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The core questions this book attempts to answer are simple:  Is space expansion, as its advocates insist, a positive development for humanity and the Earth? Is space expansion desirable because it has produced and will produce the positive consequences anticipated by visionary space advocates? Or are actual and prospective space expansion more mixed in their consequences, perhaps even largely negative? These very broad questions unfold into a cluster of interrelated, more specific questions: Have space activities altered global closure and helped reduce planetary vulnerability? Or have they intensified global closure and increased planetary vulnerability? Can the large-scale development of Earth orbital space make important, even decisive contributions to solving Earth problems? Or are such schemes unlikely to contribute to solving these problems, while entailing substantial unanticipated risks? And is the expansion of humanity into a multiworld species likely to beneficially transform the overall human situation? Or is such an expansion more plausibly viewed as the source of great, perhaps ultimately fatal perils for humanity? How this flock of questions about space are answered clearly has profound implications for both the space prospect and the contemporary debates about the human situation on Earth.

Unfortunately, answering these questions with any degree of certainty is very difficult in some cases, and probably impossible in others. Space is filled with a great many “known unknowns,” things we know we do not know, as well as “unknown unknowns,” things we do not even know we do not know anything about. Despite these many hurdles, an assessment still has great potential value, if only because space expansionists continue to provide strong answers to these questions, often with a great deal of certainty. If the topic of space is so full of unknowns, how can space expansionists be so confidently certain that space expansion is desirable? Thus even if a full assessment of the space expansionist claims faces great uncertainties, it can still be very valuable simply by showing that the strong claims offered by space expansionists rest on erroneous, contradictory, implausible, or speculative grounds.

In the other direction, among the downward paths, questions about space loom even larger. As the four horsemen of the anthropogenic apocalypse and other perils, natural and human-made, have come into view, the expectation that space can play a uniquely and decisively positive role in either fixing Earth problems or escaping from them has become an unquestioned article of faith, endlessly repeated by space advocates as well as most analysts of catastrophic and existential threats. If “all humanity’s eggs are in the one vulnerable and fraying basket” of the Earth, as widely proclaimed, then spreading human settlements into the cosmos seems a straightforward path to human survival. And if asteroids colliding with the Earth are a threat to civilization and the species, then a space program to detect and divert them becomes vitally necessary. The overwhelmingly dominant view is that space activities have an entirely positive role to play in addressing perils to human survival. In contrast to many technologies that promise both perils and benefits and that must, somehow, be partly restrained, the question is not whether space efforts are desirable but rather how soon they can be made feasible. Despite the breadth and sophistication of their visionary thinking, neither space expansionists nor analysts of catastrophes give much consideration to possible ways in which space activities might exacerbate or trigger existing threats or create new ones.11 In futurist thinking about technogenic threats, large-scale space expansion enjoys a special status, a space exceptionalism, which in turn is supported by and supports a space exemptionalism, a free pass from a serious consideration of its possible downsides.

Is this strongly optimistic view of space and macrodisasters well founded? In opening this question and weighing space ventures as sources of such threats as well as solutions to and escapes from them, this analysis raises the possibility that many significant space activities should be restrained or relinquished on the same grounds that many now believe them to be an unalloyed good, and that human survival may actually hinge on the ability of governance to avoid rather than undertake major space expansions. It is certain that the Earth will become uninhabitable over the very long term of hundreds of millions and billions of years into the future, and that humanity can survive only by leaving the Earth and migrating elsewhere in the cosmos. But these threats are so temporally distant that they can have absolutely no relevance to current human choices and activities. Many of the threats imminent within the next centuries are significantly of human origin, and space expansionists rarely consider the possibility that the patterns of human activity producing these threats might be carried into space along with the spread of humans. Nor do they consider whether regimes to restrain threatening technologies, if established on Earth, can persist if human polities spread across the solar system.

In this article, our aim is to extend the critical examination of power into the context of space expansion by considering the question: Is war (or at least the threat of war and therefore militarization) inevitable as humans or their constructs expand the scope of habitation and, through that process, political engagement beyond the confines of our planet. Despite arguments, such as Pinker’s claim that violence, including warfare, has decreased significantly over time, we are still far from eliminating war on Earth, thus it is reasonable to argue that war will follow humans into space (Pinker, 2012). Indeed, many in the space community note Pinker’s book as evidence that humans are “maturing” past their civilizational adolescence and that the future of expansion into the Solar System will be accompanied by an era of peace and international cooperation. Pinker’s argument has come under considerable criticism however, in part because of alleged cherry-picked data, downplaying periods of violence that do not fit his narrative, as well as other problems such as the ethnocentrism of his viewpoint, the fact that he largely ignores normalization of violence through its institutionalization, and the fact that the 20th Century, in terms of war, represents the most violent in human history–by far (Gray 2015). The early 21st Century, with ongoing wars such as the conflicts in Ukraine, Sudan and Israel, shows little evidence of that pattern abating anytime soon, even if one accepts the idea that there has been a reduction in violence over time.

