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Ideas & Debate

How oil industry can mitigate effects of climate change in the wake of Paris pact

A labourer works at a coal factory in Changzhi, Shanxi province, China. Coal is the leading fuel pollutant. PHOTO | REUTERS
A labourer works at a coal factory in Changzhi, Shanxi province, China. Coal is the leading fuel pollutant. PHOTO | REUTERS 

Use of fossil fuels — coal, oil and gas — produces carbon dioxide which causes global warming.

The Paris Climate Change forum last December was all about targets and commitments by various countries to reduce carbon emissions to mitigate global environmental threats.

The oil companies are key climate change stakeholders since oil and gas are their principal tools of trade across the petroleum value chain — production, processing, and end-use.

Carbon emissions are encountered at every stage of this value chain making the oil industry a potentially critical player in climate change solutions.

Oil and gas shall remain a major fraction of global primary energy mix for many decades to come. The issue is how the oil industry adjusts their business models to accommodate targeted reduction of fossil fuels use while maintaining their balance sheet values.

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It is also about how they positively support and participate in various climate change government policies and programmes to meet national and global climate change targets.

Over the past two decades the oil industry has mostly lived in self-serving denial in respect of climate change, sometimes claiming that it was a hoax not sufficiently supported by science.

Specifically in the US, the indifference to Kyoto Protocols by the Bush government and the oil lobby delayed the engagement of the mainstream American oil firms in global climate change efforts.

The Obama administration has, however, subtly mainstreamed climate change efforts in US and globally, climaxing with the Paris pact.

The EU has also put in place climate change policies, strategies and regulations that have enveloped the oil industry into climate change participation over the past 10 years.

The global oil industry has expressed support for the Paris forum deliberations, and “climate change challenges” now appears to be a routine agenda in various global and regional oil industry forums.

In months to come it will be expected that individual oil companies will internalise climate change in their corporate philosophy to signify “green” care and commitment, the same way they have emphasised commitment to safety and environment since early 1990s.

Thereafter, the oil sector is expected to incorporate individual climate change solutions in their business planning.

Coal is the worst offender in emissions while natural gas has the least carbon. It is expected that the oil industry shall “cautiously” support policies that replace coal with natural gas, especially in power generation and heavy industries.

However, the main green competitor for oil and gas is renewable energy — solar, wind, geothermal.

Renewable energy is now unstoppable since it makes strong economic sense while providing most effective green solutions. It is in renewable energy that most of the global energy investments are currently focused.

To maintain relevance and lead in the energy supply sector, oil companies will likely participate in renewable energy ventures when and where risks are low and returns sufficient. This is also another way of demonstrating corporate green commitment by the oil companies.

It is, however, in the upstream oil and gas production operations that immediate housekeeping shall be required of oil companies to curb venting and flaring of gases to reduce carbon emissions.

This will mostly be a compliance requirement enshrined in energy and environmental regulations of oil producing countries.

In the areas of transportation fuels — road, aviation, marine, rail — the oil industry will be expected to play key collaborative roles to innovate technologies and efficiencies that result in net reduction of carbon emissions.

They will need to co-operate with original equipment manufacturers to come up with lower carbon technology in the transport sector.

For example, there is the ongoing up-scaling of electric vehicle development and production to give it a mass appeal by reducing its production costs.

Future hydrocarbon consuming equipment and engines that are designed for higher fuel efficiency ultimately reduce carbon emissions.

There exist “off-line” green projects like forestry programmes and projects that the oil industry can participate in.

Plants absorb carbon dioxide while providing other economic and environmental benefits to a country. Forestry projects can be implemented sustainably on commercial scale through partnerships between oil companies and forestry agencies.

Oil companies have recently insisted that a global carbon pricing mechanism needs to be established as the most equitable way to measure and meet climate targets.

Carbon prices also provide a correct currency to evaluate economic viability of various green options and projects.

Specifically for Kenya, a robust and active green story already exists mainly in the form of renewable energy projects. Programmes for energy efficiencies are ongoing.

Opportunities to reforest the Kenyan landscape exist. All these present partnership opportunities for oil and gas companies.

Mr Wachira is the director of Petroleum Focus Consultants. Email: [email protected]

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