THE BIG PICTURE
Perhaps Shell was hoping its new climate announcement last week would distract attention from its recent losses in court. While Shell’s actual ambition on climate remains grossly inadequate, recent court rulings against the company could have long-lasting consequences.
In a landmark legal ruling, a Dutch court ordered Shell’s Nigerian subsidiary to pay compensation to Nigerian farmers over oil spills. As reported by Al Jazeera, this could “open the floodgates” for future legal cases against oil majors.
The case, initiated in 2008, sought reparations for land and waterways contaminated by oil spills in the Niger Delta. Nearby residents are still experiencing the impacts 15 years later. The plaintiffs contested Shell’s claim that the leaks were due to sabotage, which would mean that they were not legally liable for damages, contending instead that the pipes were poorly managed and badly maintained.
While the ruling held Shell’s Nigerian subsidiary liable for compensation, it also established that parent company Royal Dutch Shell has a legal duty of care to claimants in third countries, which it violated in this case. While an appeal can be made to the Dutch Supreme Court, communities are hopeful that this precedent will pave the way for greater legal accountability for fossil fuel majors.
Shell has faced a series of recent court losses over oil spills in Nigeria. Last November, the Nigerian Supreme Court rejected Shell’s appeal of a 2010 ruling ordering the company to pay compensation of NGN 17 billion over an oil spill that took place in the late 1960s. In response, Shell has initiated an international arbitration case against Nigeria. Separately, a group of farmers and fishermen recently won the right to sue Shell in the UK over environmental damage in Nigeria, setting a precedent for future cases against British companies.
By resorting to international arbitration against Nigeria, Shell could bolster growing resistance within the European Union (EU) to the Energy Charter Treaty (ECT), which fossil fuel companies are using to sue governments over climate regulations. France and Spain have stated that unless reform is enacted, they want to withdraw from the ECT, while a proposal by the European Commission would phase out protections for fossil fuel investments over a ten-year period.
–The OilWire Team
THE DATA
In January, Global Witness and Friends of the Earth Scotland released a research briefing on the potential role of carbon capture and storage (CCS) in limiting global warming to 1.5ºC. The analysis was carried out by climate researchers at the Tyndall Centre.
The briefing provides strong evidence to rebut the claims of Big Oil companies like ExxonMobil, which continue to use promises of large-scale CCS to defend their expansion plans. The analysis shows that:
- Existing CCS projects have a capture capacity equivalent to just 0.1% of annual global emissions from fossil fuels.
- Even with projects under development, fossil fuel-based CCS is incapable of delivering significant emissions reductions within this decade – the critical time frame for action.
- 81% of carbon captured to date via CCS has been used to extract more oil via the process of enhanced oil recovery (EOR).
Existing CCS projects by type: Dominated by projects used to increase oil extraction (EOR)
Source: Dr. Samira Garcia Freites & Dr. Christopher Jones, A Review of the Role of Fossil Fuel Based Carbon Capture and Storage in the Energy System, Tyndall Centre for Climate Change Research, January 2021.
WHAT WE’RE TRACKING
Trends in the right direction
U.S. President Biden takes executive action against fossil fuel expansion
In the first few weeks of his presidency, U.S. President Joe Biden has signed a number of executive orders to begin reversing the pro-fossil fuel agenda of the Trump era. Beyond committing to rejoin the Paris Agreement, Biden revoked the presidential permit for the Keystone XL oil pipeline, instructed federal agencies to seek to eliminate subsidies for fossil fuels, and pledged to end funding for “carbon-intensive” fossil fuel projects abroad. The administration also initiated a review of federal leasing and permitting for oil and gas extraction. Until the review is complete, new leases for oil and gas development on federal lands and waters will be paused. Around 20 percent of U.S. oil is produced from wells on federal lands and waters.
These moves have been welcomed with cautious optimism, though campaigners say further action is needed. For instance, the language “carbon-intensive” could leave loopholes for gas, and the current pause on new leases will not affect U.S. oil and gas production from leases already issued. And activists are demanding that Biden use his existing authority to block the dangerous Line 3, Dakota Access, Line 5, and Mountain Valley pipelines as well. All of these projects are severe threats to the climate, water resources, and Indigenous rights.
European Union seeks to align trade and investment policies with a global fossil fuel phase-out
EU countries have affirmed their commitment to the Paris goals, stating that future energy diplomacy will promote a global phase-out of fossil fuels. Council conclusions commit to “discourage all further investments into fossil fuel based energy infrastructure projects in third countries” and scale up green finance. The EU will also seek to align its trade policy and trade agreements with its climate ambitions. Climate groups have welcomed the announcements as a good first step, but say that phasing out subsidies for fossil fuels within the EU will be critical to success.
