Report: Oil and gas companies set to eat up 80% of global carbon budget
The oil and gas sector is set to burn through some 80% of the total global carbon budget the world will need to stick to if the Paris Agreement's 1.5C trajectory is to be realised, a major new report has revealed.
Published today (21 July) as a collaborative effort between the World Benchmarking Alliance (WBA), CDP and ADEME, the benchmark report assesses the emissions and climate plans of publicly listed and state-owned energy companies against the Assessing Low-Carbon Transmission (ACT) methodology. It then compares these results to alignment with a 1.5C temperature pathway.
The report analyses the emissions associated with 100 of the world’s largest energy companies, revealing that, if they do not change their business models, they will consume the sector’s carbon budget for 2019-2050 by 2037. All of the state-owned businesses and major corporates analysed have increased either oil or gas production, or both, since 2014.
In general, state-owned companies were found to be generating more emissions at present and had working with climate transition plans than their counterparts in the private sector.
State-owned oil and gas majors, the report states, will use up more than half (54%) of the world’s total carbon budget through to 2050. Among the companies deemed to be in the bottom ten on climate action by the report are Basra Oil Company, the National Oil Company of Libya, Abu Dhabi National Oil Company, Shaanxi Yanchang Petroleum Group, Sinochem Energy and EP Petroecuador.
Nonetheless, independent companies are set to account for a further 12% of the carbon budget and the seven biggest oil majors a further 13%. This cohort includes BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Royal Dutch Shell and Total Energies.
“The progress of the oil and gas industry worldwide is woefully inadequate if we’re going to limit global warming to 1.5C by 2050,” CDP’s executive director Nicolette Bartlett said.
“If we want to meet the International Energy Agency’s (IEA) 1.5C scenario, that means a total transition away from oil and gas production as a society and the inherent transformation of fossil fuel-based business models. Governments clearly also have a critical role to play, and this new benchmark from WBA, CDP and ADEME shows that the industry simply is not doing enough to make this happen.”
Recommendations for change
The report states that emissions from the companies analysed could be improved through the development of better targets. Just 13 of the firms analysed have public energy transition plans that extend at least 20 years into the future.
But it warns that target-setting alone is not enough, with many firms setting “opaque and unambitious” goals that do not tackle their main sources of emissions. For businesses in this space, this will typically be indirect (Scope 3) emissions from the final burning of their products.
The report goes on to outline how, without a strong emissions baseline, companies will not be able to set meaningful targets. Only one-third of the 100 firms assessed disclose information on Scope 3 emissions and most are still also posting incomplete information about Scope 1 (direct) and Scope 2 (power-related) emissions. This is an area where, the report states, governments could intervene, ensuring that investors and other key parties have “comprehensive and comparable” climate data.
Without transition plans, most companies are failing to align their R&D spending with the low-carbon pathways demanded by climate science and, indeed, by an ever-increasing number of nations, the report states. While more than half of the companies assessed disclosed R&D expenditure, only 17 companies reported information on the proportion of investment dedicated to low-carbon technologies in 2019. Fewer firms still – 12 – report how planned investments through to 2024 contribute to the low-carbon transition.
The benchmark report comes in the same week that the International Energy Agency (IEA) published its Sustainable Recovery Tracker, outlining how just 2% of the Covid-19 stimulus funding promised by nations has been spent on clean energy, meaning that global emissions are likely to hit a record high in 2023 and continue rising thereafter.