People have used fossil fuels for thousands of years, but their modern era began with industrialization in the mid-1800s. Now, the era of fossil fuels should end.

It's not because the Earth's oil, coal, and natural gas reserves are running out. By one estimate, about 19,000 trillion tons are still in the ground, enough to last about 25,000 years at the current consumption rate. Instead, there are other compelling reasons.

For example, only a fraction of the reserves is accessible. We have already extracted most of the fuels we can produce economically. And although oil, gas, and coal have allowed us to build the world we have today, they now can ruin it because their pollution is causing global climate change.

In addition, the future belongs to a new family of energy resources. They are less expensive, ubiquitous, and clean. They are inexhaustible, easily "extracted," and free for the taking. Sunlight, wind, water, geothermal temperatures, and plants will liberate us from pollution-related lung diseases, energy wars, roller-coaster cycles of supplies and prices, extortion by large energy producers, and monopoly control of our energy supplies.

Perhaps most important, they will stop us from clogging the atmosphere with greenhouse gases. There is great urgency in their retirement. Greenhouse gases are so named because they linger in the atmosphere and keep part of the sun's heat from escaping back into space. That raises the temperature of the Earth's surface.

The more greenhouse gases we put into the atmosphere, the thicker the "glass" and the warmer the Earth's surface becomes. Global warming changes the planet's climate to produce significantly more dangerous floods, coastal storms, sea levels, heat waves, and droughts. If it continues, climate change will cause one of the greatest migrations in history as populations to flee these conditions.

Carbon dioxide (CO2) is the most prevalent and long-lasting greenhouse gas. Scientists began noticing the relationship between CO2 pollution and climate change in the 19th century. But the science has become conclusive over the last 30 years. It tells us today that we are teetering on the brink of catastrophic and irreversible climate change.

Unfortunately, the fossil-energy sector is deeply entrenched and using its power to fight the transition to cleaner energy. Nations came together in 2015 and signed the Paris climate pact, which commits countries to reduce their greenhouse gas emissions. The widely accepted objective is to reach zero CO2 emissions by 2030 and to draw down the atmosphere's concentration of greenhouse gases during the second half of this century. Nevertheless, countries still paid fossil fuel producers and consumers nearly $6 trillion in subsidies in 2020, and their progress on shifting to clean energy is insufficient.

So, the question is straightforward: How do we end the fossil-energy era and do it as quickly as possible?

The pocketbook plan

There are two ways to force the fossil energy sector into early retirement. First, governments could mandate a phase-out. But the world's top oil-producing countries are not likely to cooperate, and neither are the biggest oil producers. For example, last November, the oil and gas industry dispatched more than 636 lobbyists to COP-27, the latest international "conference of the parties" on global warming. That was more than the delegates from the ten countries suffering most from climate change. Predictably, conferees rejected proposals to "phase down" or "phase out" fossil fuels. In addition, five of the biggest oil and gas companies – BP, Chevron, ExxonMobil, Shell, and Total Energies -- spent about $750 million in 2021 on communications staff to promote the advantages of fossil fuels. InfluenceMap, a London-based think tank, reviewed 3,421 public relations materials from last year and found that 60 percent claimed the companies are "green."

In the U.S. last year, the oil and gas industry spent $123 million on 737 lobbyists and $30 million on congressional election campaigns. It's widely known that corporations fund campaigns to buy access to and cooperation from lawmakers. Nevertheless, America's highest court has ruled there can be no limits on this money because it is free speech protected by the U.S. Constitution.

One result is that government energy policies often don't align with the preference of citizens. For example, a global survey last year for the World Economic Forum found a consensus in all 30 surveyed countries for moving away from fossil fuels. Eighty-four percent of respondents said it is important to them that their countries shift to more climate-friendly and sustainable energy resources.

In the second strategy, governments would stop intervening in markets to make fossil fuels profitable. Although carbon-free wind and solar power are less expensive than fossil fuels in most places today, coal, oil, and natural gas still provide 80 percent of the world's energy. Governments give fossil-energy producers subsidies, usually tax breaks, to lower production costs. As a result, the prices consumers pay for the fuels do not reflect their actual costs. In a free market, fuel prices accurately reflect their unsubsidized costs from when they are extracted to when they combust and their wastes are dispatched.

The G20 – the world's most developed countries (and biggest polluters) -- promised years ago to phase out their subsidies, but most haven't followed through. Instead, G20 nations gave fossil energy companies nearly $700 billion in government largesse in 2021, up 16 percent from 2020.

The International Monetary Fund (IMF) calculated that if these subsidies had been retired in 2013, the global economy would have cut energy-related air pollution in half, caused 20 percent fewer deaths, and saved $1.4 trillion. Eliminating subsidies would help mobilize market forces in favor of clean energy.

But another step is necessary to correct price distortions.

Pricing carbon

Many economists say the best way to reduce climate-altering pollution is to further enlist market forces by putting a price on carbon dioxide. Attaching a carbon fee or tax to fossil fuels is one way to do this. The tax would reflect the "social cost of carbon," in other words, its impacts on society, the economy, and the environment. In 2017, a commission co-chaired by world-class economists Nicholas Stern and Joseph Stiglitz recommended that the social cost be close to $100 per ton by 2030. An analysis published by Forbes in 2021 estimated the impact a $100 carbon tax would have on big oil companies like ExxonMobil.

