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With a 1.5°C target to stabilize the global climate moving out of reach, and Monday, July 3 setting a record for the hottest world average temperature ever, a new report says leading oil and gas companies have done little to shift out of fossil fuels and meet the goals of the 2015 Paris climate agreement.
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On Monday, the average global temperature hit 17.01°C, breaking the August, 2016 record of 16.92°C, the Guardian reports, citing data from the U.S. National Centers for Environmental Prediction. The southern United States baked under a heat dome, China faced a continuing heat wave with temperatures over 35°C, North Africa approached 50°C, and thousands suffered during an annual religious pilgrimage in the Middle East.
“Even Antarctica, currently in its winter, registered anomalously high temperatures, as glacier melt accelerates and the sun intensifies,” the news story states, with a reading of 8.7°C breaking the July temperature record at Ukraine’s Vernadsky research base in the Argentine Islands.
1.5°C Slipping Out of Reach
“It’s a death sentence for people and ecosystems,” said climate attribution specialist Friederike Otto of the Grantham Institute for Climate Change and the Environment at Britain’s Imperial College London.
“People around the world are already enduring climate impacts, from heat waves, wildfires, and air pollution to floods and extreme storms,” added Jeni Miller, executive director of the California-based Global Climate and Health Alliance. “The extraction and use of coal, oil, and gas harm people’s health, are the primary driver of warming, and are incompatible with a healthy climate future.”
A separate analysis by the Copernicus Climate Change Service showed the long-term goal of holding average global warming to 1.5°C still slipping out of reach, Reuters reported yesterday. The news coverage contrasts the urgency from scientists with the utter lack of progress at mid-year United Nations climate negotiations in Bonn last month.
Yet the Oil and Gas Benchmark report published late last week by CDP, the London, UK-based charity previously known as the Carbon Disclosure Project, and the World Benchmarking Alliance concluded that the oil and gas sector “has made almost no progress towards the Paris Agreement goals since 2021,” Reuters writes. Of the 100 oil and gas companies in the assessment, not one had cut emissions “at a rate sufficient to align with a 1.5°C pathway over the next five years.”
The analysis showed that:
• The 81 companies with oil and gas extraction activities were planning “no significant reduction” in production before 2030, the year when the Intergovernmental Panel on Climate Change (IPCC) is calling for a 45% global emissions cut to keep the 1.5°C target within reach.
• Less than one-third of the companies in the survey had set targets for the Scope 3 emissions that represent the lion’s share of the carbon in a barrel of oil.
The industry is also failing to do its part to get its climate-busting methane emissions under control, the International Energy Agency said last week. Methane is a climate super-pollutant with about 85 times the warming potential of carbon dioxide over the 20-year span when humanity will be scrambling to get climate change under control. The IPCC’s latest science assessment identified methane controls, along with solar and wind development, as one of the least expensive paths to the fastest, deepest carbon cuts by 2030.
‘Renewed Commitment’ to Oil and Gas
Instead, Reuters says many of the world’s biggest fossil companies, flush with record profits on Russia’s brutal war in Ukraine, are intensifying their search for new oil and gas reserves. They’re betting against effective climate policies and hoping for an extended run of high, long-term income, reflecting a decision to “drill deep as profits trump climate concerns”.
The shift back into exploration “reflects a renewed commitment to oil and gas after Shell and BP went back on pledges to reduce output and invest in renewables as part of the energy transition,” the news agency says. “It responds to pressure from a majority of investors to maximize their oil and gas profits rather than invest in lower-margin renewable energy businesses.”
The reversal is particularly pronounced for BP, which laid off most its exploration staff three years ago, Reuters notes. The bottom line is that, while exploration is considered a “long-term, high-risk business”, where a big project launched today will take 15 years to go into production, “it has proved more reliable for the [fossil] energy majors than the very different business model of producing renewable energy,” with profits in the range of 15 to 20% compared to 8% for renewables.
