The oil and gas industry is facing a dilemma: how to balance the growing demand for energy with the urgent need to reduce greenhouse gas emissions and combat climate change. On one hand, fossil fuels still supply 84 percent of world energy and are expected to remain a vital part of the global energy mix for decades to come, especially in developing countries where access to electricity and modern fuels is still limited. On the other hand, fossil fuels are the main source of carbon dioxide (CO2) and other pollutants that contribute to global warming, air pollution, and health problems. According to the International Energy Agency (IEA), the oil and gas sector accounted for 42 percent of global CO2 emissions in 2020 and must reduce its emissions by 90 percent by 2050 to limit global warming to 1.5°C above pre-industrial levels.
This dilemma has sparked a fierce debate between the oil and gas companies and the decarbonisation policies and campaigns that aim to phase out fossil fuels and accelerate the transition to clean energy sources. In this blog, we will explore the arguments and perspectives of both sides and try to find some common ground and possible solutions.
The case for drilling
The oil and gas companies argue that they provide essential energy services to billions of people around the world and that they are investing in innovation and technology to improve their environmental performance and reduce their emissions. They also claim that they are committed to corporate social responsibility (CSR) and contribute to social and economic development in the regions where they operate.
Some of the main points that the oil and gas companies make are:
- Fossil fuels are still indispensable for meeting the world's energy demand, especially in emerging economies where energy access and security are critical for poverty alleviation and economic growth. According to the IEA, global energy demand is projected to grow by 25 percent by 2040, and fossil fuels will still account for 74 percent of the primary energy supply. The IEA also estimates that more than 750 million people lack access to electricity and 2.6 billion people rely on traditional biomass for cooking, which causes indoor air pollution and health hazards. The oil and gas companies argue that they can help bridge this energy gap by supplying affordable and reliable energy to these populations, and by supporting the development of energy infrastructure and markets.
- Fossil fuels are also essential for many industrial sectors and products that are vital for modern society, such as transportation, petrochemicals, plastics, fertilizers, and medicines. The oil and gas companies argue that there are no viable alternatives for many of these applications, and that fossil fuels will remain the dominant source of feedstock and fuel for these industries for the foreseeable future. They also point out that fossil fuels can enable the integration and deployment of renewable energy sources, such as wind and solar, by providing backup power and grid stability.
- The oil and gas companies are investing in research and development to improve their efficiency and environmental performance, and to reduce their emissions and environmental impact. They are adopting best practices and technologies to minimize flaring, venting, and methane leakage, which are major sources of greenhouse gas emissions and air pollution from the oil and gas sector. They are also exploring and implementing solutions such as carbon capture, utilization, and storage (CCUS), hydrogen, biofuels, and renewable energy to diversify their portfolio and lower their carbon footprint. According to the IEA, the oil and gas companies spent $7.6 billion on low-carbon technologies in 2020, accounting for 1.3 percent of their total capital expenditure.
- The oil and gas companies are committed to CSR and contribute to social and economic development in the regions where they operate. They claim that they create jobs, pay taxes and royalties, support local businesses and communities, and invest in education, health, and infrastructure projects. They also adhere to international standards and principles on human rights, labor rights, environmental protection, and anti-corruption. They argue that they can play a positive role in promoting good governance, transparency, and accountability in the oil and gas sector, and in addressing the social and environmental challenges that affect their stakeholders.
The case for decarbonisation
The decarbonisation policies and campaigns argue that fossil fuels are the main cause of climate change and its devastating consequences and that they must be phased out as soon as possible to avoid irreversible damage to the planet and humanity. They also claim that fossil fuels are harmful to human health and the environment and that they perpetuate social and economic inequalities and injustices. They advocate for a rapid and just transition to a low-carbon economy based on renewable energy sources and energy efficiency.
Some of the main points that the decarbonisation policies and campaigns make are:
- Fossil fuels are the main driver of climate change and its catastrophic impacts, such as rising temperatures, sea level rise, extreme weather events, biodiversity loss, and food insecurity. According to the Intergovernmental Panel on Climate Change (IPCC), human activities have caused 1.1°C of global warming above pre-industrial levels, and are likely to reach 1.5°C between 2030 and 2052 if current trends continue. The IPCC also warns that limiting global warming to 1.5°C requires rapid and far-reaching transitions in energy, land, urban, and industrial systems and that every fraction of a degree of warming matters for reducing the risks and costs of climate change. The decarbonisation policies and campaigns argue that fossil fuels must be phased out as soon as possible to achieve this goal and that the oil and gas companies are responsible for a large share of the historical and current emissions that have caused the climate crisis.
- Fossil fuels are also harmful to human health and the environment and cause millions of premature deaths and diseases every year. According to the World Health Organization (WHO), air pollution is the greatest environmental risk to health, and is responsible for an estimated 7 million deaths annually, mainly from stroke, heart disease, chronic obstructive pulmonary disease, lung cancer, and acute respiratory infections. The WHO also estimates that 91 percent of the world's population lives in places where air quality exceeds the WHO guideline limits. The decarbonisation policies and campaigns argue that fossil fuels are the main source of air pollution, especially from the combustion of coal, oil, and gas in power plants, vehicles, and industries. They also point out that fossil fuels cause other environmental problems, such as water pollution, soil contamination, habitat destruction, and biodiversity loss, which affect the health and well-being of people and ecosystems.
