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Opinion | The commitment of fossil companies is needed in the energy transition

Jan Bouwens,
19 april 2023 - 09:57
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The impassioned speeches rejecting any university cooperation with fossil companies as a paragon of corporate social irresponsibility are only one side of the story, argues Jan Bouwens. “We can persuade fossil companies to help with the transition by charging the real price at the pump for energy for which CO2 emissions are inevitable,” he says. 

Let me start by saying that the energy transition has only just begun. Moreover, in terms of both size and money, the so-called “net zero” in 2050 will be on a scale that will virtually dwarf Delta Works. Fossil fuel companies have an organizational structure capable of handling large projects like that in the field of energy supply and energy transition. Their ability to contribute to the transition is illustrated by Shell's ongoing project in the Netherlands with 200 megawatts of electrolysis equipment powered by a wind farm off the Dutch coast that is 10 times the size of the largest existing green hydrogen plant in Europe. The renewable hydrogen plant will be operational by 2025. 

When companies cross the social boundary of decent business, they will be brought to a halt because society wants them to stop

Yet environmentalists claim that companies like Shell cannot be trusted and that universities should not cooperate with them because it would endanger the academic community. Let us now take Shell as an example and note that this company has a history in which they haven’t just made progress in exploring and delivering energy at low cost but have also made major mistakes, allegedly trying to downplay the adverse environmental consequences of using fossil-based energy. 
Indeed, fossil companies do sometimes turn to questionable activities. For example, there was a recent lawsuit over whether or not companies can export “dirty diesel” to poor countries. When such lawsuits arise, I have to admit that I ask myself which direction the moral compass of this company's leadership is pointing. But the good news is: those companies lost the case! So when companies cross the social boundary of decent business, they will be brought to a halt because society wants them to stop. 
I hear people object by arguing that the procrastination efforts of companies like Shell help the company maximize profits. And I recently read the accusation by two academics in de Volkskrant that companies like Shell come up with proposals that they themselves do not believe in, but that help them make their case for delaying the transition. Wouldn't the aforementioned investment in the renewable hydrogen plant in Rotterdam provide a counterargument? 


Oxford Net Zero 
There are also more solutions available, such as those put forward by a group of academics in science and economics known as Oxford Net Zero. Their proposal for carbon capture does not produce immediate results, but the initiative does produce a net result of zero carbon emissions in the time available. They propose a carbon capture plan that offers no possibility of escape. This is not procrastination; it is a real plan with concrete steps. Yet even this plan is denounced by environmentalists as procrastination. 

If we indeed start pricing carbon-based energy at full cost, this will lead users to look for alternatives

I would suggest a second initiative, and that is to influence demand. There is a huge carbon-based demand for energy. It is important to note that society benefited from the knowledge that the fossil companies developed and as a result, they have been providing us with cheap energy for decades. The price of fossil-based energy should rise to its full cost, which includes the cost of carbon capture. We will also need the (currently) fossil-based companies to implement this plan. 
If we indeed start pricing carbon-based energy at full cost, this will lead users to look for alternatives, including reducing consumption and providing alternative forms of energy. The latter will make it attractive for green businesses to invest in clean energy sources. It also becomes less attractive for profit-seeking and carbon-based industries to continue providing expensive fossil-based energy and also look for alternative forms of energy. This requires research that universities may be able to help with. Collaboration between universities and energy companies could be beneficial in this regard. 
Taxing kerosene 
In summary, we are likely slowing down the energy transition by rejecting cooperation with fossil companies because their knowledge, level of organization, and resources are unparalleled, both in government and in other companies. And through better prices, we can accelerate the phasing out of fossil-based energy. 
I call on activists to take the plunge and join in thinking about how everyone can be persuaded to join in thinking about how to speed up the transition. We need all the help we can get, especially from companies that can make energy available on a large scale. I call on governments to incorporate environmental taxes into prices. Nobody understands why kerosene is still untaxed except airlines and fossil fuel companies. 
Jan Bouwens is a professor of accounting at the UvA and a research fellow at the University of Cambridge. 

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