The Branch’s virtual meeting on the topic of Carbon Pricing was attended by approximately 34 persons. The meeting was a continuation of the topic - Renewable Energy and Climate Action: Reflection and Opportunity for the HSE Professional, which was covered in the Branch’s October 2020 virtual session.
The presentation was facilitated by Mr. Brendon James. Mr. James has over 21 years' experience in the energy sector, with his industry experience spanning along the natural gas value chain (drilling and workover operations, exploration and production, refining and marketing, asset management and integrity as well as the power and utilities divisions).
Brendon began the presentation by reflecting on an article posted in the daily newspapers on 23rd February 2021, which discussed climate change and its ability to lead to a jump in the cost of insurance premiums by approximately 30%. Such occurrences are early symptoms of disruption.
The philosophy of his presentation was guided by Clayton Christensen, author of the book, Innovator’s Dilemma. In this book, the author explains the power of disruption and how market leaders can fail as technologies and industries change. The book also gives insight on what incumbents can do to secure their market leadership for a long time.
He went on to explain this using the case study of the Kodak company, stating that the company failed to adjust to changing demands for digital cameras. The oil and gas industry is also experiencing changes in markets. Like the case of Kodak, incumbent industries tend to reinforce what they know by doing more and more of the same thing and not responding to changes in the market from the onset. He used the quote, “Quod me nutrit, me destruit” to summarize this scenario. This is a Latin phrase that generally translates into “What nourishes me, also destroys me.” It means that the business model in place that has been nourishing a business can be the same model that destroys it when a disruption occurs.
He posed the question to the audience – “Is the energy industry being disrupted?” He quickly answered his own question in the affirmative. The presenter emphasized the need to breakdown the problem, to understand the issue we are trying to solve and the need to be clear about the assumptions we are making. Mr. James underscored that while we are looking to react to climate change, we must also consider a range of factors when responding, such as capital flows, risk, strategy, insurance and finance.
As this point was conveyed, he made the bold statement that there is a high probability of a carbon tax being introduced and that this will in fact lead to disruption, since essentially carbon is a negative externality. To address this, policy makers have two options - regulation and incentive. The presentation discussed the advantages and disadvantages of both but the presenter offered his opinion, suggesting that a mixed approach may be best, using a quote from the EPA which states that, “A combination of standards and pricing mechanisms, referred to as a ‘safety valve’, may limit both costs and pollution in these cases”.
Some policy makers have already stated their position on the matter. For example, the US has proposed a Carbon Tax Dividend Model, which actually already exists in Alaska. Mr. James went on to stress that businesses must take measures to address their carbon footprint but at the same time, address how climate change is going to affect their business because it is indeed happening. Carbon will now form part of business accounting.
The next part of the presentation gave local examples of Trinidad and Tobago’s response to climate change and changing markets. The potential adequacy of these responses were discussed, including BPTT’s Lightsource Solar Project. The session ended with a question and answer segment when Brendon took the time to offer his professional opinion and clarification on matters related to the subject.