The announcement from representatives of the oil industry at COP28 about their joint intention to decarbonize their oil and gas operations by 2030, including an agreement to end routine venting and flaring of methane, is a “necessary and important step, but more climate action from the sector is needed,” Ceres said in a statement.
“Given the scale of emissions reductions needed to meet the goals of the Paris Agreement, investors want to see companies dramatically increase their ambition, including increased investments in climate solutions, and move away from continued investments in the expansion of unabated oil and gas operations,” said Andrew Logan, Senior Director, Oil and Gas, at Ceres. “It is imperative that these entities demonstrate a genuine commitment to transformative change and take more substantial action in reducing emissions.”
At the same time, the fact that we are finally seeing movement to decarbonize by a large group of National Oil Companies (NOCs) is an important sign of progress. These NOCs represent the majority of global oil production and have historically lagged behind many of their publicly traded peers. If these companies follow through on their commitments, and take immediate meaningful actions, to virtually eliminate methane emissions by 2030, that will represent a substantial downpayment on a transition strategy for an industry that has consistently avoided taking meaningful actions to address emissions.
“It is important to underscore that this commitment, which aligns with the International Energy Agency's (IEA) calls for the global oil industry to decarbonize production in the coming decade, also underscores the need to reduce overall demand for oil and gas over that time horizon. The announcement therefore only addresses a portion of the issue, overlooking the significant emissions stemming from the use of the industry’s end products—an aspect that constitutes most of the sector's environmental impact.”
Specifically, Logan continues, “it is critical to address the sector’s continued investment in new production of both oil and natural gas. The IEA has said that advanced economies can eliminate unabated natural gas for power generation by 2035 like the Agency’s call for a phaseout of new coal plant production by 2030 in advanced economies and a global cessation by 2040. Unabated oil must follow suit, undergoing a phased reduction globally by 2040, consistent with the IEA's timetable. Relying on abatement technologies alone is not a viable strategy.”
The escalating frequency and severity of weather and climate disasters underscore the urgency of such actions. COP28 comes in the wake of the release of the fifth National Climate Assessment, which found that the U.S. alone has experienced a staggering increase in billion-dollar disasters, costing at least $150 billion annually. With global emissions and temperatures rising, these figures will only continue to increase, negatively impacting economic growth and compounding societal and environmental costs. In addition, the stark reality outlined in the United Nations first global stocktake report is that the world is not on track to meet the goals of the Paris Agreement. The United Nations also released a report highlighting the inadequacy of current corporate climate pledges, further emphasizes the gravity of the situation.
Logan added, “These corporate pledges, falling short by a substantial margin, underscore the necessity for drastic and immediate measures, including trillions of dollars in increased investments and the unequivocal phase-out of unabated fossil fuels.”
The oil sector announcement also comes as the Biden Administration unveiled new standards to reduce methane emissions from oil and gas operations. The standards are expected to prevent the equivalent of 1.5 billion metric tons of carbon dioxide. In addition, the Global Methane Hub announced more than $200 million to address and mitigate enteric emissions from the agriculture sector.
About Ceres
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit www.ceres.org and follow @CeresNews.