The Decisive Moment: Oil Industry's Role in Escalating or Resolving the Climate Crisis
Oil and gas industry at a critical crossroads: Embrace clean investments to combat climate crisis or perpetuate the problem, warns the International Energy Agency
Oil and gas producers are facing a critical decision, according to the International Energy Agency. They can either contribute to the acceleration of the climate crisis or become part of the solution. The industry's current investment in clean energy only makes up 1% of global investment, and it continues to release large amounts of planet-heating gases, including methane, which is around 80 times more potent than CO2 in the short-term. The IEA emphasized the urgent need for drastic action on both fronts in order to have any hope of limiting the rise in global temperatures to 1.5 degrees Celsius above pre-industrial levels.
The warning precedes COP28, a United Nations climate summit beginning next week, and coincides with a recent UN analysis indicating that the planet is on track to warm by nearly 3 degrees Celsius by the end of this century. Scientists warn that such warming could trigger multiple catastrophic and potentially irreversible tipping points, including the collapse of the polar ice sheets.
"The oil and gas industry is approaching a critical juncture at COP28 in Dubai," stated IEA Executive Director Fatih Birol. "As the world grapples with the worsening climate crisis, maintaining the status quo is neither socially nor environmentally responsible."
Presenting the report "The Oil and Gas Industry in Net Zero Transitions," Birol informed journalists on Thursday about the two crucial measures that the industry needs to implement in order to help limit global warming to the internationally agreed level of 1.5 degrees.
The first measure involves reducing the emission of planet-heating pollutants from the industry's own operations including the extraction of oil and gas, processing of fuels, and their delivery to consumers. These activities collectively account for nearly 15% of global energy-related greenhouse gas emissions.
"We know that these emissions, including methane emissions, can be addressed quickly and often in a cost-effective manner," stated Birol. According to the IEA report, this pollution must be reduced by over 60% from today's levels by 2030.
Clean investments
The next step advised by the agency is a significant increase in funding for renewable energy by oil and gas companies, which have so far played only a small role in the shift towards clean energy, according to the report.
Last year, the industry only allocated about 2.5% of its total capital spending, approximately $20 billion, to clean energy projects, according to the IEA. This percentage would need to increase significantly to 50% by 2030 in order to mitigate global warming to the safer 1.5-degree level. This shift would require a substantial change in how oil and gas companies allocate their funds. The industry generated approximately $17 trillion in revenue between 2018 and 2022, with 40% spent on developing and operating oil and gas assets, 10% allocated to investors, and a minimal fraction directed toward clean energy investment, as per the IEA report.
Oil and gas companies have invested in carbon capture technologies to reduce carbon pollution from the air and capture emissions from power plants and industrial facilities. The captured carbon can be stored or reused. However, Birol told reporters that carbon capture is not the sole solution. He emphasized that these techniques can still play a significant role in specific sectors, such as cement, iron, and steel production, among others.
It is our opinion that the idea of carbon capture and storage technology enabling the oil and gas industry to maintain current production levels while reducing emissions is unrealistic. According to the IEA, limiting the temperature increase to 1.5 degrees would necessitate capturing an unimaginable 32 billion metric tons of carbon by 2050, requiring more electricity than the world currently uses in a year.
Kaisa Kosonen, the policy coordinator at Greenpeace International, emphasized the urgency of the situation, stating that industry self-regulation is leading to a collective disaster. She stressed that the crucial moment will be at this year's climate summit when governments have the opportunity to make the decision to phase out fossil fuels in a fair and swift manner.
