The International Energy Agency (IEA) finds the energy industry responsible for three-quarters of anthropogenic, global warming-causing emissions. Other research shows that just 100 businesses, including leading energy companies ExxonMobil, Saudi Aramco, Shell, Chevron, BP, Gazprom and – of course – their customers, are the source of 71% of all emissions since 1988. These entities have the expertise, resources, and scale to enact enormous and swift changes – but are they doing enough?
 

Steps in the right direction

There are many positive indicators that the world’s largest energy companies are enacting the global transition to renewables. The IEA predicts that ‘global investment growth in clean energy is set to outpace fossil fuel spending this year’. This makes sense, given that 62% of total renewable power generation added in 2020 was cheaper than the lowest cost fossil fuel and the cost of renewable technologies continues to fall significantly year-on-year, according to the International Renewable Energy Agency.
 

More IEA research published this year reports that annual renewable energy capacity additions broke records in 2021, despite complications arising from the pandemic. Forecasts for 2022 are even more positive, anticipating further renewable capacity increases exceeding 8% over 2022 and reaching almost 320 GW. 

An unexpected benefit of the global energy crisis and the resulting price spike in oil and natural gas has been to highlight the insecurity of relying on imported fossil fuels for many countries. Consequently, the IEA reports a ‘sharp acceleration in installations of renewable power, with total capacity growth worldwide set to almost double in the next five years’. 

Some oil and gas companies have already demonstrated considerable emissions reductions. Ørsted has slashed coal consumption at its power stations by 82% since 2006 and installed more than 1,000 wind turbines. Meanwhile, major gains are materialising in the US following the signing of the Inflation Reduction Act into law. This year alone, the world’s second-largest carbon emitting country has announced three major offshore wind leases sales, including the first in the Pacific region.

These moves offer hope that global warming might be limited to below 2oC. But, as Carbon Brief estimates that global CO₂ emissions from fossil fuels hit a record high of 36.6bn tonnes this year – far more action is clearly needed to aim for the 1.5℃ target the Intergovernmental Panel on Climate Change recommends. 
 

Is it enough?
Indeed, despite the progress, in many respects the largest fossil fuel companies are lagging. This includes in areas acknowledged as ‘low-hanging fruit’. For instance, methane has a global warming potential 80 times that of CO₂ during its first 20 years in the atmosphere and curtailing it should be a priority. The IEA’s Net Zero Emissions by 2050 Scenario requires methane emissions from fossil fuel operations to plummet by about 75% between 2020 and 2030. Yet these emissions actually increased in 2021 to reach over 120 Mt and there is evidence that they are still being massively underreported. 

All Oil and Gas Climate Initiative member companies have pledged to reach net zero scope 1 and 2 emissions by 2050, with some European firms also promising significant reductions in their scope 3 emissions. But, research in September shows only 12% of the five oil supermajors’ 2022 capital expenditure is forecasted to be dedicated to low-carbon activities – including gas. Meanwhile, 60% of their public communications in 2021 contained at least one green claim. None of the supermajors’ forecasted oil production aligns with the IEA’s Net Zero Emissions by 2050 roadmap; several plan to increase oil and gas production 2021-2026.

A nuanced picture

Much of the attention remains on the publicly owned oil supermajors. Yet 90% of oil and gas reserves belong to national oil companies (NOCs) and these firms produce about two-thirds of the world’s oil and gas. These NOCs are on course to invest $1.9tn in projects that would end any prospect of meeting the Paris Agreement climate goals. Many of these state-owned entities are generally not beholden to stakeholders and instead governments such as Russia, Iran, China, Kuwait and Nigeria, control these companies.

This makes international cooperation towards achieving net zero of the utmost importance, particularly annual COPs. All governments, particularly those of OPEC Plus, need to aim for net zero collectively. It has been demonstrated that renewable energy is now cheaper than fossil fuels in the majority of cases. The risk of stranded assets for fossil fuel investments and the profit to be made on clean energy should be accelerating the energy transition in line with the Paris Agreement. 

Ultimately, the energy industry holds the future of our planet in its hands. The outcome of COP28, to be held in one of the most oil and gas dependent, NOC dominated parts of the world in 2023, will prove decisive for the energy transition. Next year, we need to see the largest firms, particularly NOCs, leading the way on the energy transition, if there is to be any chance of preventing imminent climate catastrophe. 

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.