CEOs wade into climate debate

Having asked in January if CEOs care about the climate, several CEOs waded into the debate in February.  Jonathan Grant looks at where they agree and disagree.

Paul Polman (Unilever) and Richard Branson (Virgin Group) called for governments to adopt the ambitious target of net zero carbon emissions by 2050.  Although the target is consistent with governments’ long held goal of limiting warming to 2 degrees, it is raising eyebrows in the energy sector.

The net zero target implies a rapid transition away from fossil fuel use in all countries in 35 years.  Process emissions from cement and steel production would need to be captured.  And at the same time, land management practices would need to switch from being a significant source of emissions (from deforestation), to being a carbon sink for those hard to tackle sources of emissions. So achieving the target by 2050 looks extremely challenging.

PwC's Low Carbon Economy Index calculates the pace of change required to achieve the 2 degree goal.  This is more than five times faster than our current rate of decarbonisation, which is why we have questioned the feasibility of that goal.  Achieving the target would require rapid technology change and international cooperation that may be beyond what many voters will support or consumers will buy.

Anticipating increased demand for energy over the medium term, which up until now has been mostly provided by fossil fuels, energy companies also ask whether zero net emissions by 2050 is realistic.  Many energy companies see themselves being part of the transition away from fossil fuels and at the heart of a new carbon capture and storage industry.  The debate is about when and how, not if.  Both of Shell's New Lens scenarios reach net zero by 2100. However, net zero by 2050 would require a much more rapid transition than the fossil fuel industry is prepared for or believes is possible.

Oil companies are now getting more engaged as the issue has moved from fringe groups, to activist investors and more recently to mainstream investors and regulators.  In a speech in mid-February, Shell’s CEO, Ben van Beurden suggested that energy companies needed to be “less aloof, more assertive” in the debate.  Although not addressing net zero emissions directly, he said that the debate about sustainable energy needed more balance and that calls for fossil fuels out, renewables in were “simply naïve”. 

Some in the oil industry now want to shift the spotlight onto coal. Shell and Statoil advocate for the switch from coal to gas to significantly reduce emissions.  The latest UK statistics on emissions from power generation show emissions from coal are 0.907 tCO2/MWh compared with 0.395 tCO2/MWh from natural gas.

What Polman, Branson and van Beurden all agree on is the need for a strong carbon price that is applied globally.  Unfortunately, it is not something that gets much attention in the latest negotiating text at the climate talks.