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(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Jason Bordoff
Feb 12 (Reuters) - Beyond Petroleum is back.
That was the slogan of a BP Plc ad campaign launched
in 2000 to promote its efforts in renewable energy. BP’s chief
Lord John Browne famously called on the oil and gas industry to
address climate change and pivoted the firm toward renewables —
an effort ahead of its time.
Now Big Oil is claiming to take up the climate mantle under
rising pressure from investors and activists. While skepticism
is warranted, the latest corporate pledges are compelling. If
backed by real action, they mean these firms’ own economic
interests will require they move away from oil and gas and push
for stronger climate policy.
BP this week became the most recent oil major to announce a
climate target, promising not only to reduce emissions from its
operations to zero and the carbon in all the fuel it sells by
half but also by 2050 to bring to net zero the emissions
released when the oil and gas it extracts is burned. This
follows pledges from Shell, Total and Equinor
to cut the carbon intensity of their businesses in
half by 2050.
Words are meaningless unless backed by action, but these
promises matter for three reasons.
First, committing to zero out the emissions from the use of
energy it produces means BP is promising to be a fundamentally
different company by 2050.
Reducing carbon intensity can be achieved by acquiring a
renewables firm on top of a company’s existing oil and gas
operations, but that would just be an accounting exercise that
did not reduce total emissions. This goes further. An oil major
may offset some of the emissions from the oil it produces with
trees or carbon capture, but bringing that to zero means it will
be producing far more low-carbon energy and far less oil and gas
in 2050.
Many oil and gas chiefs remain reluctant to commit to reduce
emissions from the use of the oil they extract, arguing that
they cannot control whether the cars Ford builds or planes
Boeing designs run on oil. Commitments like BP’s move
beyond that debate over responsibility for so-called Scope 3
emissions, which are indirect emissions in a company's value
chain including from use of products sold, by signaling a
fundamental shift in corporate strategy toward new and cleaner
energy businesses.
Second, corporate commitments to decarbonize align the
incentives for oil and gas firms to advocate for stronger
climate policy with their own economic interests. Individual
corporate shifts toward greener energy, whether from BP,
BlackRock or Microsoft, are welcome but
insufficient unless they are also matched by policy advocacy.
There is a limit to how much any one company’s actions can
reduce emissions unless the energy system as a whole evolves. If
a single firm decides to cut back, many others can step in to
produce or finance that oil and gas supply, which will not
change unless demand does.
Real corporate leadership on climate thus requires
advocating for stronger policy to change the systemic economic
incentives that determine how people produce and consume energy.
BP’s prioritization of policy advocacy in its announcement is
notable - and will be watched closely given past behavior, such
as helping defeat a carbon tax proposal in Washington state.
If the company’s new aims are met with action, however, it
will now be in BP’s own economic interest to advocate for
stronger climate policy. The challenge for oil and gas firms
today is that they face increasing pressure to shift their
investments toward lower carbon forms of energy, yet if they
move too quickly, shareholders can penalize them for not
delivering the same returns and dividends.
For the increasing investments in low-carbon energy to pay
off, firms will need stronger climate policy. BP will also need
to explain to investors and activists alike how any new oil and
gas project is consistent with its 2050 target.
Third, if they shift a much larger share of their capital
budgets to clean energy than is the case today, oil and gas
majors can help scale a broader range of low-carbon solutions
that will be needed to decarbonize the world’s energy mix while
meeting growing energy demand.
Deep decarbonization involves far more than just generating
electricity from renewables. Hard-to-abate sectors like
industry, heating, shipping, aviation and trucking will require
different solutions, such as carbon capture, carbon removal,
hydrogen, biogas, biofuels and more. Large oil and gas companies
have the engineering, capital and project management
capabilities to develop and scale such technologies.
Delivering the climate solutions needed means business as
usual for oil firms is no longer an option. At the same time,
transitioning to clean energy will not keep firms financially
viable or reduce emissions unless climate policy keeps pace.
Companies that want to lead must now match words with action
through their investments, technologies and especially policy
advocacy.
(Jason Bordoff, a former senior director on the staff of the
National Security Council and special assistant to President
Barack Obama, is a professor of professional practice in
international and public affairs and the founding director of
the Center on Global Energy Policy at Columbia University’s
School of International and Public Affairs.)
