Emission reduction plans of oil and gas companies to invest in expensive and unproven technologies at scale are putting investors at risk, a new report from financial think tank Carbon Tracker finds Thursday.
'Oil and gas companies are gambling on emissions mitigation technologies that pose a huge risk to both investors and the climate,' says Maeve O'Connor, a Carbon Tracker analyst and author of the report entitled Absolute Impact 2022: Why Oil and Gas Companies Need Credible Plans to Meet Climate Targets.
'Most of these technologies are still at an early stage of development, with few large projects working at anything like the scale required by company goals, while solutions that involve tree planting require huge areas of land,' she said, adding that it remains to be seen whether these technologies will be technically feasible or economically viable given the huge costs involved.
The report, therefore, warns that if emission mitigation technologies (EMT) projects fail to capture or offset the intended amount of carbon, companies could face litigation, regulatory sanctions and reputational damage.
All but one of the 15 companies have announced plans to use EMTs, according to the report.
'If companies do go ahead with new production, relying on EMTs to offset carbon, this will impose extra costs and therefore increase the risk that assets will be stranded,' the think tank warns.
Carbon Tracker ranked climate policies by assessing three key criteria, which it says are minimum preconditions for claiming to be aligned with the Paris climate agreement.
These criteria include setting absolute emissions reductions with interim targets before 2050, covering full lifecycle emissions, including carbon released when oil and gas are burned, and covering worldwide emissions from all projects in which they have a stake, including sales of products they refine from crude purchased from other companies.
According to the report, only two oil and gas companies out of the largest publicly traded 15 have updated their climate targets since May 2021.
Among the analyzed companies are Eni, Repsol, Total Energies, bp, Shell, Equinor, Occidental, Chevron, Conoco Philips, EQT, EOG Resources, Devon, Pioneer, Suncar and ExxonMobil.
The report warns that net zero targets are not enough for companies to be aligned with Paris, as they need absolute limits on future emissions and significant interim targets as most companies are failing to commit to absolute cuts in emissions.
- American companies lag behind Europeans
The report finds that all North American companies lag behind European companies, with ExxonMobil having the weakest policy.
The company adopted a net zero target last year but has not pledged specific emissions cuts, having excluded 95% of lifecycle emissions from the products it sells.
Eni is one of the four companies accepting absolute cuts in emissions from the production and use of its products. It has the strongest climate policy pledging a 35% cut by 2030, up from its previous 25% target.
Repsol's new pledge of a 30% cut by 2030 sees it shoot up to second place, the report says.
'Financial institutions must scrutinize companies’ emissions targets and whether their plans to achieve them are practical and credible in order to assess alignment with global climate goals,' Mike Coffin, Carbon Tracker head of oil, gas and mining and report author, says.
'This is particularly so for companies that seek to ‘create space’ for further fossil investment. The best way for companies to reduce both their climate impact and transition risk exposure for investors is to allow their existing production to decline without investing in new assets,' he notes.
The report also cautions investors that two other strategies to reduce emissions lack credibility.
'BP and ExxonMobil are among companies selling assets, but this just shifts emissions from one owner to another who could increase production or operate under less stringent environmental standards,' the report warns.
By Nuran Erkul Kaya