The Good, the Bad and the Ugly When Oil Giants Shift to Natural Gas

June 11, 2015 By Ben Ratner

Ben Ratner

Six large European oil and gas companies recently announced a commitment to engage on climate policy, calling for a price on carbon. The now-emerging picture of their coordinated corporate talking points, however, leaves no doubt that promotion of natural gas is a core part of the group’s position.

Is this development a beneficial push to help the planet transition to a low carbon economy – or just another marketing campaign? The truth, so far, lies somewhere in between.

Here are the good, the bad and the ugly highlights of what we’ve learned over the past week and what it all means.

The good: Establishing a carbon price and cutting carbon dioxide emissions

Make no mistake about it: The world’s leading economies need to establish a price and limits on greenhouse gas emissions, and leadership from the private sector is instrumental in achieving that policy objective.

For large companies such as Shell, BP and Statoil to join forces and unequivocally state, as they now have, that a price on carbon should be a “key element” of climate policy frameworks is a refreshing boost to pre-Paris United Nations climate talks.

It is a potentially powerful validation that even some of the world’s largest corporate emitters see an upside to carbon pricing and will weigh in to make it a reality.

As to promoting natural  gas a solution, it is well documented that in many cases natural gas will replace coal for power generation – a shift already underway in the United States and partly responsible for driving down carbon dioxide (CO2) emissions.

The bad: Paying short shrift to natural gas’s Achilles heel

Notwithstanding the economic and carbon-dioxide benefits of coal-to-gas switching, there is a missing piece of the puzzle in the companies’ formulation to date.

One of the oil executives said “The enemy is coal.” Respectfully, that is incorrect. The enemy is climate pollution; coal is merely its most pernicious face.

Methane is natural gas’s Achilles heel. At close to 85 times more potent of a climate change forcer than carbon dioxide, methane emissions from the oil and gas industry undermine the very climate performance of natural gas that companies tout as a chief benefit relative to coal.

Indeed a recent report  found that the 20-year global warming potential of methane emissions from the global oil and gas sector have the same near-term impact as about 40 percent of total CO2 emissions from global coal combustion in 2012. And that’s on top of the carbon dioxide from burning the natural gas.

Fortunately, the bad methane story can be solved at little economic cost, and while creating jobs in the process. If the companies put a fraction of the effort of promoting gas into promoting methane solutions – including the regulations we need to establish basic environmental safeguards – this bad news story could disappear.

A bold methane action plan that all companies embrace, and that includes strong regulatory assurances, is the missing ingredient – the elephant in the room.

The ugly: A leadership shortage

But we have a problem.

American companies (think Chevron and Exxon) are among the most well-resourced and inventive oil and gas companies. With a large stake in natural gas, they share an interest with European corporate peers when it comes to promoting a carbon price that displaces coal and resolving the methane issue before it gets worse.

However, these “super majors” have remained conspicuously on the sidelines of the European companies’ efforts. They’re even signaling an intent to stay there even as peers move closer toward embracing a lower carbon future

It is a missed leadership opportunity, but one they can still seize.

Ben Ratner is a senior manager at the Environmental Defense Fund. He manages corporate engagement initiatives to minimize methane emissions from the oil and natural gas industry. His focus is developing innovative collaborations across diverse stakeholder groups to build the leadership, technology and information necessary to reduce emissions aggressively and cost effectively.

This article was republished with permission from the Environmental Defense Fund.

Leave a reply


*