In the past few months a wave of reports from oil and gas companies have described the measures needed to address climate change. This is encouraging. At this critical moment for the future of our planet, we need all the leadership we can get. Corporations—particularly the oil and gas sector—have an important role to play.
The actions described in these reports are all steps in the right direction. But, let me be clear, more can—and must—be done over time.
Different Plans, A Common Goal
Reports from ExxonMobil, Chevron, Shell, BP, Statoil and Total SA all support the goals of the Paris Agreement on climate change—to keep temperature increases to well below 2 degrees Celsius above preindustrial levels. They also address investor concerns that the business model of the industry—investing most of their capital into new hydrocarbon production—might result in stranded assets as the world turns away from fossil fuels. Some reports merely offer reassurance that fossil fuels will be needed for several more decades; others pledge significant actions by the company to lead the energy transition later in the century.
Although there is considerable variation in the level of ambition across the reports, it is clear that the companies have received the message from their investors and other stakeholders about the urgent need to directly address the climate threat.
The companies’ roadmaps have different elements. Shell’s ambitious “Sky” scenario outlines the potential for “net zero” CO2 emissions by 2070. This would require an early ramp down of fossil fuel use. All of the reports expect sales of electric vehicles to increase dramatically. In fact, BP and Shell are investing in electric vehicle recharging stations already. However, batteries cannot carry all of the transportation sector, so there will be a need for other low-carbon fuels for airplanes, long-haul trucking and marine transport. We should also expect our homes to become all-electric, replacing the natural gas that is now used for heating and cooking.
These reports also project robust growth in renewable energy, with solar power taking the lead as an energy source by mid-century. But in many cases, they also project an increasing reliance on natural gas in the power sector over the next two or three decades. All acknowledge that natural gas for power will not be part of the transition unless it is accompanied by carbon capture and storage to make it a low carbon option. And because methane is a far more potent greenhouse gas than carbon dioxide, continued use of natural gas will also require that methane emissions in the production and transport of natural gas be tightly controlled. Most of the companies have joined in a consortium sponsored by the U.N. to end flaring and are adopting practices such as green completions that rein in methane emissions.
Finally, all of the companies acknowledge that some form of carbon pricing—either a carbon tax or a cap and trade program like California’s—is the most sensible policy to drive the energy transition that is needed. In addition to the transition to low carbon fuels, carbon pricing also drives greater energy efficiency, where gains have been slowing lately.
Natural Climate Solutions
This week, I joined BP’s CEO Bob Dudley at an event to release their report. I did so in part because of the pledge they are making on methane controls but also because they are one of only two companies, the other being Shell, that have put natural climate solutions—what we refer to as NCS—into their mix for a long-term transition. They’ve also recognized that these solutions need to be bigger. That means landscape-scale initiatives as opposed to one-off, smaller projects.
Natural climate solutions are strategies such as reduced deforestation, reforestation of previously cleared and degraded lands, improved soil management to capture and retain more carbon, and nutrient management in agriculture. NCS prevents the release of greenhouse gases from land management practices and removes and sequesters carbon dioxide from the atmosphere as forests and grasslands are restored.
I suppose it is not a surprise that The Nature Conservancy is in favor of natural climate solutions. But I participated in the BP event to demonstrate that we are not just in favor, but we are emphatic about this element of the transition. We are emphatic for three reasons.
First, our science tells us that a lot can be accomplished with NCS. A recent paper by TNC scientists published in the Proceedings of the National Academy of Sciences indicates that one-third of the mitigation that is necessary to stay on the pathway well below 2 degrees Celsius between now and 2030 can be achieved by NCS at $100/ton CO2 or less. Natural climate solutions are also important because they are available now. This is not a strategy like cellulosic biofuels or carbon capture and storage that won’t show up for two or three decades.
The oil and gas reports say that a continued reliance on fossil fuels for approximately 70 percent of our energy will be necessary for the next two or three decades because of the tremendous investment we have in fossil fuel production and consumption infrastructure. We might even overshoot 2 degrees Celsius. But as we approach 2050, new technologies will become available that will allow us to achieve negative emissions. We will suck more carbon out of the air than we put in each year. I am skeptical about relying on unproven technologies promised long in the future to compensate for a lack of urgency now. Coasting with something like our current mix of energy sources to 2040 is not an option.
BP pledges to hold its own emissions constant at 2016 levels while its business grows. They will accomplish some of that with energy efficiency, but the rest they will offset by investing in natural climate solutions. That is not good enough. If everyone froze their emissions where they are today, we would surely fail to achieve the Paris goal. To be on the Paris pathway, we all need to be doing more, reducing our emissions by one-half every decade between now and 2050. It is not just emissions from company facilities, but even more so emissions associated with their products that must be addressed. Shell has recently said that the Net Carbon Footprint from its products needs to be reduced by one-half by 2050 to meet the Paris goal. That includes reducing emissions from its operations but more importantly changing the product mix it sells to reduce the carbon intensity of the energy services it provides.
BP, like Shell last year, has now recognized a strategy that can make a big difference in the likelihood of success—natural climate solutions. Shell is accelerating the pace and scale of investment in this area alongside its own decarbonization strategies.
Second, natural climate solutions do more than just cleanse greenhouse gases from the atmosphere. If done right and at scale, NCS projects provide important benefits to people and wildlife. That’s TNC’s mission. Unlike a wind turbine, a solar panel or a CCS pipeline, forests and grasslands have co-benefits of great value to people and nature. Financing those benefits while reducing atmospheric carbon should be part of the calculus for every company looking for a roadmap to make its own transition.
And finally, natural climate solutions are cheaper than other mitigation strategies. NCS can sequester as much as 3.5 billion tons of carbon dioxide each year at a cost as low as $10 per ton. The market for voluntary carbon offsets is now about 80 million tons per year. It is clear to me that TNC’s first priority should be to grow that market and help the new investors find projects that have the location, scale, and management to provide the greatest benefits for people and nature. We look forward to working with companies that volunteer to go down that path.
The Bottom Line—Companies Must Take More Action
My bottom line is that the steps oil and gas companies are announcing are good, but they must do more to address the urgent threat of climate change and to ensure we are on track to meet or exceed the targets set under the Paris Agreement. The steps they need to take include making deeper emissions cuts in their core businesses and committing to greater investments in clean energy technologies and natural climate solutions. Companies should also engage forcefully in the public policy debate on climate change. That means supporting climate science and advocating for natural climate solutions, carbon pricing and government support for low carbon technologies.