European oil and gas majors call for global CO2 pricing system

Published 02:14 on June 1, 2015  /  Last updated at 23:02 on June 1, 2015  /  Americas, Carbon Taxes, Climate Talks, EMEA, EU ETS, International, US  /  No Comments

Six of Europe’s major oil and gas companies have joined forces to ask the UN to help them work with governments to create a global carbon pricing system, the FT reported on Monday.

Six of Europe’s major oil and gas companies have joined forces to ask the UN to help them work with governments to create a global carbon pricing system, the FT reported on Monday.

In a letter to the paper, executives from BP, Royal Dutch Shell, Statoil, Total, BG Group and ENI said they have written to UN climate chief Christiana Figueres to ask for help in holding “direct dialogue with the UN and willing governments” over the development of national or regional CO2 pricing measures connected under a global framework.

“We have important areas of interest in and contributions to make to creating and implementing a workable approach to carbon pricing,” the executives said in the joint letter.

The European companies, all of which are covered by the EU Emissions Trading System, want other players in the global energy sector to also be forced to pay to emit, thereby creating an internationally-level playing field and giving the industry more clarity towards their future investments.

They also called for restricting coal in favour of more natural gas in the global energy mix, which would benefit the six because gas accounts for a significant source of their revenues and because falling coal prices have made their gas-fired power generation investments less profitable.  A carbon price would hit coal investments harder than gas because the former emits more CO2 when burned.

“However, our request to policy-makers as they prepare for the UN talks is not to ask for special treatment for any resource, including natural gas, or any single route to a lower-carbon future. It is rather to ensure that the outcome of these talks leads to widespread carbon pricing in all countries,” they added.

The executives stopped short of backing an end to the gargantuan subsidies oil and gas companies currently get from governments, which the IMF last month estimated at $5.3 trillion in 2015.

“The fact that Europe’s largest O&G majors have grouped together in this way to argue for gas over coal – for that, in our view, is what this is ultimately all about – shows that they are genuinely concerned about the increasing intensity of the debate around carbon risk and stranded assets as far as their own activities are concerned, and are therefore now arguing for a more explicit targeting of coal in global policymaking,” said Mark Lewis, an analyst at Paris-based Kepler Cheuvreux. “(But) we think that the oil majors need to be much more concerned about the risks inherent in investing today in new high-cost, high-carbon projects, such as new oil-sands, ultra-deepwater, and Arctic developments.”

Lewis added that measures suggested won’t likely be sufficient to limit a global average temperature rise at 2 degrees C, nor do they address the “major risk to the long-term sustainability of the oil majors’ business model posed by the disruptive threat of renewable energy and storage”.

US JOINERS?

US-based oil and gas companies have declined to join to the European-led initiative.

ExxonMobil and Chevron, the country’s two largest oil majors, said last week they would not sign up to any plan to forge a common industry position on climate change.

At least one green group welcomed the letter, which follows calls from other corners of the corporate world for a seat at the table during negotiations towards a new global climate agreement.

“This is a symbolic moment, and demonstrates an important if not universal shift. It reflects a growing realisation within influential sectors of the fossil fuel industry of a need to adapt to both market and climate realities,” said Mark Kenber, CEO of The Climate Group.

Below is the text of the letter sent to the FT:

As we gather in Paris for the World Gas Conference, just months ahead of crucial UN talks on climate change in this same city, we write to highlight the major role natural gas can play in addressing climate change. We believe the pragmatic step of implementing a widespread and effective pricing of carbon emissions is critical to realising the full and positive impact natural gas can have.

As a group of business people, we are united in our concern about the challenge – and the threat – posed by climate change. We urge governments to take decisive action at the UN climate change summit in December. We are also united in believing such action should recognize the vital roles of natural gas and carbon pricing in helping to meet the world’s demand for energy more sustainably.

Renewable energy has an increasing role to play – and our companies have significant investments in renewable energy too. However, the need to cut emissions is so essential that we have to pursue all options to lower carbon while providing the energy the world needs to meet demand from a growing population seeking better living standards. Natural gas can help deliver this.

For natural gas, the case is simple: when burned to make electricity, it typically generates around half the carbon emissions of coal. In addition, gas can provide the electricity base load that is required and can be a flexible partner to renewable as efforts continue to improve the storage of electricity produced by intermittent solar or wind. This benefit is enhanced when natural gas emissions all along the value chain are controlled and reduced, a matter we are actively addressing with peers.

However, our request to policy-makers as they prepare for the UN talks is not to ask for special treatment for any resource, including natural gas, or any single route to a lower- carbon future. It is rather to ensure that the outcome of these talks leads to widespread carbon pricing in all countries.

Carbon pricing policies in every country will stimulate all forms of low-carbon technologies. It will drive energy efficiency as rapid urbanisation increases demand from our cities. It will benefit all sectors including power, mobility, heating and energy-intensive industries along with renewable energy and natural gas, the cleanest-burning fossil fuel. Market forces will operate to favour the least expensive and most efficient ways of reducing carbon in each country or region. Pricing carbon obviously adds a cost to our production and our products – but a stable, long-term, global carbon pricing framework would provide our businesses and their many stakeholders with a clear roadmap for future investments, and a clear role in securing a more sustainable future.

We have detailed our view on carbon pricing in a letter sent to the UNFCCC Executive Secretary and the COP21 President.

We owe it to future generations to seek realistic, workable solutions to the challenge of providing more energy while tackling climate change. We urge governments to create the incentives that will encourage all potential contributors to a more sustainable future.

By Mike Szabo – mike@carbon-pulse.com