The joint declaration issued by six European oil and gas majors was cautiously embraced by the United Nations, which will host negotiations this December in Paris aimed at designing a plan to cut the fossil fuel emissions that scientists blame for rising temperatures.
Total SA, Statoil, BP Plc, Royal Dutch Shell Plc, Eni and BG Group Plc called for “decisive action” at the Paris summit that would recognize the “vital role of natural gas.”
The companies argued that when burned to make electricity, natural gas typically generates around half the carbon emissions of coal.
The willingness of oil and gas firms to accept a fee on carbon emissions was widely seen as an attempt to improve their image at coal’s expense.
It comes as the oil and gas industry is caught in a growing divestment campaign that urges investors to withdraw from fossil fuel companies because of their carbon emissions. They also face pressure from policy-makers in several countries who want to shut off billions of dollars in production and consumption subsidies that benefit the sector.
“Oil firms are under a fair amount of pressure to not be seen as obstructionist on climate,” said Alden Meyer of the non-profit Union of Concerned Scientists, who was in Bonn, Germany where international negotiators are preparing the groundwork for a deal in Paris.
“They are hearing it from their shareholders, from institutional investors. This appears to be their strategy: to work on an international pricing mechanism.”
The UN welcomed the signal of cooperation from a sector that once resisted any attempt to add costs to doing business. Christiana Figueres, the UN’s chief climate negotiator, noted in Bonn that oil companies have “enormous engineering capacity (and) enormous financial weight in shifting capital from one source of energy to another.”
The direct victim of such a shift would be the coal industry, already under tremendous financial stress from a U.S. domestic boom in oil and gas production and public policies, especially in Europe, that target its heavy carbon emissions.
The industry has fought back with a pre-Paris strategy of its own: seeking to build alliances with developing countries that regard energy shortages as a bigger problem than carbon emissions. The industry says coal remains the cheapest way to provide energy “justice” for poorer countries.
“We see energy poverty development and climate change as integrated priorities,” said Benjamin Sporton, acting CEO of the London-based World Coal Association (WCA). “We need to see more investment in ensuring that people can access new coal technology.”
In its attempt to push back, the coal industry has reached out to governments that “anticipate a significant role for coal in their future energy mix,” Sporton said. The WCA has met with officials from India to Indonesia, Pakistan, the Philippines and Malaysia, with the aim of enlisting them to defend a place for coal-fired power generation in any Paris agreement.
Nor will the WCA be without support in Paris from industrialized economies. Australia – a major coal producer – continues to pursue coal exports and finance coal power stations overseas. And the Japanese government sees a promising future in selling its emissions-reducing technologies to coal producers around the world.
“Developing countries need more electricity and they will build more coal-fired plants no matter what developed countries say,” said Takafumi Kakudo, coal division director at Agency for Natural Resources and Energy.
But coal’s “energy poverty” messaging is firmly rejected by green groups. Environmentalists warn that simply shifting consumption from coal to natural gas would dangerously delay the wider implementation of renewable fuels that are essential to curbing global warming.
James Leaton, research director at the Carbon Tracker environmental group, called it “a bit desperate when the coal industry has to rely on the poor as the main source of their long-term growth.”
Indeed the six European companies could count on that lack of popular sympathy for Big Coal in deciding to advocate for natural gas to displace coal.
“The European companies are trying to find a place for themselves in what they know will be – in Europe – a much more carbon-constrained world,” said David Goldwyn, an energy consultant who headed international energy affairs at the State Department from 2009 to 2011. What we are seeing, he says, “is a fight for gas as the back-up fuel over coal.”
Yet other observers took the move by oil and gas companies at face value, calling it a significant step.
“It’s part of a growing chorus of support from the business community for carbon pricing and for a stronger agreement in Paris,” said Elliot Diringer, executive vice president at the
Washington-based Center for Climate and Energy Solutions, a nonprofit policy group.
“They are calling for government regulation. I think that goes beyond PR.” -Reuters