Global Climate Change and the Future of the Oil & Gas Industry

I recognize that some followers of this blog may consider the oil and gas industry to be the moral equivalent of the tobacco companies – out to maximize profit without considering the broader, social implications of the use of their products.  And some may paint the oil industry with a rather broad brush, maintaining that the major oil and gas multinationals do not differ in significant ways from one another.

David Hone, my guest in the latest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” exemplifies a somewhat different reality, which makes it particularly interesting to engage with him in a wide-ranging conversation about the past, present, and future of the oil industry at a time of increasing concern about global climate change, linked with the combustion of fossil fuels.

David has been working in the oil industry for some 40 years, where for the past 20 years, he’s been focused exclusively on addressing global climate change.  Indeed, his title at Shell International is “Chief Climate Change Adviser.”  In addition, he is a board member – and former chairman of the board –of the International Emissions Trading Association, and a member of the board of directors of C2ES – the Center for Climate and Energy Solutions.

In our conversation, Hone describes investments by oil and gas companies to diversify beyond exclusive reliance on fossil fuels.  “I think what’s apparent today is that the industry is starting a pathway of transition. That’s been building momentum over the last few years, as companies have started to look at their portfolio, think about the longer term, look at the opportunities that are out there, look at the future energy mix,” Hone states. “But I think where people perhaps have problems with all of this is that they imagine a very fast transition, and they forget about the immense scale that this industry rests on.  It’s providing not just Shell, but all these companies a hundred million barrels of oil per day into the global economy.  And that’s not just going to vanish in any short period of time.”

I ask Hone about the impacts of the COVID-19 pandemic on the oil and gas industry.  He acknowledges that the pandemic has caused some real hardships for the industry, but notes that the industry’s flexibility has allowed it to respond fairly effectively, at least over the short term.

“[The] immediate problem has been largely addressed, but there’s still a period I think ahead of weak demand, which the industry is going to have to deal with,” he states.  “And that will probably modify the rate at which the various companies, not just the companies like Shell, but the international oil companies, the rate at which they invest.  So, it will take a while for the whole system to correct to this, but it will correct.”

Shifting the discussion to international climate change policy, Hone speaks highly of the European Union Emissions Trading System (EU ETS), crediting its simple design for getting the continent closer toward net-zero emissions.

“It’s focused very much on large emitters that are quite price responsive, and it has a declining cap that will eventually go to zero. The rate at which that goes is under discussion at the moment, but nevertheless, it will go to zero. And it has consistently delivered,” he says.  “We’ve seen high prices and very low prices over the last 15 years, but it just keeps ticking on and delivering. And I think that’s cause for optimism around its future.”

All of this and more is found in the latest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Listen to this latest discussion here.  You can find a complete transcript of our conversation at the website of the Harvard Environmental Economics Program.

My conversation with David Hone is the thirteenth episode in the Environmental Insights series.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

Share

How Have Companies Responded to the Coronavirus Pandemic and Climate Change?

We have just released the latest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  In this latest episode, I engage in a conversation with Rebecca Henderson, the John and Natty McArthur University Professor at Harvard University.  She shares her perspectives on how large organizations are changing in response to the coronavirus pandemic and global climate change.  A full transcript of our conversation is available here.

Rebecca makes her home at Harvard Business School, where she was the founding co-director with Professor Forest Reinhardt of the Business and Environment Initiative.  She is also a Research Fellow of the National Bureau of Economic Research, and a Faculty Fellow of the Harvard Environmental Economics Program.

In this podcast episode, we first discuss how the attention given to environmental matters has changed at business schools in the three decades since she received her Ph.D. in Business Economics at Harvard and joined the faculty at the MIT Sloan School of Management, prior to moving on to Harvard Business School.

Henderson’s research and writing explore how organizations respond to large-scale technological shifts, most recently in regard to energy and the environment.  This has also given her a special perspective to think about the role of the private sector in responding to the Covid-19 crisis.  In this regard, she notes that she is reminded that “when organizations decide they must change, they can change,” pointing to the quick shift to remote work across many sectors, the effort by biomedical firms to speed up supply changes, and the ways in which retail and grocery distribution channels are mobilizing their resources. “You’re seeing profound changes in methods of operation across the economy,” she remarks.

“The potential upside is that this emergency is making it very clear that the stability of the entire community is critical to the success of business,” Rebecca states. “I think the emergency is also highlighting that one needs a strong, effective federal government to deal with problems like this. I think both of those insights could conceivably translate into business pressure for coherent climate policy in ways that could be very helpful.”

“Climate change can seem distant; it can seem invisible. Why should I worry about it? To see the whole economy mobilized when the threat becomes very, very concrete reminds me that, as we think about climate change, we have to find a way to make that threat as concrete as possible. So that’s one thing I take away from the current moment.”

All of this and much more is found in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Listen to this latest discussion here, where, by the way, you can also find a complete transcript of our conversation.

My conversation with Rebecca Henderson is the ninth episode in the Environmental Insights series.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

Share

New Podcast on Carbon Markets & International Cooperation, Direct from UN Climate Change Conference in Madrid

In my previous posting as this blog, What to Expect at COP-25 in Madrid, I wrote about the “Rulebook” for the Paris Agreement, which puts flesh on the bones of the skeletal 13-page Agreement.  It was completed last year at COP-24 in Katowice, Poland, with the exception of one very important part of the Agreement, namely Article 6, which potentially facilitates international carbon markets and other forms of cross-border cooperation.

In the latest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” our focus is on precisely this topic in an interview with an individual who has had tremendous experience in this realm, Andrei Marcu, the founder and executive director of the European Roundtable on Climate Change and Sustainable Transition.  You can listen to the interview here.

In hosting these podcast episodes, I interview interesting and accomplished people who are working at the intersection of economics and environmental policy.  Our first episode featured my interview with Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency (who is leaving Harvard to become President of the Natural Resources Defense Council).  Our second episode featured Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change.

In this third episode – recorded here in Madrid at COP-25Andrei Marcu provides an overview of the opportunities and challenges facing the negotiators, with particular attention to the important work now being done on carbon markets and international cooperation via Article 6 of the Paris Agreement.  By the way, you can read about the other activities of the Harvard Project on Climate Agreements at COP-25 in Madrid here.

Marcu has long been engaged in multilateral negotiating processes and subsequent implementation action, both at the global and sectoral levels.  In various capacities, he has acted as negotiator for developing countries, coordinator for the G-77 and China, and as representative of the international business community.  He previously served as Manager of Private Sector Cooperation in the United Nations Development Programme; and founder, president and CEO of the International Emissions Trading Association (IETA).

Marcu attended the first week of negotiations at COP-25, during which time lower-level discussions were held among representatives of many of the 200 countries which signed the Paris Climate Agreement of 2016.  Marcu characterizes the Agreement as a “decentralized pledge and review type of approach” to the global emissions problem, one that brings countries to the table, but also one that “creates headaches” in the market.

In the interview, Marcu says that what happens in Madrid during the coming week will be very important.  “Presumably you will see three decisions – one for Article 6.2, one for 6.4 and one for 6.8,” he explained, naming three of the key sections of the Paris Agreement that are being negotiated at COP-24.  Marcu also remarked that some of the most difficult decisions may be “punted” to future talks.

In general, Marcu said he is “optimistic that we are moving in the right direction” on addressing climate change, while also expressing concern about the pace of change.  “To be fair, it is not an easy change. It’s quite a radical change as people are just coming to terms with what carbon neutrality means.” he stated. “It is not an incremental change. It is a radical change.”

Share