If we have not been warned of the dangers of climate change this summer, we never will be. Extreme heat, forest fires and floods have been all over news reports. Yet the oil and gas industry remains largely in denial.
International Energy Agency (IEA) says steep cuts in oil and gas production are
necessary to reach the Paris (COP 21) goal of keeping global warming at 1.5℃. However, only a tiny fraction of the industry, accounting for less
than 5% of oil and gas output, has targets aligned with the IEA’s “net zero”
current secretary general of production cartel Opec, Haitham al-Ghais, expects
global oil demand to rise by about 10% to 110 million barrels a day by 2045, a
volume incompatible with the Paris goals. The UK government has just offered a
helping hand, granting around 100 new North Sea licences. What are we to make
of this mismatch?
of the new breed of climate denialism is a recent report by the Energy Policy
Research Foundation (ERPF), a body funded by the US government and various
undisclosed corporate interests and foundations. It sees the IEA’s requirements
as a “seal of approval … to block investment in oil and gas production by
western companies”. The report views meeting the targets as too costly, too
harsh on poor countries and too bad for the energy security of the west.
it is wrong on each account. Many eminent economists and scientists use the
concept of the social cost of carbon (SCC), which is defined as the cost to
society of releasing an additional tonne of CO₂. Expert estimates from 2019 put this at between US$171 and US$310 (£133 to £241). If we go with, say, US$240 per
tonne, the social cost of continued carbon equivalent emissions comes out at
almost US$8.5 trillion every year.
study has factored into the calculation climate feedback loops. This is where
one problem caused by global warming leads to others, such as melting
permafrost unleashing stores of methane.
study estimated the economic damage that this could cause, it produced an SCC
in excess of US$5,000. That implies annual costs of more like US$170 trillion a
year, which makes the US$4 trillion investment into clean energy that the IEA
thinks necessary to meet the Paris climate goals look like a drop in the ocean.
help to break this down to one barrel of oil. A special IEA report for COP28
estimates that on average, each barrel of oil emits 0.53 tonnes of CO₂ equivalent in greenhouse gas across its life cycle, 20% of which comes
back to our average SSC per tonne of US$240, that points to a social cost of
US$126 per barrel. With oil currently at US$85 per barrel, the societal damage
from producing, transporting, refining and consuming it is far greater – and
that’s before including climate feedbacks.
the arguments by the EPRF and like-minded supporters about energy security are
laughable. The history of the oil and gas industry is a history of wars and
geopolitical tensions. Transitioning to cleaner fuels can only increase our
energy security and reduce the need to police remote autocracies.
argument that poor countries need to continue burning carbon for development
reasons is no better. In its latest report from 2022, the Intergovernmental
Panel on Climate Change (IPCC) said climate change would probably see an
increase in “losses and damages, strongly concentrated among the poorest
the World Health Organization estimates that: “Between 2030 and 2050, climate
change is expected to cause approximately 250,000 additional deaths per year
from malnutrition, malaria, diarrhoea and heat stress.”
denialists offer no alternatives to cutting carbon emissions, and often simply
ignore climate change altogether. The recent ERPF report mentions climate
change only four times. It is as if heatwaves, forest fires, flooding, rising
sea levels and the demise of natural habitat caused by climate inaction were
happening on another planet.
have time to limit global warming below 1.5℃. It is true that we will need oil and gas for many years, and that
there are currently no alternatives for certain sectors such as air travel,
shipping and some industries. Nonetheless, there is still much that can be done
now to make a substantial difference.
incentivise the transition to cleaner energy, governments need to end fossil
fuel subsidies, which the IMF estimates amounted to US$5.9 trillion in 2020
alone. We also need to put a proper price on carbon – only 40 countries have
attempted this so far, and none has it anywhere near the estimated social cost
of emitting carbon.
that resist charging their own polluters should face a carbon border adjustment
mechanism, which is a tariff that effectively puts the polluter on the same
footing as local players. If all the actors in the fossil fuel supply chain had
to face the cost of the damage they cause, the need to phase out long-term
investments in fossil fuels would become more obvious.
requirements for “net zero” are just one of the pathways towards meeting the
Paris goal of 1.5℃ warming. Others are explored by
some of the more credible actors in the petroleum industry, such as Shell, BP
and Norway’s Equinor, but all require a substantial decline in oil demand and
production by 2050.
of criticising efforts to slow climate change and sponsoring ridiculous reports
calling for more fossil fuels, the oil industry should eliminate leakages,
venting and flaring of methane, and electrify as many processes as possible
using renewable power. It should also employ carbon capture, usage and storage
technologies over the next ten years – yes this will increase the price of
fossil fuels, but that is exactly what we need to make clean sources of energy
competitive across the board and speed up the energy transition.
sooner the industry starts facing up to the realities of climate change, the
more chance it has to survive. The companies and even countries that produce
fossil fuels will have to face and pay the cost for the damage they cause.
Those costs are already massive and will grow. Those that survive will do so
only as a provider of clean and sustainable energy.
Imsirovic does not work for, consult, own shares in or receive funding from any
company or organisation that would benefit from this article, and has disclosed
no relevant affiliations beyond their academic appointment.