BP’s Commitment to Become Zero Emission By 2025 Is A New Challenge For Oil Producers

BP’s Commitment to Become Zero Emission By 2025 Is A New Challenge For Oil Producers

With BP pledging a zero out all its carbon emission by 2050 the gap is widening between major European and American oil producers on climate change. It is increasing the pressure for Exxon Mobil Corp and Chevron Corp to do more.

The U.S. supermajors have only committed to reducing greenhouse gases from their own operations. BP on Wednesday followed Royal Dutch Shell Plc and Equinor ASA in pledging to offset the impact from the fuels they sell. Known as Scope 3, the emissions from cars, homes and factories are responsible for 90% of fossil fuel pollution.

“If we do see capital flowing into BP, that may force the U.S. majors to rethink the speed at which they move on carbon reduction targets,” said Noah Barrett, a Denver-based energy analyst at Janus Henderson, which manages $356 billion.

The growing outcry against human-made global warming is increasingly making its way into mainstream business and investment strategies. It has already reshaped the way European oil producers operate by actively engaging in the transition to cleaner energy sources.

Exxon and Chevron both agree with the goals of the Paris Agreement, support a carbon tax and are committed to cleaning up emissions from their vast network of wells, refineries and pipelines. They joined the Oil and Gas Climate Initiative later than their European rivals but are still fully paid up members. They even lobbied against U.S President Donald Trump’s plan to roll back Obama-era emission standards.

But the fundamental difference with European peers is that neither has any plan to allocate a chunk of their multibillion-dollar capital budgets toward proven low-carbon energy sources where they have no competitive advantage. The chief executive officers of both companies said in interviews with Bloomberg News last year that they remain committed to their core oil and gas businesses and have no plans to chase the crowd into lower-margin renewables such as wind and solar.

That’s putting them in an increasingly isolated position when looked at in contrast with BP and Shell, whose executives have vowed to lead the energy transition.

BP went further than any other supermajor by pledging to become net zero, meaning it’s aiming to completely offset its emissions with renewable energy. Spain’s Repsol SA recently made a similar commitment.

We shall see this year if a change of course from Exxon or Chevron will happen.