Big Oil & Gas Embraces Carbon Pricing

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Six of the world’s major oil and gas companies have called for national or regional carbon pricing. They also propose that governments and the United Nations Framework Convention on Climate Change work on creating “clear, stable, ambitious policy frameworks that could eventually connect national systems.” These actions would reduce global uncertainty and encourage wide and cost-effective ways to reduce carbon emissions.

Six o&g cos

“Can’t Beat ‘Em? Join ‘Em”? The oil companies’ joint statement effectively reverses previous claims from industry that petroleum causes the environment—and the crucial atmospheric greenhouse—no harm. It also throws weight behind a carbon pricing scheme that may turn out more robust than the prevalent patchwork quilt of cap-and-trade systems.

Here’s how the top 10 oil companies in the world stack up by revenue, according to the Fortune Global 500:

  1. Exxon Mobil,
  2. Royal Dutch Shell,
  3. BP,
  4. Sinopec,
  5. China National Petroleum,
  6. Saudi Aramco,
  7. Chevron,
  8. Conoco Phillips,
  9. Total SA, and
  10. Gazprom.

BP, Shell, Total, and three other predominantly European oil and gas companies (BG Group plc, Eni S.p.A., and Statoil ASA)–almost a third of the Top 10 list, including #2 and #3–entered the agreement. They detailed their thoughts in a joint letter from their chief executives to UNFCCC Executive Secretary Christiana Figueres and Laurent Fabius of France, who will preside over the upcoming COP21 conference in Paris this December.

The six chief executives stated:

“Our industry faces a challenge: we need to meet greater energy demand with less CO2. We are ready to meet that challenge and we are prepared to play our part. We firmly believe that carbon pricing will discourage high carbon options and reduce uncertainty that will help stimulate investments in the right low-carbon technologies and the right resources at the right pace.  We now need governments around the world to provide us with this framework and we believe our presence at the table will be helpful in designing an approach that will be both practical and deliverable.”

Business leaders have recently joined government, academic, and popular work to reduce greenhouse gas emissions in anticipation of potentially increased climate change. Some of these disparate industrial alliances are We Mean Business, The Climate Group, the B Team, the Corporate Leadership Group, and the International Chamber of Commerce. They, and others not affiliated, have begun to consider the opportunities of atmospheric carbon reduction and a low-carbon economy and have thus abandoned their previous emphasis on threats to their bottom line.

They have for the first time raised climate change to a level equal to the importance of energy in sustaining life on Earth as we know it. They have also acknowledged the current trend of greenhouse gas emissions is over the threshold the Intergovernmental Panel on Climate Change says will keep global temperature rise below the current 2 degrees Centigrade figure.

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The petroleum executives also sent an additional letter to the media, setting out their call for carbon pricing. In it, they also expressed a strong role for natural gas in reducing carbon emissions. The subject of natural gas raises many eyebrows because although that fuel is currently available and inexpensive, it too contributes to carbon pollution, emitting half the carbon dioxide of coal and producing additional methane, a more potent greenhouse gas over the short term (20 years). However, the call is still a major step forward to decarbonization because, for the first time, major polluters at the source have shown eagerness to support potent climate change efforts.

Says Michael R. Bloomberg, the UN Secretary-General’s Special Envoy for Cities and Climate Change and former mayor of New York:

“It is not every day that industry leaders urge governments to raise their taxes, but today, six of the oil and gas industry’s biggest players did just that. Their joint letter sends an unequivocal message to the international community…. As we look ahead to the U.N. climate change conference in Paris at the end of the year, it’s crucial that national governments embrace the private sector as full partners in this work.”

This development from Big Petro underscores the importance of that meeting. It could also be seen as hinting that companies have placed previously dominant oil lower in the tier of fossil fuels, much as interest in coal has flagged over the past two years. It could also be read as an attempt to placate renewable energy advocates—although the documents do stress a strong future for nonfossil clean energy—and deter organizations pushing for complete divestment of stock related to petroleum investments.

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