And even if war is not inevitable, it is reasonable and prudent to assume there is a high likelihood that wars will be fought beyond our planet as different human groups with diverse interests encounter each other and vie for resources, such as limited water on the Moon. Here we will argue that, due to the fact that LEO has already become an arena for geopolitical tensions, locations such as the Moon, Mars and the asteroid belt are bound to become significant components in human geopolitics, if they have not already (Deudney, 2022, pp. 220- 249). It is essential that we avoid too easily accepting highly optimistic perspectives that generate an image of space as a new and inherently different context for human political behavior.

Perhaps the most significant concern about bodies in space, though, is radiation, something that is manageable for today's astronauts flying in low-Earth orbit but would be a bigger deal for people traveling farther and for longer. Some of it comes from the sun, which spews naked protons that can damage DNA, particularly during solar storms. "[That] could make you very, very sick and give you acute radiation syndrome," says Dorit Donoviel, a professor at the Baylor College of Medicine and director of the Translational Research Institute for Space Health (TRISH). 

Future astronauts could use water—perhaps pumped into the walls of a shelter—to shield themselves from these protons. But scientists don't always know when the sun will be spitting out lots of particles. "So if, for example, astronauts are exploring the surface of the moon, and there is a solar particle event coming, we probably have the capability of predicting it within about 20 to 30 minutes max," Donoviel says. That means we need better prediction and detection—and we'd need astronauts to stay close to their H2O shield. 

While competition can lead to breakthroughs at unprecedented speeds, it can also lead to development and application of technologies under differing motivations that might not serve the widest range of stakeholders and society. Geopolitical tensions also thwart attempts at partnerships leading to the duplication of efforts and the rise of security concerns as major powers such as the United States, China, and Russia become more polarized. For example, in response to tensions over the war in Ukraine, Russia announced that it intends to quit the International Space Station after 2024 and will be building its own outpost. If Russia follows through, its collaboration with the United States and will likely continue in other ways, but these types of decisions, when fueled by geopolitical tensions on Earth, can threaten the stability of space operations for the detriment of everyone involved.

The likelihood is low for global agreement and coordination on every aspect of the emerging space economy. It would be naive to assume that economic, geopolitical, and social problems on Earth would disappear in the context of space. Yet, though these conflicts persist and may become even more complex, there are still opportunities for global coordination, albeit potentially requiring a different approach in response to this reality. For example, there are still areas of common interest among different partners that space technology can help with, such as developing of vaccines, tracking natural disasters, and assessing water quality. Some experts have suggested that anticipatory diplomacy, which has been used in the context of climate change and pandemic preparedness, could be a way forward that focuses on anticipating and mitigating worst-case scenarios. This could help reveal areas with a higher likelihood of collaboration and which thus could be more strategic to focus on going forward rather than attempting to find broad consensus which could ultimately stifle progress. This will be especially true now that there are more countries with competing interests involved.

If humanity comes into direct physical contact with either ETI themselves or some ETI artifact, then it may be possible for humanity to be unintentionally harmed. One of the most prominent scenarios of this kind is the transmission of disease to humanity. This scenario is inspired by the many instances in which humans and other species on Earth have suffered severely from diseases introduced from other regions of the planet. Such diseases are spread via the global travels of humans and our cargo and also through certain other disease vectors. Introduced diseases have been extremely potent because the population receiving the disease has no prior exposure to it and thus no build-up of immunity. Indeed, disease introductions are blamed for loss of human life so widespread as to have altered the broadest contours of human history [83]. If ETI could introduce disease to humanity, then the impacts could be – but would not necessarily be – devastating. The disease could quite easily be significantly different from anything our immune systems have ever encountered before. The disease could also be entirely unfamiliar to our medical knowledge, and it could potentially be highly contagious and highly lethal. This combination of contagiousness (i.e. high R0 [84]) and lethality (i.e. high mortality rate) is unlikely in existing pathogens because such pathogens would quickly kill their host population and then die out themselves. Furthermore, if we had already encountered such a disease on Earth, then we likely would not be here anymore. However, a disease from ETI would be new to us. It presumably would not be highly contagious and lethal to the ETI themselves or to the other organisms in their biosphere, but it could be devastating to humans and the Earth system. Then again, ETI biology may be so vastly different from Earth biology that no significant interactions between organisms occur. ETI may have their own contagious diseases that are unable to infect humans or Earth-life because we are not useful hosts for ETI pathogens. After all, the ETI diseases would have evolved separately from Earth biota and thus be incompatible. So while there are reasons to believe that an ETI disease which affected humanity would be devastating, there are also reasons to believe that an ETI disease would not affect humanity. It is worth noting that a disease brought by an ETI could harm us without infecting us. This would occur if the disease infects other organisms of interest to us. For example, ETI could infect organisms important to our food supply, such as crop plants or livestock animals. A non-human infection would be less likely to destroy humanity and more likely to only harm us by wiping out some potentially significant portion of our food supply. In a more extreme case, ETI disease could cause widespread extinction of multiple species on Earth, even if humans remain uninfected.

Since 2010, Hawking has been public about his concerns that an advance alien civilization could try to kill us all. Hawking said of aliens then: “I imagine they might exist in massive ships, having used up all the resources from their home planet. Such advanced aliens would perhaps become nomads, looking to conquer and colonise whatever planets they can reach.”

