Oil Companies Are Thinking About a Low-Carbon Future, but Aren’t Making Big Investments in It Yet
The global oil industry stands at a crossroads. Corporate leaders are weighing how closely to stay wedded to their legacy business – finding, extracting and refining fossil energy – versus preparing for an uncertain low-carbon future.
There are signs of an impending pivot. Most of the largest multinational oil companies have formally supported the Paris climate agreement. Total has purchased electric power company DirectEnergie and charging solutions provider G2Mobility. Shell has acquired e-mobility company NewMotion; its CEO, Ben van Beurden, has expressed support for a zero-carbon world target.
The companies least willing to shift focus today tend to be national companies and nationally owned firms, such as those in Kuwait and Venezuela. Such companies control nearly 90% of all the oil in the world. However, some, such as Saudi Aramco, are looking at a range of green projects including solar, carbon capture and hydrogen.
As transportation/energy scholars, we are most interested in decisions by major private oil companies that are subject to greater public pressure. What should shareholders expect from these companies? And what can policymakers do to encourage further investment in more sustainable options? Oil companies clearly are thinking about a low-carbon future, but many are still exploring ways to get there.
Opportunities in Transportation and Renewables
Discussions about Big Oil's interest in sustainability center on continued global demand for petroleum. Industry and independent scenarios anticipate rising oil use until at least 2040, though at a slowing pace.
These predictions contrast starkly with calls to limit climate change to a 1.5 degrees Celsius (2.7 degrees Farenheit) increase above pre-industrial levels. As the Intergovernmental Panel on Climate Change and other expert analyses have shown, to reach that goal, oil use will likely have to peak around 2030, then decline to much lower levels by 2050.
However, large oil companies also have a leg up on the competition when it comes to creating infrastructure for some low-carbon fuels. Since they are essentially massive engineering companies, they have an advantage in the areas of hydrogen fuels and carbon capture and sequestration, which offer new uses for existing fossil fuel infrastructure. For example, hydrogen can be made from natural gas and transported along traditional pipelines and shipping routes.
In contrast, solar generation, batteries, onshore wind and nuclear power do not offer oil companies the same structural or expertise advantages. Thus shifting into these new areas may be seen as problematic.
Any Pivot Will Take Time
Oil companies cannot change course overnight, even if policymakers want them to. They must be responsive to shareholders in making such moves.
An analysis by the Carbon Disclosure Project shows that investor-owned oil companies currently are spending 1% to 4% of their capital investment on low-carbon energy sources, while national oil companies average a mere 1%. These numbers must increase significantly for the industry to claim any real pivot is occurring.
Proportion of oil company capital expenditures invested in low-carbon energy from 2010 to the first quarter of 2018. Fletcher et al., Beyond the cycle (London: CDP, 2018)., CC BY-ND
Shareholders Speak Up
Numerous reports have described climate-related shareholder resolutions at oil and gas companies. But many such resolutions initiated in the last five years have failed a vote, and the number of actions declined from 2016 to 2018.
Still, these efforts led to increased discussion of climate-related concerns between shareholders and management. The recent uptick in corporate climate strategy and investments undoubtedly reflects investor interest, societal pressure, the public policy environment and the growing competitiveness of other technologies. The question is how much change can emerge without much stronger signals from one or more of these sources.
Action and Inaction Both Have Risks
Big Oil must consider not only the economic advantages of investing in clean energy, but also the financial risk of pursuing a fossil energy source strategy rather than diversifying.
Several scientific studies have shown that nearly 85% of remaining fossil fuel reserves must remain in the ground to keep global temperatures from rising more than 2 degrees C (3.6 degrees F) above pre-industrial levels. When the first peer-reviewed article making this case was published in a major journal in 2009, oil company stock values fell by more than 2% over the next two weeks. This amounted to a shareholder loss of $16.5 billion.
Fossil fuel companies have underperformed the broader S&P index in recent years. This trend is led by U.S. coal companies, which have lost 80% of their value since 2007.