European lenders stop financing oil trade from the Ecuadorian Amazon
Three European banks – Credit Suisse, ING, and BNP Paribas – have committed to cease trade finance for new Ecuadorian Amazon oil. These announcements came in response to a report from Stand.earth and Amazon Watch that named them among the top six banks and financial institutions financing the oil trade in the area. The report found that European lenders had financed the trade of oil worth USD 10 billion from the biodiverse Amazon Sacred Headwater region over the past 10 years. According to BankTrack, these are the first commitments from global commercial banks that exclude finance for “extractive activities in the Amazon rainforest.”
Ecuadorian court rules against gas flaring in first-of-its-kind case brought by children
Nine girls sued the Ecuadorian government over rights violations from gas flaring in the Ecuadorian Amazon – and last month they won. Judges ruled in their favor, finding that flaring violates the rights of nature, health, water, and food security, as well as the right to a clean environment. Carlos Mazabanda, Ecuador Field Coordinator of Amazon Watch, said they are now calling on the Ecuadorian government to “[end] permitting for the burning and venting of gas, as ordered by the court, and to protect the life and rights of its people.”
Major victories in the fight to stop the Jordan Cove LNG export project
U.S. communities in southern Oregon won two major victories in the past month in their 14-year-long fight to stop the Jordan Cove LNG export terminal and associated Pacific Connector Pipeline. First, the U.S. Federal Energy Regulatory Commission surprised observers by upholding the state of Oregon’s denial of water permits. Weeks later, the Biden administration’s Commerce Department rejected the company’s appeal of a separate coastal zone permit, likewise leaving the state’s rejection in place. These twin victories leave Jordan Cove LNG without multiple crucial permits, nor any clear legal route to obtain them. Indigenous groups, landowners, and climate activists are celebrating these hard-fought wins and recommitting to ensuring the LNG export project is never built.
Campaign news
UK must phase out North Sea oil and gas to prove climate leadership
In this op-ed, Mary Robinson and Baroness Sheehan call on the UK to demonstrate its leadership on climate in the run up to COP26 by committing to phase out fossil fuel production in the North Sea. They say that the government’s policy of “maximising economic recovery” of North Sea oil is out of step with the Paris goals, especially since we’re on track to produce double the amount of fossil fuels compatible with a 1.5ºC warming limit by 2030. The op-ed explains why the UK needs to implement supply- as well as demand-side measures to achieve its climate aims. In particular, it should halt new licenses and introduce a deadline for phasing out production entirely.
Campaign hub launched for Fossil Fuel Non-Proliferation Treaty
An international network of civil society groups has launched the Fossil Fuel Treaty Campaign Hub to coordinate international support for a fossil fuel non-proliferation treaty. Three cities and 211 organisations have already endorsed the idea. The website offers a series of resources and campaign suggestions.
Alberta uses anti-democratic tactics to suppress climate advocacy in Canada
A recent report by Environmental Defense Canada highlights similarities between the government of Alberta’s response to critics of the fossil fuel sector and the responses of autocratic oil-producing nations. Tactics include revoking the charitable status of groups that are openly critical, criminalizing protest, and claiming that NGOs are foreign agents. The release of the report comes in the wake of Alberta Premier Jason Kenney’s inquiry into “anti-Alberta energy campaigns,” which the authors say deploys many of these tactics.
#DefundLine3 campaign launched
As Indigenous leaders, climate campaigners, and legislators call on U.S. President Biden to revoke the permit for Enbridge Energy’s proposed Line 3 tar sands oil pipeline, the Stop the Money Pipeline Coalition is launching a parallel push targeting big banks to #DefundLine3. Line 3 would carry 760,000 barrels of tar sands oil from Alberta, Canada, to the U.S. state of Wisconsin daily. The pipeline would bisect Minnesota Tribal lands and threaten to pollute watersheds and the headwaters of the Mississippi River. A USD 2.2 billion loan to Enbridge is up for renewal by 18 banks, with a deadline of 31 March. You can support this effort: Email banks like Chase, Citi, Bank of America, and TD Bank to demand that they stop financing Line 3.
BlackRock increases pressure on Big Oil, but still has a big problem
BlackRock CEO Larry Fink’s 2021 letter to CEOs and clients committed the company to align with a goal of net-zero greenhouse gas emissions by 2050 and to apply greater climate scrutiny to its actively managed assets. This week, BlackRock added more detail as to how it will implement these still-vague pledges. BlackRock says fossil fuel producers must disclose the carbon emissions from the oil, gas, and coal they extract (Scope 3), and announce short- and medium-term reduction emission targets, in addition to long-term net zero goals. For companies that fail to meet these standards, BlackRock lays out “escalation” steps such as voting against company directors. The BlackRock’s Big Problem Coalition has responded, explaining how the world’s largest investor in climate destruction continues to send mixed signals.
After UK gas plant approval is upheld, Drax may shelve the project
The UK Court of Appeal has upheld planning approval for energy company Drax’s planned gas power plant in Yorkshire. If built, it would be the largest gas power plant in Europe. ClientEarth contested the plant on the basis that the UK government has already approved three times more gas plant capacity than it forecasted it will need out to 2035. Though the court has upheld the approval, the case set some important precedents: that decision-makers must take the carbon lock-in risk of a project into account, that permission can be refused on the basis of a project’s climate impacts, and that the public can raise these issues in planning processes. News outlets are now reporting that Drax may ditch the project after all, as the company shifts away from fossil-based power.