Hawking also said this during a Discovery Channel program: “If aliens visit us, the outcome would be much as when Columbus landed in America, which didn’t turn out well for the Native Americans,” he said. “We only have to look at ourselves to see how intelligent life might develop into something we wouldn’t want to meet.”

It is clear why traveling into outer space holds such great appeal and captures the imagination of humanity. It is the adventure of humanity into the cosmos, the journey into the mysteries of the universe. It offers the possibility of exploring a myriad of other worlds. Through space travel and colonization, humanity and life will spread through the universe and potentially diversify and multiply in mind-spinning ways. The further growth of science, technology, and civilization to depths and heights that would dwarf our present human reality are also part of the potential saga of space exploration. As we imagine the incredible expanse of the universe, there to be explored and settled, the future and the time needed to accomplish this immense and variegated journey stretches outward into thousands, millions, and even billions of years. Space travel also offers the possibility of contact with alien intelligent minds and strange and wondrous cultures. What will we learn, what will we see within ourselves, as a consequence of meeting other sentient beings? Perhaps the single most important event of the coming centuries, if not within the entire history of humanity, will be contact with cosmic neighbors. With these hopes and dreams there are also great fears, for space is a metaphor for mystery and uncertainty. There are the fears, beginning with H.G. Wells’ The War of the Worlds, and popularized so well in contemporary science fiction, that aliens will destroy us or inflict some our great cultural shock upon us. For every one of the fantastic and uplifting dreams associated with the journey into outer space, there is a potential demon, nightmare, or unsettling reality lurking in the darkness. All told, space travel has been seen as a central metaphor on the future and the ultimate adventure of tomorrow, filled with both great uncertainties and promises, extending outward to the infinities of existence.

First, our modern science and technology are only a century old. The basic principles of Quantum Mechanics, which establish the foundation for our electronic devices, computer technology, and artificial intelligence (AI), were discovered merely a century ago. This period represents merely one part in a hundred million of the typical age of habitable exoplanets in the Milky Way galaxy.

Other civilizations are unlikely to be synchronized to the precision of a century with our phase of technological development because their stars formed billions of years before the Sun. If they were seeking terrestrial resources, they would have reached Earth long before we developed our modern science. Moreover, we did not reach them as of yet, and so by reaching us first – they would demonstrate that they are farther along in their technological progress. From a cosmic perspective, they are likely to have benefitted from thousands, millions or even billions of years of scientific progress. The slow spacecraft that they launched early on were overtaken and outnumbered by advanced probes that they manufactured subsequently.

Many people here on Earth are devoted to detecting signs that we aren’t alone in the universe, from amateur conspiracy theorists, to the minds behind professional research centres such as SETI and the Galileo Project. But what if intelligent alien life is already watching us and learning about our civilisation without us knowing it’s even there? According to a draft document released by the head of the Pentagon’s UFO investigation arm earlier this month, that’s a very real possibility.

Authored by Sean Kirkpatrick, the director of the Pentagon’s All-Domain Anomaly Resolution Office (AARO), and Avi Loeb, the chairman of Harvard’s astronomy department (and founder of the ET-hunting Galileo Project) the research report outlines the possibility that aliens have been able to travel to Earth by analysing the physical constraints of spaceflight.

Yet a wave of interest in pursuing solar system colonization is building, whether its initial focus is the Moon, Mars, or O’Neill-style space habitats. Jeff Bezos has argued eloquently for moving heavy industry off the home planet, preserving Earth as a nature reserve, and building the space-based infrastructure that will lower barriers and create opportunities for vast economic and cultural growth (similar to how the Internet and a revolution in microelectronics has allowed Amazon and numerous other companies to achieve spectacular wealth). Elon Musk and Stephen Hawking both suggested the need for a “hedge” population of humans on Mars to allow human civilization to reboot itself in the event of a catastrophe on Earth – an eggs-in-several-baskets approach which actually complements the arguments made by Bezos. And while both are valid reasons for pursuing colonization, there’s a stronger, overarching rationale that clinches it.

I’ll assert that a fundamental truth – repeatedly borne out by history – is that expanding, outwardly-focused civilizations are far less likely to turn on themselves, and far more likely to expend their fecundity on growing habitations, conducting important research and creating wealth for their citizens. A civilization that turns away from discovery and growth stagnates – a point made by NASA’s Chief Historian Steven Dick as well as Mars exploration advocate Robert Zubrin.

"Mars is obviously the logical next place to expand our capabilities and getting Earth crews there," Edwin "Buzz" Aldrin told CNBC in a recent interview. The famed astronaut and second man to walk on the moon's surface said sending humans to the planet would be an accomplishment "that's unparalleled in humanity." 

In a document outlining its rationale for sending humans to the far-flung planet — which lies 140 million miles from the Earth — NASA invoked the 1969 Apollo voyage, adding that unlike the moon, a mission to Mars would involve "going to stay." 

We can, however, get a lower bound more straightforwardly by simply counting the number or stars in our galactic supercluster and multiplying this number with the amount of computing power that the resources of each star could be used to generate using technologies for whose feasibility a strong case has already been made. We can then divide this total with the estimated amount of computing power needed to simulate one human life.