Investors plan to triple fossil fuel divestment rates over the next decade https://t.co/cZsdFBZZ8y— Divest Ed (@divesteddotorg) October 16, 2019
Each oil company will address climate change pressures in its own way. Some with resources to develop in-house renewable energy expertise will do so. More likely, however, we expect that large companies like Total and Shell will continue to purchase smaller companies that have the strategic know-how to help them make the switch.
On a positive note, oil companies are increasing their low-carbon investments each year. While they are starting from a low baseline, rapid growth rates suggest that with sustained commitment, they could be quite large within a decade. For example, Total and BP each are prepared to spend $500 million per year on renewables over the next several decades. Total expects to grow its low-carbon business to 20% of its asset base over the next 20 years.
Ultimately, however, investment strategy will always be driven by expected returns. If available oil and gas investments have an expected return of 15% and low-carbon investments are only expected to make 7%, money will likely continue to flow towards fossil fuels. Changing this reality will require major market and pricing shifts, which may have to be driven by government policies such as carbon taxes.
A Pale-Green Forecast
Our discussions suggest that companies are interested and feel compelled to explore their options, but there is no clear road map for transforming them into low-carbon energy providers.
Some observers might conclude that oil and gas companies' limited investments to date in low-carbon technology and business ventures are hindering this transition. Others may view any such investments as a plus, so long as these investments grow and companies don't simultaneously advocate against policies to reduce emissions.
We believe it is vital for the energy industry and climate stakeholders to continue this conversation, and to identify policy changes that can make it economically advantageous for oil companies to pursue low-carbon futures.
Lewis Fulton is co-director of STEPS (Sustainable Transportation Energy Pathways) at the University of California, Davis.
Daniel Spurling is a professor of civil and environmental engineering and founding director of the Institute of Transportation Studies at the University of California, Davis.
Disclosure statements: Lewis Fulton directs a research group that receives consortium funding from transportation and energy companies, government agencies that fund or regulate transportation agencies and companies, and private foundations engaged with mobility issues.
Daniel Sperling receives funding from government agencies that fund or regulate transportation agencies and companies, and private foundations engaged with mobility issues. He is a board member with the California Air Resources Board.
Reposted with permission from our media associate The Conversation.
- BP to Cut Oil and Gas Production 40%, Invest 10x More in Green Energy - EcoWatch ›
- Major Utility Companies Lag Switching to Clean Energy - EcoWatch ›
- Oil Demand May Have Peaked in 2019, BP Report Says - EcoWatch ›
As the coronavirus has spread around the globe, so have the germs of misinformation and conspiracy theories about the new disease. Fake news about the virus is so prevalent that health professionals have started referring to it as an "infodemic."
- Doctors Aren't Just Fighting a Pandemic, but Also an 'Infodemic ... ›
- Trump Orders Hospitals to Stop Sending COVID-19 Data to CDC ... ›
- Facebook, Twitter Remove Trump Posts Sharing False COVID-19 Info ›
EcoWatch Daily Newsletter
A new report shows the U.S. government bought more than $350 million in bonds issued by oil and gas companies and induced investors to loan the industry tens of billions more at artificially low rates since the coronavirus pandemic began, Bloomberg reported.
- Fed's Corporate Debt-Buying Could Mean Big Oil Bailout - EcoWatch ›
- Marathon Petroleum Takes Bailout Tax Breaks During Pandemic ... ›
By Karen Charman
When President Donald Trump visited California on September 14 and dismissed the state Secretary of Natural Resources Wade Crowfoot's plea to recognize the role of climate change in the midst of the Golden State's worst and most dangerous recorded fire season to date, he gaslighted the tens of millions of West Coast residents suffering through the ordeal.
