Windfall: The Booming Business of Global Warming (7 page)

At the end of the second morning, during a session titled “Environmental Challenges—Risk Management and Technological Solutions,” the head of the World Wildlife Fund’s Arctic program took the stage. “Apologies to the translators,” he said, “because I’m going to talk very fast. Okay. Would you buy a house on a floodplain below the one-in-fifty-year flood level? Would you, if you were a regulator, set the standard for nuclear power stations for one serious accident every one hundred years?” His voice was loud, his accent Australian, and his gray mustache flapped up and down as his head whipped back and forth.

“I think the answer for most people here would be no,” he continued. “So why do we, the most inventive and intelligent species on the planet, continue to undertake activities which have far more risk than any of the things I’ve just outlined?” He began reciting facts: the pace of Arctic warming, the contraction of Greenland’s ice sheet, and the magnified sea-level rise from Siberia’s swollen rivers. Carbon in the atmosphere was increasing by 1.9 parts per million each year, up from 1.5 parts per million during the previous thirty years. Natural carbon sinks—oceans, plants—could now hold 10 percent less carbon than fifty years ago, their efficiency as buffers weakening. “Since 2000, the growth in carbon emissions from fossil fuels has tripled—tripled compared to the 1990s!” he said. “We’re exceeding even the highest IPCC emission scenarios.” He showed us a graph and how we were above the red line.

“Okay, let’s summarize,” he said. “We lost 22 percent of the area of sea ice in two years. And you think that’s business as usual. We’ve lost 80 percent of the volume of Arctic sea ice in the last four years, and we pretend this is just part of what we do.” He looked at the crowd, visibly seething. “So, what can we conclude?” he asked. “That the emperor has no clothes. The expansion of oil and gas activities in the Arctic will fuel further greenhouse-gas emissions, which will, in turn, cause further warming and systemic changes to the Earth’s system, which, in turn, will cause massive impacts in the Arctic and globally, which will hurt you and me. Ladies and gentlemen, we are living inside the paradox.” He then called for a moratorium on all offshore oil and gas development in the Arctic. For a moment, there was a stunned silence—his anger seemed out of place, rude and unhinged, an interruption to what had so far been a pretty nice conference—then the crowd clapped politely.

In time, Shell would have a practiced response to the apparent paradox, which was to say that it was no paradox at all. “There was a question about whether there was a paradox to produce oil and gas in the Arctic,” Blaauw told another conference. “I don’t think so. The story is pretty simple. Today, we share the planet with 6.9 billion people. By 2050, there will be 9 billion people. In order to meet rapidly growing demand, especially from China and India, diverse sources of energy need to be developed in parallel. Renewable energy, yes, in ever greater volumes. We need to reduce CO
₂
emissions. But also fossil fuels and nuclear. We need them all. As conventional oil and gas sources run out, we need to look at unconventional resources and unconventional locations. And that’s exactly where the Arctic comes in.”

Shell executives also studiously avoid any suggestion that the company’s Arctic ambitions are tied to melting sea ice. This is, in many ways, reasonable. As Blaauw has pointed out, the last time oil prices were this high, after the 1970s oil shocks, Shell began exploring the Arctic’s Chukchi and Beaufort seas, west and north of Alaska, only to give up a dozen prospects after oil prices bottomed out again. Its main Arctic drill ship, the twenty-eight-thousand-ton, 270-foot-diameter
Kulluk,
which it purchased in 2005 and began refurbishing at an eventual cost of more than $300 million, is more than thirty years old, having been built during this same period of high prices. Now prices were back, global supplies were further depleted, and improved technology also made the Arctic more commercially viable: Thanks to a new exploration technology, directional drilling, no longer does every well require an expensive, environmentally disruptive platform of its own. Rather than dozens of pinpricks in the seabed, a single platform could drill a web of wells in every direction. There was another key change: In the 1980s and 1990s, the eight-hundred-mile Trans-Alaska Pipeline was full of Prudhoe Bay oil, too full to carry anything more. Now it was running so dry that Alaska officials were desperate to find new supplies, lest the depleted oil in the pipes get so cold that it began freezing in place.

