Obama risks torching his otherwise admirable climate change legacy, through his failure to comprehend the scale of change that is necessary - business leaders must avoid making the same mistake
President Barack Obama is, by any impartial measure, an extremely intelligent man. The White House is also staffed by extremely intelligent people and as one of the most financially successful companies on the planet Shell has a similarly enviable brains trust. All of which makes the staggeringly dumb decisions to seek and allow permission to drill for oil in the Arctic so difficult to understand.
Shell's rationale is at least consistent with its long-standing and long-flawed arguments about the continuing need for high cost fossil fuel exploration even as the world commits to decarbonisation. The company reckons we need oil long into the future, it reckons the price will rebound to a level that makes high cost Arctic oil commercially viable, it reckons it can extract the oil without serious accidents, despite a far from spotless safety record, it reckons it has a duty to its shareholders to try and open up new oil reserves in the far north, and it is clearly sceptical about the ability of policymakers and clean tech rivals to deny it a long term market. It goes without saying that, regardless of protestations to the contrary, it is also intensely relaxed about the implications for the climate of its actions.
That explains Shell's logic-defying group think, but what of the enabling short-sightedness at the White House? How did an administration that has sought to make action on climate change the defining achievement of the second half of its second term end up approving the world's most controversial fossil fuel project at the same time as defying Congress to force through sweeping emission reduction rules?
Obama and his team attempted to explain their thinking ahead of this week's Presidential visit to Alaska, defending the strength of the regulations Shell has to comply with and declaring "our economy still has to rely on oil and gas - as long as that's the case, I believe we should rely more on domestic production than on foreign imports". The problem is the argument in favour of continued domestic oil and gas production while the US and other countries decarbonise just about works for shale gas and oil, or perhaps even drilling off the Gulf and Atlantic coasts. But it simply does not fly when attached to some of the most expensive drilling the world has ever seen in one of the most hostile pristine habitats on Earth, just as it doesn't work for massively carbon intensive tar sands and their enabling pipeline infrastructure.
Moreover, Obama is politically savvy enough to know that this argument invites completely justified charges of hypocrisy when delivered days before a high profile speech warning there is such a thing as being too late when acting on climate change. If he wasn't, Hillary Clinton last month gave him a useful reminder, tapping into both public opinion and environmental logic by declaring drilling in the Arctic was not worth the risk.
The reality is there are debates to be had over the pace and scale of the transformation the fossil fuel industry needs to undertake to ensure dangerous levels of climate change are avoided. For example, will carbon capture technology allow some continued gas and coal development in the second half of the century? Does a coal to gas switch justify gas exploration for several more decades? And does the necessarily gradual nature of the transition away from fossil fuels make continued exploration for oil reserves in low cost production areas justifiable?
But, as Carbon Tracker's excellent and still largely unchallenged analysis shows, there are no such questions around Arctic exploration and tar sands. As long as you accept the world needs to decarbonise in order to avoid the worst effects of climate change, these projects make little sense as either investment proposition or climate-compatible means of securing energy supplies. You simply can't burn it all, and the most carbon intensive and high risk reserves should be the first to be declared off limits. President Obama not only surely understands this, he has made meaningful action on climate change the defining task of his second term. All of which makes his approval of Shell's Arctic exploration even harder to understand.
So what is happening here? The only explanation can be provided by our old friends entrenched thinking, vested interests, and political trade-offs/triangulation/cowardice (delete as appropriate).
The Obama administration intellectually understands certain types of domestic fossil fuel production are not compatible with the need to keep temperature increases below 2C, but it has allowed concerns about jobs, dubious arguments about energy security, and an institutional willingness to keep the traditional energy industry onside to temporarily override this knowledge. Charges of hypocrisy are completely justified, particularly when Obama appears so committed to tackling climate change the rest of the time.
However, Obama is not alone in adopting such an inconsistent stance. Countless governments, businesses, and, indeed, all of the rest of us, do the same thing all the time. In an economy that is still largely powered by fossil fuels, it is hard not to be a hypocrite.
In almost all discussions of climate change there is a very human tendency that focuses on the good side of the necessary low carbon economic transition - the exciting clean technologies, the energy bill savings, the jobs created - and downplays the bad side - the industries retired, the investments required, the jobs lost. This is understandable, particularly when you consider the benefits of a green economy will almost always outweigh the costs. But a failure to engage openly and honestly with those costs that do exist leaves too many political and business leaders in a position where they feel unable to deliver some of the more challenging parts of the transition. Too many politicians and CEOs are happy to lap up the positive headlines about clean technologies and green policies, while ignoring the logical implications of the low carbon transition for incumbent polluting industries. They are guilty of focusing on the fun and (relatively) easy stuff and hoping the really tough part of the transition solves itself. From whaling to Welsh coal mining, it is as if we have learnt nothing from how best to manage the structural decline of previous industrial success stories.
Obama could and should have declared that drilling in the Arctic was simply not compatible with his wider commitment to curbing carbon emissions. He could and should have said he understood there was a price attached to this decision and the US would now have to work even harder to accelerate its clean energy transition and bolster its energy security by maximising output from the fossil fuel reserves it already has. He could and should have said he would seek to create new jobs in Alaska through alternative and sustainable investments. And he could and should have deployed the same arguments to reject the Keystone XL pipeline once and for all.
Instead, he attempted to triangulate his way out of a difficult decision, only to see his legacy on climate change tarnished and his soaring rhetoric on the need to build a cleaner economy grounded by a grubby commitment to outdated and reckless fossil fuel exploration.
Obama's ledger on climate action is still just about in credit, thanks to his willingness to take on coal in a manner that he has shied away from when it comes to Arctic oil. But the need for a consistent approach to climate change and an honest appraisal of the true cost of decarbonisation for incumbent industries has never been more aptly illustrated. It might be a difficult political and commercial balancing act to pull off, but failure to acknowledge the full policy and investment implications of decarbonisation for incumbent polluting industries simply results in intelligent people being forced into making dumb decisions.
Plus nuclear fusion, French outdoor heating ban, Spanish green hydrogen plant and all the top green business news from around the world this week
Investment bank joins growing number of financial institutions as a member of the Partnership for Carbon Accounting Financials
Octopus Renewables Infrastructure Trust inks deal to purchase 119.5MW subsidised solar portfolio as UK investor expands into French market
The climate impact of artificial intelligence - both in terms of power consumption and all the electronic waste that gadgets create - is a growing concern