Saving the world isn’t going to be cheap. If you sell oil, coal or old-fashioned cars, that threatens disaster. For makers of stuff like solar panels, high-tech home insulation, and efficient lighting, it’s a potential miracle.
That’s the bottom line from this weekend’s climate deal in Paris, which commits 195 countries to reducing pollution in order to head off dangerous climate change.
Global governments and companies are counting the costs and benefits from the agreement, which calls for wholesale transformations of energy, transportation, and dozens of other lines of business. Fossil-fuel producers and countries that depend on them face massive, costly disruption. Players in up-and-coming industries like renewable power and energy efficiency are looking at an unprecedented opportunity.
“As a major oil and gas company, we are clearly at stake in these discussions,” Patrick Pouyanne, the chief executive officer of French oil giant Total SA, said in Paris. But “an optimist sees in every difficulty an opportunity. I’m definitely an optimist; I have to be.”
The Paris pact, which also calls for a review of ever-tightening pledges every five years, is the most significant global climate agreement ever, outstripping the 1997 Kyoto Accord in its scope and ambition. Along with Barack Obama, Vladimir Putin, Xi Jinping and dozens of other top political leaders, the summit that produced it attracted hundreds of large companies eager to influence or understand negotiations that could deeply affect their future business models.
The deal will likely accelerate investments in technologies like renewable energy and electric vehicles — especially if more countries join the European Union and parts of North America in imposing a price or tax on carbon. The United Nations estimates upward of $1 trillion a year in spending is required to de-carbonize the global economy and prevent temperature rises scientists say could flood coastal cities, disrupt agriculture, and destroy ecosystems.
That means companies with business models threatened by a low-carbon world need to re-focus, and fast, said Lyndon Rive, CEO of SolarCity Corp., a U.S. provider of home-solar systems chaired by billionaire Elon Musk. For people who sell oil, Rive said on the sidelines of the Paris summit, “you’re going to defend that job because that’s your livelihood. But your livelihood is going to be destroyed.”
Executives from more traditional companies have a similar, if less stark, view. Peter Terium, CEO of German utility RWE AG, said companies like his would have to learn from the successive transformations of International Business Machines Corp. to stay relevant in a new energy system. RWE on Friday approved a plan to split into two companies, one focused on renewables and grids and the other managing declining conventional assets.
That doesn’t mean Big Oil will be closing up shop anytime soon. According to a relatively optimistic forecast of emissions cuts by the International Energy Agency, fossil fuels will still account for about 75 percent of energy demand in 2030, with coal hitting a plateau, oil growing slightly and natural gas surging.