Three Energy Stories That Emerged in the Last Week

May 27, 2015 – In the last week or so we’ve seen the convergence of energy companies and climate change action in a number of announcements from the fossil fuel industry. I share these with you because they illustrate the beginning of a change in attitude from positions of keeping the status quo to acknowledgement of the validity of the science of climate change.

Oil Giants Unite to Get Together to Address Climate Change and Influence Policy

The European oil companies including Royal Dutch Shell, Total SA, BP, Statoil and Eni SpA are rethinking strategy around the issue of climate change. Their conclusion is to get more actively involved in climate policy decision making. Ben van Beurden, Shell’s CEO is quoted as stating, “targets will not be enough….we will argue for what we think should be done to bring carbon down.”

What is the motivation?

As Patrick Pouyanne, head of Total SA states, “if each of us is attacked separately, we will be stronger as a group.” But there are many other drivers behind this effort: COP2015 in Paris, imminent government enactment of some form of carbon pricing, the divestment movement, and a growing public concern that is leading to negative perceptions of the energy giants who are being seen as focused on profit rather than the planet’s future.

Why only the European fossil fuel companies?

Because the European Union has enacted targeted reductions of 40% in carbon emissions by 2030 for carbon, a doubling of its 2020 commitment and more aggressive than any other nations on the planet.

North and South American oil and coal giants have chosen not to participate presently although Exxon-Mobil and Chevron both acknowledge the need to address the risks of climate change. Exxon has had carbon pricing in its books since 2007, waiting on government to implement it.

Saudi Arabia Sees a Future Without Oil

In a frank admission in the last week at a meeting of business leaders in Paris, Ali Al-Naimi, the Saudi Arabian Minister for Petroleum and Mineral Resources acknowledged that “eventually we are not going to need fossil fuels.” He talked about a phase out by mid-century, “2040, 2050 or thereafter.” He also stated that the Kingdom has plans to become a global leader in exporting electricity rather than oil through a massive build out of solar and wind energy facilitites. Income from electricity will then replace that derived from oil and gas today.

The Saudis uses 25% of the crude oil they produce for domestic consumption and if demand continues to grow will become an oil importer by 2030 based on present projections. The country is also an enormous greenhouse gas polluter and to-date has set intensity targets but not volume CO2 reductions. Al-Naimi in the same conversation acknowledged that keeping oil in the ground to avoid climate change has been “in the back of our heads for awhile,” but he added “can you afford that today?” The Saudi minister called for renewed research into technological ways to diminish CO2 release from the burning of fossil fuels.

Coal and Solar Executives Bash Heads at Paris Conference

“With the best will in the world, solar is not an answer to broad scale industrialization,” stated Tony Hayward, chairman of Glencore, the Australian fossil fuel giant. He made these remarks in reference to Developing World economies in places like China and India. Glencore exports more coal to power plants than any other company in the world. He went on to point out that coal will be a part of the energy mix in these countries for decades to come.

In response, Kerry Adler, CEO of SkyPower, a North American solar energy company, stated, “Solar is the new world. You’ve got to get used to it.” Adler explained that with solar power costs dropping it can become the energy source of choice in countries like India.

The case of India drew heated words with Hayward arguing that coal represents the cheapest and most abundant fuel available. He went on to describe Europe’s carbon cap and trade system as “dysfunctional” and a “mess.” He also argued that putting a global carbon tax in place would be premature in light of the continued subsidies that governments give to fossil fuel producers.