API's Pivot Represents Major Shift in Industry Thinking on Climate

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.

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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.

Comments (3)

Blaming it on God....
How convenient, lets blame our stupidity on God. If that does not work, lets blame politics, because unfortunately that does seem to work. Why is it that we, the oil and gas industry, promote the very best in science when it has come to developing oil and gas resources, but when the very best of science indicates that humans DO have an influence on climate change, many want to ignore this science? The industry promoted the ignoring of this science for several decades as the money it was going to cost if we leave bought reserves in the ground is enormous. That point is a fact. Now when API even has to admit to human-influenced climate change, the industry is slowly having to give up its made-up stories. This is not hard to understand.
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10/1/2021 3:17:21 PM
Let me answere the Questions
Paragraph 1 Sentence 1: Yes by stating climate changes. We (Oil industry) didn't cause this to happen God did. We ( the Oil Industry) may it possible to not only endure the environment and deathly mother nature but to thrive and improve the human condition in a mere 150 years. While still maintaining the environment. The majors are simply bending to public discourse. The API is also. However, all this will do is embolden the radical leftist (some of which are now in the AAPG and API and SEG and etc.) to continue to chip away at the O&G Industry. We are crazy if we think we can "stabilize" the climate. One would think an association named American Association of Petroleum GEOLOGIST would understand that climate is very dynamic and we are not de-stabilizing it. This is simply a political play and socialist/marxist agenda playing out and the AAPG needs to stand up to it. Or they will hollow this association and industry out until they are neutered and not viable. Ernie Grodi, Proud Oilman
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9/15/2021 12:23:03 PM
API's pivot on climate change
API is 'pivoting' not because the science has shown for many years that the climate is changing because of human-caused activities but because of public opinion. Trade group or not, this attitude shows why their stature and influence has declined dramatically.
9/3/2021 8:08:19 AM

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