The oil and gas industry’s support for carbon pricing may seem counterintuitive, but a recent study by the National Petroleum Council reveals a pragmatic approach to embracing climate action.
The push for a price on carbon is often associated with environmental activists and policymakers seeking to reduce greenhouse gas emissions. However, there’s another group that has been quietly backing this initiative: the oil and gas industry.
The oil and gas industry has undergone significant transformations since its inception.
From drilling manual wells to employing advanced technologies, the sector has witnessed a remarkable evolution.
In 1859, the first successful oil well was drilled in Pennsylvania, marking the beginning of the industry's growth.
Today, the global oil and gas market is valued at over $1 trillion, with major players investing heavily in exploration and production.
The industry continues to adapt to changing environmental regulations and increasing demand for renewable energy sources.
In response to a request from U.S. Energy Secretary Jennifer Granholm in 2021, the National Petroleum Council (NPC) conducted a study on the deployment of low- and zero-carbon hydrogen energy in various sectors. The NPC’s report, ‘Harnessing Hydrogen: A Key Element of the U.S. Energy Future,’ presents a positive take on hydrogen as an energy commodity.
Why Oil and Gas Companies Support Carbon Pricing
At first glance, it may seem counterintuitive for oil and gas companies to advocate for a price on carbon. However, this proactive approach is in line with business strategy principles. The NPC recommends that the administration establish an economy-wide price on carbon well before current incentives expire.
Oil and gas companies play a crucial role in meeting the world's energy demands.
They explore, extract, refine, and distribute petroleum products to power industries, transportation systems, and households.
The top five oil and gas companies globally are ExxonMobil, Royal Dutch Shell, Chevron, BP, and TotalEnergies.
These companies invest heavily in research and development to improve extraction methods and reduce environmental impact.
One of the key features the NPC wants to see in a carbon pricing mechanism is predictability. This is essential for companies making long-term investments, such as those in the oil and gas industry. Predictability allows businesses to anticipate future changes and make informed decisions about their investments.
The Value of Predictability
Predictability is crucial for companies that engage in strategic planning. By anticipating future market trends and regulatory changes, businesses can position themselves to take advantage of opportunities and mitigate risks. In a rapidly changing business environment, predictability can be the difference between success and failure.
Predictability refers to the ability to forecast or anticipate outcomes, events, or behaviors with a high degree of accuracy.
It involves understanding patterns, trends, and relationships between variables.
In various fields, predictability is crucial for decision-making, planning, and problem-solving.
For instance, in weather forecasting, predictability helps meteorologists issue accurate warnings and forecasts.
Similarly, in finance, predictability aids investors in making informed investment decisions.
Why Oil and Gas Companies Can Afford to Plan for a Low-Carbon Future
The oil and gas industry is well-equipped to understand the trajectory of climate change. With their technical expertise and resources, companies in this sector are able to plan for a future that may be very different from the present.
In fact, the clarity around the non-sustainability of fossil-fuel-based energy economies can be seen as a blessing for oil and gas companies. By acknowledging the inevitability of disruption, these companies can proactively plan for a low-carbon future without being held back by nostalgia for the status quo.
Conclusion
The support from oil and gas companies for carbon pricing may come as a surprise to some. However, it’s a pragmatic approach that acknowledges the need for a predictable business environment in the face of climate change. By embracing this initiative, these companies can position themselves for long-term success in a rapidly changing world.
