In late July, Hunter Harrison, the CEO of CSX railway corporation, declared that his railroad, founded to haul coal, and still getting a fifth of its revenue from coal, would no longer invest capital in its coal business – neither new locomotives or track investments designed to support its coal business. Harrison was blunt as to the reason. “Fossil fuels are dead,” the CSX CEO said. “That’s a long-term view. It’s not going to happen overnight. It’s not going to be in two or three years. But it’s going away, in my view.”
The same week, Morgan Stanley reported that Trump or no Trump, “we expect the US to exceed the Paris commitment of a 26 to 28 percent reduction in its 2005-level carbon emissions by 2020.” The investment banker cited as the reason its conviction that with a few exceptions, renewable energy would be cheaper than fossil power by 2020 in every important market.
But such radical market share growth for non-fossil fuel energy is not reflected in most top-down projections. DOE, in examining the future of fossil fuels, continues to project very slow declines in US climate emissions over the next decade. More alarmingly, an analysis derived from BP’s most recent “Statistical Review of World Energy” looked at the percentage of total world energy derived from fossil fuels and at the rate of growth of such energy use and concluded that there was no evidence whatsoever of a turning point having been reached.
Why such sharp divergences of opinion? Is one side cooking the books? Probably not. There is a well-known difference in economics between leading and trailing indicators. After all, this year’s consumption of gasoline, or combustion of coal, is largely driven by investments made in cars or power plants a decade or three ago. But this year’s investments in various kinds of vehicles or power generation will cast an emissions shadow for years to come.
Actual consumption (or emissions) is a trailing indicator. The decision by CSX to no longer to invest in its coal business won’t drive coal demand down next year at all – but over time, if sustained, less coal will come to market – it’s a leading indicator. The problem with leading indicators is that no one is a sure-fire harbinger. Sale of electric vehicles is one leading indicator in the transportation sector. But so is the percentage of US vehicles sales that are SUV’s. Both might go up in a given year.
EIA’s Annual Energy Outlooks are the most influential projections of future energy trends in the United States. While they are explicitly “not predictions of what will happen”, they are often… Read more »
My nomination for the best leading indicator is CO2 (and CO2e) concentration in the atmosphere. It is a direct reading of fossil fuel emissions, land use changes, and the Earth’s… Read more »
Dan’s comment flags an important point: you need to specify what outcome you are projecting. Dan is correct, if you want a leading indicator for climate forcing — what happens… Read more »
But the question is what are we managing to? I assume we are managing to prevent unacceptable climate outcomes. Climate scientists tell us that CO2 concentrations are already too high… Read more »
On a global basis there is no convincing evidence that coal will not remain a leading source of energy for decades. The construction of coal fired plants in Asia is… Read more »
Prices and subsidies are indeed two potential leading indicators — and are frequently used in the electricity sector in particular, because electricity prices are significantly regulated and hence only moderately… Read more »
I agree that no one can accurately predict what gasoline prices will be beyond the short term but vehicle sales show that when gasoline prices are low, consumers move to… Read more »
Putting aside the fact that fossil fuels are more heavily directly subsidized than renewables and that renewables are cheaper or becoming cheaper in places where there are no subsidies, fossil… Read more »
You can’t put aside what is not correct. You can start with EIA to see that renewables are more heavily subsidized that fossil fuels. And, there have been numerous analyses… Read more »
I think Dan, Bill and I can agree that it is prices as they emerge taking into account both subsidies and anti-competitive behavior that are the best indicators of future… Read more »
I agree completely that it is not inappropriate for policy to drive us toward safer, cleaner fuels, and I agree completely with the idea that we must increase renewables in… Read more »
Carl, I am glad to find something that we agree on–the role of prices. Subsidies are the devil’s elixir. They distort and are tools of industrial policy which has a… Read more »
Bruce: While large-scale deployment of renewables does put price pressure on traditional power generation sources, that’s not necessarily a bad thing. Already, the health costs of coal (not including the… Read more »
Bill: My “assumption” about fossil fuels emissions causing global warming is supported by every major scientific academy in the world! There is only a small chance that climate sensitivity is… Read more »
Dan, I am not denying that CO2 is a greenhouse gas that contributes to warming. My view of the empirical evidence, without biased adjustments, is that it is less than… Read more »
Bill: 1. We know that you do not think that global warming is as serious as climate scientists say. I believe the climate scientists. 2. Why do you keep saying… Read more »
Dan, we have probably taken this exchange beyond the point of it being informative. You make assertions about what I believe without knowing what I really believe in terms of… Read more »
Bill: Your comments that climate scientists are “biased”, have “doctored” temperature data, and don’t know where we are on the “nonlinear” CO2 warming curve are wrong and dangerous. Even if… Read more »
Dan, if you had not purposely distorted my reply to you I wouldn’t bother sending this. I did not say that climate scientists were biased. I did say that surface… Read more »
Morgan Stanley reported that Trump or no Trump, “we expect the US to exceed the Paris commitment of a 26 to 28 percent reduction in its 2005-level carbon emissions by… Read more »
I would argue that private investment in energy infrastructure should be a strong leading indicator. I’ve been arguing since the election campaign that the rhetoric from a given president about… Read more »
I think this is probably my favorite and most easily measured leading indicator. Even motor vehicles are 12 year bets, electrical generating facilities are 40 year bets, and roads vs.… Read more »
I recently completed a review of New York State’s REV program which puts great emphasis on expanding the use of renewable energy, especially in the production of electricity, and in… Read more »
The best leading indicator of fossil fuel consumption is probably the capital investment in finding, producing and consuming these fuels. Energy is a capital intensive business. Since we cannot consume… Read more »
There already are far more known reserves of fossil fuels than we can possibly burn. Any new discoveries will just be identifying stranded assets. Instead of looking for fossil fuels… Read more »
The ideal leading indicators of fossil fuel use in the electric power and transportation sectors would be detailed strategic plans established in each of these sectors by the federal/state governments… Read more »
As a postscript to Carl’s thread, it would seem that the decision by the Norwegian $1 TRILLION sovereign wealth fund, which was built on oil revenue, to drop investments in oil… Read more »