The Big Picture


Last week the Stockholm Environment Institute launched the Production Gap report, with support from the United Nations and four other research organisations. It adds a major new piece to the growing body of research showing that tackling fossil fuel production is critical to meeting the Paris goals. In fact, the report finds that the global production gap is even larger than the already-significant global emissions gap, due to minimal policy attention on curbing oil, gas, and coal production.

As Stockholm Environment Institute executive director, Måns Nilsson, put it, “We’re in a deep hole – and we need to stop digging. Despite more than two decades of climate policymaking, fossil fuel production levels are higher than ever.”

The report came on the heels of some momentum in the right direction. The European Investment Bank (EIB) committed to put an end to its fossil fuel financing – a game-changing, movement-driven win. In a major victory for frontline communities and activists, California’s Governor initiated new steps towards phasing out oil and gas production in the state.

All three pieces point to emerging political ambition to tackle fossil fuel supply. A few short years ago it would have been difficult to imagine the world’s largest multilateral lending institution or one of the United States’ biggest oil-producing states making these moves, not to mention a major UN-endorsed report on the need to wind down oil, gas, and coal production. As governments prepare to convene in Madrid for the UN climate summit, here is to this trickle of ambition turning into a tidal wave of bold action.

–The OilWire Team

The Data


The figure below shows the Production Gap: Governments are planning to produce 120% more fossil fuels in 2030 than would be consistent with a 1.5°C pathway, and about 50% more than would be consistent with a 2°C pathway.

While many governments have plans to decrease emissions, “they are signalling the opposite when it comes to fossil fuel production, with plans and projections for expansion,” the report warns. “This hinders the collective ability of countries to meet global climate goals, and it further widens not just the production gap, but the emissions gap as well.”

Source: SEI, IISD, ODI, Climate Analytics, CICERO, and UNEP, The Production Gap: The discrepancy between countries’ planned fossil fuel production and global production levels consistent with limiting warming to 1.5°C or 2°C, 2019.

What We’re Tracking


Trends in the Right Direction

The European Investment Bank announces 2021 end to fossil fuel financing
After a bold campaign for a #FossilFreeEIB, the European Investment Bank finally approved a new policy this month to end financing for fossil fuel energy projects at the end of 2021. This move sets a new global precedent for multilateral banks and will have a material impact on public financing for the fossil fuel sector. The EIB’s fossil fuel financing has averaged more than EUR 2 billion annually since 2013, almost entirely for fossil gas. Resistance from Germany, the European Commission, and the fossil gas sector led to some last-minute loopholes in the final policy – a reminder of the tight grip the sector still has on some European policy makers. Campaigners now turn their attention to holding the bank accountable to the policy, avoiding potential exploitation of loopholes, and leveraging this win into pressure on other financial institutions.

Communities in California win critical steps towards reining in oil production
Activists and communities in California are celebrating new measures that signal growing political will to shift state policy towards reining in oil production. Governor Gavin Newsom announced new steps to strengthen health and safety protections for communities near drilling sites, halt one extreme form of oil extraction, and establish a third-party review of fracking permits. “Today, Governor Newsom and his administration ushered a new day in California where the source of the climate emergency and fossil fuel public health crisis are finally being addressed,” said Gladys Limón, Executive Director of California Environmental Justice Alliance. The Last Chance Alliance, which includes more than 700 organizations fighting for climate, health, and environmental justice, continues to call on the governor to halt all new permitting and roll out a 2,500-foot setback requirement between fossil-fuel infrastructure and homes, schools, and other sensitive sites.

UK halts fracking in the midst of the election campaign 
After nearly a decade of community-led organizing, the UK government announced it was “ending support for fracking with immediate effect.” This move was a dramatic departure from the current conservative government’s previous position on fracking, indicating the political pull of bolder action to protect communities and act on climate. Activists will now focus on ensuring the ban is made permanent regardless of the election outcome next month.

Sweden’s central bank sells off bonds due to climate concerns
Sweden’s central bank, Riksbank, announced that it was selling off bonds from the Canadian tar sands and the Australian provinces of Queensland and Western Australia over climate concerns. The bank’s deputy governor noted that, “Australia and Canada are countries that are not known for good climate work. Greenhouse gas emissions per capita are among the highest in the world.” This move is yet another signal that financial institutions are beginning to see a bleak future for oil, gas, and coal as the world moves to address the climate emergency. As pointed out by Greenpeace strategist, Keith Stewart, “Central bankers aren’t your typical tree huggers, so Canadian politicians should take note when they start blacklisting government bonds over climate concerns.”

