The energy industry in a post COP21 environment: a view on 2016
(written in partnership with my colleague Daniela Stawinoga-Carrington)
The last minute agreement at COP21 in Paris has been hailed as an “outstanding achievement for French diplomacy” and “an end to the fossil fuel era”. Apart from a very vocal but tiny minority, we all accept that the world is heating up due to human activity and unless carbon intensive practices are constrained in some way, life will become intolerable for billions of people around the world. Something clearly must be done. 2016 could be the first year that the energy industry, as one of the major carbon emitters, is forced to genuinely re-evaluate its business model, and the way it communicates across all channels and audiences.
However, it’s worth stepping back from much of the supportive editorial coverage the Paris Agreement has driven. It has been noted that much of the cheering and hugging on the floor at COP21 was actually being done by journalists, who appeared to forget their role as objective observers. Many environmental journalists are advocates as much as analysts – they start from the point that “something must be done” as opposed to “what is happening?”
There is a perfectly acceptable view put forward by different sections of the commentariat that whilst COP21 shows a significant amount of international support there is no legally binding mechanism and limited policy or commercial rationale to fundamentally transform international industrial paradigms.
So what will happen in 2016?
1. Coal to get a kicking
Spend a few days in a coal fired city wearing glasses or contact lenses and everyone will understand the basic truism that coal fired powerstations are a bad thing not only for the environment in a carbon sense, but also for the lungs of anyone breathing in various pollutants. The health effects are crucial here. Carbon is a long term problem that can be put off by policy makers. Hospitals filled with asthma and emphysema patients and the wider societal and economic effects are a major challenge for today – across all markets, but particularly in APAC.
2. Gas to try and differentiate itself from “fossil fuels”
Gas has been fighting hard to break away from the “fossil fuel” tag beloved by the environmental lobby. Gas will look to use its inherent advantages over coal and oil (it burns much cleaner) whilst also making the case that it can be the best partner for renewable energy. It’s also worth noting the significantly enhanced percentage of revenues generated by natural gas by companies such as Shell & Exxon. Oil companies are becoming gas companies, thereby enhancing the likelihood of enhanced gas advocacy.
3. Renewables to try and hold on to the COP21 feel good vibe
Renewables now have their big chance to force policy makers and investors to take them more seriously than may have been the case up till now. Get ready to see the ongoing references to “promises made” at COP21 as the renewables industry looks to both capture the optimism of the Paris Agreement and turn it into an issue of trust with policy makers and investors alike. “#COP21promise” anyone?
4. Fear grips the oil industry
Will oil hit $20 a barrel as some predict? As Saudi Arabia keeps pumping and Iran is set to start production again after the end of sanctions, the oil industry is likely to continue having to deal with a glut of supply and a low-price environment. 2016 is likely to see more job cuts and projects being shelved for companies to even have a chance to maintain dividend. Topped by the latest COP21 “the end of fossil fuels” agenda and the clearly needed re-evaluation of the energy industry’s business model, makes for challenging times for communicators.
Finally two major issues for consideration. Money & technology. Without major technological leaps forward, “green” energy is often significantly more expensive than the alternative or is simply not an industrially viable competitor. In an era of constrained capital, the environmental lobby will have to work very hard to convince policy makers, industrial executives and finally the average consumer that higher bills are an acceptable price to pay for cleaner energy.
It’s not impossible. It’s happened in Germany – all be it with some major compromises. What is certain that COP21 has the potential to change the game for energy communicators the world over.