BP’s grim warning on carbon emissions

The world’s tardiness in starting to reduce carbon emissions will make the inevitable transition to net zero emissions more disorderly and costly, according to energy major BP’s chief economist, Spencer Dale, who is calling on society to demand governments set the policies to drive the energy transition.

Everyone – society, companies and governments – have a responsibility to put the world on a path to net zero emissions as demanded by climate science, Mr Dale said. But emissions are going in the wrong direction, increasing in 2018 at the fastest rate for seven or eight years, by 600 million tonnes, or by the equivalent of having added 400 million cars across the globe.

“A really worrying picture, and this happened at a time when around the world we are seeing increasing societal demand for urgent policy change in terms of climate change,” he said in an interview from London ahead of his address to The Australian Financial Review National Energy Summit later this week.

“You can see this growing mismatch between the hopes of society and the reality of the data which moves stubbornly in the wrong direction.”

But Mr Dale, a former member of the Bank of England’s monetary policy committee, said energy suppliers like BP, while it is committed to a rapid transition to a low carbon energy system, can’t get too much out in front of society or governments.

“We tried that before with Beyond Petroleum and we lost an awful lot of money, and so we can’t get ahead of where society and governments are,” Mr Spencer said, referring to BP’s strategy of the 2000s which resulted in heavy losses from its significant investments in solar and sustainable energy.

He said governments have a key role to play in setting incentives to drive toward cleaner energy but that everyone has a collective responsibility in that direction.

The idea that somehow you can choose between either renewables and oil and gas just doesn’t add up in terms of the arithmetic.

— Spencer Dale, BP chief economist

“We need to demand that governments set the right policies, we need to demand cleaner energy and really importantly, particularly in rich, developed economies like the UK and Australia we need to have greater energy efficiency so that we free up that energy so that it can be used in other parts of the world that are still very energy deficient.”

At the same time, he said that while renewable energy has an “unbelievably bright” future, investing in new oil and gas fields is still critically important to meet the world’s demand for energy in developing nations,

“The idea that somehow you can choose between either renewables and oil and gas just doesn’t add up in terms of the arithmetic,” Mr Dale said.

“We just need to understand that renewable energy can play a part, but it can’t solve the problem on its own.”

BP calculates that the share of wind, solar and biofuels in the energy mix is on track to reach about 15 per cent by 2040 from the present 4 per cent, which Mr Dale said represented the quickest penetration of any fuel ever seen in history but nowhere near enough to achieve the goals of the Paris climate accord.

To achieve the Paris goals, renewable energy’s share would need to reach 30 per cent by 2030, he said, describing that as “off the chart relative to anything we’ve ever seen”.

“But even if it gets to 30 per cent what’s going to provide the other 70 per cent in 2040? It’s just basic arithmetic here, and if we don’t want coal to provide much of it because coal is by far the most carbon-intensive fuel then oil and gas will have to play a role going forward.

“I make no apology for BP continuing to invest in oil and gas.”

In May, BP shareholders passed a resolution with 99 per cent support requiring BP to spell out a strategy consistent with the goals of the Paris climate accord of December 2015. A second resolution that would have required BP to set goals for “Scope 3” emissions – those emitted by its suppliers and customers – was rejected.

Mr Dale said energy efficiency, carbon capture and storage and hydrogen would be important areas alongside renewable energy to meet the net zero emissions goal.

Carbon capture was one technology that is still not playing a role anywhere near to the one it needs to, he said, urging governments to provide incentives either through a carbon price or another means of support.

“That’s a key technology and I think potentially it can play a role in Australia both in terms of its power system in the near term … but also going forward in terms of the development of clean hydrogen within different parts of the world, including in Australia.”


Extracted from AFR