Big Oil has cleaved into two factions. On the Eastern side of the Atlantic, supermajor oil companies in Europe have majorly divested from oil and gas. Reading the writing on the wall, Big Oil in the European Union has made a concerted effort to place itself at the forefront of the green energy transition, pivoting to rebrand itself as Big Energy. Across the pond in the United States, Big Oil has taken an entirely different approach. Instead of accepting the inevitable and imperative move away from fossil fuels, U.S. supermajors have doubled down on oil and gas and turned to carbon capture as a means of offsetting their environmental impact.
As the United Nations and the Intergovernmental Panel on Climate Change (IPCC) sound the alarm bells about the fast-approaching threat of catastrophic climate change, the United States seems as deadset as ever on finding a way to get on board with the fight against global warming and rebrand itself as climate-conscious without letting go of its sizeable oil and gas industry. Even President Joe Biden, who featured climate change as a central tenet of his platform, has recently sparked the ire of environmentalist and climate activists with what some see as a toothless effort at curbing emissions through the $1 trillion dollar infrastructure bill.
Critics have argued that the bill itself seems co-opted by the oil industry, as efforts like carbon capture continue to receive major government support. Carbon capture has largely functioned as a means of allowing the oil industry to produce barrels of oil with a low(er) carbon footprint, or even net-zero barrels, without encouraging the industry to actually produce less oil and gas. In some cases, carbon capture is merely a means of ramping up oil production via a process known as enhanced oil recovery (EOR). EOR entails capturing natural gas that would otherwise be vented into the atmosphere as a byproduct of oil extraction and then pumping that gas back into the ground to force more oil to the surface.
While a net-zero barrel of oil might sound like a great advance, the reality is that we don’t need to merely offset the emissions of the energy industry. The reality of climate change is so dire that we must offset carbon at the same time that we phase out fossil fuels entirely. We need to be taking greenhouse gases out of the atmosphere, not merely limiting the amount that we continue to release. Carbon capture is not the only strategy being employed by the oil and gas industry that critics decry as blatant greenwashing. Oil and gas companies in the United States have also begun to invest in solar and to power their own operations with a higher mix of renewable energy. This approach, while great for PR, is not going to do much to move the needle on the industry’s greenhouse gas emissions, however. Part of the problem is that the fossil fuel industry continues to aim for low-hanging fruit when it comes to curbing emissions instead of aiming for the more challenging, and more important, sources of emissions.
The sector has primarily opted to tackle scope 1 and 2 emissions — those that are directly produced by a company and the goods and energy it consumes — but the vast majority of emissions occur either upstream or downstream in the value chain and outside of the company’s direct purview. Scope 3 emissions — such as the exhaust coming out of your tailpipe — are not technically an oil company’s emissions, but they are a direct result of an oil and gas company’s operations. They are also the most significant source of emissions in the oil and gas value chain.
While U.S. fossil fuel companies are certainly making some headway on climate change — they’re acknowledging its importance and beginning to take some concrete actions — it’s all too little too late unless they pivot away from extraction in a very serious way. Justifying continued production with carbon offsetting will not be enough to keep the world on track to mitigate the worst effects of climate change. Hopefully, with Environmental, Social, and Governance (ESG) becoming the mainstream, oil companies will have to compete with each other to be more green than ever before in order to stay in investor’s good favor.