As companies, countries, and communities urgently pursue decarbonization targets, the route we take toward net zero will determine whether and when we reach that destination.
The transition to a low-carbon economy requires everyone. That’s why, more than a year ago, Ceres, with our decades of industry engagement experience, brought together a group of oil and gas exploration and production (E&P) companies, banks, and investment managers to analyze what E&Ps can do in the next decade to meaningfully implement their net zero goals, align with the energy transition, and clearly disclose their plans to financial institutions. The group met in a series of roundtables to facilitate action on a question rarely discussed among such a disparate range of stakeholders: What would it mean for an exploration and production company to meaningfully act on climate change?
Key Elements for a Net Zero Transition at Oil and Gas Exploration and Production Companies, the Ceres document born of these meetings, details key actions that can underpin real steps toward net zero for an E&P, as these companies face different choices in managing the energy transition than their fully integrated counterparts.
Even under the most ambitious climate scenarios, some sectors of the global economy will rely on oil and gas in coming years. That production is energy-intensive, and each cumulative ton of greenhouse gases released counts as we shape our collective future. Comprehensive climate action requires that the hydrocarbons we use are produced as cleanly and responsibly as possible, even as we accelerate to bring clean energy online. Today, big gaps exist between the emissions intensities of otherwise similar producers. Working alongside companies to define and promote better practices offers significant potential for emissions reductions.
Key Elements is a suite of common yet strategically flexible actions that can facilitate emissions reductions for E&Ps and may ultimately influence investment decisions. Its guidance covers climate targets and disclosure of progress; aspects of operational net zero transition plans that explicitly include climate-related financial assumptions and impacts; disclosure and use of offsets; scope 3 emissions reporting; and transparent, climate-aligned lobbying in line with stated net zero targets.
Robust and aggressive climate-focused policies, aligned with the latest science, are needed both to mitigate climate risks and manage the necessary transition to a net zero economy by 2050. This document’s guidance on policy positions and climate-aligned lobbying can play a vital role in shaping the societal framework needed to meet global climate goals and provide assurance that companies are acting in good faith toward ambitious climate targets.
Exploration and production companies can take real action now by reducing their operational emissions, an area where they have immediate influence. There was recognition during the roundtable meetings that reducing scope 3 emissions — those generated by the use of products, including sources such as cars, buildings, industrial operations, and power plants — is critical to the attainment of global climate goals. However, for this particular convening, participants decided by consensus to focus on the most meaningful immediate actions E&Ps can take to mitigate their operations’ impact.
By design, these elements don’t solely reflect any single entity’s vision. Each firm brought its own perspectives and priorities. Certainly not every roundtable participant agreed with every point. For our part, Ceres remains committed to our theory of change and the Ceres Roadmap 2030, which presents a vision for sustainable business leadership.
The companies acknowledged the importance of minimizing the environmental impacts of their operations and that their business models must evolve to remain competitive in the transition. Many E&Ps also understand that companies acting in line with their transparent, comprehensive, and ambitious transition plans will be more likely to attract and maintain a solid, broad investor base in global markets.
Already, a number of financial institutions that invest in or lend to the oil and gas industry have made formal climate commitments of their own, and are working to measure, monitor, and manage climate risk in their portfolios. E&Ps that provide better data, clear insight into their environmental footprint, comprehensive and ambitious transition plans, scenario analyses, and ongoing analysis of climate strategies alongside assessments of the risks from inaction are more likely to establish a secure position in the energy transition.
For an industry that produces hydrocarbons, constructive policy advocacy to address end use emissions and support clean energy solutions also helps demonstrate commitment to advancing a clean energy transition.
These elements, created through a unique collaboration in a group with widely varied interests within the low-carbon transition, carry critical future benefits. Yet developing and publishing this powerful, actionable document is only a first step. Its true value will be determined by how it is used. Meaningful impact at the scale required demands action from the companies that participated in this process, their peers, investors, and ultimately, the broader oil and gas industry.
Ceres invites and encourages non-participants from both within and outside of the E&P sector to engage with these important elements. Interested companies should reach out to Andrew Logan at [email protected] for more details.