Companies and Markets

Fossil fuel companies sign up to emissions reduction pact at UN climate conference

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Fifty of the world’s top fossil fuel companies have promised to eliminate emissions from their own operations by the middle of the century as part of a package of controversial pledges unveiled at a UN climate summit in Dubai.

ExxonMobil, TotalEnergies, BP and Shell were among the companies to agree to set or tighten voluntary deadlines for emissions reductions, along with state energy companies Saudi Aramco and the Abu Dhabi National Oil Company. None agreed to reduce hydrocarbon production.

The companies, which represent about a third of global oil and gas production, also pledged to stop routine flaring of excess gas and to eliminate almost all leaks of methane, a potent greenhouse gas, by 2030.

The main state energy companies of Iran, China, Mexico, Kuwait, Venezuela and Russia did not participate. Chevron, which did not sign the charter, said it welcomed the effort but required “more clarity on the framework”. It would focus on delivering its own lower carbon targets, it said.

The moves were part of a series of energy commitments brokered by Sultan al-Jaber, president of the COP28 summit and Adnoc chief executive, in the run-up to the summit.

Some 116 countries have endorsed the COP28 presidency’s aim to reach an agreement on tripling installed renewable energy capacity and doubling the annual rate of energy efficiency by 2030.

“We can do this,” Sultan al-Jaber told world leaders as he announced the climate deals.

However, the pledge covering oil and gas industry operations addresses only 15 per cent of the total greenhouse gases the energy sector is responsible for contributing to global warming.

The agreement disappointed climate experts by steering clear of addressing the carbon dioxide released when fuels are burnt, which make up the bulk of the industry’s greenhouse gas emissions.

Critics said the pledges largely preserved business models and were not consistent with limiting the global temperature rise to no more than the 1.5C since pre-industrial times. Temperatures have already risen at least 1.1C.

Difficult UN negotiations on a final agreement lie ahead to reach consensus between countries on the issues of climate finance and cuts to fossil fuel production.

“For the UAE it’s a coup,” said Tom Evans, policy adviser on climate diplomacy at the think-tank E3G. “But there are two weeks to go and there are red flags ahead . . . There’s uncertainty about how we anchor this into a multilateral regime so that it sends a market-shaping signal to the world.”

Accelerating the take-up of clean energy was “only half the solution” to keeping the global temperature rise to within 1.5C from pre-industrial levels, said Tina Stege, climate envoy of the Republic of the Marshall Islands, one of the nations most vulnerable to rising sea levels.

“The [clean energy] pledge can’t greenwash countries that are simultaneously expanding fossil fuel production,” Stege said.

The International Energy Agency estimates that the industry would need to invest $600bn to halve its operations’ emissions by 2030 as a proportion of its energy output. This would be “only a fraction” of the record income they earned last year because of soaring prices during a global energy crisis, the IEA said.

Oil and gas companies also committed to invest in renewable energy and low-carbon fuels, and to enhance their reporting of emissions. “We really do at some point need to look at what is realistically possible rather than some of the idealistic narratives,” said a COP28 representative. 

COP28 said a secretariat would be set up to monitor companies’ progress towards the voluntary oil and gas charter’s goals, but it did not outline any penalties for failing to hit self-imposed targets.

Campaigners were critical of the nature of voluntary pledges. David Tong, global industry campaign manager at Oil Change International, said an agreement was needed to end fossil fuel production. “This is like a cigarette company trying to solve lung cancer by making cigarettes more efficiently,” he added.

Heavy industry, shipping and aviation groups signed up to a coalition to accelerate the transition to a low-carbon economy as part of the same package of measures, after saying they could “plausibly” cut greenhouse gas emissions from these sectors by a third by 2030. 

The Biden administration approved new US rules to crack down on methane leaks, estimating they would cut American emissions by 58mn tonnes by 2038, or by 80 per cent from levels that would occur without the rule.

Nuclear gets in on the act at COP28

More than 20 countries including the US, the UK and France signed a declaration at COP28 committing to try to triple global nuclear power capacity by 2050.

The declaration said nuclear power has a crucial role to play in limiting global emissions as a source of clean energy that can run alongside renewables.

It was signed by 22 countries including the UAE and Canada, but not China, Russia or India, which have large nuclear power capacity.

More than 370GW of nuclear power capacity has been installed worldwide, according to the International Atomic Energy Agency, supplying about 10 per cent of global electricity.

The declaration is the latest sign of revival for the nuclear industry, which has benefited from the increased focus on energy security in the wake of Russia’s full-scale invasion of Ukraine last year.

Rachel Millard

Climate Capital

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