The latest round of net-zero pledges from the world’s biggest oil and gas producers are “largely meaningless”, with many of the companies selling off their most carbon-intensive extraction sites to boost their net-zero credentials rather than shutting them down, according to two new reports released this week.
Those properties remain in production and may even emit more climate pollution under new ownership, states a report this week by the Columbia Center for Sustainable Investment. A separate assessment by the UK’s Net Zero Tracker found that net-zero pledges by 75 of the world’s 112 biggest oil and gas companies “do not fully cover or lack transparency on Scope 3 emissions—which include the use of a company’s products, the biggest source of emissions for fossil fuel companies—or don’t include short-term reduction plans,” Reuters reports. “The report also found that none of the fossil fuel companies were making the needed commitments to move away from fossil fuel extraction or production.”
Some 4,000 countries, states, regions, cities, and companies globally have issued net-zero pledges, and the UN has issued a report on how to avoid greenwashing those commitments. But “we haven’t yet seen a huge move from fossil fuel companies or other companies on meeting those (guidelines),” report co-author Thomas Hale of the University of Oxford told the news agency. “So there’s still a lot of work to do to come up to that level.”
The asset sales by companies like BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Shell, and TotalÉnergies are just one part of that picture. But they’ve been worth hundreds of billions of dollars since 2010 and covered about 25% of the companies’ Scope 3 or downstream emissions between 2017 and 2021, the Columbia analysis concludes.
With regulators and investors focusing in on the 86% of global greenhouse gas emissions that oil and gas extraction produces, companies’ net-zero pledges “often incorporate plans to sell upstream fossil fuel assets worth billions of dollars,” the report says. “While these company-specific emissions reduction plans may seem like a step in the right direction, asset sales by fossil fuel companies to other entities that will produce and sell the resources may not actually reduce global net emissions.”
On the contrary—the buyers are often smaller, privately-held companies that don’t face the same scrutiny as publicly-traded corporations, and may lack the funds and expertise to manage the sites properly. “In some well-documented cases, polluting assets are sold to companies with apparently lower management and environmental protection standards than the previous operator.”
While evading responsibility for emission reductions may not be the only motivation for multi-billion-dollar business deals, many of them involving private equity firms, “the transfer of emissions through asset sales may become increasingly common as the supermajors’ emissions come under increasing scrutiny and investors apply more pressure to public companies to offload their dirtiest assets,” the report warns. And efforts to monitor the companies’ activities and hold them accountable are hindered by reporting systems that make no distinction between asset transfers and real emission reductions—by either shutting down facilities or at least operating them more efficiently.
The Columbia research team looked at corporate disclosure standards in the United States, the European Union, and the United Kingdom and found them “insufficient” to track big fossil companies’ asset sales. “While each jurisdiction requires publicly-listed companies to disclose certain financial and non-financial metrics annually, in practice, specific assets may not be traceable through public reporting,” the report states. “While some jurisdictions specifically require companies to disclose certain large asset sales through real-time supplemental reporting, the most prominent oil and gas companies are so large that even multi-billion-dollar sales may not trigger these heightened disclosure requirements.”
Not only do the asset sales give the illusion of emission reductions where none are taking place: they often drive up emissions, the Columbia team says. In a sample of 46 properties that were bought and sold between 2017 and 2021, 33 showed higher emission intensities after their new owners took them over, indicating they were operating less efficiently.
Some of the buyers were also companies with (even) worse records on “environmental and other matters” than the big fossil producers with assets to sell. “We found that several buyer companies had a worse track record than the supermajors,” Columbia says, with one report on a major asset sale in Alaska documenting “a notable increase in regulatory violations and other incidents, along with a corresponding increase in oil spills attributable to human error.”
Across the 71 buyers and sellers, including seven oil and gas supermajors, the available tracking databases documented 1,900 environment-related and 900 non-environmental regulatory violations over the five-year span, with W&T Offshore, Delek, Talos Energy, Hilcorp, and Occidental recording the worst environmental track records per billion barrels of oil produced. And those numbers were conservative—they only included companies with operations in the U.S. and the UK, and 68% of those firms conducted the majority of their business in other countries.
The report calls for reforms to existing greenhouse gas accounting frameworks to “substantially enhance transparency around fossil fuel asset sales,” but also suggests tracking specific production sites and jurisdictions as a more effective approach.
“Direct project-specific reporting requirements could provide granular data about operational efficiencies and emissions and would allow governments and the public to closely monitor fossil fuel asset sales by regulated companies,” the researchers say. However, if that disaggregated reporting system applied to some companies but not others, it might only increase the pressure on bigger companies to sell off their assets and avoid scrutiny.
A third study released this week by Germany’s NewClimate Institute found that fewer than 5% of net-zero commitments from companies across all industrial sectors met a basic checklist of performance criteria, like setting interim emission reduction targets earlier than the 2050 deadline and including Scope 3 emissions, The Associated Press reports. Last week, a study in the journal Science concluded that about 90% of countries that have set net-zero targets are unlikely to achieve them.