Will the fossil fuel industry be properly scrutinised at COP?

What’s happening? International Energy Agency (IEA) chief Fatih Birol has warned the oil and gas industry that it will face a “moment of truth” at COP28 in Dubai, which kicked off on 30 November. Speaking as the IEA published a special report on the role of fossil fuel companies in the transition to net-zero, Birol said the sector must decide if it will continue to contribute to climate change or become “part of the solution”. He added that “successful clean energy transitions require much lower demand for oil and gas, which means scaling back oil and gas operations over time – not expanding them”. (BBC) 

Why does this matter?  Birol’s prophesied “moment of truth” may already have begun pre-conference as intense scrutiny of the oil, gas, and coal sectors, and in some cases, the national governments closely tied to these industries started in earnest earlier this week. The BBC revealed that the UAE was planning to use its position as host of COP28 to secure lucrative gas and oil contracts during the summit, while an investigation by Channel 4 and Centre for Climate Reporting accuses Saudi Arabia of running a global investment programme to “hook” developing countries on fossil fuels by driving demand and dependence for the kingdom’s oil and gas in these economies. Further discouraging news came from the US this week, which is poised to extract a record amount of oil (12.9 million barrels) and gas this year despite President Biden’s attempt to position the US as a global climate leader.

Coal has also been in the headlines recently as India appealed for private finance to support expansion of its national coal capacity – a plan the US and France aim to block during COP – as China also continues to expand its coal capacity, undermining its rapid expansion of renewable energy capacity.

IEA report – Moving back from the fossil fuel industry headlines dominating news coverage this week and focusing on the IEA’s report covering the role fossil fuel companies may play in the energy transition, the organisation claim that demand for oil and gas will likely peak by 2030 under current policy settings. Should governments fully deliver their national energy and climate targets, demand would decline by 45% by mid-century compared to today’s level, potentially limiting temperature rise to 1.7C. However, if governments successfully follow a 1.5C pathway, as defined by the Paris Agreement, and emissions from the global energy sector hit net zero by 2050, oil and gas use may drop by 75% by the same date.  

A potent gas – The oil and gas sector is responsible for 15% of global energy-related greenhouse gas (GHG) emissions. If the industry is to align with a 1.5C scenario, its emissions must fall by 60% by 2030 against current levels. Additionally, emissions intensity from oil and gas operations must be near zero by the early 2040s. Methane – which is 28 times more potent than CO2 at trapping heat in the atmosphere – accounts for around half of total emissions in the sector. The report states that while it is not the only priority, addressing methane leaks is essential and can be achieved cost-effectively.  Indeed, it’s expected that leading figures in the global oil industry and national governments will formally pledge to eliminate methane emissions by 2030 during the summit – a proposal spearheaded by COP28’s President, Sultan Al Jaber.

Not pulling their weight – Despite the sector’s heavy contribution to global emissions, just 1% of 2022’s $1.6tn investment in global clean energy came from oil and gas companies, the report claims. Of this, over 60% came from just four providers – Equinor, TotalEnergies, Shell and BP – each spending approximately 15-25% of their total budgets on such technologies. Several companies, including CNPC, Qatar Energy and ConocoPhillips, spent far less. Others, such as UAE’s state-owned ADNOC, indicate they are investing in clean energy, but have not disclosed their expenditure.  

Declining value – The report notes that as net-zero transitions accelerate, oil and gas prices and output will decline. For instance, if prices and demand follow a trajectory based on current policy settings, today’s private oil and gas firms would be valued at approximately $6tn. Should all national energy and climate targets be met, that value would reduce by 25%, and if the world gets on track to hit the 1.5C goal, it could be cut by 60%.

A clean opportunity – Additionally, the report suggests that around 30% of energy used in a net-zero energy system in 2050 will come from low-emission fuels and technologies, which could take advantage of the skills and resources held by oil and gas companies. These include hydrogen and hydrogen-based fuels, carbon capture, utilisation and storage (CCUS), biofuels, biomethane, geothermal energy and offshore wind. Indeed, many of these firms are already collaborating with planned hydrogen projects relying on CCUS and electrolysis, and the industry is involved in 90% of CCUS capacity currently in operation worldwide. By contrast, just 2% of current offshore wind capacity has been developed by oil and gas firms, although there is scope for this to grow as technologies, including floating turbines, expand into deeper waters, creating a positive long-term technology risk.  

However, the report argued that despite CCUS being considered a key technology for the energy transition in particular circumstances, it must not be viewed as a way to preserve the present status quo. For example, if oil and natural gas use evolved under today’s policy settings, it would need an “inconceivable” 32 billion tonnes of carbon capture by 2050 to limit warming to 1.5C.  

Despite this ominous warning, fossil fuels’ position in the international energy mix looks as secure as ever after the first days of COP as widespread divisions mired discussions surrounding a potential deal to end fossil fuel production.

Share This Post

You might also like

Data centres and AI are straining natural resources

What’s happening? The US-China tech trade war and the rise of AI have spotlighted the immense resource consumption of data ...

Read more

Tom Rejwan
June 12, 2024

Edinburgh bans adverts for high-carbon products in public spaces

What’s happening? The City of Edinburgh Council has approved a ban on out-of-home advertising for high-carbon products to uphold its ...

Read more

Nicola Watts
June 4, 2024

Avatar photo

Antibiotic-resistant bacteria found in soil across Scotland: study

What’s happening? Scientists have found bacteria resistant to antibiotics, including last-resort drugs like vancomycin, ubiquitously present in soils across Scotland, ...

Read more

Sam Robinson
May 30, 2024

Avatar photo