Foxes Guarding the Henhouse<p>Before he assumed power, Trump attacked regulations as unnecessary barriers to freedom and economic prosperity. Since taking office, he has targeted anything enacted by the administration of his predecessor, Barack Obama, and taken steps to withdraw the U.S. from the Paris agreement, the international effort to combat climate change. He has also staffed heads of key agencies with climate deniers of various stripes, forced out career public servants and created a hostile work environment for those who don't profess loyalty to his deregulatory agenda.</p><p>Like Trump himself, some of his cabinet choices displayed an audacious penchant for <a href="https://www.nytimes.com/interactive/2020/09/27/us/donald-trump-taxes.html?action=click&module=Spotlight&pgtype=Homepage" target="_blank">self-dealing</a> and abusing their positions of authority. One example is Trump's first Environmental Protection Agency (EPA) Administrator, Scott Pruitt, who aggressively worked to overturn Obama's climate regulations, spent most of his time in <a href="https://www.washingtonpost.com/national/health-science/trump-epa-head-steps-down-after-wave-of-ethics-management-scandals/2018/07/05/39f4251a-6813-11e8-bea7-c8eb28bc52b1_story.html" target="_blank" rel="noopener noreferrer">private meetings</a> with fossil fuel and chemical company executives, sidelined career EPA staff and reconfigured independent scientific advisory boards to make them more supportive of the industries EPA is charged with regulating. Dubbed "<a href="https://www.latimes.com/politics/la-na-pol-pruitt-leaves-20180705-story.html" target="_blank" rel="noopener noreferrer">one of the most scandal-plagued Cabinet officials in U.S. history</a>," Pruitt resigned in disgrace after revelations about his multiple brazen abuses, including using the agency as his personal concierge service and piggy bank.</p><p>Pruitt's deputy, Andrew Wheeler, a <a href="https://www.cbsnews.com/news/andrew-wheeler-acting-epa-administrator-former-number-two-before-scott-pruitt-resignation/" target="_blank">former coal industry lobbyist</a> and longtime Republican Washington insider, took over and has continued Trump's deregulatory agenda apace.</p><p>At the Department of Interior (DOI), a sprawling agency that oversees 75 percent of the country's public federal lands and includes the U.S. Geological Survey, which is tasked with evaluating natural hazards that threaten life and the health of our ecosystems, Trump installed another flamboyant anti-environmentalist to head the agency. Like Pruitt, Trump's first Interior Secretary Ryan Zinke aggressively attacked environmental regulations, <a href="https://www.washingtonpost.com/news/energy-environment/wp/2017/05/07/epa-dismisses-half-of-its-scientific-advisers-on-key-board-citing-clean-break-with-obama-administration/" target="_blank">ditched more than 200 advisory panels</a>, and pushed to open up vast swaths of public land to oil and gas drilling. Described by one environmental group as "<a href="https://www.washingtonpost.com/national/health-science/interior-secretary-zinke-resigns-amid-investigations/2018/12/15/481f9104-0077-11e9-ad40-cdfd0e0dd65a_story.html" target="_blank" rel="noopener noreferrer">the most anti-conservation Interior secretary in our nation's history</a>," Zinke was forced out after numerous highly publicized conflict-of-interest scandals.</p><p>The DOI is now run by Zinke's deputy secretary, David Bernhardt, another longtime Republican Washington insider and former oil industry lobbyist who has also been the subject of <a href="https://slate.com/news-and-politics/2020/05/this-is-still-happening-david-bernhardt-trump-lincoln.html" target="_blank">several government ethics complaints</a> for various violations favoring polluting industries.</p><p>More recently, longtime climate change denier David Legates, a climatologist at the University of Delaware previously <a href="https://insideclimatenews.org/news/19032015/u-delaware-refuses-disclose-funding-sources-its-climate-contrarian" target="_blank">funded by fossil fuel interests</a>, was hired for a <a href="https://www.npr.org/2020/09/12/912301325/longtime-climate-science-denier-hired-at-noaa" target="_blank" rel="noopener noreferrer">top job</a> advancing weather modeling and prediction at the National Oceanic and Atmospheric Administration (NOAA). Legates has called for <a href="https://www.democracynow.org/2020/9/18/noaa_david_legates_climate_crisis" target="_blank" rel="noopener noreferrer">increasing carbon emissions</a>.</p><p>The Trump administration has done much more than stack government agencies with fossil fuel industry proponents. It has removed or diluted discussion of climate change from as many government platforms as it can and decimated independent scientific advisory boards that provide unbiased, fact-based information the government needs to enact policies that protect the public. It has also <a href="https://thehill.com/policy/energy-environment/482352-trump-budget-slashes-funding-for-epa-environmental-programs" target="_blank" rel="noopener noreferrer">slashed environmental agency staffing and budgets</a>.</p>
