The words ‘green giant’ are apparently no longer applicable only to cans of peas. Six of Europe’s largest oil firms have teamed up to convince the UN to pull its socks up and do something about climate change.
The chief executives of Shell, BP, Total, BG Group, Norway’s Statoil and Italy’s Eni wrote to the executive secretary of the United Nations Framework Convention on Climate Change, Christiana Figueres, asking if they can help devise a global carbon pricing policy.
‘We owe it to future generations to seek realistic, workable solutions to the challenge of providing more energy while tackling climate change,’ they said in a letter to the FT.
While it’s possible that the chief executives of Shell, BP, Total, BG Group, Norway’s Statoil and Italy’s Eni have all simultaneously ditched their tailored suits for woolly jumpers and hand-stitched hemp tree-hugging gloves, their motive is likely to be more pragmatic.
It’s widely expected that unprecedented measures to cap global warming will be agreed at the UN’s Paris climate change conference later this year. Rather than having a potentially ruinous regulatory framework imposed upon them, the energy firms want to ensure they can survive under the new system.
Carbon pricing is essentially a tax that charges energy firms a fixed fee for every tonne of carbon dioxide they emit into the atmosphere. It incentivises polluters to burn relatively cleaner fuels and use carbon capture technology, and provides a competitive advantage to renewable energy.
The oil giants prefer this market-based mechanism to regulations (which might include for instance a widespread ban on power plants or cars with emissions over certain levels) because it offers them a way to adapt.
A ban on cars emitting more than a certain amount, for instance, would reduce demand for oil much as a carbon tax would, except that oil producers themselves could do little to mitigate their losses directly – only car manufacturers can make their products greener.
Carbon pricing would hit coal harder than oil and gas. Indeed, as gas is a far cleaner fuel for power stations, a carbon pricing system would in a sense benefit gas producers. Companies like Shell and BP would have a natural place to focus their investments for the new market. Just as importantly, they’d know what that focus was, without the fear that some future regulatory pronouncement could ruin it.
That may sound win-win, but not everyone’s behind it. The big US producers refused to join in, with Exxon’s chief Rex Tillerson last week saying his firm wouldn’t ‘fake it’, presumably preferring other options (or expecting Europe’s climate change commitments to be stricter than America’s).
Besides, the real question is what the cost of a tonne of carbon dioxide should be. The unhappy history of carbon pricing so far has been because the price was too low to make a difference. Given big oil's lobbying against high prices before, it's perhaps a bit rich for them to get behind it now.
The oil bosses may hope for a 'workable' agreement on carbon pricing, but they'd better be careful what they wish for. If the world does come to a far reaching deal in December, it won't be pleasant for big oil, either way.