- Fossil fuels also perpetuate social and economic inequalities and injustices and benefit a few at the expense of many. The decarbonisation policies and campaigns argue that the fossil fuel industry is dominated by powerful and wealthy corporations and countries, which often exploit and oppress the rights and interests of the poor and marginalized communities and countries that bear the brunt of the negative impacts of fossil fuels. They also claim that the fossil fuel industry is rife with corruption, tax evasion, and human rights violations and that it undermines democracy and the rule of law by influencing and interfering with the political and regulatory processes that affect the energy sector. They advocate for a just transition that ensures that the costs and benefits of the energy transition are shared fairly and equitably and that the rights and needs of the workers and communities affected by the phase-out of fossil fuels are respected and addressed.
The reality of drilling and decarbonisation
Despite the strong arguments and evidence for decarbonisation, the reality is that many governments around the world continue to license fossil fuel companies to drill and explore for new reserves of oil and gas, often in contradiction with their own climate commitments and policies. For example, the UK government has recently opened a new licensing round for companies to explore for oil and gas in the North Sea, despite the warnings from its own climate advisers and the international scientific community that no new fossil fuel projects should be approved if the world is to limit global warming to 1.5°C. The UK government argues that the new exploration will boost energy security and support skilled jobs and that the new fields will be less polluting than their predecessors.
Similarly, many developing countries, especially in Africa, are pursuing oil and gas development as a means to achieve economic growth, poverty reduction, and energy access, often with the support and financing of foreign investors and lenders. For instance, the East African Crude Oil Pipeline (EACOP) is a project that will transport oil produced from Uganda's Lake Albert oilfields to the port of Tanga in Tanzania, where the oil will then be sold onwards to world markets. The project is backed by TotalEnergies, China National Offshore Oil Corporation (CNOOC), and the governments of Uganda and Tanzania, and is expected to cost $5 billion and create 10,000 jobs. The project proponents argue that the pipeline will unlock the potential of East Africa's oil resources, and bring benefits such as infrastructure, technology transfer, and social development to the regions along the route.
However, these drilling and exploration projects also face strong opposition and criticism from environmental and social activists, who claim that they are incompatible with the global climate goals and the Paris Agreement and that they pose serious risks and threats to the environment, human rights, and local livelihoods. For example, the EACOP project has been denounced by over 260 civil society organizations from around the world, who have called on the banks and financial institutions involved in the project to withdraw their support and funding. The project opponents argue that the pipeline will fuel climate change, destroy biodiversity, displace communities, and violate human rights and that it will lock the region into a fossil fuel-dependent future.
Another example is the USA, where the Biden administration has recently approved hundreds of drilling permits on federal lands and waters, despite its pledge to halt new oil and gas leasing and to cut greenhouse gas emissions by 50 percent by 2030. The administration argues that it is legally obligated to process the backlog of permits that were left by the previous administration and that it is working on a comprehensive review of the federal oil and gas program to align it with the climate goals. The administration also claims that it is taking other actions to promote clean energy and reduce emissions, such as rejoining the Paris Agreement, canceling the Keystone XL pipeline, and investing in green infrastructure and innovation.
These examples show the complexity and controversy of the drilling and decarbonisation debate, and the challenges and trade-offs involved in balancing the energy demand and climate action.
Finding common ground and possible solutions
The debate between the oil and gas companies and the decarbonisation policies and campaigns is complex and contentious, and there is no simple or easy solution. However, there may be some areas of common ground and possible solutions that could help bridge the gap and foster cooperation and dialogue. Some of these are:
- Recognizing the urgency and seriousness of the climate challenge, and the need for ambitious and credible action from all stakeholders, including the oil and gas companies. The oil and gas companies should acknowledge their responsibility and accountability for their emissions and impacts, and align their strategies and investments with the goals of the Paris Agreement and the 1.5°C target. They should also increase their transparency and disclosure on their emissions, risks, and opportunities, and engage constructively with the regulators, investors, and civil society on the energy transition. The decarbonisation policies and campaigns should acknowledge the role and contribution of the oil and gas companies in providing energy services and products, and the challenges and opportunities they face in the energy transition. They should also support and encourage the oil and gas companies that are taking positive steps and actions to reduce their emissions and impacts and to diversify their portfolio and business model.
- Leveraging the innovation and technology potential of the oil and gas companies to accelerate the deployment and scale-up of low-carbon solutions, such as CCUS, hydrogen, biofuels, and renewable energy. The oil and gas companies should increase their investment and collaboration in research and development, and in the demonstration and commercialization of these solutions, and share their knowledge and expertise with other stakeholders. They should also integrate these solutions into their core operations and value chain, and seek new markets and opportunities for their application and use. The decarbonisation policies and campaigns should support and facilitate the innovation and technology development and transfer of the oil and gas companies, and provide them with the necessary incentives and frameworks to enable and reward their adoption and implementation. They should also monitor and evaluate the performance and impact of these solutions, and ensure that they are consistent and compatible with the environmental and social objectives and standards.
- Addressing the social and economic dimensions and implications of the energy transition, and ensuring a just and inclusive transition that leaves no one behind. The oil and gas companies should respect and protect the human rights and interests of their workers and communities, and provide them with adequate compensation, training, and opportunities for a fair and smooth transition to new jobs and livelihoods. They should also engage and consult with the affected stakeholders, and address their concerns and grievances in a timely and effective manner. The decarbonisation policies and campaigns should advocate and campaign for a just transition that ensures that the costs and benefits of the energy transition are shared fairly and equitably and that the rights and needs of the workers and communities affected by the phase-out of fossil fuels are respected and addressed. They should also support and empower the vulnerable and marginalized groups, and promote their participation and representation in the decision-making and implementation processes.
The drilling and decarbonisation debate is a critical and complex issue that will shape the future of the global energy system and the world. The oil and gas companies and the decarbonisation policies and campaigns have different perspectives and interests, but they also share some common goals and challenges. By finding common ground and possible solutions, they can work together to achieve a sustainable and equitable energy transition that meets the energy demand and climate action.
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