BP has scaled back its industry-leading commitment to cutting oil and gas production after soaring fossil fuel prices propelled the British energy group to the highest annual earnings in its 114year history. The shift follows a tumultuous year in energy markets driven by Moscow’s war in Ukraine and the ensuing clampdown on Russian gas and oil by western governments. Soaring fuel prices that drove up costs for households and businesses supercharged profits for the world’s biggest oil and gas companies last year. «Governments and societies around the world are asking companies like ours to invest in today’s energy system,» Looney told the Financial Times.
Total shareholder returns since Looney took the helm in February 2020 have been the lowest among western energy majors, none of which set a hard target to cut oil and gas production like BP. Looney argued that the altered oil and gas output guidance, which means its carbon emissions will fall slower than planned, was not a shift in approach. «The strategy that we have is to invest in today’s energy system and to invest in accelerating the energy transition,» he said. That’s a sign of the astonishing payoff oil companies have had from soaring energy prices driven by Russia’s invasion of Ukraine.
And as governments grapple with the cost of living aftershocks, plus rising climate change concerns,
there are predictable demands for more challenging windfall taxes. One idea that British academics have been pushing for years is gathering pace. It would make fossil fuel companies pay to clean up their carbon emissions in a way that would create a safer climate at a relatively affordable cost. This so-called «carbon takeback obligation» would not require carbon taxes or direct taxpayer subsidies and a version of it made it into last month’s weighty UK government net zero review by Conservative MP Chris Skidmore.
Some in Westminster would like to include the measure in an energy bill making its way through parliament. Then, carbon could be captured initially from cement plants or factories, and oil companies would not have to store the CO₂ themselves. The idea is that a market based on tradable carbon storage certificates would develop, which would help to reduce costs. That’s because cutting emissions from sectors such as aviation is going to be hard, and because the world is set to overshoot its carbon budget so much that some CO₂ will need to be removed from the atmosphere to ensure a stable, cooler climate.
This has bolstered interest in direct air capture companies that suck carbon dioxide out of clean air rather than clouds of factory pollution. But none of these developments guarantee that global emissions will fall as quickly as they must. «And also, why should cash-strapped taxpayers pay for this when the industry is making out like bandits?» says Oxford university’s Professor Myles Allen, who has spearheaded the carbon takeback idea. So too, is Allen’s insistence that an idea like carbon takeback can never be a replacement for all climate change policies.
When Allen was first writing about the carbon takeback idea in 2009, critics understandably told him that fossil fuels should be phased out entirely. Unfortunately, this has not happened and, meanwhile, emerging market countries have become more insistent that they should have the right to exploit their fossil fuel reserves. A carbon takeback obligation would still allow that, as long as the resulting carbon emissions were safely disposed of.
I agree that BP probably needs to focus on fossil fuel for a while. But they still have to have a clear plan of slowly but surely retreating from this in the following years.
ReplyDeleteAs other companies must as well. We need to reduce our footprint while also making sure that we create enough energy for today so it's a balance that we need to seek between fossil fuel and greener energy.
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