As a rough approximation, let us say the Virgo Supercluster contains 10^13 stars. One estimate of the computing power extractable from a star and with an associated planetsized computational structure, using advanced molecular nanotechnology (Drexler 1992), is 10^42 operations per second (Bradbury 1999). A typical estimate of the human brain’s processing power is roughly 10^17 operations per second or less (Bostrom 1998; Kurzweil 1999).1 Not much more seems to be needed to simulate the relevant parts of the environment in sufficient detail to enable the simulated minds to have experiences indistinguishable from typical current human experiences (Bostrom 2003).2 Given these estimates, it follows that the potential for approximately 10^38 human lives is lost every century that colonization of our local supercluster is delayed; or equivalently, about 10^29 potential human lives per second.

The 4IR and space have a positive, mutually reinforcing relationship: Scientific advancements and the convergence of technologies are leading to advances in space exploration, while advances in space are leading to the creation of new technologies and applications. Advances in blockchain technology, artificial intelligence (AI), 3D printing, materials science, nanotechnology, and biotechnology have led to two key trends—decreasing launch costs and increasing capabilities of smaller satellites—both of which are leading to new capabilities for the sake of exploration and with direct benefit to society on Earth. 

The advancements in materials science and 3D printing have significantly decreased launch costs with sweeping impacts for the space industry. Advanced materials, such as carbon fiber and advanced composites, are also being used for rockets, significantly decreasing their overall weight and saving millions of dollars in the fuel needed for launch. 3D printing is lowering spacecraft manufacturing costs, especially for rocket engines—oxygen and kerosene engines now take only 24 hours to produce using 3D printing.[1] Going forward, companies and governments are exploring how 3D printing in orbit can be expanded to take advantage of the microgravity in space to print fiber optic cables, tools, and construction materials in new, more effective ways. Reusable rockets are also becoming a reality, making trips to the lower Earth orbit more sustainable and accessible going forward for individuals and for companies in industries from pharmaceuticals to energy that may eventually operate there as they take advantage of the microgravity and other physical characteristics. 

The realm of space travel has evolved significantly in the last 5 years alone, driven by rapid advancements in technology. From reusable rocket technology to advanced propulsion systems, the small satellite revolution, and the integration of artificial intelligence (AI), these innovations have revolutionized space exploration. In this article we delve into each of these areas, exploring their impact on the industry and the future of space travel.

Reusable Rocket Technology

Fossil fuel market dynamics will have a significant impact on the effectiveness of climate policies1 . Both fossil fuel owners and investors in fossil fuel infrastructure are sensitive to climate policies that threaten their natural resource endowments and production capacities2–4, which will consequently affect their near-term behaviour. Although weak in near-term policy commitments5,6, the Paris Agreement on climate7 signalled strong ambitions in climate change stabilization. Many studies emphasize that the 2 °C target can still be achieved even if strong climate policies are delayed until 20308–10. However, sudden implementation will have severe consequences for fossil fuel markets and beyond and these studies ignore the anticipation effects of owners and investors. Here we use two energy–economy models to study the collective influence of the two central but opposing anticipation arguments, the green paradox11 and the divestment effect12, which have, to date, been discussed only separately. For a wide range of future climate policies, we find that anticipation effects, on balance, reduce CO2 emissions during the implementation lag. This is because of strong divestment in coal power plants starting ten years ahead of policy implementation. The green paradox effect is identified, but is small under reasonable assumptions. Since the eighteenth century, fossil fuel use—and resulting CO2 emissions—has increased steadily. Yet the remaining endowment of coal, oil and gas is abundant, which, if combusted using conventional technologies, will lead to dangerous climate change in the future. The Paris Agreement aims to limit the global mean temperature increase ‘well below’ 2 °C. This implies a very tight global carbon budget for the twenty-first century and, consequently, that policies to reduce CO2 emissions would leave a considerable share of fossil fuels underground1,3,4 . Previous studies have shown that cost-effective emission reduction policies tend to begin as soon as possible and progressively tighten over time, thus allocating the CO2 budget most efficiently over the remainder of the century. The Paris Agreement, however, is weak in near-term policy ambition. The sum of the nationally determined contributions (NDCs), made as part of the Paris Agreement, is around 12–14 GtCO2-eq higher in 2030 than the global costeffective greenhouse gas emission pathways commensurate with the 2 °C target9 . Previous studies assessed that it is possible to delay the implementation of strong climate policies until 2030 and still achieve the 2 °C target. However, this significantly increases the challenge of complying with the 2 °C target because of: (1) higher necessary CO2 prices13; (2) a strong drop in fossil fuel prices because of the rapid reduction in demand1 ; (3) stranded assets of fossil fuelbased infrastructure14; (4) and a strong acceleration in the required ramp-up of low-carbon technologies10. These studies made the simplifying assumption that emitting sectors are forced to follow prescribed emission trajectories until 2030. Some of these baselines include weak climate policies such as NDCs6,10, while others do not8 , but a key limitation is that relevant actors are unable to react to policies that are brought into force post-2030 before they are actually implemented. If actors were given knowledge of future climate policy, it has been argued that they would choose to deviate from these prescribed trajectories, which could therefore lead to large deviations in CO2 emissions. Two arguments, the green paradox and the divestment effect, are central in the debate. Both are responses to a climate policy that has a lag between announcement and implementation. The green paradox15 argument hypothesizes that near-term CO2 emissions would rise above the baseline. Fossil fuel owners frontload supply from their endowments to evade the negative consequences of future drops in fossil fuel prices due to future climate policies. The argument relies on resource owners seeking to maximize rents received from their resources: they seek to avoid, or reduce, the devaluation of fossil fuels that are rendered ‘unburnable’ because of future climate policies. In the near-term, this increases fossil fuel supply at lower prices and thus boosts CO2 emissions11,15–17. Conversely, the divestment effect argues that near-term CO2 emissions would decrease below the baseline. Investors avoid building fossil fuel-based infrastructure whose operation would become un-economic by the future climate policy. They divest away from infrastructure with high emission intensities, high capital costs and long technical lifetimes that could become stranded and search for alternative investment opportunities. The divestment effect intensifies as climate policy ambition increases and the policy implementation date comes closer. The green paradox effect materializes directly after the policy announcement, since fossil fuel owners frontload extraction as long as climate policies are weak or even absent during an implementation lag. The growing body of literature on the green paradox relies on highly idealized theoretical models that agree that near-term emissions tend to exceed baseline levels because of future climate policies11,16,17. Yet these studies ignore the divestment argument since infrastructure inertia is difficult to treat analytically. Conversely, while a few numerical studies have investigated the divestment argument12, the methods employed were unable to take into account the maximization of intertemporal resource rents that are essential for the green paradox effect18,19.

