Oil and gas companies face a critical juncture, according to a report released Thursday by the International Energy Agency.
The report found that the oil and gas industry are severely behind when it comes to investing in clean energy solutions, only accounting for 1% of global investment in the sector. Simultaneously, the industry continues to release dangerous levels of greenhouse gases, including methane, which is up to 80 times more potent than carbon dioxide in the short term. If the world is to have any chance of limiting global temperature rise to 1.5°C, as outlined in the Paris Climate Agreement, the industry must drastically reduce emissions and increase its clean energy investments, according to the IEA.
The report comes ahead of COP28, a UN climate summit starting next week, which is expected to focus on accelerating climate action. However, despite the looming threat of catastrophic global warming, the UN recently released an analysis showing that the planet is on track to warm by nearly 3°C by the end of the century. This level of warming could have dire consequences, including the collapse of polar ice sheets and other irreversible tipping points.
“The oil and gas industry is facing a moment of truth at COP28 in Dubai,” IEA Executive Director Fatih Birol said in a statement. “With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible”, he added.
In the report, entitled "The Oil and Gas Industry in Net Zero Transitions," Birol laid out two essential steps the industry must take to limit global warming to 1.5°C. First, the industry must reduce greenhouse gas emissions from its operations, such as extracting, processing, and transporting oil and gas. These activities currently account for nearly 15% of all global energy-related emissions.
Second, the industry must ramp up its investments in clean energy technologies, such as wind and solar power, and help decarbonize other sectors of the economy.
"These emissions, including methane emissions, we know that they can be fixed rather easily, quickly and in many cases in a cost-effective manner,” Birol warned.
This pollution needs to be cut by more than 60% by 2030 from today’s level, the IEA report says.
The second measure the agency recommends is a dramatic ramp-up in investments in renewable energy by oil and gas companies, which have been “a marginal force” in the clean energy transition, the report said.
The industry invested around $20 billion in clean energy projects last year — only around 2.5% of its total capital spending, the IEA found. That share would need to shoot up to 50% by 2030 to help keep global warming to the less dangerous level of 1.5°.
Such an increase would mean a radical change in how oil and gas firms spend their cash. Between 2018 and 2022, the industry generated around $17 trillion in revenue: 40% was spent developing and operating oil and gas assets, 10% went to investors and just a fraction was invested in clean energy, according to the IEA report.
Oil and gas companies have been investing in carbon capture technologies to remove carbon pollution from the air and to capture what’s produced by power plants and industrial facilities. The captured carbon can then be stored or reused. But carbon capture is “not the answer,” Birol told reporters.
The techniques can play an important role in certain sectors such as the production of cement, iron and steel among others, he said.
“But to say that the carbon capture and storage technology would allow the oil and gas industry to continue with the current oil and gas production trends and at the same time bring the emissions down… is, in our view, a pure fantasy.”
Limiting the temperature rise to 1.5° would require capturing “an entirely inconceivable” 32 billion metric tons (35 billion short tons) of carbon by 2050, the IEA said. The amount of electricity needed to power this process would exceed current global annual electricity demand.
Commenting on the IEA report, Kaisa Kosonen, policy coordinator at Greenpeace International, said: “Industry self-regulation leads to collective disaster, so the real moment of truth will come at this year’s climate summit when governments have the chance to agree to make fossil fuels history, in a fair and fast manner.”
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