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.
- Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
- Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
- Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
- Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
- Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
- David Keith, professor at Harvard and a leading authority on geoengineering
- Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
- Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
- Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
- Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
- Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
- Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.