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(Bob Dudley is Chief Executive of BP. Ahead of a criticalconference on climate change in Paris at the end of the month,Dudley explains the role oil and gas companies can play in thetransition to a lower carbon future. The opinions expressed hereare his own.)
By Bob Dudley
Nov 12 (Reuters) - This year many of us have increased ouradvocacy on this issue. And last month, companies responsiblefor a fifth of the world's oil and gas supply in the Oil and GasClimate Initiative (OGCI) threw their support behind a newglobal agreement at the forthcoming UN talks in Paris.
For oil and gas companies to take such a stance has beendescribed as "unusual" -- and even "unprecedented". However, infact, in BP we have publicly acknowledged the risk and have beenworking to address it since the 1990s.
So why do companies that produce oil and gas want to seemore done to tackle climate change? The first reason is simplythat we want the planet to be sustainable in the future. We havethe same hopes and fears for our children and grandchildren asanyone else.
The second reason for our stance is that, being close to theissue, we have views on the realistic and affordable ways tomake the transition to a lower carbon economy. And we can seethat oil and gas are part of that transition.
With the UN-led conference on climate change in Parisapproaching, it's important that we explain our view.
In BP, as we and several other companies made clear in aletter to the UN in June, we believe the best mechanism to drivea shift to a lower carbon future is to put a price on carbon.That can be done via taxes or by cap-and-trade systems. Eithercan be effective if well-constructed.
There are many ways to reduce carbon emissions: greaterenergy efficiency, renewable energy, gas displacing coal, carboncapture and storage, nuclear power and many others. Of these,energy efficiency is generally viewed as being "good for allseasons", whereas the rest have their supporters and theirdetractors.
The benefit of a broad-based, well-designed carbon price isthat it encourages improvements in energy efficiency as well asshifts in the fuel mix.
In terms of the fuel mix, a carbon price makes all of thelower carbon alternatives more competitive -- and in eachparticular situation the most economical options will emerge.This is vital when the technologies need to be deployed atmassive scale and affordability is key.
KEEN TO COMPETE
A price that treats all carbon emissions equally, whetherfrom a refinery smokestack or car tailpipe, will make ouroperations and products more costly in some cases. We acceptthat. If it has the same impact on everyone, we are keen tocompete.
A carbon price creates opportunities as well as risks.
Others take different views. Some call for the rapid phasingout of fossil fuels now. Some ask shareholders to sell theirfossil fuel holdings, arguing that some reserves are effectively"unburnable" or some company assets "stranded" if the world isto limit the global temperature rise to the widely recognisedgoal of 2 degrees Celsius on pre-industrial times. Others ask usto switch investment wholesale from oil and gas to renewableenergy.
These are passionately held views that deserve a response.
To start on common ground, we agree that if all the world'sfossil fuel resources were burned, the temperature rise wouldexceed the 2 degrees threshold.
To put the resource issue into perspective, society has sofar consumed the equivalent of around two trillion barrels ofoil and gas and we estimate that there are still more than 40trillion barrels worth in the world's reservoirs.
So there is clearly far more oil and gas out there than wecan burn if we are to have a sustainable future. As SheikhYamani famously observed, the Stone Age did not end because weran out of stones and it will be the same with fossil fuels.However this does not mean that we should stop using all fossilfuels now, even if we could.
STARTING POINT
To devise a workable route forward we need to understand thestarting point -- and particularly the scale of the world'sreliance on fossil fuels.
Today the world uses the equivalent of around a quarter of abillion barrels of energy every day. Of that, 32 percent ofenergy comes from oil, 30 percent from coal, and 24 percent fromgas -- so 87 percent from fossil fuels in total. That means, 7percent comes from hydro-electricity, 4 percent from nuclearpower and 3 percent from other renewables, including wind andsolar power.
This global energy system, with its huge reliance onhydrocarbons, has evolved over two centuries as societies haveused fossil fuels to support the world's growing population andraise global living standards.
