Why Are Oil And Gas Companies Calling For More Action On Climate Change?


(Bob Dudley is Chief Executive of BP. Ahead of a critical conference on climate change in Paris at the end of the month, Dudley explains the role oil and gas companies can play in the transition to a lower carbon future. The opinions expressed here are his own.)

Nov 12 (Reuters) - This year many of us have increased our advocacy on this issue. And last month, companies responsible for a fifth of the world's oil and gas supply in the Oil and Gas Climate Initiative (OGCI) threw their support behind a new global agreement at the forthcoming UN talks in Paris.

For oil and gas companies to take such a stance has been described as "unusual" -- and even "unprecedented". However, in fact, in BP we have publicly acknowledged the risk and have been working to address it since the 1990s.

So why do companies that produce oil and gas want to see more done to tackle climate change? The first reason is simply that we want the planet to be sustainable in the future. We have the same hopes and fears for our children and grandchildren as anyone else.

The second reason for our stance is that, being close to the issue, we have views on the realistic and affordable ways to make the transition to a lower carbon economy. And we can see that oil and gas are part of that transition.

With the UN-led conference on climate change in Paris approaching, it's important that we explain our view.

In BP, as we and several other companies made clear in a letter to the UN in June, we believe the best mechanism to drive a 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. Either can be effective if well-constructed.

There are many ways to reduce carbon emissions: greater energy efficiency, renewable energy, gas displacing coal, carbon capture and storage, nuclear power and many others. Of these, energy efficiency is generally viewed as being "good for all seasons", whereas the rest have their supporters and their detractors.

The benefit of a broad-based, well-designed carbon price is that it encourages improvements in energy efficiency as well as shifts in the fuel mix.

In terms of the fuel mix, a carbon price makes all of the lower carbon alternatives more competitive -- and in each particular situation the most economical options will emerge. This is vital when the technologies need to be deployed at massive scale and affordability is key.

Keen to Compete

A price that treats all carbon emissions equally, whether from a refinery smokestack or car tailpipe, will make our operations and products more costly in some cases. We accept that. If it has the same impact on everyone, we are keen to compete.

A carbon price creates opportunities as well as risks.

Others take different views. Some call for the rapid phasing out of fossil fuels now. Some ask shareholders to sell their fossil fuel holdings, arguing that some reserves are effectively "unburnable" or some company assets "stranded" if the world is to limit the global temperature rise to the widely recognised goal of 2 degrees Celsius on pre-industrial times. Others ask us to switch investment wholesale from oil and gas to renewable energy.

These are passionately held views that deserve a response.

To start on common ground, we agree that if all the world's fossil fuel resources were burned, the temperature rise would exceed the 2 degrees threshold.

To put the resource issue into perspective, society has so far consumed the equivalent of around two trillion barrels of oil and gas and we estimate that there are still more than 40 trillion barrels worth in the world's reservoirs.

So there is clearly far more oil and gas out there than we can burn if we are to have a sustainable future. As Sheikh Yamani famously observed, the Stone Age did not end because we ran out of stones and it will be the same with fossil fuels. However this does not mean that we should stop using all fossil fuels now, even if we could.

Starting Point

To devise a workable route forward we need to understand the starting point -- and particularly the scale of the world's reliance on fossil fuels.

Today the world uses the equivalent of around a quarter of a billion barrels of energy every day. Of that, 32 percent of energy comes from oil, 30 percent from coal, and 24 percent from gas -- so 87 percent from fossil fuels in total. That means, 7 percent comes from hydro-electricity, 4 percent from nuclear power and 3 percent from other renewables, including wind and solar power.

This global energy system, with its huge reliance on hydrocarbons, has evolved over two centuries as societies have used fossil fuels to support the world's growing population and raise global living standards.

Global energy needs to continue to play that role over the next 50 years, as some of the world's poorest countries grow and hundreds 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 human development 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 the journey to a more sustainable future.

That scenario envisages a future energy mix where the concentration of greenhouse gases in the atmosphere stabilises at 450 parts per million and the global temperature rise is kept to 2 degrees and emissions in 2040 are around 40 percent down on 2013.

However, in that scenario the total consumption of energy still grows, by 12 percent to 2040, and oil and gas still make up almost half of the energy used.

Affordable Transition

While we cannot be complacent, the world can make an orderly and affordable transition to a low-carbon economy. And there are several means to that end. The road to sustainability has several lanes.

The first is energy efficiency -- reducing emissions by using energy more effectively. A carbon price would encourage smart buildings, advanced industrial plant, home insulation, higher fuel economy and the myriad of other ways to use energy more efficiently.

There is plenty of potential here. Europe has been a leader in energy efficiency but the U.S., China and others are catching up. This can account for around half of the emissions reduction required, according to the International Energy Agency.


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