Thursday, June 26, 2014

Energy Evolution:

Managing Change

Much has been made of the recent EPA carbon emission rules (which were largely validated by the Supreme Court ruling earlier this week) and whether they will mean "the demise of the coal industry."  The arguments are complex and overlapping:

  • Some say that it would be OK for the coal industry to die if it is a free market "decision," but not if it is the result of government intervention.  Others point out the inherent complexities of the electricity "marketplace."

  • Some say that it will cause a huge amount of economic harm, both to those employed by the coal industry and to the states where the coal is mined.  Others see new doors opening when some doors close.

  • Still others take a different perspective and point out that delaying climate change policies may be worse  for the industry in the long run, noting that any new capacity that is constructed now might have to be shuttered prematurely, resulting in more stranded capacity.  

No one seems to have given thought to the fact that, throughout the history of industrialization, we have experienced numerous instances in which one technology has replaced another:  horse-drawn carriages, whale oil, and wood-burning stoves are just a few of the technologies and resources rendered obsolete by newer technologies.  Recently, we have seen even more rapid changes in telecommunications and related technologies.

Indeed, these changes were disruptive.  We don't have neighborhood wheelwrights and horseshoe makers anymore.  We don't have people making and selling ribbons for typewriters.  The younger generation has never seen carbon paper.

I could go on almost endlessly, but the point would be the same.  In each case, particular jobs have been lost, but new jobs have been created.  In most cases, the evolution took place over a period of time.  As a result, nimble companies were able to adapt and change their product line.  Some employees, too, shifted to other types of work, or completed their careers in a shrinking industry that adapted mainly by not bringing in new blood. 

I don't want to belittle the potential impacts of change on individuals, or even on companies.  Certainly, any change produces new challenges.  And any challenge produces winners and losers.  Surely, some companies may fail, and some people may lose jobs.  However, new companies and new jobs will be created.  With foresight, the states that are most concerned about potential job losses in the coal industry can counter those losses by attracting some of the new jobs that will be created by the replacement industries. 

In reality, the challenges presented to the coal industry by the EPA rule are really no different in nature from the challenges presented by the introduction of trains, automobiles, airplanes, digital cameras, computers, and any of a dozens of other products I could name.  In fact, coal itself is a relative newcomer on the human stage.  It was undoubtedly a disruptive technology in its early days.

I am not a Pollyanna.  I am sure there will be some companies and some employees that will not be able to adapt.  But the changes will not take place overnight, and most should be able to adapt.  In that case, the net result for most can be positive.  

Therefore, while there is certainly a potential for disruption in the wake of the new rule, there is also considerable opportunity.


1 comment:

  1. Of course, your article could be rewritten replacing "coal industry" with "nuclear industry". Both industries will try to adapt to the new playing field. One or both may survive but neither is assured of success.