The world’s oil and gas industry is facing a critical juncture as it approaches the upcoming UN climate conference, COP28. Dr. Fatih Birol, the head of the International Energy Agency (IEA), warns that the sector must decide whether it will contribute to the climate crisis or become part of the solution. The release of the IEA’s new report on the future of fossil fuels just days before COP28 is a strategic move to put pressure on attending governments to reach agreements on reducing the use of fossil fuels.
The uncomfortable truth that the industry must reckon with is that successful clean energy transitions demand a significant reduction in oil and gas operations over time, rather than their expansion. Dr. Birol emphasizes that there is no way around this fact. Last year, fossil fuel companies allocated a mere 1% of global investment to renewable energy. However, clean energy transitions require much higher investments to meet the world’s climate goals.
Moreover, the choice of the United Arab Emirates (UAE), a major oil producer, as the host country for COP28 has sparked controversy. Sultan Al Jaber, the chair of the climate talks, has been criticized for prioritizing carbon capture and storage (CCS) technology. CCS is costly and underdeveloped, but it aims to prevent most of the CO2 emissions from fossil fuel burning by either reusing or storing them underground. Some critics argue that fossil fuel producers hope to rely on this technology to continue extracting and using oil and gas.
Dr. Birol reminds us that achieving climate goals requires dispelling the illusion that large-scale carbon capture can solve the issue. The IEA report estimates that to halt global temperature increases above 1.5°C, the world would need to capture or remove approximately 32 billion tonnes of carbon—a goal that far exceeds current capabilities. Additionally, deploying these technologies would require more electricity than the world currently consumes.
While the report acknowledges the need for investment in carbon capture technology, experts like Dr. Steve Smith from Oxford Net Zero and CO2RE emphasize the importance of reducing emissions simultaneously. Trying to remove carbon dioxide while not addressing the root causes of emissions is akin to trying to use the brake and accelerator simultaneously in a speeding car.
The oil and gas industry faces criticism in the report for insufficient investments in renewable energy. Despite reporting record profits, fossil fuel companies contribute only 1% ($18 billion) of the estimated $1.8 trillion global clean energy investments, with the majority coming from governments and other industries. Brendan Curran from the Grantham Research Institute on Climate Change and the Environment suggests that the industry’s level of investment falls far short of what is needed to transition to a net-zero future.
Furthermore, the report warns countries against pursuing new drilling projects for oil as a means of enhancing energy security. Earlier this year, UK Prime Minister Rishi Sunak granted new North Sea oil and gas licenses under the pretext of strengthening the country’s resilience to volatile energy markets. However, Dr. Birol cautions that any new fossil fuel projects announced today will face not only climate risks but also business risks, as global oil consumption is projected to decline by the time these projects come to fruition in seven or eight years.
The IEA report serves as a wake-up call to the oil and gas industry and countries heavily reliant on fossil fuels. COP28 presents an opportunity for the sector to make crucial decisions that align with the urgency of addressing the climate crisis. By embracing clean energy transitions and making significant investments in renewable alternatives, the industry can position itself as a contributor to climate solutions rather than a contributor to the problem. Failure to act decisively may result in escalating climate risks and diminishing business prospects in a rapidly transforming energy landscape.