But melting ice is not irrelevant. In public statements and private conversations, Shell officials acknowledge the following truths: Climate change is real. Climate change is melting the Arctic. Ice-free seas are easier for shipping. Ice-free seas are easier for spill cleanup. Ice-free seas are easier for seismic survey, which, as the company Web site explains, “enables explorers to see through solid matter in the same way an ultrasound can see a baby inside its mother.” And in places like Alaska, governments allow oil drilling only during the ice-free summer, a season that is lengthening year after year. As a Shell vice president once told a crowd at yet another conference, “I will be one of those persons most cheering for an endless summer in Alaska.”

I caught up with Blaauw in the Arctic Frontiers coffee line one morning, and he voiced a similar thought. An eighteen-ship Shell armada had recently sailed to the Beaufort Sea, where the company had again acquired drilling leases in 2005, but it was blocked in court by a coalition of Native and environmental groups before summer exploration could begin. “It was such an abnormally low ice year,” Blaauw told me, “so it’s a pity we weren’t allowed to go forward with the drilling.” The Arctic wasn’t like Saudi Arabia. “If you lose your chance to drill in the Middle East,” he said, “you can go back in six weeks. But the Arctic is slow, very slow. You must wait an entire year until the ice is gone again.” I asked if talk of the high north as the world’s next oil elephant was overblown. It was not, he said. I should keep an eye on Alaska’s upcoming Lease Sale 193, the first offshore auction in the Chukchi Sea in seventeen years. “There are enormous hopes for the Arctic,” he said, “and I think you’ll see that reflected in the prices at this Anchorage lease sale.”

 • • • 

IN THE OPTIMISTIC WORLD
of Blueprints, wrote Jeroen van der Veer in the booklet introducing Shell’s two scenarios to 2050, “growing local actions begin to address the challenges of economic development, energy security and environmental pollution. A price is applied to a critical mass of emissions giving a huge stimulus to the development of clean energy technologies.” There would be energy efficiency measures, electric cars, solar panels—“increasingly a world of electrons rather than molecules”—and, crucially, widespread adoption of carbon capture and storage, or CCS, the still embryonic process to catch carbon at power plants before it enters the atmosphere. CCS would keep greenhouse gases in the ground, and it would keep fossil fuel companies in business. Shell would prepare for either scenario, van der Veer wrote. “But in our view, the Blueprints’ outcomes offer the best hope.”

Blueprints, along with its counterpart, Scramble, was imagined as a plausible outcome of what Shell called the three hard truths: There would be a step change in global energy use. (“Developing nations, including population giants China and India, are entering their most energy-intensive phase of economic growth.”) There would not be enough conventional energy to keep up. (“By 2015, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth.”) And climate change and other environmental stresses were real and getting worse. (“People are beginning to realise that energy use can both nourish and threaten what they value most—their health, their community and their environment, the future of their children, and the planet itself.”)

Change comes from the bottom up in Blueprints as people’s fears about their economy and quality of life lead to local action, which leads to regional, national, and eventually international action—“a critical mass of parallel responses to supply, demand, and climate stresses.” Carbon trading accelerates, the story goes, “and CO
₂
prices strengthen early. Perceptions begin to shift about the dilemma that continued economic growth contributes to climate change.” Even in the developing world, “people make the connection between irregular local climate behaviour and the broader implications of climate change, including the threats to water supplies and coastal regions. After the Kyoto Protocol expires in 2012, a meaningful international carbon-trading framework with robust verification and accreditation emerges from the patchwork of regional and city-city schemes.” By 2050, under Blueprints, the vast majority of coal- and gas-fired power plants in the world’s richest countries would have CCS, reducing overall emissions by up to 20 percent.

Jeremy Bentham, the British theater enthusiast and former head of Shell Hydrogen who now sits in Wack’s and Schwartz’s seat leading the scenarios team, later explained to me why having a carbon price would be crucial to having CCS. “A rule of thumb is that a one-gigawatt coal-fired power plant costs $1 billion,” he said, “and it’s another billion to equip it with CCS. There’s no return on that second billion unless you have carbon dioxide pricing.” There was another rule of thumb to keep in mind. “Once something is technically and commercially proven,” he said, “it will then grow at double-digit figures.” But 25 percent growth per year, projected over thirty years, was still minuscule. “That’s just 1 percent of the global energy system,” he continued, “because the global energy system is so large.” In other words, Blueprints, Shell’s hopeful scenario, was only so hopeful. “The best climate outlook, pushed to extremes of plausibility, was Blueprints,” he told me. “Blueprints was a 3.5-degree kind of outlook. I think we can be open about the fact that we hope for something more, but we have to think about what it’s like to operate in a world that’s on that trajectory. Ocean-level rises. Climatic turbulence, storms, and whatnot. I used to be a physicist. The more energy you’re capturing in any fluid, the more turbulent would be the behavior.”

