By Ben Ratner
The climate change discussion is percolating even in surprising places. The latest sign: the American Petroleum Institute’s recent formation of an internal task force on climate change. Reportedly the new task force’s mandate is to revisit API’s approach to this crucial issue, going into an election year and with ever greater scrutiny on fossil fuels.
It is too soon to know whether the task force will rubber stamp a business-as-usual approach defined by glossing over climate concerns and attacking policy measures, or chart a new path instead.
But if the task force is serious about a fresh look at the issue, here are three keys for the task force to consider as it ponders the future of API on climate.
Face the Facts
The oil and gas industry must be responsive to growing pressures from its investors, corporate customers, and Americans affected by oil and gas operations – from local pollution to climate change.
The historic global climate agreement reached in Paris, supported by nearly 200 countries including powerhouses like the United States and China, was also supported by a wide cross-section of American businesses, like PG&E, which as a natural gas distribution company and power generator is a user of API members’ products and a face to climate conscious consumers.
Last April, over 400 investors representing more than $24 trillion in assets under management urged stronger leadership and more ambitious policies to lessen risk to investment and retirement savings of millions of Americans. Since then, the 2016 investor shareholder resolution season yielded a record breaking number of resolutions – 94 – addressing climate change, many levied as challenges to large oil companies.
And American public concern on global warming is reaching an eight year high, with nearly two-thirds of adults saying they worry about global warming a “great deal” or “a fair amount”, according to Gallup.
Facing all the facts, not cherry-picking them, can ground the task force’s work in today’s dynamic environment and enable an effective response in a changing world.
Solve Methane
While understanding and concern on the methane challenge has snowballed, API’s response has severely lagged.
But it doesn’t have to.
The methane emissions from the U.S. oil and natural gas industry account for the climate damage over a 20-year timeframe equivalent to roughly 240 coal fired power plants. And yet, when the Environmental Protection Agency issued rules earlier this year requiring operators to implement basic safeguards to detect and prevent emissions, API’s public response was to decry new environmental rules as “unreasonable and burdensome”.
Months prior, API’s combative regulatory filing questioned the authority of EPA even to regulate methane emissions, resisted twice-a-year inspections for accidental leaks and urged inspection exemptions that ignore insights on leak unpredictability.
The next round of methane rules is around the corner, and better late than never for API to embrace the United States’ goal of a 45% reduction in methane emissions from the oil and gas sector and to support effective national methane rules grounded in science and economics. Supporting a level playing field to address the invisible but undeniable methane problem would increase investor confidence and keep more product in the pipelines working for the economy, not against the climate. And it just might help build public trust in an industry that according to Edelman lags only the pharmaceutical and financial services industries in that category.
Truth be told, new regulations and compliance are not cost-free, but neither are exploration and drilling. Investing in effective rules will provide climate and environmental safeguards – a needed advancement responsive to legitimate pressure that is only rising.
Support Carbon Pricing
Implementing a market based approach to reducing greenhouse gas emissions is widely thought to be the ultimate key to achieving U.S. climate goals including cutting emissions 80% by 2050. Geographies from northeastern states and California to South Africa and the EU have implemented various forms of carbon pricing. A number of mostly European API members have publicly supported pricing carbon, for example BP recognizing “that carbon pricing by governments is the most comprehensive and economically efficient policy to limit greenhouse gas emissions.”
And yet, some prominent API members have to date withheld support for carbon pricing, or provided lukewarm quasi-endorsements but not lobbying muscle.
The oil and gas industry has survived through evolving, and it’s time to evolve on carbon pricing. An economically rational policy can provide the investment clarity companies want, while delivering the greenhouse gas reductions that societies, supply chains, and ecosystems need.
API is a large organization with diverse views represented, and the climate task force’s job won’t be easy. But the time for change couldn’t be better.
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