Oil and gas producers must convert their operations to renewable energy or face steep economic decline, the world’s chief energy adviser has said amid the forging of a new alliance of energy companies at the UN Cop28 climate summit.
Fatih Birol, executive director of the International Energy Agency, said: “We have to find a way to reduce fossil fuel consumption, and as such there is an important role that the oil and gas industry can play. I very much hope that they can show in Dubai that they can be part of the solution when it comes to tackling climate change.”
Birol warned that oil and gas companies would find it more difficult to operate in future. “It is not just people in Europe or the US, or Australia, who are raising the alarm – more and more people around the world, from the streets of New Delhi and Jakarta, to Nairobi and Rio. They are seeing the clear links between the continued high use of fossil fuels and the increasingly severe climate impacts they are seeing almost on a daily basis.”
Governments should bring in policies to encourage the switch, but even if they did not, on current policies fossil fuel use would peak by 2030, leaving companies with an uncertain future, he warned.
Currently only 2.5% of the capital investment of oil and gas companies goes towards renewable energy, which Birol said was insufficient.
“I very much hope we will see [from Cop28] a strong signal to energy markets that fossil fuel use needs to decline,” he told the Guardian.
Birol warned that fossil fuel companies must prepare now “for an orderly decline” rather than try to expand or continue their operations. He said the skills and technology such companies already possess could be used in renewable energy generation, if they refocused their aims.
“I would like to see oil and gas companies embrace clean energy because they have a strong overlap with the strengths of oil and gas companies,” he said. “There is good affinity and they can really move in that direction.”
Many experts and countries, including the EU, now regard the Cop28 target of tripling renewables by 2030 to be insufficiently stretching, as recent analysis has shown it is likely to be achieved on current trajectories.
Birol repeated his view that simply investing in carbon capture and storage (CCS) would not give companies a licence to operate in future. “It’s a fantasy,” he told the Guardian. “It is an illusion.”
CCS technology will never scale up to cover the emissions of the oil and gas sector if they carry on with business as usual, and its use should be concentrated among sectors such as steel and cement that face the greatest difficulty in switching from fossil fuels, Birol said.
Current investment in CCS is about $4bn (£3.15bn) a year, but it would need to be $4tn a year to cover the emissions from fossil fuel use, amounts which Birol said were “implausible”.
At Cop28, the host country, the United Arab Emirates, itself one of the world’s biggest oil and gas producers, has drawn together a large group of both private sector and nationally owned oil and gas companies. Members of the “decarbonisation accelerator” will unveil promises in Dubai on Saturday to reduce and eventually eliminate greenhouse gas emissions from their operations.
However, these emissions are small relative to the size of the emissions from burning oil and gas. Many of the actions the companies are likely to sign up to are ones that they are already taking, or that could benefit them financially, such as plugging or capturing leaks of methane – the main component of natural gas – from their extraction operations. These measures are already profitable in many such operations, because of the high price of gas.
A letter, seen by the Guardian, signed by more than 300 civil society groups including Greenpeace, WWF and Oxfam, said the world needed a “transformative outcome” from Cop28, not voluntary pledges from fossil fuel companies.
David Tong, global industry campaign manager at the pressure group Oil Change International, which organised the letter, said: “The Global Decarbonisation Alliance is a dangerous distraction from the Cop28 process. We need legal agreements, not voluntary pledges. The science is clear: staying under 1.5C global warming requires a full, fast, fair and funded phase-out of fossil fuels, starting now.”
Cansın Leylim Ilgaz, associate director of global campaigns at 350.org, said: “We don’t have time to waste with more pledges and initiatives with fancy names. In order to shift the billions of dollars going to fossil fuels to renewable energy, and achieve an ambitious renewable energy target globally, we need a fast, fair and equitable fossil fuel phase out that does not rely on dangerous distractions. Cop28 must ensure we take the steps to ensure our collective future is one of shared prosperity by massively scaling up public finance for a just transition.”
One of the hardest-fought issues at Cop28 is likely to be whether to include a resolution to phase out fossil fuels in the final text. Some countries insist this is necessary to give a clear direction to the fossil fuel industry and investors, but some fossil fuel producers want to protect their industries, and many developing countries see the issue as one of global north hypocrisy that could deprive poor countries of the chance to exploit their reserves.
Cop28: Can fossil fuel companies transition to clean energy?
On Tuesday 5 December, 8pm-9.15pm GMT, join Damian Carrington, Christiana Figueres, Tessa Khan and Mike Coffin for a livestreamed discussion on whether fossil fuel companies can transition to clean energy. Book tickets here or at theguardian.live