Insights

Locked In and Losing Out: British Columbia’s fossil fuel subsidies
A new report out yesterday from the International Institute for Sustainable Development reveals that the Canadian province of British Columbia (BC) is spending hundreds of millions of dollars per year subsidizing the fossil fuel industry. Meanwhile, new subsidies are being created to scale up liquefied natural gas infrastructure. As the report sums up, “BC has a clear choice to make for its future: bold action to spur a low-carbon transition that works for its residents, or support for a costly fossil fuel sector that worsens the effects of climate change.”

Reflections from the Permian: An overwhelming scale of oil exploitation
Lorne Stockman from Oil Change International provides an account of his recent trip through one of the world’s largest oil fields: the U.S. Permian Basin. Stockman observes that everything about its scale is overwhelming, with “barely an acre untouched by the oil and gas industrial complex.” As Permian oil, gas, and gas liquids flood global markets, it’s also overwhelming the climate: “Permian Basin producers are gearing up for a further doubling of production, having tripled production in the last 5 years. […] The flood of petroleum and gas is keeping prices low, stimulating demand, and competing with clean energy. We need to rise against it and turn it around.”

Right: Oil well on fire near Pecos, Texas. Credit: Oil Change International

Saudi Aramco IPO: Investors are wary of carbon-intensive offering 
The high-profile initial public offering (IPO) of Saudi Aramco shares is not living up to expectations. Concern over climate, as well as security and human rights issues, has deflated initial valuations compared to the kingdom’s expectations. Civil society groups have warned banks about the carbon-intensive listing (including analysis on the IPOs valuation in light of climate limits). As Julian Lee at Bloomberg put it, “The oil age may not be over – far from it – but oil is facing unprecedented headwinds. […] Twenty years ago investors would have fallen over each other beating a path to Saudi Aramco’s door. It’s a much tougher sell now.”

Campaign News

Pressure builds on the International Energy Agency to #FixTheWEO
The International Energy Agency (IEA) received swift pushback from investors, climate scientists, business leaders, diplomats, and climate activists after releasing its flagship publication, the World Energy Outlook (WEO), this month. The IEA again failed to provide a central, 1.5°C-consistent scenario, a necessary tool for decision makers to align energy investments with that limit. The Financial Times, Reuters, the Associated Press, and Bloomberg featured climate critiques in their reporting. Intergovernmental Panel on Climate Change lead author Joeri Rogelj noted the IEA’s most ambitious scenario “remains inconsistent with 1.5 C and several aspects of the Paris Agreement.” Murray Worthy from Global Witness warned, “The IEA must free themselves of the influence of the fossil fuel industry.” Last Monday, more than 65 influential investors, scientists, and energy experts sent a letter to IEA director Fatih Birol demanding changes to next year’s WEO.

Norwegian NGOs return to court to protect the Arctic from drilling 
Environmental groups in Norway returned to court this month to appeal the dismissal of their climate case against the Norwegian government. Greenpeace and Nature and Youth are again pointing to the country’s obligations under the Paris Agreement, as well as the constitutional guarantee to future generations to a healthy and sustainable future, to compel the Norwegian government to stop issuing new oil and gas licenses.

As Exxon trial begins, Hawai’i jurisdictions join wave of Big Oil lawsuits 
In the U.S. state of Hawai’i, Maui and Honolulu have joined a quickly growing list of jurisdictions suing fossil fuel companies for climate damages. Maui County’s lawyer declared that, “[F]ossil fuel companies knew – their own experts warned them – about the potentially ‘severe’ or ‘catastrophic’ effects of doing business as usual.” Both cases emerged as the high-profile New York v. ExxonMobil trial drew to a close. The New York Times headline, “Fossil Fuels on Trial,” captures the growing movement to hold the sector legally accountable for climate damages.

More Headlines

Auctions for major new oil licencing fall flat in Brazil
Brazil’s efforts to sell off major oil licences fell flat as international oil companies (IOCs) kept their distance in recent licencing auctions. National Brazilian and Chinese companies won the licences with little competition, signalling a new degree of caution from IOCs on expanding into high-cost new production.

New Canadian government faces calls to reject Teck mine, scrutiny over Trans Mountain subsidies
The Canadian government swore in a new cabinet last week amidst pressure to scale up climate ambition, including rejecting a massive new tar sands mine proposed by Teck Resources. The government faces challenges from officials in the oil-producing provinces of Alberta and Saskatchwan. Following its purchase of a major tar sands pipeline project, the Canadian government also faces serious scrutiny from climate groups and First Nations. A recent report from the Institute for Energy Economics and Financial Analysis showed that the subsidy for the pipeline had already reached CAD 320 million in the first six months of 2019.

