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Climate change and energy

Why the UN climate talks are a moment of reckoning for oil and gas companies

This week’s COP28 meetings in Dubai show how fossil-fuel companies might be able to contribute to climate progress, and what will happen if they don’t.

November 28, 2023
A pumpjack on the prairie just before sunset
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The United Arab Emirates is one of the world’s largest oil producers. It’s also the site of this year’s UN COP28 climate summit, which kicks off later this week in Dubai. 

It's certainly a controversial location choice, but the truth is that there’s massive potential for oil and gas companies to help address climate change, both by cleaning up their operations and by investing their considerable wealth into new technologies and lending their expertise to growing fields. The problem is, of course, that these companies also have the power to slow progress on cutting emissions, and a vested interest in preserving the status quo.

The oil and gas industry employs nearly 12 million workers around the world and generates $3.5 trillion in revenue every year. It’s a massive part of the global economy, and also a massive source of greenhouse-gas emissions, which are generated when fossil fuels are burned.

If the world is going to reach net-zero greenhouse-gas emissions, demand for oil and gas could fall by 75% below today’s levels by 2050, according to projections in a new report from the International Energy Agency.

That means if they want to be part of a net-zero future, something will need to change for oil companies, and soon. “The oil and gas industry is facing a moment of truth at COP28 in Dubai,” said Fatih Birol, executive director of the International Energy Agency, in a press release.  “Oil and gas producers around the world need to make profound decisions about their future place in the global energy sector.” 

Clean up after yourself

One way for companies to be part of the solution? Invest in cleaning up their own operations. 

There’s a profound need to cut the use of fossil fuels in the long term. However, we’re stuck with at least some of these fuels, especially for now.

Even in a scenario where the world reaches net-zero emissions in 2050 and new projects are limited, some oil and gas will be needed to provide fuel for sectors that are harder to clean up, like heavy industry. The good news is there are ways to make the fossil fuels we do use cleaner. 

The energy sector as a whole is responsible for roughly three-quarters of the world’s emissions. And extracting, processing, and transporting fossil fuels makes up about 15% of that number. This could be a whole lot lower, though. Companies can employ existing technologies to clean up methane leaks, use more electricity to power facilities, and add carbon capture technologies to power plants to help cut their emissions, according to the IEA report. 

(For the record, while some carbon removal is probably going to be essential to reaching climate goals, continuing with business as usual and just sucking carbon out of the atmosphere is not a feasible solution. The electricity required would be more than the entire global demand today. So take any pledges around carbon removal with a grain of salt.)

In order to be on track for net-zero emissions, the oil and gas industry will need to cut emissions from production and processing about 60% by 2030. That’s a huge jump, and one that will cost about $600 billion between now and the end of the decade. 

Slimming down production emissions won’t be enough to reach net-zero, though, so companies will also need to find ways to pivot and invest money and expertise into new technologies while ramping down fossil-fuel production.

Reaching the international climate goals set at the UN talks in Paris in 2015 will mean significant declines in demand for oil and gas. That means it’ll be necessary to cut investment into new projects and even shut down some existing ones. If oil and gas companies want to be part of an energy transition, or even to still exist a few decades from now, they need to rethink their focus and start investing in some new technologies. 

Today, oil and gas companies are responsible for just 1% of investment into clean energy, and the majority of that comes from just four companies. Yet the industry could be a massive player in growing fields like geothermal energy, offshore wind, and low-emissions hydrogen. 

Some of these fields have significant potential overlap with oil and gas. For example, technology developed for oil and gas extraction could be crucial in next-generation geothermal projects, as evidenced by startups like Fervo Energy that employ techniques similar to those used in the oil and gas industry.

Bigger stakes

But there’s a big difference between talking the talk and walking the walk when it comes to cutting emissions from fossil fuels. Take the head of COP28, Sultan Ahmed Al-Jaber, who in some recent media interviews comes off as a pragmatic realist on the state of climate change and the role of fossil fuels. 

“A phasedown of fossil fuels is inevitable, it is essential,” he told a reporter from Time in an interview published earlier this month. Sounds like someone on board with change, right? 

Yet the company that Al-Jaber helms is planning a huge expansion, to the tune of $150 billion over the next few years. Some of that will go toward renewables, but the company is also expanding its production capacity for crude oil. 

And according to new reporting from the BBC and the Centre for Climate Reporting, the UAE planned to use this year’s climate talks to make oil deals. Documents show talking points to be used in meetings with over a dozen countries that suggest plans to develop new fossil-fuel projects. One document suggested that the UAE’s national oil company and China were looking to jointly evaluate opportunities for liquefied-natural-gas products in countries including Mozambique and Australia. 

That revelation is exactly why a critical eye remains an absolute necessity when it comes to fossil-fuel companies’ promises around climate change. Yes, it’s true that oil and gas companies do have the potential to be part of the solution. And it’s probably going to be crucial for petrostates and the industry to participate in climate talks as we pursue goals that seem increasingly ambitious in a heating world. 

At the same time, however, there’s no guarantee that everyone is really on board with working toward a scenario where we can avoid the worst dangers of climate change. 

As the talks unfold over the next few weeks in Dubai, we’ll be watching for more indications of the UAE’s plans for fossil-fuel expansion and waiting to see how negotiations unfold around financing to help poorer nations deal with the worsening effects of climate change.

Deep Dive

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Illustration by Rose Wong

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