Wednesday was a bad day for Big Oil, or a good day, depending on your point of view. They will have to liquidate their affairs much faster than they planned.
Three of the world’s largest publicly traded oil and gas companies – Exxon Mobil, Royal Dutch Shell and Chevron Corp – were hit hard by shareholders and a Dutch court called for faster action to cut greenhouse gas emissions on May 26.
Exxon shareholders voted to appoint at least two climate-conscious members of the company’s board of directors despite strong opposition from management (the third vote is very close at the time of writing). Chevron’s counterparts have endorsed a proposal to include emissions from burning the fuel the company sells against board wishes in future reduction targets.
Meanwhile, in Europe, Shell is mandated to cut greenhouse gas emissions by 45% by 2030 – a much more difficult goal than the company initially suggested.
Oil companies have adopted climate pronouns at very different rates, with companies in the United States generally lagging behind their European counterparts. But they tend to focus on the same thing: emissions from their own operations (drilling, pumping, shipping, and processing oil and gas) and those from their suppliers.
These are known as Scope 1 and Scope 2 emissions respectively. However, companies face a bigger and more complex challenge to reduce Scope 3 emissions – those from burning the products they produce.
This is about to change. The Dutch court ruling, against which Shell is expected to appeal, must take into account the carbon dioxide emitted from the fuel it produces. Environmental group MilieuDefensie, or Friends of the Earth in the Netherlands, which has filed a lawsuit against Shell, is already helping other groups bring similar cases under human rights law in other countries.
Exxon CEO Darren Woods has argued that even if the world moves away from fossil fuels, customers will still need a lot of oil, and Exxon could benefit from meeting that demand. it will be. So are Shell and Chevron, as well as other major oil companies such as BP Plc and Total SE (whose shareholders supported the company’s sustainability plans on Friday and voted to rename TotalEnergies).
Even as the world changes for the major oil companies, there is still a long way to go to net zero.
Reducing emissions is either a technical challenge, an expensive one, or both. One of the fastest and cheapest options for oil companies is to clean up their most polluting assets. But while it may look better, it often does little to reduce global emissions.
That’s because these assets are simply transferred from one company’s accounts to another – and potentially transferring to a company that is less concerned with its environmental report and less subject to shareholder pressure to change.
Exxon, Shell and Chevron may not sell as much oil as they previously planned, and they will have to produce much cleaner than in the past, while compensating for the inevitable emissions.
While this is undoubtedly a step in the right direction, the global net-zero goal will not be achieved by forcing a small group of companies to change the way they operate.
The real change has to come from the demand side. It is the introduction of affordable, reliable and consumer-friendly alternatives to fossil fuels that will transform energy consumption and ultimately the operations of the world’s oil producers. Bloomberg
Julian Lee is a strategic oil analyst at Bloomberg. The opinions expressed here are those of the author.
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