In February, BP announced the appointment of Bernard Looney to the position of CEO, bringing a new face to one of the world’s largest oil companies. While firmly embedded in BP and its work – he worked with the company for 28 years before February’s announcement – he has made genuine efforts to reform the oil major’s commitment to environmental protection, announcing a ten-point plan to improve BP’s performance in this field.

On paper, the pledges are impressive. The company will aim to reach net-zero across its operations by 2050, including from its upstream oil and gas production, and overhaul its reporting and transparency processes by 2023. The oil major has also announced plans that go beyond its own operations, such as making a pledge to review associations with trade unions and industry bodies with inadequate environmental commitments, and creating incentives for employees to work towards net-zero goals beyond that which the company aims to do.

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In this way, BP aims to provide both practical change and social leadership, to drive not only its own operations, but the oil and gas sector in general, towards a cleaner future. Yet many of these pledges are light on details, and recent backlash against other oil majors with similar targets has demonstrated that many in the energy industry are no longer satisfied by vague promises to improve operational performance, but will need concrete proof of the change being made. With this in mind, it is unclear whether BP’s long-term goals can be realised.

Scope three challenges remain

BP’s plans are certainly striking, with the headline commitment to net-zero operations by 2050 setting both a clear agenda and definitive timescale for the major’s reforms. The move looks to build on what has been a productive few years for the company’s environmental performance, with its greenhouse gas emissions falling from 50.1 million tonnes of carbon dioxide equivalent (MtCO2e) in 2016 to 46MtCO2e three years later. Similarly, the major has seen its sustainable greenhouse gas emissions reduction double from 0.7MtCO2e to 1.4MtCO2e over this period, while the methane intensity of its operations fell from 0.16% to 0.14% from 2018 to 2019.

However, there is a significant oversight in these figures, and one that has plagued the environmental reporting of many oil and gas majors for years now: that of scope three emissions. A company’s harmful emissions can be divided into three types, known as “scopes”, with the first two covering emissions directly and indirectly produced by a company, while the third, “scope three”, are those produced by other companies buying and using the first company’s products.

Due to BP’s vast supply chain and global influence, these scope three emissions are significantly higher than the first two types combined. World Oil reported that the company’s scope three emissions could be anywhere between 437 million tons and one billion tons per year, based on how scope three is defined, figures which completely eclipse the scope one and two emissions published by BP itself. According to BP’s annual reports, its scope one emissions were 49.2MtCO2e in 2019, while scope two emissions were just 5.2MtCO2e.

This uncertainty renders BP’s latest plans significantly less ambitious. While the company’s pledge to reach net-zero by 2050 refers to scope one, two and three emissions, BP has not announced a method to limit scope three emissions, beyond pledging a 50% reduction in carbon intensity by 2050. Considering these are emissions not produced by the oil major itself, there are questions as to how any company can aim to directly influence scope three emissions without dramatically overstepping its boundaries.

Bold plans but unproven technology

BP faces further challenges in that the plans it has made, and the technologies it plans to use, are somewhat unproven, despite the sincerity of the company’s plans.

“I think Bernard Looney was genuinely sincere, saying he wants to change the company,” said Charlie Kronick, senior climate finance advisor at Greenpeace, who was positive about Looney’s intentions. “He’s a completely different person than the bulk of the previous CEOs; he’s a generation younger and, even though I’ve never met him, I genuinely believe he’s sincere.

“But I think the bigger issue that BP, and the rest of the industry, faces is ‘net’, as opposed to ‘zero’,” he continued, highlighting the practical challenges that remain ahead. “Much of this is going to be dependent on negative emission technologies, so that means carbon capture and storage [and] carbon capture and utilisation, neither of which have been in any way meaningfully rolled out.”

Projects such as the Century Plant in the US exemplify this issue. At its height, the project captured 8.4 million tonnes of carbon dioxide per year, and was the largest single industrial source carbon dioxide capture facility in North America, yet this would only cover around 16% of BP’s scope one and two emissions, to say nothing of its critical scope three emissions. In addition, the facility closed down after just six years of production despite receiving more than $1bn in investment. The shutdown suggests that these technologies can only be effective in the short-term, and only with significant financial investment, two traits that make it difficult to see carbon capture technology as a viable long-term solution.

Indeed, a 2005 report commissioned by the Intergovernmental Panel on Climate Change (IPCC) found that even in the most optimistic models, the widespread use of carbon capture technology could lead to an increase in the cost of electricity of 9%, compared to an energy mix without carbon capture facilities. In this example, the IPCC also noted that this level of carbon capture would cost $11 per tonne of carbon dioxide captured, and could reach up to five times this figure in other models.

These financial constraints place additional obstacles to the widespread adoption of meaningful environmental policies, and cast further doubt over the future of environmental protection in the offshore industry. Kronick noted that “renewable energy, as a product, has much tighter margins than oil does now and the reason that oil is still so central to big capital markets around the world is the dividends they pay, and the cash they generate.

“And that’s the real challenge they’ve got,” he continued. “That’s a challenge not just for them, it’s a challenge for their investors and shareholders too: are they going to walk? Are they going to sell? Are they going to take the money and put it into companies who they think can deliver these outcomes better? It’s all to be determined.”

Leadership and decisive action

Kronick also said that these overlapping challenges create a desperate need for strong leadership, both within the oil and gas sector and in society in general, but that private companies are not in a position to provide this kind of influence, noting that “this is an issue of governance, this is an issue of public values.”

Yet many oil and gas majors have been implementing environmental reforms, both to improve the public perception of their companies, and to change their financial models to remain profitable in an increasingly volatile global market.

“BP’s ambition to be a net zero company by 2050 is not a wholly unique one,” said Lefteris Karagiannopoulos, a market analyst at Rystad Energy, highlighting the role of private companies in accelerating this change. “Norwegian supermajor Equinor aims to be carbon neutral by 2030 and Italian supermajor Eni aims to reduce its greenhouse gas emissions by 80% by 2050.

“BP has mentioned that it will be increasing its investments in renewable energy non-oil and gas businesses over time, but Eni has a very specific goal of installing 55GW of renewable energy capacity by 2050, while Equinor aims to grow its renewable energy portfolio tenfold by 2026,” continued Karagiannopoulos.

However, as is the case with BP’s plans, many of these ambitions have been coolly received by the energy industry. In April, Shell announced its own plans to reach net-zero emissions across its operations by 2050, but did not update its operating plans nor its budget to take into account the pledge; this inability to align its financial activities with its environmental ambitions raised questions about Shell’s sincerity to improving its environmental performance.

The plan drew criticism from Follow This, a group of activist investors which aims to use its influence on Shell policy to drive the company to more environmentally sustainable projects, noting “that this ambition has not resulted in an adequate change in investments beyond oil and gas” in a resolution presented to Shell at its 2020 AGM.

“Halving the carbon intensity in a growing energy system will not lead to a level of absolute emissions reduction necessary to actually achieve the goal of the Paris Climate Agreement, and is therefore not on a well-below-2°C pathway,” the group continued. “[Our] resolution reflects our belief that every fossil fuel company needs visible and unambiguous shareholder support to truly align its targets with the Paris Climate Agreement and invest accordingly.”

Kronick was critical of this disparity between BP’s stated ambition and its practical policies, and until these aspects are aligned across the oil and gas industry, it is difficult to see how the sector can improve its environmental performance.

“Ambition is great but it’s not delivery,” he said. “It is a completely inadequate response to the challenge we face; the best thing you can say about it is it’s better than they were before, but it’s nowhere near good enough, nowhere near as dramatic or even, dare I say it, radical, as is required to meet the challenge.”