IEA report says oil and gas companies must step up to combat climate change
A new report from the International Energy Agency (IEA) details why the oil and gas industry should accelerate the transition to clean energy to fight climate change.
While some oil and gas companies have taken steps to combat climate change, the industry could play a more significant role, IEA’s Oil and Gas Industry in Energy Transitions report said.
Failure to address the need to reduce greenhouse gas emissions could threaten the long-term social acceptability and profitability of oil and gas companies.
“No energy company will be unaffected by clean energy transitions,” Fatih Birol with IEA said. “Every part of the industry needs to consider how to respond. Doing nothing is simply not an option. The first immediate task for all parts of the industry is reducing the environmental footprint of their own operations. As of today, around 15% of global energy-related greenhouse gas emissions come from the process of getting oil and gas out of the ground and to consumers. A large part of these emissions can be brought down relatively quickly and easily.”
The most important and cost-effective way to lower emissions is by reducing methane leaks to the atmosphere and integrating renewables and low-carbon electricity.
“Also, with their extensive know-how and deep pockets, oil and gas companies can play a crucial role in accelerating deployment of key renewable options such as offshore wind, while also enabling some key capital-intensive clean energy technologies – such as carbon capture, utilization and storage, and hydrogen – to reach maturity,” Birol added. “Without the industry’s input, these technologies may simply not achieve the scale needed for them to move the dial on emissions.”
The average investment by oil and gas companies in non-core areas is about one percent of total capital spending. The largest capital outlays are going to solar PV and wind. But overall, there are few signs of the large-scale change in capital allocation needed to put on a more sustainable path. The report says they must step up investment in hydrogen, biomethane, and advanced biofuels that lower net carbon emissions. These low-carbon fuels would need to account for around 15 percent of overall investment in fuel supply in the next 10 years to get on track to fight climate change.
“The scale of the climate challenge requires a broad coalition encompassing governments, investors, companies and everyone else who is genuinely committed to reducing emissions,” Birol said. “That effort requires the oil and gas industry to be firmly and fully on board.”
If they are operating effectively and alert to the risks and opportunities, oil companies can provide stability for economies during this process. The report was presented to government and industry leaders at the World Economic Forum (WEF) Davos on Jan. 21.