Global energy needs to continue to play that role over thenext 50 years, as some of the world's poorest countries grow andhundreds of millions of people are lifted out of fuel poverty,but it needs to do so in a sustainable and safe manner.
This energy system which underpins modern life and humandevelopment cannot be dismantled overnight.
Fortunately, that's not only impossible, but unnecessary.Studies such as the widely cited International Energy Agency's'450 scenario' show that oil and gas can and will be part of thejourney to a more sustainable future.
That scenario envisages a future energy mix where theconcentration of greenhouse gases in the atmosphere stabilisesat 450 parts per million and the global temperature rise is keptto 2 degrees and emissions in 2040 are around 40 percent down on2013.
However, in that scenario the total consumption of energystill grows, by 12 percent to 2040, and oil and gas still makeup almost half of the energy used.
AFFORDABLE TRANSITION
While we cannot be complacent, the world can make an orderlyand affordable transition to a low-carbon economy. And there areseveral means to that end. The road to sustainability hasseveral lanes.
The first is energy efficiency -- reducing emissions byusing energy more effectively. A carbon price would encouragesmart buildings, advanced industrial plant, home insulation,higher fuel economy and the myriad of other ways to use energymore efficiently.
There is plenty of potential here. Europe has been a leaderin energy efficiency but the U.S., China and others are catchingup. This can account for around half of the emissions reductionrequired, according to the International Energy Agency.
Our industry has an important part to play in this,particularly by providing products that promote fuel economy invehicles.
Second, gas is very much part of the solution because itemits around half the carbon of coal when used to generatepower.
So replacing coal with gas in power stations can make amassive difference, given that coal is the largest source ofenergy-related emissions.
Switching just 1 percent of power generation from coal-firedplants to gas-fired ones would cut global CO2 emissions as muchas increasing renewable energy capacity by 11 percent -- and doso rapidly and economically.
A tonne of emissions saved by switching from coal to gas isjust as effective as one saved by switching from fossil fuels torenewables.
A third route towards lower emissions is of course renewableenergy. For the future, it is important to build the renewablesector from today's low level.
The issues to overcome are that renewables are starting froma low base and currently cost more than energy from fossilfuels.
Renewables are growing fast, but where they have beendeployed in large volumes, it has largely been thanks togovernment subsidy.
Again, a carbon price would change the picture -- it wouldnarrow the gap between costs of renewables and fossil fuels andstimulate companies to invest in the research and developmentneeded to make renewables more competitive.
ENERGY MIX
So the transition to a more sustainable future is one wherethe energy usage shifts over time towards a lower carbon blend.
It will involve greater energy efficiency, significantgrowth in use of renewables and gas gaining share from coal inthe power sector.
Fossil fuels have driven our economies and built prosperityin societies for two centuries in which we have seen lifeexpectancy double, living standards rise and technology changeand enhance our lives.
They provide the energy that fuels our vehicles, powers ourhomes and lifts millions out of poverty.
Everyday objects from plastics to fabrics are derived fromthe petroleum chain.
While we do need to make the transition to a lower-carbonworld, it can be an orderly transition; and many oil and gascompanies are keen to work with governments and others to helpmake that transition happen.
It is also worth noting that oil and gas companies' reservesare typically produced over around 10-15 years, a timeframewithin which we can respond to changes in policy to avoid anyassets being "stranded".
In BP we want to be part of a solution that will work.Already, we are increasing the ratio of gas to oil in ourportfolio from 50/50 towards 60/40.
We have a large biofuels business in Brazil and enough windturbines to power a city the size of Munich. We are pursuinggreater energy efficiency in operations and providingincreasingly energy-efficient products to customers.
We want to do more and a carbon price would enable us to dothat.
We all share a responsibility to solve this problem together-- every one of us who drives a car, heats a home or uses amobile phone.
We look forward to the conference in Paris, and to theopportunity to work together as a society to build a sustainablefuture. (Editing by Karolin Schaps and David Evans)