Another oil and gas company in the midst of a major about-face is Shell, where CEO Wael Sawan’s decision to abruptly abandon a set of deeply inadequate climate plans prompted energy trader Steffen Krutzinna and Thomas Brostrom, the company’s head of renewable generation, to quit their jobs.
“Sawan, who took office in January, announced on June 14 a shift back to oil and gas production while paring back investments in renewables following investor pressure to focus on the most profitable businesses,” Reuters writes.
“I perceive that as pivotal shift in corporate values,” Krutzinna said in a LinkedIn post. “I don’t want to be part of that, so I’m out.”
A ‘Wider Lane’ for Renewables Firms
But the fossil producers’ departure from clean energy may not be as important as it seems. The current trend “may be a worrying sign for investors and policy-makers seeking a quicker energy transition,” says Bloomberg News. But “they also have the effect of widening the lanes for renewables firms in the game from the start,” like wind giants Iberdrola and Ørsted and Germany utility RWE.
“Oil companies pulling back from renewables isn’t great for climate change, but it’s good for the existing competitors,” analyst Deepa Venkateswaran of Sanford C. Bernstein & Co. told Bloomberg. “If they had decided to subsidize renewables with oil and gas profits, and they were willing to accept lower returns, that wouldn’t have been good for utilities.”
While the absence of some deep-pocketed investors might be particularly worrying for offshore wind development, “there’s no sign the low-carbon transition is slowing,” Bloomberg writes, citing International Energy Agency data. “This year, clean energy is set to attract a record US$1.7 trillion of investment—about two-thirds more than the global investment in fossil fuels,” and the eighth year when clean energy forms have attracted more investment than oil, gas, and coal.
Early last month, the IEA said renewables are “set to soar” to a record 440 gigawatts of new capacity this year, an eye-popping 107-GW increase over last year, with solar accounting for two-thirds of the total.
Oil’s Retreat May Not Matter Much
Against that backdrop, “oil majors retreating from clean energy investment means more to oil majors than it means to the energy transition,” writes Bloomberg columnist Nathaniel Bullard. From 2015 to 2022, all the world’s large oil companies—not just the five largest—invested US$113 billion in “low-carbon assets and technologies”, a vague category that lumps technological unicorns like carbon capture and storage together with wind, solar, and other options that are practical, affordable, and ready for prime time. More than half of that investment occurred in 2021 and 2022, Bullard says.
“It’s a reasonable sum, certainly, but it needs context to understand the role the companies played in decarbonization,” he notes. “Over the same period of 2015 through 2022, energy transition investment from all companies and sectors came to more than $4.8 trillion.”
Along the way, the share of oil and gas majors’ capital investment devoted to any kind of low-carbon activity only increased from 0.8% in 2015 to 8.6% in 2022, Bullard adds, with the rest still going into fossil fuels. Nor has fossil companies’ spending kept pace as a share of total global investment in the energy transition.
“Every $1 billion invested in the energy transition is certainly welcome, but oil major dollars have not, to date, moved the needle much,” Bullard writes. “Clean energy investment trends would look largely the same if oil majors were not investing at all. And there is no shortage of capital at the moment” from other sources, based again on IEA numbers.
Keystone XL definitely should be compensated from the US treasury. If the politicians make it so one year the pipeline is a go and the next it is stopped and the company invests millions of dollars when they are allowed build it is absolutely necessary to be compensated for such BS behavior. Not only that but Biden has shown it was a very poor decision to cancel the pipeline. In the future who in hell would do any business in the US with such assine presidents.
The US must pay up bar none.
Except that compensating a fossil pipeline company is not in the public interest, especially given an industry that understood the science of climate change as far back as the late 1970s and chose not to let the rest of us in on the secret. If the precedent set by not compensating Keystone XL is that utterly irresponsible, world-changing, potentially civilization-ending projects don’t get taxpayer bailouts when they fail…maybe that’s a reality check for other industries that are just as bad.
Maybe the Biden administration could pay its fair share by explicitly directing the equivalent funds to international climate finance, to help address the community impact of TC Energy’s other business activities in the world’s most vulnerable countries?