of the 200 largest fossil fuel exploration and production companies are grossly overvalued on all global stockmarkets. This constitutes a large financial and ethical risk for institutional investors.
3. Each year those 200 fossil fuel companies spent 675 billion USD on finding new unburnable oil
There is clearly a disconnection between financial markets, the interests of large fossil fuel companies and the continued wellbeing of current and future generations.
Many institutional investors are now being forced by stakeholders to perform financial risk analyses on their holdings, while also taking into account ethical, environmental and social considerations. This has already led to actions of pension funds to dispose of holdings in fossil fuel companies.
4. Fossil Fuel Subsidies
The IEA, within the framework of the World Energy Outlook, has been measuring fossil-fuel subsidies in a systematic and regular fashion for more than a decade. Its analysis is aimed at demonstrating the impact of fossil-fuel subsidy removal for energy markets, climate change and government budgets.
The IEA’s latest estimates indicate that fossil-fuel consumption subsidies worldwide amounted to $544 billion in 2012, slightly up from 2011 as moderately higher international prices and increased consumption offset some notable progress that is being made to reign in subsidies. Subsidies to oil products represented over half of the total.
5. Summary and Conclusion
As we see from the short summary of the history of fossil fuels there is clearly an end to the era of applying fossil fuels for electricity production, heat generation and the transport sector. Fossil fuels may still be used in the chemical industry.
Sheik Yamani (OPEC) once said: ” The Stone age did not end because of lack of stones”.
Investors should look for other energy technologies with a sense of urgency.
It is clearly unacceptable that we continue to:
- Aggrevate global warming, thereby affecting the lives of 7.0 billion people
- Pollute the large cities in the world, now affecting the health of 3.6 billion people
- Accept that 3.6 billion people have no or partial access to affordable electricity
- spend 675 billion US$ each year in finding more unburnable fossil fuels
- Subsidise the use of fossil fuels by 544 billion US$ each year
Fossil fuels have clearly served humanity well to evolve, create affluence and general wellbeing amongst a growing number of people. We are grateful that fossil fuels have served us well. We should also have the wisdom and courage to conclude that the end of an era has come.
As a reaction many other technologies have been developed such as nuclear power, hydropower, geothermal power, wind power and solar power.