The induced transition from fossil fuels to low-carbon energy can affect firm investment through powerful anticipation effects. This column uses a firm-level measure of climate policy exposure to show that climate policies have already led to a 6.5% decline in global investment by publicly traded oil and gas companies between 2015 and 2019. The findings reject the ‘green paradox’ model, which predicts that firms will increase investment to pump more oil and gas before climate policies are implemented, in favour of the neoclassical investment model, in which firms pre-emptively cut investment in anticipation of a reduction in future demand or when they are faced with a higher cost of capital. A smooth energy transition requires moving away from fossil fuels at a pace that is commensurate with the adoption of renewable energy. This challenging balancing act is complicated by the forward-looking nature of energy investment and extraction, which saddles companies and investors with the challenging task of correctly anticipating future revenues in a rapidly changing market and policy environment. This poses a transition risk that is specific to each company and sector, but that for most oil and gas companies represents a large downside risk in the form of the potential loss in the value of their physical and financial assets (van der Ploeg and Rezai 2020). The literature has typically split transition risk into technology risk and climate policy risk. The latter seems especially relevant for oil and gas companies. In contrast to previous transitions, such as the one from biomass to coal in the 18th and 19th centuries that underpinned the first industrial revolution, climate policies are crucial for controlling the direction and pace of the current transition. Since the adoption of the Paris Agreement in 2015, many countries have pledged and announced targets to reduce carbon emissions in the not-so-distant future, sometimes coupled with policies that, once ramped up, should make these targets feasible. While the energy transition is a slow-moving process it has a level of predictability that has already induced some investors to react, for example in the form of fossil fuel divestment pledges (Pless 2023). Banks and investors are pricing in climate policy risk A large and rapidly growing literature has already analysed the effects of climate transition risks on various dimensions relevant to private firms (Ongena et al. 2021). For example, research shows that risks related to environmental regulation are increasingly driving up the cost of capital for high emitters in corporate loan markets, through syndicated loans (D’Arcangelo et al. 2023), corporate bonds, and higher interest rates charged by banks to dirtier firms (Delis et al. 2019). Investors are increasingly pricing in climate policy risks in Germany (Sen and von Schickfus 2020) and in the US (Bolton and Kacperczyk 2021). In theory, a higher cost of capital due to stricter climate policies should reduce investment by affected firms. None of the papers in this literature, however, has specifically analysed the impact of climate policy exposure on oil and gas investment which, in turn, has direct implications for energy supply, energy prices, and energy security. Two competing theories of the effect of climate policies on oil and gas investment Investment by oil and gas firms peaked in 2014 amid the shale boom, reaching 0.9% of global economic output – the largest share in three decades. Five years later, investment had dropped to 0.5% of global output, and then fell even further during the pandemic. The decline in investment was especially pronounced for publicly traded companies, which had cut investment in oil and gas more than their state-owned counterparts. Such outlays fell more notably in the Americas and Africa as opposed to the Middle East and Russia. Bogmans et al. (2022) find that lower oil and gas prices can explain some, but not all of the decline in oil and gas investment after 2015, which suggests that (expectations of) stricter climate policies may have also played a role. [figure omitted] The qualitative impact on oil and gas investment of announcing stricter future climate policies is a priori ambiguous. Two opposite anticipation effects could be at work: namely the divestment effect (Bauer et al. 2018) and the ‘green paradox’ effect (van der Ploeg and Withagen 2015). In a recent paper (Bogmans et al. 2023), we explore two distinct theoretical frameworks, each of which embodies one of these two anticipation effects. The two models capture distinct aspects of the oil and gas industry, and yet, the frameworks give starkly different results: while investment declines in response to the carbon tax announcement in the first framework, it increases in the second – and vice versa for oil and gas prices. In the neoclassical model, a carbon tax announced today and implemented with certainty at a future date causes an immediate drop in the value of installed capital (i.e. Tobin’s Q), as the carbon tax reduces future demand for oil and gas. Firms in the oil and gas sector react by cutting investment immediately to initiate the costly transition to a lower