Ex-BP Chief: Warming poses "existential threat" to big oil and big coal
Energy groups face ‘existential’ climate threat, says ex-BP chief
Financial Times, Nov. 20, 2014
Energy and mining companies are ignoring the “existential threat” from climate change and must change the way they operate, the former head of BP warns.
The intervention by Lord Browne, one of the energy world’s most influential voices, comes as coal, oil and gas companies face mounting investor criticism that they are too complacent about the risk of tougher action to curb global warming.
He told a seminar in London on Wednesday that the scientific evidence of global warming should be treated as settled but “this conclusion is not accepted by many in our industry, because they do not want to acknowledge an existential threat to their business”.
Expectations have grown that a global climate agreement will be sealed in Paris next year, which could lead to more stringent regulation of the energy sector. Some financial analysts have warned that it could end up devaluing oil and mining companies’ assets worth billions of dollars.
Big oil companies such as ExxonMobil and Royal Dutch Shell have dismissed such a threat, arguing that the global demand for the oil they produce will only grow.
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Resource companies are also being targeted by a growing grassroots campaign aimed at making fossil fuels as unpopular as tobacco. It has prompted both Stanford University and the family foundation built on the riches of John D Rockefeller’s Standard Oil fortune to announce plans this year to cut their hydrocarbon investments.
The risk of more energy regulation was underlined by last week’s unexpected joint announcement by the US and China of plans to curb fossil fuel pollution, said Lord Browne, who promoted renewable energy and climate action during his time at BP.
“The targets agreed by President Obama and President Xi will not be achieved with the policies currently in place,” he told the seminar, hosted by Critical Resource, an industry advisory group he supports that encourages extractive companies to reshape their business models to address environmental and political risks.
“They will therefore require new policies, which could reduce the two countries’ cumulative oil demand by more than 17bn barrels of oil over the next 15 years.
“But many operators remain largely insensitive to the potential consequences of such policies,” he said, adding “very few” small and medium sized companies in North America “publicly accept the science behind climate change and even fewer think of climate change as a risk to their business”.
In a thinly veiled rebuke to companies such as US coal giant, Peabody Energy, whose chief executive recently called for an end to “climate alarmism”, Lord Browne said today’s energy leaders had been “somewhat absent” from the climate change debate, or were trying to resist progress. “Signals of resistance do not help because they place you firmly in the past,” he said.
Possible remedies for companies seeking to address the climate challenge include moving into renewable energy and ending the funding of lobby groups trying to weaken climate change policies, said Daniel Litvin, managing director of Critical Resource.
Lord Browne still has interests in the energy sector himself, and is on the board of Cuadrilla, a shale gas exploration company that is set to drill wells in the UK. He said some energy company leaders had an ideological opposition to regulation, while others believed “a CEO whose tenure will last for less than a decade will not be held accountable for their company’s fortunes many decades into the future”. But both were wrong, he added
While Lord Browne said he was reluctant to spell out precisely how energy companies should adapt, the peer said they should accept the conclusions of scientists about climate change and look at “the opportunities presented by low carbon energy systems”.
These technologies were developing at an impressive pace, he said, pointing to how the cost of a wind turbine had fallen more than 20 per cent in five years and the cost of a solar panel had fallen 80 per cent over the same time.