BP chief: Alternative to ‘polluter pays’ carbon tax can help meet net-zero
BP's chief executive Bob Dudley and group chief economist Spencer Dale believe that regional carbon prices that don't just tax the producers will enable the oil and gas giant to join the global transition to net-zero emissions, but neither were convinced of when that would happen.
Speaking at the One Young Summit in London on Wednesday (23 October), Dudley and Dale outlined the role BP would take in transitioning to a net-zero world and how it would impact technologies, costs and pensions.
Dudley reiterated the company’s position that a regional carbon price would help accelerate the transition to net-zero. He also dismissed the notion that BP was one of the main lobbying forces behind weakened legislation on environmental protection in the US and the European Union (EU).
“Two hundred years of economic history says that unless you put a price on something, it won’t actually change behaviours,” Dudley said. “All of us are using carbon, and there’s got to be a united effort to put a carbon tax or price, not just on the people who produce it, but people who use it.
“You probably need to set it up regionally. It will be a great start and the market will respond. We actually need a framework, and the lobbying that people say we do is actually pushing regulation for methane in the US, pushing for a carbon tax in the US.”
BP’s official stance on a global price on carbon is that it is applicable to all quantifiable GHG emissions in all sectors of the economy on a CO2 equivalent basis while preventing the shifting of emissions from one jurisdiction to another.
However, the company’s internal carbon price is currently $40/tonne, well below the $100/tonne mooted by economists and green groups to spur climate adaptation.
Both Dudley and Dale reiterated that BP could absolutely function in a net-zero future, and the company was committed to playing its part and had made steps to kickstart its own transition from an oil and gas company to an energy company.
In February 2019, constant pressure from investors led to BP pledging to align its business with the aims of the Paris Agreement and has begun linking staff bonuses to its low-carbon progress.
BP accepted the recommendations from investor group Climate Action 100+ at its annual general meeting (AGM) on May 2019. The investor group, which consists of more than 300 firms and individuals with a collective total of $32trn in assets under management, asked BP to publish details of how its strategy aligns with the 2C trajectory outlined in the Paris goals.
BP said in a statement that it will take this recommendation on board, while also working to exclude high-carbon investments from its existing and future portfolio. The company has begun linking the bonuses of 36,000 of its workers to the progress it makes towards its climate targets.
The firm’s Advancing the Energy Transition (AET) strategy has a headline aim of generating reductions of 3.5m tonnes of CO2 equivalent annually throughout the businesses by 2025. BP claimed the strategy would help it to keep net greenhouse gas emissions at 2015 levels as the business expands.
However, the company has faced criticism regarding the specifics of its AET strategy – or lack thereof. CDP criticised the fact that BP has only made short-term decarbonisation targets which do not cover the firm’s Scope 3 (indirect) emissions, for example, while former BP adviser and current E3G chair Tom Burke dubbed the strategy a “twentieth-century solution to a twenty-first-century problem”.
Group chief economist Spencer Dale admitted that it would be “enormously challenging” for the world to reach net-zero emissions by 2050, considering that the main greenhouse gas emissions driving climate change have all reached record levels in the past year.
Given that BP pays £1 out of every £12 for pensions, Dale claimed that the company couldn’t make big bets and assumptions on the technologies that would drive progress towards net-zero. Natural gas, he said, would have a big role in the transition.
“Net-zero by 2050 is enormously challenging and we’ll need many types of fuels and technologies to achieve it. We will not be able to burn oil or gas in its current form, but there is a massive role for natural gas and carbon capture and storage (CCS),” Dale said.
“But you can’t have a fully decarbonised power sector based on wind solar and batteries. As we evolve from an oil and gas company to an energy company, I do have a problem imagining how we’re going to get there in a world where carbon emissions are rising, not falling. Making huge bets now on the assumption that we will get there is a hard thing to do.
“We want to absolutely be part of this, but in the reality that carbon emissions rose last year, we have to understand where we are now in order to outline a sensible path to net-zero.”
BP has indirectly been faced with pressure from green groups that are demanding investors divest from fossil fuels. Just this week, 300 UK MPs call on the trustees of the £700m Parliamentary Pension Fund to divest its £11.6m shares in BP.
Price to pay
BP is a member of the Oil and Gas Climate Initiative (OGCI), a coalition of 13 oil and gas firms, including Chevron, Exxon, Shell and Total that account for more than 32% of global operated oil and gas production. Those businesses are also amongst the 100 firms that account for more than 70% of global emissions.
While BP had pledged to invest $500m into low-carbon solutions after posting a strong financial performance in 2017, higher oil prices and growing crude production had pushed up its full-year underlying profits to $6.2bn that year. Critics of the company argue that it isn’t funnelling enough money into the low-carbon revolution.
Dudley claimed that the 15,000 BP staff that work on low-carbon technologies were a testament to the company’s desire to transition to the decarbonised economy.
Specifically, he claimed that the $200m investment in solar developer Lightsource and further investments in rapid charging points for electric cars at its UK petrol stations were adding to the capital that BP was spending, and creating, on low-carbon solutions.
However, oil and gas companies are on track to spend £5.2trn ($6.5trn) on new production by 2030. Think tank Carbon Tracker has warned that major companies, including BP, risk wasting £1.8trn ($2.2trn) on stranded assets by 2030.
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