When John Selwyn Gummer was Secretary of State for Environment in the 1990s he told an audience not to cheat on their children. The now chairman of the sustainability consultancy Sancroft offered a broadly similar message when he took part in the online Energy 2050 Summit recently. Speaking on the second day of the event Lord Deben (as John Gummer has become) said there had been a revolution in the way people viewed environmental, social and governance (ESG) issues and that the fossil fuel industry was under more pressure than ever. Against a backdrop of falling share prices, large-scale job cuts and so called stranded assets “This was happening before COVID,” he said “but COVID has compressed the process even more.”
In the face of COVID and, for the oil and gas sector, the accelerating pressures of transitioning towards a low carbon economy, the Frontier summit was both upbeat and informative – a good advertisement for the new world of online engagement. Its screens of participants were of the highest calibre and there was an urgency, arguably a COVID-charged urgency, in discussing the path to net zero carbon by 2050.
“The challenge to get to net zero is really steep,” argued Eric Ingersoll, a Managing Partner with the consultancy Lucid Catalyst and another speaker at the event. “We’re still increasing emissions and we need scalable solutions.” Capturing, taxing and trading carbon were all discussed as potentially large scale and international solutions which had yet to gain sufficient traction. So too was hydrogen, the predicted growth in solar, wind power and even biomass which has helped knock coal of its perch in part of the developed world but has been criticized for its impact on biodiversity.
The ESG session highlighted a new imperative for oil and gas and other sectors, said Lord Deben. “There’s been a revolution in the way people think about ESG, even in the last six months,” he said. “The financial world is saying how sustainable is this business going to be and for the fossil fuel industry who are negotiating transition that’s an even bigger pressure.”
COVID has heightened the trend towards sustainable portfolios which in the nine months to the end of September attracted €134 billion of investment. Oil and gas companies are being asked to show that they have a programme to reduce emissions but being on the wrong side of the transition equation isn’t a reason for investors to abandon them altogether, argued Lord Deben. “We should be supporting companies who are trying to understand how to move their industry on,” he said.
One such, arguably, is the Finnish company Neste, whose VP Salla Ahonen, gave a keynote address. Echoing Lord Deben “We have a purpose to create a healthier planet for our children,” she said. “This is why the company exists.” State-owned Neste was founded in 1948 to secure Finland’s oil supply and had revenues of €15.84 billion in 2019. These days the company derives 80% of its profits from renewable businesses – diesel for road transport, shipping and aviation – and has 25% of its people working in R&D and engineering. “We are committed to reaching carbon neutral production by 2035,” said Ahonen.
Neste is one impressive example of how you turn the tanker around en route to transition but the challenge is daunting by any standards noted another keynote speaker, Jim Skea of Imperial College London and the IPCC. “Even if we achieve global net zero by 2050,” he said “there will still be positive emissions in one country balanced by sinks in another. There is no priority because you need to do absolutely everything to reach the net zero target.”
What price carbon?
The Frontier Summit produced lively debate around the issue of a carbon tax, “the best solution that no-one wants to pay for,” quipped Sujay Shah, Standard Chartered Bank’s Managing Director for Clean Technology. While there have been suggestions for a carbon price of $2 a tonne the true social cost could be as high as $50 a tonne or more, said Kingsmill Bond, an energy strategist with Carbon Tracker. “We’re going to have to do it. At the moment it’s a bit like trying to run the economy without money. If Europe, the US and China get behind this it will force the rest of the world into line.” In a session on change drivers towards net zero EY Energy Lead Rob Doepel was more sceptical. “We’re just not going to get agreement globally,” he said. “In the UK we have to show leadership on carbon pricing but this will only come when it’s politically acceptable.”
COVID was accelerating a huge societal shift in Europe, said Doepel. Recent EY research indicated that more consumers wanted to switch to a green energy supplier and more under 35s were prepared to pay a premium for sustainable products. While there were opportunities for the energy sector as part of a gradual green recovery, investors wanted more disclosure on environmental risk, he said. “They want to see a response and plans going forward.”
Doepel and others identified China as the new leader in energy technologies, notably with the US, for the moment at least, vacating its chair at the climate change table. “If you think about leadership in EVs, in offshore and onshore wind and in photovoltaics you will find yourself in China,” added Lord Deben. “By not leading the US has left a gap and the Chinese are filling it.”
Where does that leave the rest of the world, including developing countries which require access to cheap and reliable energy? By 2040, said Kirsty Gogan, there could be three billion people without access to any electricity at all. “If we were to bring everyone up to the median level of consumption,” she said, “which would be about the level of the Czech Republic, we would need an energy system which is four times as big as the one we have at the moment.”
The conclusion is that all forms of energy in greater or lesser degrees will stay part of the mix, at least until 2050 and almost certainly beyond. COVID has changed the way we think about the global economy, about consumerism, about the vulnerability of individuals and societies, and clean energy, the drive towards technology-led transition must be part of the solution.
About the author
Nick Cottam has more than 20 years’ experience in journalism, PR and communications, working in environment, sustainability, IT, mining and oil & energy. Nick has written on technology and environmental matters for the Times, the Nasdaq Magazine and many other well respected industry publications.
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