Can the oil and gas industry ever speak
with one voice on climate action?
Can majors, national oil companies,
leading independents and energy trade
associations ever get on the same page
when it comes to climate change?
And critically, is climate policy turning
into a no-win exercise for the oil industry?
The American Petroleum Institute
and other industry associations are now
adopting a revised climate policy approach,
partly based on growing public pressure in
support of climate action.
“Over the past few years, API and
our member companies have had many
discussions updating our climate policies,
which are outlined in our Climate Action
Framework,” said Aaron Padilla, API
manager of climate and ESG policy.
“The natural gas and oil industry can
find and articulate a consistent voice on
climate action because of the convergence
of policy positions of natural gas and
oil trade associations across the world,”
Padilla said.
A ‘Growing Consensus’
That “convergence” of policy direction
reflects a number of recent trends affecting
the oil industry.
Some significant events so far in 2021:
In January, TotalEnergies SE, one of
the world’s supermajor oil companies,
announced a decision not to renew its
membership in API. It cited several reasons
for the action, including API’s support for
rolling back U.S. regulations on methane
emissions and API’s membership in an
alliance opposed to subsidies for electric
vehicles.
Total found API’s climate views only
“partially aligned” with its own company
principles, which include backing the
objectives of the Paris Agreement, a
belief in the necessity for carbon pricing
and support for initiatives promoting the
development of renewable energy.
In March, API unveiled its new Climate
Action Framework and described it as
centered on five action areas:
- Accelerating technology and
innovation to reduce greenhouse gas
emissions
- Reducing GHG emissions from
operations
- Endorsing a carbon price policy
- Advancing cleaner fuels and lowercarbon
electricity
- Expanding and improving climate
reporting
Details of those policy areas are
included on the API website at API.org
under its Climate Action link.
“The natural gas and oil industry has a
critical role to play in reducing emissions
from our operations and supporting
public policies that can help reduce GHG
emissions across the entire economy
in line with the ambitions of the Paris
Agreement,” Padilla noted.
“To this end, API’s Climate Action
Framework outlines steps the industry is
taking to address climate issues,” he said.
In April, Royal Dutch Shell plc issued
an Energy Transition Strategy detailing
the company’s target to reach net-zero
emissions by 2050, for an advisory vote
by its shareholders. That strategy was
later rejected as insufficient by a Dutch
court that also ordered Shell to reduce
carbon emissions by 45 percent by 2030,
compared to 2019 levels.
In May, at their annual shareholder
meetings, ExxonMobil Corp. and Chevron
Crop. announced that stockholders had
approved several climate-action proposals.
Some reports described the results as a tap
on the shoulder for the two oil supermajors,
others as a wake-up call.
A majority of Exxon shareholders
voted to replace three of the oil major’s 12
board directors with an alternative slate of
candidates backed by activist hedge fund
Engine No. 1, which had been critical of the
company’s climate policies.
The shareholders also voted to support
a proposal asking the company to report
on how its climate lobbying aligns with the
goals of the Paris Agreement.
At Chevron, a majority of shareholders
voted to request the company to
“substantially reduce” the amount of
GHG emissions resulting from its energy
products, known as Scope 3 emissions.
The vote did not require the company to
establish emission-reduction targets.
Exxon and Chevron had asked
shareholders to vote against the climateresponse
actions and Exxon actively
campaigned against the change in
directors.
Padilla said API’s climate policies
reflect the consensus, or convergence,
of the energy industry’s overall position
– as public demand and oil company
stockholder support for climate-action
response have continued to grow.
“API, as the largest industry trade
association, is recognized as a bellwether
for what the industry stands for both in the
U.S. and globally,” Padilla noted.
“Our climate framework is an example
of the unification of the industry globally
as we interact with policymakers and offer
constructive, concrete instructions on the
best approach to climate policy,” he said.
In June, the Group of Seven political
forum of economically advanced nations
issued a communique following its summit
meeting in Cornwall, England.
As part of its announced action plan,
the G7 vowed to “protect our planet by
supporting a green revolution that creates
jobs, cuts emissions and seeks to limit the
rise in global temperatures to 1.5 degrees.”
“We commit to net zero (GHG
emissions) no later than 2050, halving our
collective emissions over the two decades
to 2030, increasing and improving climate
finance to 2025, and to conserve or protect
at least 30 percent of our land and oceans
by 2030,” it stated.
Also in June, Equinor ASA announced it
would speed up investment in renewable
energy and low-carbon solutions and
reiterated its commitment to achieve netzero
emissions by 2050.
The majority state-owned Norwegian
oil giant, formerly known as Statoil, said
it would dedicate more than 50 percent
of investments to renewables and CO2
capture by 2030, from less than 5 percent
in 2020.
Dissension in the Ranks
In July, the Wall Street Journal published
a report on API’s climate policies under the
headline “Washington’s Oil Lobby Pivoted
on Climate Change – and Made No One
Happy.”
The article reported that API’s 2021
climate framework, including support
for carbon pricing and reductions of
methane emissions, had created tensions
within its membership. It characterized
the framework as a greener shift for
the association, stating that, “For years,
API used its clout to fight a growing
environmental lobby.”
“How these tensions play out will help
determine how the oil industry responds to
climate change initiatives and whether API
can remain a powerful force helping shape
laws and regulations,” the Journal noted.
“Several members have threatened to
leave API over disagreements about the
climate agenda,” it reported, adding that
so far, “the group has stopped further
defections, and API says it has added
independent members since the carbon
pricing plan was announced.”
A ‘Must-Do’
In August, the Intergovernmental Panel
on Climate Change reported that “scientists
are observing changes in the Earth’s
climate in every region and across the
whole climate system,” with many of those
changes “unprecedented in thousands, if
not hundreds of thousands of years.”
“Stabilizing the climate will require
strong, rapid, and sustained reductions in
greenhouse gas emissions, and reaching
net-zero CO2 emissions,” said IPCC working
group co-chair Panmao Zhai.
Current thinking on climate action at API
at other energy trade associations reflects
a convergence on climate policy in general,
according to Padilla.
Instead of a “no-win” exercise,
establishing a consistent policy on climate
action has come to be regarded as a “mustdo”
exercise for the oil and gas industry.
Padilla said, under the API framework,
“the industry is accelerating technology and
innovation like carbon capture and storage,
working to further mitigate emissions from
operations, endorsing a carbon price policy,
advancing cleaner fuels and driving climate
reporting.
“The natural gas and oil industry
supports a meaningful reduction in GHG
emissions while we work to maintain
affordable and reliable energy and
economic growth,” he said.