By Lise Alves, Contributing Reporter
MIAMI BEACH, FLORIDA – Oil and gas companies around the world are undermining efforts to curb climate change effects by investing heavily in fossil fuel projects, a new report has shown. According to Carbon Tracker, eighteen recently approved projects in the oil and gas industry and estimated to cost a total of US$50 billion, fail the Paris alignment test.
“Examples include Shell’s US$13 billion LNG Canada project and BP, Total, ExxonMobil and Equinor’s Zinia 2 project in Angola,” says the financial think tank in its report.
According to Carbon Tracker, since the beginning of 2018 the largest listed oil and gas companies have spent billions of dollars in projects to drill for oil and gas from places like the deep sea off the coast of Africa to oil sands in Canada, despite their compliance commitment discourse to the Paris Accord.
“This includes the large European companies that are doing the most to reassure investors that they are responsive to climate concerns – BP, Shell, Total and Equinor,” says the report.
This is the first study to identify individual projects that are inconsistent with the Paris Agreement, says the entity. The report finds that “no major oil company is investing to support its goals of keeping global warming ‘well below’ 2˚C and to ‘pursue efforts’ to limit it to a maximum of 1.5˚C.”
The UK-based think tank tracked these global companies and found that they spent at least thirty percent of their investments last year in projects that go against the Paris Accord agreements and carbon.
“Every oil major is betting heavily against a 1.5˚C world and investing in projects that are contrary to the Paris goals,” says Andrew Grant, Senior Oil & Gas Analyst at Carbon Tracker and one of the authors of the report.
The analyst says the best way to both preserve shareholder value in the transition and align with climate change goals ‘will be to focus on low-cost projects that will deliver the highest returns’. And this is where investors will play a big role.
Investors are increasingly concerned about the risks climate change poses to their portfolios and their clients’ lives as evidence grows of the dangers of warming beyond the 1.5˚C threshold, says the report.
“Through identifying projects and setting emissions targets, investors will force companies to focus on only the most competitive projects and either diversify their businesses or return capital to shareholders. Failure to do so risks significant loss of shareholder value,” Mike Coffin, a co-author of the report, told The Miami Beach Times.
The authors of the report warn that oil and gas companies risk wasting US$2.2 trillion by 2030 if they base investment decisions on current emissions policies announced by governments, which would lead to 2.7˚C of warming, instead of planning for continued momentum towards a low-carbon world and ensuing reduced demand for fossil fuels.
“In a Paris (Accord)-aligned world with reduced demand for oil and gas, companies who continue to sanction projects that are unneeded risk creating significant stranded assets,” adds Coffin.
According to the analyst, increased investor pressure is critical to increasing company disclosure and requiring them to demonstrate compliance at the individual project level.
“Investors should challenge companies’ spending on new fossil fuel production,” concludes Grant.