Exxon reported earnings of $56 billion in 2022, a record for the company and big U.S. and European oil companies in general. Stern and Stiglitz computed that a $100 tax on Exxon's corporate and supply chain emissions would cost the company $92 billion. If the company passed that cost to consumers, it would raise gas prices by 20 cents per gallon at the pump. If Exxon also paid a tax on the carbon emitted by its products, the company would go bankrupt.

However, the Stern/Stiglitz analysis recommends that the carbon tax climb gradually to $100 by 2030, giving oil, coal, and gas companies time for emission reductions and time to begin reinventing themselves to join the clean-energy transition.

Governments could provide a golden parachute for oil and gas companies, using some funds from eliminating subsidies and pricing carbon. Seaver Wang of the Breakthrough Institute notes fossil energy producers have skills to develop and deploy geothermal energy, green hydrogen, carbon sequestration, refining and transporting biofuels, and more. "Nothing could change the trajectory of global climate more than if some of the major oil and gas players were to undertake strategic shifts toward low-carbon business models," Wang writes.

However, governments should shift most of the new funds to social programs that help industries and low- and middle-income citizens transition to renewable energy technologies. "The oil and gas companies are perhaps the most flagrant example of our upside-down world," observes Sandrine Dixson-Decleve, co-president of the Club of Rome. "Despite being responsible for most of the emissions that cause climate change, they continue to make higher and higher profits. At the same time, vulnerable people in the lowest income countries, who have done the least to cause climate change and are most impacted by the extreme weather events caused by a warming world, are getting poorer."

The ancillary benefits of the shift could be enormous. Researchers at Oxford University estimated last year that the world would save as much as $12 trillion by mid-century. In addition, the International Renewable Energy Agency (IRENA) says developing countries will already save $156 billion over the lifespans of the renewable energy projects they accomplished in 2020.

Considering both direct subsidies and social costs, nations spent nearly $6 trillion in 2020, according to the most recent report from the International Monetary Fund (IMF). With competitively priced renewable energy and the international effort to achieve zero-carbon economies by the mid-century, the clean energy transition has begun. But it must move faster to avoid the worst consequences of climate change, and that won't happen if society keeps subsiding on fossil fuels.

Disclose climate risks

For the energy transition to happen in time, the private sector must redirect its energy investments, too. Bloomberg NEF reports that global investments in the transition totaled $1.6 trillion last year, a record, and the first time that clean-energy investments equaled those in fossil fuels.

However, these investments were only a third of the money necessary every year for the rest of this century to achieve a net-zero carbon global economy by 2050. People who manage other people's money have a fiduciary responsibility to do what's best for their clients, but "best" does not only mean high returns. Risk is an important factor, too. So, countries should require corporations to report publicly and annually on climate-related risks such as carbon taxation, emerging public policies, physical damages from weather disasters, or court decisions that hold fossil energy companies responsible for climate damage.

It would be difficult to find any sector of the global economy more at risk than fossil-fuel production. Climate change affects nearly every part of civilization, including worldwide loss of life and property. People who manage other people's money have a fiduciary obligation to invest in their client's best interests, considering risks as well as rewards.

Greater transparency will help shift substantially more money from fossil to renewable energy industries.

Conclusions

Energy pollution is the principal cause of climate change. We are unlikely to avoid the worst of it if we don't get energy prices right.

But political will is essential, too. Eight years after nearly 200 countries signed the Paris climate agreement, the United Nations says international ambition is insufficient to meet the agreement's goal to cap global warming at 1.5oC compared to pre-industrial times. Many scientists say that goal is now unachievable. So the climate clock is still ticking toward midnight.

It's time that nations get tougher on themselves and each other. To win unanimous approval in Paris, the agreement only calls for voluntary actions by each government. Now, countries should show how they will make their plans legally binding in their own laws, constitutions, or other instruments.

At COP-18 later this year, they should adopt the "climate club" plan proposed by William Nordhaus, where countries who meet their carbon-reduction targets could impose minor trade penalties on those who don't. COP-18 should also adopt the Energy Transition Accelerator proposed by U.S. Climate Envoy John Kerry and the Rockefeller Foundation. It would engage the private sector in purchasing carbon credits for clean energy investments in developing nations.

The plan should include strict standards, reporting criteria, and transparency requirements to ensure that offsets are legitimate and meet expectations. And delegates should endorse the ESG principles conservatives and the fossil-energy lobby are attacking in the United States.

Fossil fuels have had a very good run for a very long time. They have produced enormous benefits for much of the world. But there have always been environmental costs at scales nature could absorb. Now, we have exceeded nature's limits, risking biodiversity, quality of life, international stability, our children's futures, and much more.

We are supposed to be the most intelligent species. If we insist on ruining the planet, we will forfeit the title as well as the Earth’s hospitality. Are we smart enough, caring enough, and loving our children enough to fix this?