capital stock. Production of oil and gas, however, declines only slowly as the capital stock gradually erodes with capital depreciation outweighing investment. In the initial phase of the transition oil and gas prices slowly increase on account of lower production, but then fall once the carbon tax is implemented (Figure 2). [figure omitted] In the green paradox model, the extraction (and investment) path immediately jumps up in the pre-tax period in response to the carbon tax announcement as producers seek to sell more oil today by frontloading investment and extraction before demand destruction from the carbon tax sets in. This leads to lower prices and higher oil and gas consumption today (i.e. a green paradox). In the post-tax period, instead, extraction of oil and gas falls (Figure 3). Furthermore, we discover a non-monotonic relationship between the length of the policy delay and the magnitude of the green paradox. While for initial increases in the delay the green paradox worsens, at some point further delays to the implementation of the carbon tax will soften the green paradox, until the policy, too far into the future, becomes irrelevant. Since the balance of the two opposite anticipation mechanisms is a priori unclear, only empirical analysis can determine the net direction of the overall investment response. [figure omitted] Climate policy exposure and uncertainty have reduced fossil fuel investment Our regression analysis employs firm-level measures of climate policy exposure (Figure 4) and climate policy risk as sources of plausible exogenous variation in companies’ investments, which are influenced by both current and expected climate policies. These measures are derived by Sautner et al. (2023) from transcripts of earning calls of publicly listed firms using machine learning and keyword discovery algorithms to identify climate change conversations. The exposure measure should capture revisions in expectations of climate policies and their impact on the firm’s profitability while the risk measure should reflect the associated uncertainty. [figure omitted] Using 117 publicly traded oil and gas firms (accounting for about 40% of global oil production) and a control group made up of non-energy firms, a panel regression over the period 2012-2019 shows that a one standard deviation increase in exposure to climate policy leads to a reduction of around 3% in investment by a typical oil and gas company. Climate policy risk has an even stronger effect than exposure (i.e., the first moment), with a typical shock in uncertainty reducing investment by around 4%. For the control group, instead, a one standard deviation increase in climate policy exposure increases investment by 4.9% – for non-energy firms, the energy transition may, on average, represent more of an opportunity than a threat. These effects are also economically meaningful. When aggregated across firms, estimates imply that upstream oil and gas investment fell by 6.5% between 2015 and 2019, i.e. a -1.45% annual rate. In its 2016 flagship report, the International Energy Agency (IEA) estimated that the implementation of all pledges announced up to that point, including the Paris Agreement, would have resulted in an average annual decrease in oil and gas investments of 0.7% through 2040, relative to a business-as-usual scenario in which climate policy stringency remained at its pre-2015 levels (IEA 2016). Our empirical evidence suggests that the actual investment trend has been even lower, pointing to potential underinvestment as global oil and gas demand is curbed only in the more distant future. The cut in investment can, thus, be rationalised as the optimal response of oil and gas firms to a downward revised path for oil and gas demand, aimed at minimising (the risk of) stranded assets. These findings support the Neoclassical investment theory which suggests that announcing a stricter path of climate policies and regulations should (1) reduce investment and (2) increase oil and gas prices and, thus, oil and gas free cash flow, in the initial stage of the energy transition. While in the neoclassical investment model a higher cost of capital induced by stricter climate policies could lead to a decline in investment too, only future demand-side policies would also lead to a contemporaneous increase in free cash flow for oil and gas firms, which seems more consistent with recent events. Policy implications: The need for credible climate policies and reduced uncertainty Based on our empirical evidence, it is conceivable that overly optimistic expectations about the pace of the energy transition coupled with climate policy uncertainty (delaying both fossil fuel and renewable investment) may result in a shortfall of the total energy supply. This, in turn, could lead to higher and more volatile fossil fuel prices. To guide market actors through the energy transition, a credible climate policy commitment by policymakers is needed. Clear and consistent signals by authorities about the direction of climate policy and the energy transition will reduce uncertainty, boost investment in renewable energy, and incentivise the proper amount of fossil fuel divestment.