The Damage So Far<p>A September 17 <a href="https://rhg.com/research/the-rollback-of-us-climate-policy/" target="_blank">report</a> by the Rhodium Group calculates that 1.8 billion tons more greenhouse gases will be released over the next 15 years as a result of climate change rollbacks the Trump administration has achieved so far. These include repealing Obama's main climate policy, the Clean Power Plan, which was intended to reduce dirty emissions from power plants; increasing pollution from cars by rolling back fuel economy standards and challenging California's longtime authority to set stricter emissions standards; targeting controls on hydrofluorocarbons, powerful greenhouse gases used mainly in refrigerators and air conditioners that also destroy the Earth's protective ozone layer; and allowing unreported and unregulated emissions of methane, another potent greenhouse gas, by oil and gas companies.</p><p>Besides these measures, Trump is also trying to gut core environmental statutes like the Clean Air Act, the Clean Water Act, the National Environmental Policy Act and the Endangered Species Act, all of which were enacted to protect human health and preserve a livable world.</p><p>The Paris agreement aims to keep the rise in average global temperatures at less than 2 degrees Celsius above pre-industrial levels and hopefully cap it at 1.5 degrees C or lower. We are now at approximately 1.2 degrees C and counting.</p>
- Trump Admin Guts Endangered Species Act in the Midst of Climate ... ›
- Climate Change Purged From White House Website - EcoWatch ›
- California Burns Because of the Climate Crisis While Trump ... ›
By Jan Ellen Spiegel
It wasn't so long ago that the issue of climate change was poised to play a huge – possibly even a decisive – role in the 2020 election, especially in the race for control of the U.S. Senate. Many people supporting Democratic candidates saw a possible Democratic majority as a hedge against a potential Trump re-election … a way to plug the firehose spray of more than 100 environmental regulation rollbacks and new anti-climate initiatives by the administration over its first term.
Potential Climate Voters<p>In a September 1 memo on climate and the election, Andrew Baumann, vice president of the consultants Global Strategy Group, wrote: "Few issues have seen as dramatic a shift in public opinion as climate change has over the last few years. Only marriage equality and the recent shift in views around racial justice outpace the rapid growth in the salience of climate change as an issue."</p><p>Calling it a "winning political issue" the memo says: "First, it is clearly a motivator for both younger and Latinx voters. Second, it has the power to move swing voters, particularly center-right white women."</p><p>Baumann points to a finding that when a group of such women were asked generic ballot questions, Democrats trailed by nine percentage points. But when the question was revised as a choice between:</p><p>"A Democrat who supports taking strong government action to combat climate change.<br>A Republican who opposes taking strong government action to combat climate change."</p><p>… the result was a 29 percentage point shift, putting Democrats ahead by 20 percentage points among that same group.</p><p>"I think it is playing a role," says Senator Sheldon Whitehouse, D-RI, a longtime outspoken climate activist who is on the Senate Environment and Public Works Committee and also on the Senate Democrats' Special Committee on the Climate Crisis. If Democrats win back the Senate, he stands to play an even more pivotal climate role as part of the majority. He is not up for re-election this year.</p><p><span></span>"I think from the Democratic side it's playing a role in generating enthusiasm – particularly making younger voters feel that they have a real stake in this election. On the Republican side, I think things have moved enough that candidates can no longer get away with simply scoffing about climate change."</p>
