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How the fossil fuel industry is fighting for legitimacy by using Big Tobacco’s playbook

The fossil fuel industry has been unsettled by unfavorable trends in the stock market, the divestment movement and changes in popular opinion. Read More

Crude oil pumpjack on oilfield at sunset.
Source: Shutterstock/Maksim Safaniuk

The fossil fuel industry’s relentless attacks on purpose-driven investments and all that is socially and environmentally responsible in the United States is reminiscent of how the tobacco industry has deployed similar strategies during its own crisis. Coal, oil and gas must inevitably decline if humans are to survive, just as tobacco use had to decline for the same purpose.

The World Health Organization lists a number of harmful tactics deployed by the tobacco industry, including “discrediting proven science, conspiring to hijack the political and legislative process, exaggerating the economic importance of the industry, and manipulating public opinion to gain the appearance of respectability.” 

Sound familiar? 

The fossil fuel industry’s playbook closely mirrors that of Big Tobacco, including stoking climate change denial, lobbying policymakers for fossil fuel subsidies and against measures to reduce fossil fuel pollution, overstating job numbers while trying to discredit clean energy jobs, and releasing greenwashing ads to the general public. 

On one hand, our world is stubbornly addicted to fossil fuels, despite the overwhelming evidence that fossil fuel use makes us sick and is leading to our demise. Coal, oil and gas accounted for about 84 percent of the world’s energy mix in 2023.     

On the other hand, a few signals point to the end of the fossil fuel era. In a 100-day stretch in 2024, renewable energy supplied 100 percent of California’s electricity demand for at least part of the day. Since 2023, fossil fuels make up less than 50 percent of China’s installed electricity generation capacity. In the first half of 2024, wind and solar energy generation overtook fossil fuel generation in the European Union for the first time. What is happening in emerging markets and developing economies is especially critical, as they are where most of the world’s growth and thus energy demand take place; economies from Kenya to Nepal generate more than 70 percent of the energy from renewable resources.

Just like the tobacco industry before it, the fossil fuel industry has witnessed the signals of its unpopularity and decided to put significant resources into squelching its demise. Specifically, the fossil fuel industry has almost single-handedly funded the anti-ESG apparatus in the United States. 

Three signals that unsettled the fossil fuel industry include unfavorable trends in the stock market, the sting of the divestment movement and the removal of the social license to operate.

Stock market signals

The Dow Jones Industrial Average (DJIA), created in 1896 with 12 companies that included tobacco and fossil fuels, is a stock index that tracks 30 large cap companies listed on the Nasdaq and New York Stock Exchange. While the DJIA is no longer the main market benchmark (the S&P 500 is now the gold standard), it still bears weight as a reference of the highest-quality stocks. Tobacco company Philip Morris (now Altria Group) entered the DJIA in 1985 and was removed in 2008, marking the beginning of a complete elimination of tobacco from the index.

In 2020, the world’s second-largest oil and gas company by market capitalization, Exxon Mobil, was removed from the DJIA after being a part of its ranks since 1928. While some argued that Exxon’s removal had technically more to do with the power of Big Tech than the decline of Big Oil, the decision was rooted in market fundamentals: There was a fall in absolute fossil fuel demand in the COVID era.

With their declining profits, fossil fuel stocks have dogged stock market returns over the past decade, as the Institute for Energy Economics and Financial Analysis wrote in a February report.

The divestment movement

Through the Tobacco-Free Finance Pledge, financial institutions representing more than $17.5 trillion assets under management have adopted tobacco-free investment policies to help delegitimize the tobacco industry. The tobacco divestment campaign began in the 1990s and pointed to the contradictions between anti-tobacco public health policies and state treasury investments that supported the tobacco industry. Altria Group, the world’s leading tobacco company by market cap, and its peers made efforts to block these plans and raised concerns about the divestment movement’s ability to negatively impact their capital raises.

Just under $41 trillion has been divested from fossil fuels — to put that number in perspective, it represents about 40 percent of the world’s annual gross domestic product. Both public and private financial institutions have divested from the fossil fuel industry, demonstrating a growing awareness in the market about both the harmful ethical and financial implications of holding fossil fuel assets.

The fossil fuel industry has taken note. In 2020, Shell formally warned its shareholders that the divestment movement could cause problems for oil and gas partnerships and reduce its stock price. Exxon similarly identified the effectiveness of the divestment movement as a risk to increasing the cost of capital for oil and gas in a 2020 Form 10-K disclosure to the Securities and Exchange Commission.

Popular opinion

In 1954, 45 percent of U.S. adults said they smoked tobacco; in 2023, that number dropped to 12 percent. This is in part due to the successful messaging, backed by science and a surgeon general’s warning that smoking cigarettes is bad for one’s health. The work of health advocates also led to omnipresent bans on smoking tobacco in public spaces. A 2023 Gallup survey found that 76 percent of U.S. adults say cigarettes are very harmful. 

The masses in the U.S. are similarly dismayed by the consequences of fossil fuel use. According to a 2023 survey, 70 percent or more of U.S. residents believe climate change is real, climate change will harm future generations, and carbon dioxide should be regulated as a pollutant. The same survey found that 68 percent of U.S. residents believe that fossil fuel companies should pay a carbon tax.

The response of Big Oil & Gas

The various shifts away from fossil fuels have simply scared the otherwise all-dominant fossil fuel industry. The fossil fuel industry receives over $7 trillion in annual taxpayer subsidies. In turn, the industry doles out billions of dollars in deceptive communications about climate change and in lobbying governments against climate action. The five oil and gas supermajors alone — BP, Shell, Chevron, ExxonMobil and TotalEnergies — together spend about $750 million each year on climate-related misinformation. United Nations Secretary-General António Guterres has officially requested that news outlets, tech companies and governments ban fossil fuel company-sponsored ads.

The U.S. tobacco industry reinvented itself in part by moving into overseas markets such as China. The U.S. fossil fuel industry, however, is making the opposite geographical move and taking advantage of a receptive environment on its home turf to keep itself alive. Factors that help support the fossil fuels industry in the U.S. include a lack of corporate accountability rules and a highly partisan judicial system. The 2010 Supreme Court’s Citizens United v. Federal Election Commission decision allowed corporations and other entities to spend unlimited amounts on political campaigns. The inertia of the U.S. investment structure has become so attractive to the fossil fuel industry on a global level that French oil major TotalEnergies is considering moving its primary stock listing from Europe to the U.S.

The climate movement’s response

What is the way forward given the fossil fuel industry’s clear mirroring of the tobacco industry playbook? The science, public opinion and investors are aligned on the course of action for a climate-safe future. But any solution that technically reduces greenhouse gases does not exist within a governance vacuum. And in the U.S. context, there cannot be serious, continued and reliable implementation of climate solutions without governance reform of the institutions that set the rules of the game. Those measures would include reforming the Supreme Court, modifying campaign finance rules in favor of the public interest, and granting full voting representation to all U.S. citizens in both houses of Congress. For example, West Virginia Sen. Joe Manchin’s vote was critical to the passage of the Inflation Reduction Act (IRA); consequently, the act expanded fossil fuel use to win his support. If Washington, D.C., residents had voting representation in Congress, there might have been a different outcome.

These structural governance underpinnings, the “G” of ESG, are currently the main barrier to climate action in the world’s largest economy. To counter the efforts that seek to cement a fossil fuel, and thus climate-destructive, future, U.S. climate action must counter the tobacco industry’s copycat via governance reforms.

[Level up your net-zero strategy and tap into the leading minds behind advancing decarbonization at VERGE 24 (Oct. 29-31, San Jose).]

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