Earlier this month, more than 30 oil and gas CEOs and investors captured headlines by meeting with Pope Francis in the Vatican on climate change, then releasing a statement supporting carbon pricing. What is clear from this high-profile event is that the climate crisis has become a societal imperative, an investor priority, and a top tier business risk for the oil and gas industry.
What’s not clear is whether these leading oil companies will help bring about the low-carbon future they envisioned with Pope Francis, by consistently advocating for essential public policies, including those that price and limit carbon emissions.
Spiritual capitals like the Vatican can inspire vision and stoke resolve. But ultimately, it is in political capitals around the world where government leaders will make the decisions that determine whether the climate crisis is solved. The real test is whether companies’ actions will match their rhetoric or lapse back into business as usual, exacerbating concerns of the financial community and deepening license to operate issues for oil and gas companies.
During the meeting, participants “agreed on the urgent need for a systematic transition to a low-carbon emissions future…aimed at keeping global warming below 2° C”. Reportedly, the oil and gas executives in the room also recognized that addressing the climate crisis requires “radical changes at all levels, both personal and collective.” If genuinely meant, this language is a welcome breath of fresh air from an industry known for its resistance to this level of change.
The subsequent statement from oil companies and other participants includes an endorsement of “carbon pricing regimes” whether tax, trade, or other market-based measures, and an acceptance that energy sector advocacy and engagement are essential to achieve government policy changes. This is an important statement, because pricing carbon is the key way to create incentives, establish regulatory certainty, and help industry allocate capital for the lower carbon future that investors demand.
One leading indicator of the seriousness of executive commitments will be how companies engage in the political debate on carbon pricing in the U.S., the world’s most energy intensive nation and one of its largest emitters. Today, business support for climate action is re-igniting in Washington DC.
While the oil companies that signed the Vatican statement are a fraction of the global industry, their leadership matters. Here’s what it will take for the oil companies that signed the Vatican statement to make their commitment meaningful in practice:
- CEO-level attention and resources commensurate with a global problem that demands – in their own words – “urgent action”.
- Active and public support for science-based federal climate policy that includes carbon pricing.
- Transparency on how they – among the largest dues paying members of the American Petroleum Institute – are using their clout to reverse API’s longstanding opposition to pricing carbon.
- Political giving that rewards pro-climate lawmakers and candidates, not those who oppose and obstruct government action on climate change.
- Earnest efforts to bring along a wider swath of industry actors.
Early Industry Actions
Recent climate lobbying by signatories includes reasons for cautious optimism, but also ample cause for concern.
Shell has taken the strongest and most consistent position on preserving and strengthening methane regulations, a vital part of meeting international climate goals. Moreover, Shell joined the CEO Climate Dialogue, whose Guiding Principles state that federal climate legislation must achieve an 80% or more reduction in emissions by 2050.
BP more recently came to vocally support federal methane regulation, though the company previously faced criticism for its reported lobbying of the Trump Administration to relax methane rules. BP also donated $13M to defeat a Washington State carbon tax ballot initiative (but later supported a cap and trade bill in that state). BP is also a member of the CEO Climate Dialogue.
ExxonMobil has long touted support for the Paris Agreement, but a careful review of its public position on climate policy reveals a gap; among the company’s principles for climate policy one cannot find the required level of ambition, i.e., the need for policies to contain the environmental stringency to keep warming below the 2° C goal discussed in the Vatican. Like some peers, ExxonMobil participates in another corporate-led climate policy initiative, the Climate Leadership Council, though ExxonMobil Chairman and CEO Darren Woods also presides over API.
Occidental has made commitments to storing carbon underground and potentially even removing it from the air with negative emissions technology, but so far has kept a low profile on carbon pricing policy and remained silent on methane regulations. As has ConocoPhillips, seen by some as a company with untapped potential to lead in the public sphere.
Meanwhile, Chevron continues to stake out the anti-climate pole of international oil companies. Chevron even violated a public promise by supporting methane deregulation by the Trump EPA. Moreover, Chevron maintains a climate policy web page bereft of urgency and apparently designed as a brake on ambitious climate action.
The history of oil and gas engagement on carbon and other climate policies too often has been defined by obstruction, opposition, and hiding behind the lowest common denominator. But with the urging and support of motivated investors, leaders in industry can chart a different future.
As the participants in the Vatican discussion agreed, radical change is needed, building on the positive steps taken by several companies in the industry. How companies lobby, engage with trade associations and peers, and politically spend will answer whether reality lives up to rhetoric.
Get new posts by email
We'll deliver new blog posts to your inbox.