*GHG = Greenhouse Gas, SAI = Solar Aerosol Injection, SG = Solar Geoengineering, MCB = Marine Cloud Brightening, CCT = Cirrus Cloud Thinning

As discussed in Chapter 1, current scientific understanding makes clear that the changes in climate are being driven by the rapid rate at which greenhouse gas (GHG) concentrations are increasing in the atmosphere. GHGs are relatively transparent to incoming solar radiation, but they absorb (and reemit) infrared (IR) radiation emitted from Earth’s surface. As GHGs accumulate, energy is retained longer in the global climate system. This raises temperatures and causes many other changes within the Earth system. Aggressive action to stabilize and reduce atmospheric GHG concentrations can address this problem directly. However, given the enormous risks that climate change poses now and in the future, a variety of complementary strategies— including strategies based on increasing the amount of sunlight reflected back into space—are being considered as possible options to help stabilize the climate and protect human safety worldwide. There are two main approaches considered herein for increasing how much incoming solar energy is reflected back to space: stratospheric aerosol injection (SAI) and marine cloud brightening (MCB). In addition, this report considers cirrus cloud thinning (CCT), which differs from the other strategies in that it focuses on increasing outgoing longwave radiation and thus is not technically “solar” geoengineering. Each of these three approaches would affect Earth’s radiation balance in different ways, and they are described briefly below and illustrated in Figure 2.1. SAI is the most studied and best understood of the SG approaches proposed to date. It is based on increasing the number of liquid or solid particles in the stratosphere, where they can reflect sunlight. Unlike the highly turbulent troposphere, the stratosphere is relatively stable, and the aerosols in this region of the atmosphere can remain for 1 year or more before being transported to the troposphere and eventually removed by sedimentation and precipitation. Large volcanic eruptions (e.g., the 1991 eruption of Mt. Pinatubo) add significant amounts of hydrogen sulfide (H2S) and sulfur dioxide (SO2) into the stratosphere, where they are oxidized to form sulfuric acid (H2SO4), which then forms reflective sulfate aerosols. The Mt. Pinatubo eruption is estimated to have cooled global mean temperatures by approximately 0.5°C for 1 year or more (IPCC, 2013). A similar effect could, in principle, be achieved deliberately, either by adding SO2 or H2S gas, adding sulfate particles directly, or adding some solid particles such as calcite. While sulfate has the advantage that it is more directly analogous to material expelled by volcanoes, it also absorbs IR radiation and can pose undesirable effects on atmospheric chemistry (discussed later in this chapter); these concerns have motivated some exploration of other aerosol choices. Because aerosols spread relatively uniformly in longitude and are transported broadly poleward in latitude during their lifetime in the stratosphere, the cooling effects of SAI would be inherently global. Regional-scale climate impacts may vary considerably, however, and the details of impacts at this scale are highly uncertain and will depend on how SAI is deployed (e.g., choices such as the latitude at which it is injected and the aerosol material used). MCB is based on the idea of cooling Earth by increasing the reflectivity of low clouds over certain parts of the ocean. As an analogue, under the right conditions, the aerosol pollution from ships leaves behind a “ship track” caused by the emitted aerosols acting as additional cloud condensation nuclei. For the same total cloud water content, more droplets (from more nuclei) result in higher surface area and a more reflective cloud. It has been proposed that the same effect could be achieved by spraying a fine mist of salt water into the marine atmosphere. NRC (2015) provides a detailed review of the decades of research on aerosol and marine cloud interactions, including ship track studies. Yet despite this large research base, many uncertainties remain regarding MCB strategies, including limited understanding of aerosol-cloud interactions and how these interactions affect a cloud’s total water content and lifespan. This understanding needs to be improved in order to reliably project where, when, and by how much cloud albedo could be modified. The expectation is that MCB would be implemented at the regional level, potentially allowing more targeted interventions (e.g., to protect a specific coral reef ecosystem). However, if the MCB forcing could only be applied over a relatively small fraction of Earth’s surface, actually reducing global mean temperature would require a relatively larger radiative forcing (RF) to be applied over that smaller area, likely inducing more spatially heterogeneous climate responses than SAI. It is also important to recognize that for MCB the albedo modification effect is localized, but the resulting cooling effects are not, since the atmosphere will transport the changes in heating to other areas. Cirrus clouds—thin wispy clouds composed primarily of ice crystals that form in the upper troposphere—warm the planet (particularly at higher latitudes) because they reduce outgoing longwave radiation more than they reflect incoming sunlight. Reducing cirrus cover would thus produce a net cooling. It has been hypothesized that in the right conditions, it may be possible to seed cirrus with ice nuclei that would lead to fewer, larger ice crystals, with higher fall velocities, thus decreasing lifetime and hence cirrus cover. This approach would only work in locations where cirrus clouds form through homogeneous freezing—that is, where there are not currently enough ice nuclei to allow heterogeneous freezing. If there are already sufficient ice nuclei in some regions, then adding more could have the opposite effect of leading to more, smaller ice particles with longer lifetimes—and hence a warming effect. CCT is the least well understood of the three methods considered herein. If CCT were feasible, it has the advantage that it works by increasing the outgoing longwave radiation and thus more directly compensates for the radiative effects of increased atmospheric GHG concentrations. The maximum RF achievable with this method would be limited by the amount of cirrus cover currently formed through homogeneous nucleation. It should be noted that applying combinations of SAI, MCB, and CCT strategies could offer possible ways to leverage the benefits and reduce the negative consequences of each approach individually. But there has to date been little to no focused study of these combined strategies.

