IMG.gif
Opinion

What COP27 Means for Oil and Gas

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.
COP27 in Egypt

As a non-lobby oil and gas association focused on sustainability issues and established at the request of the UN Environment Programme in 1974, Ipieca has had observer status at climate COPs since the first one in 1995 in Berlin. Our role there is to listen to the negotiations and provide feedback on the outcomes to our member companies. While at a COP we also make the most of the opportunity to host, participate in and listen to events, workshops and meetings to explore collaborative pathways to deliver a sustainable energy transition, which leaves no one behind. This year was particularly busy for the Ipieca delegation as we were awarded an official side event and also hosted and participated in five others while in Sharm el-Sheikh. I’d like to use this opportunity to share my take on the outcomes, provide some on-the-ground insights from the events, workshops, meetings and conversations, and reflect on what it all means for the industry.

Was COP27 a Success?

Given Ipieca’s involvement, this is a question we get asked at the end of every COP.

I think it’s important to put Sharm el-Sheikh into context. COP events are often compared against one another, however, in reality each COP is part of a larger ongoing process. They are not individual sprints; one COP presidency passes the baton to the next.

COP26 was considered a success because we came away with the Glasgow Climate Pact agreeing on a range of items. This included strengthening efforts to curb greenhouse gas emissions, building resilience to climate change and providing the necessary finance for both. The focus at COP27 was very much on implementation, indeed it was referred to by many as an implementation COP. In that sense I think the Egyptian COP27 presidency can claim a win. After long negotiations, the Sharm el-Sheikh Implementation Plan was agreed, which most notably establishes a new loss and damage fund.

Going into COP27, I highlighted a loss and damage mechanism as one of the key outcomes to look out for. While the details are still to be negotiated, this is a big, even historic moment. The fund is expected to see developing countries particularly vulnerable to the adverse effects of climate change supported for losses arising from droughts, floods and rising seas that are attributed to climate change.

So, while dealing well with the impacts of climate change, how did COP27 progress on tackling its causes?

Going into this COP, a concern I had was that elements of energy security issues had caused some countries to go backward in their emissions targets. With the end-of-year deadline for countries to update their 2030 emissions reduction targets (known as nationally determined contributions or NDCs), the hope was that this COP would see increased NDC ambition. While the EU notably committed to increasing emissions reduction targets, this COP didn’t see the flurry of pledges to reduce emissions that we saw at COP26.

On-the-Ground Insights

One of the key takeaways from COP27 was a growing appreciation that the complexity of transforming global energy systems requires all parties to work together and that all solutions must be considered, with the COP presidency listing collaboration as one of its key goals and making a concerted effort to support inclusive and meaningful dialogue with a wide spectrum of stakeholders.

This COP also put a focus on the regional and local dynamics of the energy transition. What’s often missing from global dialogue is that each country’s journey will vary, with the trajectory and speed of their journeys to carbon neutrality different, depending on their starting point, geographical location, available energy sources, sustainable development needs and infrastructure they have in place.

Leaders from the Global South made it clear that while their contribution to global warming is minimal, they often suffer the most from its consequences. Time and again the point was made that reducing emissions must and can go hand in hand with sustainable development, for which energy access is key. This COP drove home that hundreds of millions of people worldwide still have no access to electricity, and that for the energy transition to work, it must work for everyone. On site, there was growing use of the term “just transition” instead of “energy transition.”

It was great to see nature so high on the agenda. The interconnection between climate and nature is starting to get the recognition it deserves. Healthy ecosystems can act as buffers against the worst extremes of climate change, while natural climate solutions represent a large, readily available option for reducing greenhouse gas emissions. However, ecosystems are in turn affected by climate change, which is the third-biggest driver of global biodiversity loss. By addressing these issues in a holistic way, we can maximize our impact on climate change and nature loss.

Implications for the Industry

The Sharm el-Sheikh Implementation Plan includes an energy section. It emphasizes the urgent need for global greenhouse gas emission reductions, while also recognizing the need for energy systems to be secure, reliable and resilient. The industry can provide the world with the reliable energy it needs, and with ever-decreasing emissions. Rapidly reducing methane emissions from the gas value chain was identified at COP27 as being key to the industry supporting a net-zero future. The solutions to do so are technically available and economically feasible, and as a potent greenhouse gas with a relatively short life span, methane reductions will be felt quickly, helping to reach net zero by 2050.

While the implementation plan does not directly reference carbon capture, storage and utilization (CCUS), it does refer to the Working Group III report of the IPCCC Sixth Assessment as the scientific basis for climate action. This report identifies carbon removal as a key element of limiting global warming to 2°C or 1.5°C by 2100, indicating that CCUS — a technology the industry is leading on — and other forms of removal, have the backing of the plan.

A just transition requires the industry and as part of a transition, all sources of energy to be managed in order to ensure access, security and progress. As a key pillar of the energy system, oil and gas are an important contributor to the ambitions at the heart of the UN Sustainable Development Goals — providing the energy needed to support fair growth and improved living conditions for all. Providing over half the global energy mix, markets cannot simply switch off from oil and gas and support a smooth transition. As the incumbent energy sector in many places, the industry has an unrivaled line of sight on how to support the transition, where investment is needed and the economic, people and nature impacts of transitioning toward a lower-carbon energy system.

Within the sector, national oil companies will be essential to achieving the aims of the Paris Agreement. Representing a significant part of the world’s oil and gas production, what they do makes a difference. By continuing to reduce operational emissions and support the scale-up of low-carbon energy and mobility solutions they can be a big part of the climate solution. As state-owned organizations, they are ideally placed to support their governments’ climate strategies.

Ultimately, a partnership approach will be the key to tackling climate change in a way that supports sustainable development. The oil and gas industry, along with all other sectors and parties, has an important role to play in supporting governments as they turn their emissions reduction ambitions into on the ground realities.

Brian Sullivan was appointed as the executive director of Ipieca in 2011, following a 23-year career in BP. The views expressed in this article are those of the author.

Topics:
Low-Carbon Policy, CO2 Emissions, Methane Emissions, Carbon Capture (CCS)
Wanda Ad #2 (article footer)
#
Refiners have captured a significant share of the revenue that historically would have gone to producers.
Fri, Feb 3, 2023
The project would supply OCI's planned ammonia plant in Beaumont but is not related to separate agreements Linde has with other companies.
Mon, Feb 6, 2023
New CEO Wael Sawan said undervaluation was one of the reasons why Shell has announced another $4 billion share buyback.
Thu, Feb 2, 2023