I am often struck by the differences between the economic systems in the U.S. and Europe (see also Strategic CSR – Europe vs. U.S.). While the quality of life generally appears to be higher in Europe, the level of innovation/creativity seems higher here in the U.S. Although this contrast is pretty fixed in my head, the article in the first url below argues that the balance is shifting. Specifically, the author (a Finance Professor at NYU) emphasizes how the U.S. has become much less competitive in the past 20 years, while the EU has become more competitive:
"When I landed in Boston in 1999, the United States was the land of free markets. Many goods and services were cheaper here than in Europe. Twenty years later, American free markets are becoming a myth. Internet service, cellphone plans, and plane tickets are now cheaper in Europe and Asia than in the US. In 2018, the average monthly cost of a broadband internet connection was $31 in France, $39 in the UK and $68 in the US. American households also spend twice as much on cellphone services as households in France or the UK. This is a result of policy choices. In 1999, the US had free and competitive markets while European markets were dominated by oligopolies. The airline industry is a prime example. Over the past two decades a wave of mergers has turned the US airline industry into an oligopoly while Europe has opened its skies to competition, thanks in part to low-cost carriers such as Ryanair and EasyJet. US regulators allowed these mergers to happen without meaningful challenges. EU regulators, on the other hand, encouraged the entry of low-cost competitors by making sure they could get access to takeoff and landing slots."
As this quote suggests, there are many structural reasons that explain the shift that the author explores, and the gridlock around public policy at present can hardly be helping, but one additional reason may be an unwillingness in the U.S. to adapt to what science has to teach us about our changing environment. In particular, developments over the past few months suggest that the fossil fuel companies in Europe are reacting very differently to the evolving societal awareness about climate change compared to their U.S. counterparts (e.g., see Strategic CSR – BP (I) and Strategic CSR – BP (II)). As the article in the second url below notes, what was always a philosophical difference is suddenly having very practical implications:
"As oil prices plunge and concerns about climate change grow, BP, Royal Dutch Shell and other European energy companies are selling off oil fields, planning a sharp reduction in emissions and investing billions in renewable energy. The American oil giants Chevron and Exxon Mobil are going in a far different direction. They are doubling down on oil and natural gas and investing what amounts to pocket change in innovative climate-oriented efforts like small nuclear power plants and devices that suck carbon out of the air."
As the article continues:
"The disparity reflects the vast differences in how Europe and the United States are approaching climate change, a global threat that many scientists say is increasing the frequency and severity of disasters like wildfires and hurricanes. European leaders have made tackling climate change a top priority while [the U.S. president] has called it a 'hoax' and has dismantled environmental regulations to encourage the exploitation of fossil fuels."
While both sets of companies recognize the reality of climate change and that we cannot go on burning carbon forever, that is about where the agreement ends:
"'Despite rising emissions and societal demand for climate action, U.S. oil majors are betting on a long-term future for oil and gas, while the European majors are gambling on a future as electricity providers,' said David Goldwyn, a top State Department energy official in the Obama administration. 'The way the market reacts to their strategies and the 2020 election results will determine whether either strategy works.'"
This is where we have some hope, as the market is beginning to signal that the U.S. oil and gas firms need to move further and faster than they have publicly committed to date:
"In August, for example, Storebrand Asset Management, Norway's largest private money manager, divested from Exxon Mobil and Chevron. And Larry Fink, who leads the world's largest investment manager, BlackRock, has called climate change 'a defining factor in companies' long-term prospects.'"
While the U.S. companies double-down in response to this criticism:
"European oil executives, by contrast, have said that the age of fossil fuels is dimming and that they are planning to leave many of their reserves buried forever."
The problem is that while, from an environmental perspective, the European companies are right, it is not at all clear, from a business perspective, that the U.S. companies are wrong:
"'If this is the sunset time for oil and gas, someone forgot to tell consumers,' said Raoul LeBlanc, a vice president at IHS Markit, a research and consulting firm. He said that while sales of electric cars may have picked up, it would take decades to replace the more than a billion internal-combustion cars on the road now. It will probably take just as long, if not longer, to replace the large fleets of trucks, airplanes and ships that run on fossil fuels. There ought to be enough demand for oil over the next 30 to 40 years for Exxon and Chevron to exploit their reserves and make money, though the profits will decline over time, said Dieter Helm, an Oxford economist who studies energy policy."
Take care
David
David Chandler
© Sage Publications, 2020
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Monopolies cost Americans $300 a month. We're no longer the land of free markets
By Thomas Philippon
November 19, 2019
The Guardian
Oil Giants An Ocean Apart on Adapting to Climate Change
By Clifford Krauss
September 23, 2020
The New York Times
Late Edition – Final
B1, B9