Climate a Top Concern for Youths, Latinx<p>So who's still thinking climate? Mostly young voters – 18 to 25 or 29 and Latinx voters.</p><p>Climate and the environment are the top concern among young voters, just above racism and healthcare according to <a href="https://circle.tufts.edu/latest-research/poll-young-people-believe-they-can-lead-change-unprecedented-election-cycle" target="_blank" rel="noopener noreferrer">CIRCLE</a>, the Center for Information and Research on Civic Learning and Engagement at Tufts University, which focuses on the political life of young people in the U.S. For Latinx youth, it drops a bit but remains in the top three.</p><p>The issues young people care about have an impact on how they volunteer their time, says Kristian Lundberg, an associate researcher at CIRCLE. He says that's played out most notably through the Sunrise Movement, which focuses on climate change and the environment along with other key activist groups such as Black Lives Matter and March for Our Lives.</p><p>He points to polling this summer that showed that 83% of 18-to-29-year-olds felt they had the power to change things. "Young people feel much more empowerment than in 2016 and 2018," Lundberg says. "It's intentional these movements are carving out space for young people. It's an important strategy."</p><p>In positions of power in these organizations, young people have developed peer-to-peer outreach on activism. And Lundberg says young people have made the leap that connects activism to voting as a lever for change. "In the past in very close races, young people breaking heavily have provided the margin of victory," he says.</p><p>CIRCLE is highlighting 10 U.S. Senate races as ones in which young voters can be decisive. Several of them have notable climate or environmental components – most prominently the Colorado and Montana races.</p><p>The Republican incumbents in each state – Cory Gardner in Colorado and Steve Daines in Montana – are running against a popular Democratic governor – John Hickenlooper in Colorado, now out of office — and Steve Bullock, still the governor of Montana. Both governors have had to balance their state's fossil fuel economic interests with supporting climate change solutions.</p>
Tying Climate Change to the Economy<p>In August, Data for Progress, a progressive research think tank, released polling on climate change – including in the battleground Senate elections in Arizona, Iowa, Maine, and North Carolina – showing voters back a Senate candidate supporting strong climate action.</p><blockquote>Climate change as 'mobilizing issue … key persuasion issue.'<br></blockquote><p>It also showed that linking climate change to the economy may be key. That means talking about clean energy and jobs together, says Danielle Deiseroth, climate data analyst for <a href="https://circle.tufts.edu/latest-research/poll-young-people-believe-they-can-lead-change-unprecedented-election-cycle" target="_blank">Data for Progress</a>. She says that in addition to jobs, climate change issues include climate justice and economic equality – both of heightened interest because of fallout from western wildfires.</p><p>"Climate change, we've observed over the last year or so, is a key mobilizing issue and a key persuasion issue," she says. "Climate issues can only grow support for Democratic candidates.</p><p>"I think it's pretty naive to say climate is the key issue for voters. For a lot of voters it really exemplifies so many things that are wrong with the Trump presidency," Deiseroth says.</p><p>So a factor among others. Helpful, but pivotal only in narrow circumstances.</p><p>At the League of Conservations Voters, a progressive environmentalist organization putting a lot of money and effort into the 2020 races, Senior Director of Political Affairs Craig Auster says: "I'll push back that climate change doesn't matter or isn't registering."</p><p>"It's still showing up in several Senate races. It's been playing a role in almost all of them."</p><p>Candidates are still talking about it, he says, pointing to Colorado, Montana, Iowa, and other states where ads are addressing climate and environmental issues. That shows the candidates believe their opponent is vulnerable on the issue or they're strong on it, he says.</p><p>Like others, Auster calls climate a motivator.</p><p>"Climate change matters," he says. "We have proof point after proof point about what's happening, whether it's a hurricane, a superstorm, derechos in Iowa, or wildfires out west.</p><p>"Pre-COVID it was top tier for Democratic voters along with healthcare. If COVID didn't happen I think climate would be a big deal."</p>
- Green New Deal Champion Ed Markey Defeats Joe Kennedy III ... ›
- These Races Will Shape How U.S. Elections Affect Climate Progress ... ›
- Outdoor Brand Patagonia Wants You to 'Vote the A**holes Out ... ›
Two lawmakers introduced a bill Tuesday addressing previous actions the U.S. government inflicted upon Native Americans.
The bill, authored by Rep. Deb Haaland from New Mexico and Sen. Elizabeth Warren from Massachusetts, specifically addresses the "intergenerational trauma" caused by policies that tore Native American children away from their families and sent them to boarding schools to be educated in white culture, HuffPost reported.
- Maine Becomes First State to Ban Native American Mascots at ... ›
- Federal Judge Orders Trump Admin to Give Native Americans Their ... ›
- Federal Bill Seeks First Native American Land Grab in 100 Years ... ›