Worldwide, energy transition targets alone have attracted a staggering $1.34 trillion in government allocations since 2020, according to the International Energy Agency. Some $130 billion in new government spending across the globe was announced in the first half of this year. The results of such investments are already becoming apparent. Over the past year, the US Inflation Reduction Act has prompted companies to invest more than $270 billion in clean energy projects, which should cut emissions by 50-52% below 2005 levels by 2030. Worldwide, energy transition targets alone have attracted a staggering $1.34 trillion in government allocations since 2020, according to the International Energy Agency.

Some $130 billion in new government spending across the globe was announced in the first half of this year. The results of such investments are already becoming apparent. Over the past year, the US Inflation Reduction Act has prompted companies to invest more than $270 billion in clean energy projects, which should cut emissions by 50-52% below 2005 levels by 2030.

Many of us focused on the problem of climate change have been waiting for the day when renewable energy would become cheaper than fossil fuels. Well, we’re there: Solar and wind power are less expensive than oil, gas and coal in many places and are saving our economy billions of dollars. These and other renewable energy sources produced 30 percent of the world’s electricity in 2023, which may also have been the year that greenhouse gas emissions in the power sector peaked. In the United States alone, the amount of solar and wind energy capacity waiting to be built and connected to the grid is 18 times the amount of natural gas power capacity in the queue. So you might reasonably conclude that the market is pivoting, and the end for fossil fuels is near. But it’s not. Instead, fossil fuel interests — including think tanks, trade associations and dark money groups — are often preventing the market from shifting to the lowest cost energy. Similar to other industries from tobacco to banking to pharmaceuticals, oil and gas interests use tactics like lobbying and manufacturing “grass-roots” support to maximize profits. They also spread misinformation: It’s well documented that fossil fuel interests tried to convince the public that their products didn’t cause climate change, in the same way that Big Tobacco tried to convince the public that its products didn’t harm people’s health. But as renewables have become a more formidable competitor, we are now seeing something different: a large-scale effort to deceive the public into thinking that the alternative products are harmful, unreliable and worse for consumers. And as renewables continue to drop in cost, it will become even more critical for policymakers and others to challenge these attempts to slow the adoption of cheaper and healthier forms of energy. One technique the industry and its allies have used is to spread falsehoods — for example, that offshore wind turbines kill whales or that renewable energy is prohibitively expensive — to stop projects from getting built. What appear to be ordinary concerned citizens or groups making good-faith arguments about renewable energy are actually a well-funded effort to disseminate a lie. Researchers at Brown University have revealed a complex web of fossil fuel interests, climate-denial think tanks and community groups that are behind opposition to wind farms off New Jersey, Massachusetts and Rhode Island. Fossil fuel interests also donate piles of money to sympathetic politicians who then make false claims about renewable energy and push oil and gas on their constituents even when renewable energy is cheaper. After the Texas blackout in 2021, which was caused in part by the failure of the natural gas system, politicians blamed renewable energy, and have since argued that more natural gas is needed to strengthen the state electrical grid. The Texas grid could certainly be made more robust. But building backup natural gas plants that should ultimately sit idle 90 percent of the time is probably the most expensive way to address the problem, compared with approaches like paying consumers to cut their energy use when the electrical grid nears its limits. One of the most pervasive pieces of misinformation being spread by fossil fuel interests is that we cannot run our society on renewable energy. It is true that the sun doesn’t always shine and the wind doesn’t always blow. However, we could deal with this by expanding our existing electrical grid to allow us to move clean energy from regions with excess to those with shortfalls. When that’s not sufficient, power sources that can be quickly turned on and off, like batteries or hydroelectricity, can match supply and demand. In the current U.S. grid, natural gas provides the primary balance for intermittent wind and solar, and we can keep using it that way — in very limited quantities — when we need it. One study published in 2020 showed that we could operate a grid that is 90 percent clean energy and 10 percent natural gas by 2035, which would produce energy for a cost similar to that of a grid with a continuation of current policies. Alarmingly, fossil fuel interests are also looking to dictate how schoolchildren learn about the environment. Children are some of the most powerful messengers when it comes to climate awareness, so fossil fuel promoters are keen to shape their understanding from the start. They have succeeded in getting the Texas State Board of Education to reject textbooks that accurately depict the effects of climate change and extreme weather. Fossil fuels do deserve credit for getting us to where America is today — rich beyond the dreams of anyone living before the Industrial Revolution. But oil and gas are not the fuels of the future; they are changing the climate and generating air pollution that kills millions of people each year. They also bolster autocratic petrostates, fuel conflicts over energy resources and contribute to geopolitical instability. Simply put, the industry’s lies can cost consumers their health, their money and their security. With existing technologies, the United States can largely phase out oil, gas and coal. The last 5 percent to 10 percent of that process may be expensive, but credible estimates place the cost of getting to net-zero emissions within the historical range of energy costs. This means that a sustainable future hinges on politics, not technology or science. Policymakers must now call out the fact that an industry facing obsolescence is distorting the market to try to shut out a superior competitor, clean energy. Make no mistake: Failure to do so may mean a planet no longer able to sustain human life in the style to which we have become accustomed.