February 12, 2020
The oil and gas giant BP on Wednesday announced that it plans to take aggressive steps to combat climate change by becoming net-zero by mid-century — and pushing others to follow its example.
The London-based colossus, responsible for the worst oil spill in U.S. history with the Deepwater Horizon disaster in 2010, said that it will “fundamentally transform its whole organisation” to zero-out the greenhouse gas emissions generated by its fossil fuel production and global operations by 2050.
The company also aims to halve the carbon intensity of its products – namely crude oil, natural gas, and other fossil fuel products. And it plans to support global efforts “to help get the world to net zero,” it said in a statement, by advocating for putting a price on carbon emissions and other “policies that support net zero.”
The move is the first major announcement from BP’s new CEO, Bernard Looney, who took the reins last week following the retirement of Bob Dudley, who had led the company for nine years.
“We are seen by many as a source of the problem, and we're still an obstacle to solving it,” Looney said in public remarks Wednesday. “Let me be very clear today: I get it. The world does have a carbon budget, it is finite, and it is running out fast, and we need a rapid transition to net-zero.”
By becoming net-zero in its oil and gas drilling operations, BP aims to remove 415 million metric tons of carbon dioxide emissions a year, nearly as much as California generates. The company also plans to exit organizations that oppose efforts to address climate change.
“I see huge opportunity for BP to demonstrate that we are a force for good in the world, and to grow, and to thrive,” Looney said. Addressing climate change will require “replumbing and rewiring the global energy system,” which “will require nothing less than reimagining energy. And today that becomes BP's new purpose: Reimagining energy for our people and our planet.”
The announcement marks a significant shift from Looney’s predecessor, who in one of his last interviews before retiring after nine years at BP sounded a warning about heavily investing in renewable energy, carbon capture, and other technologies aimed at reducing heat-trapping emissions and addressing climate change: “If you go too fast and you don’t get it right you can drive yourself out of business,” Dudley said last month.
However, while the oil and gas sector might have once been a reliable investment standby, it was the worst-performing market sector of the 2010s, hammered by anemic prices and sluggish global demand growth. BP’s stock price when markets closed yesterday was down 35 percent from a decade ago — and it hasn’t come within shouting distance of that 2010 peak in the past 10 years.
That’s likely made BP’s most influential shareholders more open to the company’s major change in course, experts say. While Looney and BP, in announcing the company’s new efforts to address climate change, have cast the effort in terms of agreements like the 2015 Paris Climate Accord, where nations pledged to take steps to keep the global average temperature from rising by more than 2 degrees Celsius from pre-industrial levels, the new CEO has also argued that it makes good business sense.
“They’re saying, ‘Not only is this possible, we're going to do it, and we're not forecasting any depression in our financial performance; in fact it might be better,” said Jigar Shah, president and co-founder of Generate Capital, a clean-energy financing company. “Most institutional investors, they’re saying, ‘Figure out how to pick it up,’ and what they’ve found is, when you look at the performance of not just us at Generate Capital, but our peers, we’re roundly beating the returns of the oil companies.”
BP’s new climate goals, if fulfilled, would signal a significant shift for the fossil fuel industry. It follows a drumbeat of similar announcements in recent months: In December, the Spanish oil and gas titan Repsol announced that it would seek to become net-zero by 2050. The Italian firm ENI said that it would aim to go net-zero even earlier, by 2030, although it’s using a less stringent benchmark. Meanwhile, in the U.S., Vicki Hollub, the CEO of Occidental Petroleum – the country’s fifth-largest oil and gas producer – has said that she wants the company to become carbon neutral, spearheading heavy investments in carbon-capture technology.
However, BP is in a different class entirely in size, influence and reputation: The company ranks among the largest in the world by market capitalization – as of 2016, behind only Exxon Mobil, Royal Dutch Shell, Chevron and Total. Yet it remains tarnished by the legacy of the Deepwater Horizon explosion, which killed 11 people, dumped 168 million gallons of crude oil into the Gulf of Mexico, and continues to have lasting impacts on the region.
For both reasons, some environmental groups greeted the company’s climate announcement with deep skepticism. Notably, two-dozen fossil fuel companies were responsible for more than half the world’s greenhouse gas emissions between 1988-2015, with BP ranking among the “highest emitting companies over the period,” according to a 2017 report by CDP, a nonprofit that tracks environmental impacts.
“BP is one of the companies most responsible for the climate emergency,” Ellen Gibson, senior organiser in the United Kingdom for 350.org, a global climate advocacy group that calls for stopping all fossil fuel projects. “They say they want their business model to align with the Paris Agreement, but simply put: it is not possible to keep to a 2 degree warming limit – let alone 1.5 degrees – while continuing to dig up and burn fossil fuels. Unless BP commits clearly to stop searching for more oil and gas, and to keep their existing reserves in the ground, we shouldn’t take a word of their PR spin seriously.”
As recently as last May, news reports revealed that BP in 2017, under Looney’s predecessor, was lobbying the Trump administration to open regions of the Arctic to oil and gas drilling, which is intensely opposed by environmental groups. BP meanwhile once rebranded itself as “Beyond Petroleum” in 2000, touting its investments in what were then much more costly renewable energy resources. But it quietly retrenched a decade later amid fallout from the Deepwater Horizon disaster and a new boom in shale oil and gas production.
“BP is not committing to what’s needed, which is a rapid phase-out of oil and gas production in line with climate justice and climate science,” Hannah McKinnon, director of the Energy Transitions and Futures program at the environmental group Oil Change International, said in a statement. “Instead, BP continues to invest massively in looking for and expanding into new fossil fuel reserves, this keeps them on the wrong side of history.”
Climate protesters led by Greenpeace managed to shut down the company’s headquarters last week. Looney, following the incident, said in a statement that he “shares their deep concern about climate change and will set out his low carbon ambition for the company next week.”
Outside the advocacy community, though, experts broadly welcomed BP’s net-zero pledge. Where it’s now an outsize player in the oil and gas industry, the company, with its deep pockets, its institutional expertise and its influence in capitals around the world, could have a similar impact on efforts to address climate change.
“What BP has going for it is 43,000 full-time employees, of which 10,000 of them are engineers. They're the smartest and brightest people in the world at complex engineering solutions,” Shah said. “If BP wants to refocus its assets on decarbonization, the technologies are ready for scale-up. We need BP's government-affairs capacity, engineering capacity, and expertise to get that done.”
The move, he continued, may spark similar efforts by other oil and gas conglomerates – if not American firms Exxon Mobil and Chevron, other European firms like Shell, in part because it goes far beyond “dipping their toe in the water.”
Jason Bordoff, a White House energy and climate advisor during the Obama administration advisor and founding director of the Center on Global Energy Policy at Columbia University, offered a similar assessment.
“BP has gone further than any other oil and gas company to date in committing to fundamentally transition to being an energy company, not just oil and gas, by 2050 — and, very importantly, lobbying for the policy to get us there,” Bordoff said.