Industry News

ConocoPhillips responds to pressure to scale back shale
The oil major announced plans to buy back USD 30 billion of shares (half of its market value) as it moves to return capital to investors and distance itself from “the troubled U.S. shale industry,” reports Bloomberg. According to the company’s CEO, there’s a “struggle for relevance unless the industry can create value on [a] sustained basis.”

Fossil fuel titan falters: Moody’s shifts ExxonMobil’s Triple-A rating from stable to negative
Exxon is facing the likelihood that its credit rating will be downgraded in 2020. Exxon’s “substantial negative free cash flow and expected reliance on debt to fund its large growth capital spending programs,” is one of the red flags for Moody’s. More broadly, the fossil fuel industry has lagged the S&P 500 for a decade now. While investors remain hooked on the hefty dividend that have been a hallmark of the industry, the potential Exxon downgrade is a warning that these dividends cannot be sustained as the world confronts the climate crisis.

Flaring and venting continue to grow despite industry promises 
An investigative piece in the New York Times finds that flaring and venting are surging across the oil and gas sector. For example, “Exxon flared or vented 70 percent more gas in 2018 than it did the previous year, according to the data, bringing an end to several years of improvements.”

Cultural protests erode BP’s social license
In the midst of a series of protests against fossil fuel sponsorship of cultural institutions, including against BP’s relationship with the British Museum, BP is revisiting is sponsorship deals. The move reflects growing threats to the oil industry’s social license. 

Resources


Report: Foundations for a fair transition off fracking in Argentina 
The Río Negro province in Argentina has been at the center of the spread of fracking in the Vaca Muerta shale. The Río Negro Production and Energy Transition Working Group was created several years ago to promote alternative strategies for development in a region heavily affected by fossil fuel expansion. After two years of field work, the working group is sharing its first conclusions and reflections on fair transition scenarios for the Vaca Muerta region. The summary of the findings can be found in English here, and the full report is available in Spanish here.

Report: The fiscal transition beyond fossil fuels in BRICS countries
A new report from the Global Subsidies Initiative of the International Institute for Sustainable Development and Leave it in the Ground, provides the first-ever synthesis of official data on governments’ revenues and subsidies associated with fossil fuels in Brazil, Russia, India, China, and South Africa (BRICS). The report calls on the BRICS governments to foster economic and fiscal diversification and use current revenues from fossil fuels strategically, including to cover the social cost of a clean energy transition that is just and protects vulnerable groups.

The Plastic Atlas 2019
The role of plastics in driving the climate crisis is significant, something fully explored in this chapter of the Plastic Atlas produced by Break Free From Plastic. The analysis, from the Center for International Environmental Law, estimates that “at current and projected rates of growth, the production of plastics alone could generate 53.5 billion tonnes of carbon dioxide emissions by 2050. Adding the incineration of waste plastics pushes this total up to nearly 56 billion tonnes. In other words, plastics alone could consume between 10 and 13 percent of the earth’s remaining carbon budget for staying below 1.5 degrees.”

Report: Philanthropy need not sacrifice value for values
In January 2014, 17 foundations with USD 1.8 billion in assets launched Divest Invest Philanthropy. Five years later, a new report by the Croatan Institute shows foundations are making good returns while making good on their divestment promises: 97 percent of the original signatories have divested and nearly all (94 percent) have done so without seeing any loss in performance. According to the Financial Times, “What is even more remarkable is the initiative has swelled to include more than 200 foundations with $24bn – and 89 per cent of that group are ahead of schedule and have already met their divestment goals.”

Report: The Fossil Elephant in the Room
This report from Both ENDS finds that, “the Netherlands provides export credit insurance and guarantees worth EUR 1.5 billion annually to Dutch companies active in the oil and gas sector abroad,” thus undermining Dutch efforts to confront the climate crisis.

Report: Land Back
This project and report from the Yellowhead Institute, “breaks down the current status of land dispossession in Canada, focusing on alienation through resource extraction.” It “examine[s] various forms of redress and recognition by governments and industry to incentivize Indigenous participation in resource development, while pointing to the gaps in these models,” and exploring “meaningful Indigenous economies outside of federal and provincial policies.”

Report: Managed Decline of Fossil Fuel Businesses
This report by Sustainable Energy (Denmark) targets an investor audience, suggesting a framework for investors to align their portfolios with a managed decline of fossil fuel production in line with the Paris Agreement limits.

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