Oil and Gas Majors Call for Carbon Pricing – The Response

Earlier this month as officials from nearly 200 countries gathered in Bonn Germany for a round of UN climate talks, major oil and gas companies have issued a public letter calling for carbon pricing to control greenhouse gas emissions. (See GLOBE-Net article  Oil and Gas Majors call for Carbon Pricing)

The oil majors that were signatories to that letter, BG Group plc, BP plc, Eni S.p.A., Royal Dutch Shell plc, Statoil ASA and Total SA, announced a joint call to governments around the world and to the United Nations Framework Convention on Climate Change (UNFCCC) to introduce carbon pricing systems and create clear, stable, ambitious policy frameworks that could eventually connect national systems.

Christiana Figueres, the Executive Secretary of the UN Framework Convention on Climate Change, has written to the heads of six leading oil and gas companies thanking them for getting behind a universal climate agreement in Paris in December, while urging them towards higher short-term and long-term ambition.

Here is her response:

Addressees:

Mr. Helge Lund, BG Group plc
Mr. Bob Dudley, BP plc
Mr. Claudio Descalzi, Eni S.p.A.
Mr. Ben van Beurden, Royal Dutch Shell plc
Mr. Eldar Saetre, Statoil ASA
Mr. Patrick Puyanné, Total S.A

Dear Sirs,

Thank you for your letter of 29 May 2015 calling for a clear, stable, long term and ambitious agreement in Paris. I very much appreciate that you have taken this important step in the months leading up to COP 21. Your stated intention to support a strong outcome in the negotiations will provide confidence to governments that a low carbon, resource efficient and prosperous economy is achievable.

In your letter you raise several important issues and make substantial offers of support to the UNFCCC and to the international negotiation process. I thank you and would like to address each of these in my response.

You acknowledge that the world is right now failing to keep on the under 2 degree pathway that is determined as critical by the IPCC in avoiding the worst impacts of climate change. This is a source of constant concern for those of us involved in the negotiations and for anyone who is well informed about the implications of missing that target. The agreement that will be adopted in Paris is meant to construct a long term framework to keep us on track to this objective over time but this must be supported by urgent and ambitious short term action to ensure that even before the Paris Agreement takes effect in 2020 we are taking strong action to keep below 2 degrees.

You have taken many steps to increase operational efficiency in recent years and I have been impressed by the dedication and innovation shown in this endeavor by the oil and gas sector. I feel confident that there are still more efficiencies and opportunities to be found even within the current regulatory frameworks. I would call on you to devote urgent attention to scaling this action up and look forward to learning about progress later in the year.

Beyond this, you are right that government action through a comprehensive agreement in Paris is necessary to create a level playing field to drive investment and innovation. In my role as Executive Secretary of the United Nations Climate Convention I act in service of a negotiation process that is led by national governments. I am happy to report that without exception all of those governments are committed to achieving an ambitious outcome. You can support those governments over the coming months in the following ways:

1. Participating in detailed carbon pricing dialogues

I appreciate your call for a direct dialogue on the design of internationally linked carbon pricing schemes and have asked my office to work directly with your offices to identify the right forum for us to have an open and inclusive dialogue on this issue in the coming months. In particular, I would like to use our conversations to discuss the design of international systems and linkages and also to learn from you about details on pricing and timing principles. I would be interested in your thoughts regarding what price of carbon would be needed to achieve particular outcomes such as fuel switching, and CCS. This type of detailed dialogue between government and industry has not occurred in this way before and will be an important step on the road to an effective global agreement.

2. Committing to consistent government engagement

Having engaged with many of you during my tenure as Executive Secretary, I am confident that your assertion that you want to be part of the solution to climate change is genuine. I hope you can understand that governments and civil society also need to be reassured of your sincere commitment. So I would call on you to ensure that henceforth your government engagement is clearly focused on the outcome you have sought in your letter to me: an ambitious, long term policy framework on climate change that will guide us promptly and resolutely toward a low carbon economy.

3. Planning capital expenditure transitions

The G7 recently called for a long term decarbonization of the global economy by the end of this century. Given this ambition, I would encourage you to plan for these long term scenarios by setting out how you will transition your companies to meet the challenges of the 21st Century. I have no doubt that the oil and gas sector has an important and urgent role to play through an orderly transition to low carbon forms of energy. I look forward to learning your vision for this when we meet later in the year.

Once again, thank you for your leadership in sending this very welcome letter at this critical time. Through scaling up your own emissions reductions efforts, engaging in specific details about carbon pricing, ensuring your government engagement is consistent and by planning for a long term transition to a low carbon economy, your companies and others in your sector can play a crucial role in managing and reducing the threat from climate change. The world wants to be proud of your actions at this time of crisis and I look forward to your giving us every reason to be.

Yours sincerely,

Christiana Figueres