Even Oil Companies Recognize the Need to Move to a Low-Carbon Future

The path to the 25x’25 goal – and with it, to a clean energy future – is a long haul and dotted with occasional negatives, such as the disappointing Renewable Fuel Standard biofuel blending proposals announced by EPA May 29, along with some real positives. One of those positives came to light this week in two stunning letters from seven of the world’s largest oil companies, telling UN organizers of the upcoming climate summit they want to see a universal price set on carbon.

The letters underscore the growing momentum behind moving to a low-carbon energy future and the energy technologies, including renewables, that can sustain that movement.

The companies signing off on the letters include the BG Group, BP, Eni, Shell, StatOil and Total, which together represent some $1.4 trillion in annual revenues. They are all European-based oil companies; U.S.-based Exxon, Chevron and ConocoPhillips did not join in the letters.

While oil companies have, at best, dabbled in low- to no-carbon energy research, they have mostly challenged – often vociferously – government efforts to reduce global emissions, such as policies that promote renewable energy, energy efficiency, smart-grid technology and other strategies.

“We acknowledge that the current trend of greenhouse gas emissions is in excess of what the Intergovernmental Panel on Climate Change (IPCC) says is needed to limit the temperature rise to no more than 2 degrees above pre-industrial levels,” states a letter to Christiana Figueres, the top UN official on climate change and a principal organizer of the climate summit set for Paris later this year. “The challenge is how to meet greater energy demand with less CO2. We stand ready to play our part.”

In another letter to the media, the oil giants say, “We owe it to future generations to seek realistic, workable solutions to the challenge of providing more energy while tackling climate change. We urge governments to create the incentives that will encourage all potential contributors to a more sustainable future.”

The letters come as energy and environment officials from 190 countries gather this week in Bonn, Germany to begin drafting the details for a two-week international climate summit set to begin Nov. 30 in Paris, where, analysts say, unlike previous summits, an agreement is expected to be reached.

For sure, the letters should not be taken as simply altruistic gestures. The principal incentive being sought by the oil companies is universal carbon pricing, which the petroleum firms say will cost them, but which they also recognize is inevitable. So, they say, let’s get universal carbon pricing established now and provide some certainty and stability as these companies undertake their long-term financial planning.

They also recognize that carbon pricing would push the global power sector away from high-emitting, carbon-heavy coal to cleaner-burning natural gas. The oil companies concede that putting a price on carbon will benefit their increasing investment in natural gas, which would be cheaper on the carbon market and in cap-and-trade systems.

And certainly not lost among the oil companies is a growing trend among big name entities, including foundations, pension funds and endowments, divesting themselves of their investments in fossil fuel enterprises.

Most analysts agree with the oil firms’ assertion that carbon pricing would stimulate all forms of low-carbon technologies, including energy efficiency and renewable energy, such as biofuels. (Research from Argonne National Laboratory and others also show that improved technological processing is reducing the carbon intensity for biofuels, while the carbon intensity from gasoline is going up.)

Regardless of the oil companies’ motives, their call for carbon-pricing underscores the advantages of pursuing low- and no-carbon energy, including wind, solar, biomass, biofuels, geothermal and hydropower – all staples among the means by which a 25x’25 energy future can be met. Policy makers around the world would be well served by heeding the caution that is being delivered by prominent members of what had been a major sector antagonistic to a low-carbon energy future. They must implement and/or sustain those initiatives that take us to that future.

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