With international climate negotiations (COP26) set to get underway in roughly two weeks, there is growing momentum to speed up the energy transition.
One new front in the global campaign to slash greenhouse gas emissions is to place new restraints on fossil fuel supply. While there likely won’t be any concrete agreement in Glasgow, momentum is building for harder limits on production that could ease the path for a managed wind down of oil, gas and coal production.
Beyond oil and gas
Climate talks typically focus on national efforts at cutting emissions, which take various forms but mostly focus on incrementally phasing in renewable energy, energy efficiency, and a litany of demand-side policies to ween countries off of fossil fuels. Over time, as clean energy is phased in, it will displace dirtier fuels, the logic goes. While much of that is important, it remains insufficient in the face of rising global greenhouse gas emissions.
One oft-neglected piece of the puzzle is the growth of supply, which, to be sure, was severely interrupted as a result of the pandemic. All too often governments announce emissions targets they plan on hitting within a decade or two, but say nothing about the relentless growth in drilling and mining of new supplies. Once online, new oil fields, gas export facilities, and mines lock in future production – and emissions – which complicate the effort to meet climate targets.
The U.S., for example, now has a stated target of cutting emissions in half by 2030, but has virtually no restraint on production growth. While oil lobbyists have cried foul about the Biden administration’s attempt to freeze oil and gas leasing on public lands, that Biden executive order only targeted new leases (not drilling permits), and only on public lands. Most drilling occurs on private land. In any event, a federal court overturned that executive order.
So, even with an announced climate target, there is very little standing in the way of the industry continuing to grow production. The same can be true of other major oil and gas producing countries.
However, there is growing momentum to address the problem of fossil fuel supply growth around the world.
In September, Costa Rica and Denmark announced a new coalition, the Beyond Oil & Gas Alliance (BOGA), aimed at establishing a “managed and just transition away from oil and gas production.” Members of the new alliance commit to ending licensing new oil and gas projects, and also lay out a timeframe to wind down existing operations. The new initiative will officially debut in Glasgow in two weeks.
“As climate impacts worsen, it becomes urgent for countries to move out of fossil fuels and enable a just transition to clean energy as soon as possible,” Peter Wooders, senior director for energy at the International Institute for Sustainable Development (IISD), said in a statement in September. “BOGA sets a new bar for climate leadership, and provides welcome encouragement for countries to undergo a managed phaseout of oil and gas production in line with the Paris goals. We urge governments to join the initiative.”
The logic is pretty straightforward, and it aligns with the framework laid out in the United Nation’s Production Gap report, which has sought to quantify how fossil fuel supply needs to be reduced in order to keep global warming to 1.5-2.0 degrees Celsius (2.7 to 3.6 degrees Fahrenheit). The UN says that fossil fuel production needs to decline at a rate of 6 percent per year between 2020 and 2030 if the world is to stay on track. An updated version of that report is expected to be released later this month ahead of the climate talks.
A complimentary effort that is gaining steam is the so-called Fossil Fuel Non-Proliferation Treaty, which takes inspiration from the global denuclearization efforts from decades past. Tzeporah Berman, the Chair of the effort, gave a TedTalk on the sidelines of the Glasgow Conference in mid-October, citing her past work on climate change in Canada.
“Prime Minister Trudeau came to Paris, and with his hand on his heart, he said, ‘Canada’s back.’ And he went home to introduce some really good climate policy [including] carbon pricing. And our emissions didn’t go down,” she said. “And the government continued to greenlight and even subsidize new oil sands, pipelines, and fracking. And that for me was the moment when I realized where one of the big problems lie. Our governments are regulating emissions, but not the production of fossil fuels.”
She added that if left to the markets to constrain fossil fuel production, “it will be an unmanaged decline, instead of a managed decline. And more people will suffer.” As of now, the nascent effort has succeeded in getting 15 cities and subnational governments to sign on, including Los Angeles, Barcelona and Sydney, along with more than 800 civil society groups from around the world.
Uncertainty in Glasgow
In the past, such calls to limit fossil fuel production may have fallen on deaf ears. But times are changing quickly. Global capital markets have significantly begun to shift in this direction already, punishing oil and gas companies that decide to ramp up drilling, and rewarding those that keep rigs on the sidelines.
Moreover, the International Energy Agency’s widely-cited Net-Zero report earlier this year has made the case that new oil and gas projects are no longer needed. The IEA reiterated its call for a faster and much more aggressive shift into clean energy in its latest World Energy Outlook.
Responding to the recent spike in global energy prices, the European Commission has called for accelerating the clean energy effort, rather than digging up more oil, gas and coal. In addition, the newly forming German government appears poised to agree to a faster phaseout of coal, aiming for a full abolition by 2030, eight years ahead of its current schedule.
Meanwhile, the U.S. is lagging behind. With U.S. climate policy held up in Congress, it is unclear if the Biden administration will show up to Glasgow empty handed. International climate envoy John Kerry just downplayed expectations heading into the summit due to the gridlock in Congress.
It’s unclear if COP26 will be deemed successful or not. And a global limit on fossil fuel production is not yet in the cards. But governments, civil society and even capital markets are beginning to tighten the screws on new sources of supply.