Shell climate adviser David Hone talks with CCL about carbon pricing
By Liz Fisher
For a while now, we’ve been hearing that big oil companies have assigned an internal price on carbon in anticipation of societal response to global warming. Some companies, like Shell, have come out publicly for carbon pricing, which might seem counterintuitive to the casual observer. To wrap our arms around the oil companies’ perspective on climate change and carbon pricing, CCL had Shell Climate Advisor David Hone as our national call guest this past Saturday.
Hone said that Shell’s position on the science is that “adding carbon dioxide to the atmosphere is a real problem and … just can’t continue” and that “action on the climate is inevitable. It’s not about the science; it’s about the regulatory outlook that we’re facing.”
In response to the need to reduce emissions, Hone said, Shell supports carbon pricing. They prefer cap and trade as the most flexible but believe a carbon tax is better than nothing at all.
Why carbon pricing? Hone listed the reasons Shell and other companies would prefer this option:
- They don’t want direct standards-based regulations, which are difficult to deal with, often limit flexibility for compliance, and can be very costly to implement for some legacy facilities.
- Carbon pricing is the lowest cost pathway for compliance. It avoids the need for immediate investment.
- It’s flexible, technology neutral, and minimizes the burden on industry by distributing the burden fairly and ensuring equitable impact on all industries.
- Carbon pricing doesn’t remove market share by decree. It is transparent and allows the fee to be passed up and down the supply chain; up to the resource holder and down to the end user.
- It also allows the government to address leakage (both carbon and profit) and cross-border competition.
Another incentive for the fossil fuel industry to support carbon pricing is that it helps the development of carbon capture and storage (CCS), which would allow for continued use of fossil fuels.
“We have to get to net zero emissions by the end of the century or even before that and we can’t see a way to do that without Carbon Capture and Storage,” Hone said. “That’s not to say that you don’t have large deployment of renewables and big changes in the energy mix, but carbon capture and storage has to come in and pricing is really the driver for that particular technology.”
Important to Shell as well is that carbon pricing encourages fuel switching from coal to natural gas to renewables and nuclear.
Shell has been supporting carbon pricing since the late 1990s. They sometimes have issues with the way some governments implement carbon pricing, so they don’t support all proposals, but they did support the need for an Emissions Trading System (ETS) in the EU and the need to base it on absolute carbon reductions. They were active in US Climate Action Partnership (CAP) in 2008/9 and are still active in Australia and the EU.
Hone said Shell’s internal pricing of carbon started around 2000 as recognition that as time goes by governments will implement carbon pricing policies or policies that effectively put a price on carbon. Shell wants to ensure that the projects they’re building over the next 10 – 30 years will reflect that pricing in business decisions similar to the way the long term price of oil, gas, refiner’s margins, etc. affect their business plans and decisions. The internal price started at just a few dollars per ton but has now risen to $40/ton. With really big investments they run more detailed scenario analysis.
When asked how CCL can work with the oil companies to get beyond the anti-oil rhetoric and present a more inclusive vision for the future, Hone coached CCL volunteers to “Find common ground,” as was done with US CAP, where for Shell that common ground was carbon pricing.
One question put to Hone on Saturday’s call: Why does Shell continue to work with ALEC despite ALEC’s work to undermine efforts to combat climate change?
Hone responded that Shell belongs to ALEC for their coverage of a broad range of issues and their power as a strong convener of state legislators so that business can actually talk to them. On ALEC and climate change, Hone said, “My own experience in organizations which don’t have the same outlook as us is that actually being at the table is more helpful in many cases than not being there, that we can influence the agenda. We can perhaps shift their attitudes to something more reasonable and more aligned with where we are and that can be sometimes more constructive than just picking up and leaving.”
In addition to being Shell’s Climate Change Advisor, Mr. Hone is a Board Member (and former Chair) for the International Emissions Trading Association (IETA) and the Washington based think-tank Center for Climate and Energy Solutions (C2ES). He also works closely with the World Business Council for Sustainable Development and has been a lead contributor to many of its energy and climate change publications.
Mr. Hone, who is based in London, also has an e-book, Putting the Genie Back: 2 degrees C will be harder than we think, available Amazon. Find out more about Carbon Capture and Storage with CCLU on January 22, 2015.
Liz Fisher is a volunteer with the CCL chapter in Contra Costa, California.