The companion to Blueprints, Scramble, described an even scarier future—and one that has seemed closer to reality in the half decade since. Its world’s key feature is that it is reactive: “Events outpace actions.” Countries keep burning coal and oil deposits, racing one another for them, emitting more and more carbon, and changing course only when nature forces them to. “Policymakers pay little attention to more efficient energy use until supplies are tight,” wrote van der Veer. “Likewise, greenhouse gas emissions are not seriously addressed until there are major climate shocks.”

In the early years of Scramble, despite some “turbulence,” the global economy continues to grow. “National governments, the principal actors in Scramble,” Bentham’s team explained, “focus their energy policies on supply levers because curbing the growth of energy demand—and hence economic growth—is simply too unpopular for politicians to undertake.” Much of the energy powering these unfettered times comes from coal, the dirtiest fossil fuel, which emits twice as much carbon as does gas and nearly a third more than does oil: “Partly in response to public pressures for ‘energy independence,’ and partly because coal provides a local source of employment, government policies in several of the largest economies encourage this indigenous resource. Between 2000 and 2025, the global coal industry doubles in size, and by 2050 it is two and a half times as large.”

In their hunger for energy, the nations of Scramble also turn to biofuels. These compete with agricultural production, especially in the corn-growing regions of the world, and drive up global food prices. Biofuels importers inadvertently encourage poorer nations to destroy rain forests in order to grow palm oil or sugarcane, resulting in major emissions of the CO
₂
stored in the soils of the former forests. Investors also pour “more and more capital into unconventional oil projects”—such as Canada’s tar sands—that are opposed by environmental groups for their high emissions and water use.

In Scramble, climate campaigners get louder, but “alarm fatigue afflicts the general public. International discussion on climate change becomes bogged down in an ideological ‘dialogue of the deaf’ between the conflicting positions of rich, industrialised countries versus poorer, developing nations—a paralysis that allows emissions of atmospheric CO
₂
to grow relentlessly.” Toward the end of the scenario, when the supply crunch and climate change are impossible to ignore, emissions begin to level off. But CO
₂
concentration is heading above 550 parts per million—200 more than the red line of 350 parts per million identified by campaigners and many diplomats and scientists. “An increasing fraction of economic activity and innovation,” the scenario planners write, “is ultimately directed towards preparing for the impact of climate change.” That is, the world must adapt to what it has become.

When I asked Bentham in 2012 if the future was looking more like Scramble than Blueprints, he was uncharacteristically concise. “Yeah,” he said. “That’s the view.”

 • • • 

BEFORE I FOLLOWED
Shell to Alaska for the lease sale, I traveled up the Norwegian coast from the conference in Tromsø for a glimpse of the future Arctic. The formerly dingy fishing town of Hammerfest was home to Snøhvit, or Snow White, the world’s northernmost liquid natural gas operation, watched closely by Shell and its rivals. It was the day before the planned start of production when I arrived, and the $10 billion installation had long ago taken over a once grassy island abutting town. Viewed from Hammerfest’s newly glitzy shopping mall, it was a tangle of smokestacks, lights, and tubes, backed by a fjord and a row of snowy peaks. The gas field was farther offshore, in the Barents Sea, eight hundred feet underwater and connected to the island by eighty-nine miles of pipes. Production was behind schedule. A few months earlier, the winds had shifted as engineers were putting the plant through the paces, and its flares—chimneys burning off excess gas—coated cars and homes in a layer of black soot. The plant operator, Statoil, Norway’s national petroleum company and Shell’s soon-to-be rival in the Alaska lease sale, brought in doctors to test for carcinogens and community liaisons to hand out reparations checks.