If you’ve been keeping track of the world’s major energy companies in recent years, you might have a positive impression of their efforts towards a clean energy transition. However, the reality is that the pace of change is far from adequate when it comes to tackling the climate crisis. Despite rising emissions and continued use of fossil fuels, some companies are prioritizing their profits over meaningful action.
For instance, Shell recently announced that it will no longer decrease its oil and gas production until the end of the decade, while also increasing dividends instead of investing in clean energy. BP, too, walked back its plan to reduce oil and gas output. Although the industry highlights its efforts to reduce emissions and pursue green energy technologies, these initiatives pale in comparison to their focus on maintaining and enhancing oil and gas production. According to the International Energy Agency (IEA), investment in clean fuels by the industry is still far below the necessary levels.
In fact, oil and gas companies are projected to spend over $500 billion this year alone on identifying, extracting, and producing new supplies of oil and gas, as well as distributing record profits to shareholders. Unfortunately, only a minuscule percentage of their production and exploration investments have been dedicated to low-emission energy sources. This behavior suggests that these companies either don’t believe in the possibility of a low-carbon transition or fear that it would significantly impact their profitability.
Exxon Mobil, for example, expressed doubt in its regulatory filing that society would accept the necessary sacrifices to achieve net-zero emissions. And while Shell claims its commitment to net zero by 2050, it also acknowledges that the company may not meet its target if society fails to become net zero by then. These viewpoints are likely influenced by the fact that the world is currently off track to achieve net-zero emissions by 2050. Moreover, rising energy demands in developing countries pose a challenge to decarbonization efforts.
Even governments that are dedicated to fighting climate change, like the Biden administration, have at times encouraged energy companies to produce more oil to stabilize gasoline prices. This contradictory behavior raises questions about whether society will accept the consequences of maintaining the status quo in the face of rising temperatures and extreme climate events.
The preference for distributing oil profits as dividends, rather than reinvesting them in low-carbon energy solutions, indicates that shareholders are also skeptical about the industry’s ability to remain profitable in clean energy. They seem to favor investing in companies they believe have a competitive advantage in these technologies.
While the world will continue to rely on oil for years to come, even in accelerated climate action scenarios, it’s concerning that some oil companies appear to be aiming to be the last producers standing. This approach is problematic because not every company can be the last one standing, and many of them haven’t taken adequate steps to reduce emissions from their operations.
The influence of the seven major publicly traded oil and gas companies, known as the supermajors, is disproportionate to their production share. These companies possess the technological and engineering expertise to lead the way in advancing clean energy solutions.
Furthermore, governments, whether fully or partially owning oil and gas companies, are also falling short in their climate efforts. Several of the largest-producing countries blocked a Group of 20 agreement to reduce fossil fuel use and increase renewable energy by 2030. This is particularly troubling because state-owned companies can take a longer-term perspective beyond quarterly shareholder pressures. However, they also face the challenge of meeting national budget requirements.
A successful energy transition would benefit from greater involvement and investment from the big energy companies. Their skills, capital budgets, and expertise make them well-suited to contribute to low-carbon technologies such as carbon capture and hydrogen.
Industry leaders now face a critical choice: either back up their rhetoric with substantial investments in clean energy or accept that their plan is to be among the last producers, relying on a slower transition. The outcome will have significant implications for our collective ability to tackle the climate crisis.
In conclusion, it is clear that the current actions of oil and gas companies do not align with their public declarations about supporting a clean energy transition. Urgent and concerted efforts are required from these industry leaders to match their words with meaningful actions. Society must demand accountability and promote a sustainable and responsible approach to energy production and consumption. By prioritizing investments in clean energy and emission reduction technologies, these companies can play a vital role in addressing the climate crisis and securing a sustainable future for all.
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