Some not-yet-jaded climate activists are getting quite excited that six European Oil companies recently wrote a letter to the United Nations requesting a carbon price and emissions trading scheme. Ever-so-kindly,they even offered to help design it…
This is part of the general flurry of activity in the lead up to the Paris climate change talks in November, the 21st meeting of the “Conference of the Parties” to the United Nations Framework Convention on Climate Change. That framework, signed in 1992 at the Rio Earth Summit, committed its signatories to avoiding dangerous climate change. The intervening generation has not seen much activity. To quote Mark Moody-Stuart –
“I find it quite distressing that 18 years after major oil companies, such as BP and Shell, acknowledged the threat of climate change, and the need for precautionary action, and began to put in place modest steps to address it, that the world in general and the industry has made remarkably little progress.” [Carrington, 2015]
While the European companies are pro-actively seeking to guide the policy process, US-based companies such as Exxon and Chevron are less enthused by the prospect of a carbon price. Chevron’s head told a recent OPEC meeting “It’s not a policy that is going to be effective because customers want affordable energy. They want low energy prices, not high energy prices.” (Hume and Clark, 2015).
So why should we party like it’s 199…7? History isn’t necessarily repeating herself, she never does. But she might be rhyming; this isn’t the first time that the oil industry has been divided on climate change. In May of 1997 John Browne, who two years previously had become head of BP, gave an earth-shattering speech at Stanford University. Referencing the recently published Second Assessment Report of the Intergovernmental Panel on Climate Change, he noted that there was;
“mounting concern about two stark facts: The concentration of carbon dioxide in the atmosphere is rising. And the temperature of the earth’s surface is increasing.”
Warning against the banning of fossil fuels, he invoked the image of a
“journey taken in partnership by all those involved, a step-by-step process involving both action to develop solutions and continuing research that will build knowledge through experience.”
Both BP and Shell left the Global Climate Coalition. Despite its cuddly-sounding name, it had been set up by the US National Association of Manufacturers in 1989 with the purpose of derailing attempts to agree reductions of greenhouse gas emissions.
Shell, bruised by the damage to its reputation caused by Brent Spar and its Nigerian operations, invested in renewables. In 1997 it announced a five-year, $500 million plan. By 2009 it announced it would drop wind and solar altogether, and invest in biofuels.
In July 2000 BP changed its logo and declared it was “beyond petroleum” [For further analysis,see Beder, 2002],
Of course, the oil companies major investments were in oil exploration and takeovers. For example;
“Mr. Browne … built BP by taking over other oil companies, like Amoco in 1998, and then ruthlessly cutting costs, often firing the acquired company’s most experienced engineers. Taking shortcuts was ingrained in the company’s culture, and everyone in the oil business knew it.”
Since those heady years either side of the millennium Shell and BP have decided that renewables aren’t going to be where they make their profits in future. BP tried – and failed– to sell of its US wind energy division in 2013. Shell remains determined to drill in the Arctic, and has huge investments in Canadian tar sands.
Those enthused by the ‘carbon price’ letter would also do well to remember Shell’s recent successful lobbying to undermine European Union targets on renewable energy.
Oil versus coal
There aren’t just splits within the oil industry. The fossil fuel industry generally has been thinking about which of the three strands (oil, coal, gas) might be most vulnerable. Recently the head of Shell, Ben Van Beurden explained one obvious barrier facing Carbon Capture and Storage (CCS). He
“insisted that he had his hands tied from investing more heavily in renewables or CCS because they would not produce the high financial returns that investors had been used to from oil and gas. “I would lose my job over it if I just threw a few billions away [on CCS] … CCS is essential for society and … is ultimately important for our company, but listen, I have great difficulty to have shareholders focus on the quarter after next.”
While the head of Australian mining giant BHP understandably wants everyone to say that gas is cleaner than coal, the head of Woodside Petroleum clearly didn’t get the memo. Peter Coleman (the clue is not in the name) gave a speech to the World Gas Conference (also in Paris) last week has been described as ‘punch’ and included the immortal phrase –
“Give me a break – who coined ‘clean coal’ and why did we let that happen.” (Chessell, 2015)
It’s worth noting that when the Australian Gas Association was trying to get the Business Council of Australia to modify its anti-Kyoto, anti-emissions trading scheme 15 years ago, the uncertainties around the lower carbon intensity of gas were raised by coal’s supporters.
These intra-industry battles are useful to remember when reading comments like those by Peter Freyberg, head of Glencore Coal when he bemoans the lack of investment in clean coal technologies claiming “global carbon dioxide emissions could have been cut by 2bn tonnes over a decade if all power stations built between 2000 and 2010 had used the best technology available.” (Smyth, 2015),
What does it all mean?
Various industry actors appear to be trying to ‘throw each other under the bus’. To use a more European analogy, it’s a game of pass the parcel, and nobody wants to be left standing away from a chair when the music stops, because this isn’t just about who doesn’t get the present, but about whose multi-billion dollar investments lose their value.
Update: Think Progress has an excellent piece entitled “Why You Should Be Skeptical of Big Oil Companies Asking for a Price on Carbon“, which goes into detail on where the campaign contributions are going…
Beder, S. (2002) ‘bp: Beyond Petroleum?‘ in Battling Big Business: Countering greenwash, infiltration and other forms of corporate bullying, edited by Eveline Lubbers, Green Books, Devon, UK, 2002, pp. 26-32.
Carrington, D. (2015) Fossil fuel divestment is rational, says former Shell chairman Guardian , 4th June
Chessell, J. (2015) Woodside CEO slams coal industry: ‘Give me a break, who coined clean coal’ Australian Financial Review, 3rd June
Hume, N. and Clark, P. (2015) Chevron chief lashes out at European oil groups on climate change Financial Times 3rd June [paywall]
Nocera, J. (2010) BP Ignored the Omens of Disaster New York Times 18th June
Smyth, J. (2015) Glencore attacks anti coal lobby Financial Times, 4th June [paywall]
Kolk, A., Levy, D., 2001. Winds of change: corporate strategy, climate change and oil multinationals. European Management Journal Vol. 19, pp 501–509.
Kolk,A..and Pinkse, J. (2007) Multinationals political activities on climate Business and Society, Vol.46(2), pp.201-228
Levy, D. and Spicer, A. (2013) Contested imaginaries and the cultural political economy of climate change Organization Vol. 20(5), pp.659-678.
Pinkse, J. and Kolk, A. (2012) Multinational enterprises and climate change: Exploring institutional failures and embeddedness Journal of International Business Studies Vol. 43, pp 332-341.
Pulver, S. (2007) Making Sense of Corporate Environmentalism An Environmental Contestation Approach to Analyzing the Causes and Consequences of the Climate Change Policy Split in the Oil Industry Organization & Environment Vol. 20 no. 1 44-83