In May 2020, global greenhouse gas (GHG) concentrations reached an all-time high. Even the worldwide pandemic that has depressed demand for gasoline, diesel and jet fuel cannot stop the Earth from dangerously warming.
One-off events like COVID-19 only temporarily reduce annual emissions. But atmospheric levels of climate-warming gases are cumulative; they will not decrease until more emissions are removed than go into the air year after year. Over the long-term, this will require the oil industry to undergo a wholesale clean energy transition, one that achieves large-scale change in capital allocation to carbon-free systems. But, in the short-term, each oil company needs to reduce the climate footprint of its own operations.
It could take as long as a decade for the economy to fully recover from the pandemic. Oil markets will remain in flux while global producers and refiners rebalance supply with demand. New oil market choices will need to be squared with climate risks. During this “great reset” companies must ask themselves: Which operations should we turn back on first? Which assets should remain off? And how do we convert our Paris pledges into durable climate actions?
Know Your Oil
Investors can pick and choose among different oil majors or independent producers and refiners — or the dedicated funds that track them. But they need detailed emissions data on current assets and future capital investments to measure a company’s real climate progress.
This knowledge exists. A new open-source tool called the Oil Climate Index (OCI) disaggregates the various lifecycle GHG emissions from the oil and gas sector in a fully transparent manner. For the industry’s part, producing, transporting and refining a barrel of crude oil (Scope 1 and 2 GHGs) vary widely, and account for up to 40% of total lifecycle emissions (including Scope 3 GHGs), depending on the oil selected and the production and refining processes used.
Given the massive volumes of oil and gas that circulate daily through the economy, the industry’s own GHG footprints are large enough to matter when calculating climate risks.
Estimated GHG Emissions for Select Global Oils (Ranked by Scope 1 and 2 Industry Emissions)
Assessments of upstream GHGs from nearly 9,000 oil fields in 90 countries and downstream emissions in nearly 400 refineries from 83 countries have been conducted using the OCI’s underlying models. Together, these studies find that the estimated carbon intensities of producing and refining a barrel of crude vary markedly, even when…