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Gushing profit

Gushing profit

Oil and gas companies made record profits last year. What does that mean for net zero?

Long stories short

  • South Africa declared a “state of disaster” as the electricity utility Eskom struggles to maintain its ageing coal-fired power plants.
  • Janet Yellen, the US treasury secretary, called on the World Bank to be “bolder and more imaginative” in tackling challenges such as climate change.
  • Conservationists said the lynx faces extinction in France, 40 years after the big cats made a comeback there.

Gushing profit

The numbers are jaw-dropping – $59 billion at Exxon, $40 billion at Shell, nearly $28 billion at BP. A blockbuster year for oil company profits was accompanied by a scaling back of green ambition.

But here’s another straw in the wind. The environmental law not-for-profit ClientEarth said last week that it was bringing legal action against Shell’s directors for failing to manage climate risk properly. The lawsuit is backed by institutional investors including UK pension funds Nest and the Swedish national pension fund AP3.

So what? The signals from the market are, to say the least, confusing. On one hand, the listed oil companies doing most to shift to renewable energy have received little recognition for their efforts. BP’s shares went up when it said it would pump more oil. On the other, major asset managers – at least in Europe – are putting pressure on Big Oil to decarbonize faster.

The good news on climate change is that we are close to a major turning point on emissions.

  • Solar and wind generated more than a fifth of the EU’s electricity last year, overtaking gas for the first time. The increase in coal use was a blip.
  • Even on our current trajectory, global carbon emissions from energy are forecast to peak this decade.
  • Both the Russian invasion of Ukraine and America’s Inflation Reduction Act are expected to bring emissions down.

The bad news is that this still isn’t happening fast enough. To avert the worst consequences of climate change, human-made emissions need to be reduced by 45 per cent on 2010 levels by the end of this decade. That will need a dramatic shift in current government policy.

Here’s where the energy majors come in. In a world that’s going to keep using fossil fuels, short-term projects with high rates of return are going to make business sense – especially if it’s accompanied by an obligation to remove carbon from the atmosphere.

The graver challenge to hopes of a liveable planet is investment in long-term hydrocarbon projects such as TotalEnergies’ plans to drill for oil in Uganda.

It’s in the developing world that this fight will be critical. The planet is decarbonizing – but the future isn’t evenly distributed.

While the US, EU and China are all on track to cut carbon emissions from fossil fuels this decade, India’s emissions will rise as its economy and population grows. Net zero needs the developing world to shift from coal to renewable energy rather than locking in the use of oil and, especially, gas as a bridge.

Ultimately, aligning the market and business with what society needs will require government action. This will be much harder to do if Big Oil is fighting to maintain long-term demand.

Lobbyists for Exxon let slip in undercover filming that the company’s support for a carbon tax  is “an easy talking point” intended to stall progress.

Yet such taxes are the critical measure to price and reduce emissions. Businesses alone can’t get the world to net zero – but the oil and gas industry can stop blocking the way.


Jet zero?

Lufthansa will this week begin offering higher fares that offset 100 per cent of flight-related carbon emissions. “Green fares” will be made available for more than 730,000 flights per year within Europe and North Africa, following successful trials in Scandinavia. The airline said climate impacts will be offset by 80 per cent through the financing of climate protection projects, while the remaining 20 per cent will be achieved through the use of Sustainable Aviation Fuels, similar to jet fuel but made from waste. SAFs are currently much more expensive than kerosene but the hope is that scaling production could help bring down costs and boost adoption by airlines. Taxing aviation fairly is likely to be more effective at driving rapid change. 


Saving the Amazon

Defending the Amazon is critical to protecting our species from the worst impacts of climate change. Former Brazilian leader Jair Bolsonaro’s time in office was catastrophic. He weakened Ibama, the agency responsible for protecting the giant rainforest, deforestation rates soared, and Norway and Germany suspended donations to the Amazon Fund, intended to finance sustainability projects. Following a visit to the White House last Friday, Brazil’s president Luiz Inácio Lula da Silva and US president Joe Biden said Washington could provide financial support for the Amazon Fund for the first time. The US funding will need Congressional support – a stretch given Republican control of the lower chamber – but is a welcome signal that the world has a stake in this fight.


Ray of light

The inventor of the silicon technology used in 90 per cent of solar panels worldwide has predicted a big boost in the efficiency of photovoltaic cells. Combining silicon with other materials – such as the common mineral perovskite – could increase the conversion of sunlight into electricity from 25 to more than 40 per cent. That’s according to Martin Green, an Australian professor and part of the team that recently earned the Queen Elizabeth Prize for Engineering for their work on the widely used Perc cell. Two of his fellow laureates, Aihua Wang and Jianhua Zhao, are the founders of CSun, a company that played a key role in building China’s world-beating solar industry.


Slippery slope

More than 200 winter athletes have sent a letter to the International Ski and Snowboard Federation urging it to take more action against climate change. Warm weather and a lack of snow have delayed the world skiing championships by nearly a month, while preseason training on glaciers is fast becoming a memory. Signatories of the letter, including US ski star Mikaela Shiffrin, wrote that winter sport needed to adapt to a changing season and requested a more “geographically reasonable” race schedule to reduce emissions from athletes’ travel. But the reality is that events will be forced into higher altitudes or closer to the poles if they want to continue: of the 20 Winter Olympics venues used since 1924, only 10 will have the natural snowfall levels needed to host an event by 2050.

Thanks for reading.

Jeevan Vasagar

If you want to get in touch, drop us a line at sensemaker@tortoisemedia.com.

With thanks to our coalition members: a network of organisations similarly committed to achieving Net Zero

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