Oil companies’ support on climate change comes with a caveat
By Liz Fisher
What’s up with the oil companies? CEOs from six of Europe’s oil and gas majors (BG, BP, Eni, Shell, Statoil, Total) call on “governments across the world to provide us with clear, stable, long-term, ambitious frameworks … with a price on carbon [as] a key element of these frameworks” in a June 1 letter to UNFCCC Executive Secretary Cristina Figueres and COP21 President Laurent Fabius, On their websites BP, Chevron, ConocoPhillips, Exxon, Shell and Total call for action on climate change and a carbon price.
First of all, kudos to those companies for acknowledging the fact that climate change is happening and needs to be addressed and for going as far as to recommend a solution, and a good one at that — pricing carbon. Special recognition goes to Exxon CEO Rex Tillerson for calling for a “Refundable Greenhouse Gas Fee” back in 2009 and to Shell CEO Ben van Beurden for speaking out on the need for the fossil fuel industry to step up on climate change.
But amidst this love fest, a little caution.
CO2 vs CH4
“The gas industry is quick to talk about how little CO2 is emitted from natural gas but rarely mentions the devastating impact on the climate from methane emissions associated with the producing, processing, transporting, distributing and burning gas.” warns Lou Allstadt, former EVP of Mobil. Fugitive emissions (leaks) from pumps/valves/fittings, and other releases all along the supply and use chain are plentiful and difficult to capture and control.
Cornell University scientists Robert Howarth and Anthony Ingraffea, in their April 14 “Still A Bridege to Nowhere” presentation at Cornell University, updated and confirmed their and other scientists’ findings that natural gas is no better than any other fossil fuels, and even worse in some circumstances.
While methane (CH4) is relatively short-lived (tens of years vs. hundreds for CO2) the damage it does – its global warming potential – is 72 times worse than CO2 over an immediate 20 year period. Reducing methane emissions now will slow global warming immediately. “To do so is essential, since otherwise the Earth will warm to dangerously high temperatures within 15 to 35 years, increasing the risk of runaway global warming,” they warn.
CAT vs CFD
The European oil and gas group seems to be pushing for CAT (Cap and Trade), something they are familiar with in the EU. Some are active members of the International Emissions Trading Association (IETA). But Exxon’s Tillerson says “These costs and consequences inherent to cap and trade schemes have led many policy experts and economists to prefer another course of action to reduce Greenhouse Gas emissions. That other course of action is a Revenue-Neutral Carbon Tax. I know that’s hard for a politician to say so we’ve given them a new name. They can call it a Refundable Greenhouse Gas Fee.”
He also suggests, “By returning the tax revenue to consumers through reductions in other taxes, payroll taxes, or a simple dividend, we can reduce the burden on the economy and our most vulnerable citizens… American families and businesses can hardly afford to be paying a higher cost for energy, so a direct and transparent refund mechanism is an imperative.”
Tillerson makes an excellent case for CFD (Carbon Fee and Dividend) instead of CAT. CFD is predictable, simple, transparent, a viable framework for engaging participation by other nations, and no transaction costs allow more money to go to controlling emissions. It’s easily tuned up or down if the economy is affected too much. CAT leads to volatile prices for emissions allowances and undermines the ability to invest; it’s complicated and requires a whole new construct to manage inventories, auctions, verifications, and trades; it’s visible only to keepers of the program, difficult to connect nations. It’s administratively costly, difficult or impossible to adjust once caps are in place. CAT is also easy to corrupt in countries that might not be as honest as we’d like or where infrastructure doesn’t exist to manage the complex CAT scheme.
Picking Winners & Losers
Anything short of putting a price on all GHGs and giving the revenues collected right back to all consumers gets into the business picking winners and losers. Ignoring methane’s devastating effects makes natural gas the artificial winner. Shell’s Climate Change Advisor David Hone suggested using some of the revenue to fund R&D into green energy including Carbon Capture and Storage (CCS). California funnels some funds to programs in poor communities. But those ideas that get funded, those communities or individuals defined as poor, and the folks who administer the programs become the defined winners. The losers are those that don’t get picked up front but pay the costs and get nothing back — albeit clean air and less global warming benefits us all.
So the oil companies should be applauded for joining the effort to address climate change and their support of putting a price on carbon. In developing the policies to get there, they can offer valuable and pragmatic input. But “throwing coal under the bus” and replacing it with Natural Gas will simply cook the planet earlier rather than later. We need to get to non-carbon based energy ASAP. Carbon pricing is the way to go and CFD is the simple, easy, transparent, predictable, honest, effective, efficient, and equitable route to get there, not via CAT. Let’s do it in Paris.
CCL volunteer Liz Fisher is a member of the Oil Action Team.