More headlines
European Investment Bank president: ‘Gas is over’
Werner Hoyer, president of the EIB, reaffirmed last month that the bank intends to end finance for fossil fuels, including gas, by the end of 2021. Its ‘climate bank roadmap’ includes plans to increase green investment to EUR 1 trillion by 2030, and align all its activities with the Paris Agreement. “To put it mildly, gas is over,” Hoyer said in his remarks. However, commentators say that loopholes could allow for indirect financing of fossil fuels through financial intermediaries.
Irish climate bill would put oil and gas licensing ban into law
The Irish Climate Action Bill will put into legislation a ban on oil and gas exploration and extraction in Ireland. The Bill also introduces a requirement for a national carbon budget, updated every five years, which sets sectoral emissions ceilings. The Cabinet will review the final text of the Bill later this month.
China’s fossil fuel expansion incompatible with its climate pledge
China currently has over 34,000 kilometres of oil and gas pipelines under construction, with lifetime emissions equivalent to around 159 coal plants. Climate groups say this is incompatible with its pledge to become carbon neutral by 2060. The findings come from a recent report by Global Energy Monitor on pipelines that found that more than USD 1 trillion is invested in the development of 468 fossil fuel pipeline projects globally. These projects are at risk of becoming stranded assets as the energy transition renders them obsolete.
Norway awards new oil and gas exploration licenses
Norway granted 61 new oil and gas exploration licenses to 30 companies in the latest annual licensing round last month, again contradicting its own climate commitments. The licenses were largely granted for areas in the North Sea and the Norwegian Sea, though three were given in the ecologically diverse Barents Sea.
Industry news
Shell’s updated climate plan still = failure
In Shell’s latest update on its climate ambition, the company commits to be a “net zero” company by 2050, including the emissions from burning its products. However, Shell’s updated plan includes little new substance and still adds up to failure in meeting the Paris Agreement goals. In the near term, Shell will continue spending at least USD 12 billion per year on fossil fuels versus less than USD 3 billion combined on renewable energy and other ‘energy solutions’ (which include hydrogen and biofuels). Furthermore, Shell still plans to increase gas production, substituting false solutions like forest offsets for rapid action to phase out fossil fuel extraction.
Shell’s own version of a global 1.5°C energy scenario, also released last week, would see oil and gas use remain at more than 85% of current levels in 2050. Instead of reducing fossil fuels, Shell’s scenario would rely on planting trees over “an area approaching that of Brazil” to offset excess pollution.
ExxonMobil’s CCS-focused climate plans do little to assuage investor concern
ExxonMobil is under pressure from investors after a comparatively weak financial performance in 2020 and fossil fuel asset write-downs of around USD 20 billion. It has also been the subject of ongoing criticism for its lack of action on the climate crisis. In response, Exxon released its 2021 Energy and Carbon Summary in January. While the plan includes some minor updates, it falls far short of meaningful climate ambition. Exxon has pledged a small amount of its capital budget towards “Low Carbon Solutions” (5 percent), but focused heavily on CCS. The report does not acknowledge the risks associated with CCS technology, which is unproven at scale. Further, many of the projects announced are not new, but were already underway.
S&P considers downgrading oil and gas majors’ ratings
Rating agency S&P has increased its risk rating for the oil and gas sector due to price volatility, weaker profitability, and the risks associated with the move away from fossil fuels. In late January, S&P said 13 oil and gas companies, including ExxonMobil, Chevron, and Shell, face a downgrade, partly due to increased competition from renewables. Last week, S&P followed through, cutting the credit ratings of Exxon, Chevron, and ConocoPhillips.
BP reduces its exploration team from 700 to less than 100
BP recently cut its exploration staff team by more than 85 percent, and said it will reduce exploration spending by more than half, to USD 350-400 million annually. The move comes after BP unveiled plans last year to cut production by 40 percent by 2030. In practice, the pledge may only represent a less than 30 percent cut to production, since it excludes BP’s equity stake in Rosneft. BP may be recognizing the limits to fossil fuel expansion – but still not rapidly enough to respond to the climate emergency.
General Motors commits to sell exclusively electric vehicles by 2035
GM announced that it will end production of diesel and gasoline-powered engines by 2035, switching instead to fully electric vehicles. The company has pledged to invest USD 27 billion in electric and autonomous vehicles by 2025. These commitments form part of a wider plan to become carbon neutral by 2040. GM shares increased by 7.4 percent after the announcement.
RESOURCES
NGFS Scenarios: Guiding finance towards climate ambition or failure?
In a new report, Oil Change International and Reclaim Finance analyse the shortcomings of the climate scenarios published by the Network for Greening the Financial System (NGFS), a group of central banks. The report warns that these scenarios may be used to justify slow and inadequate climate action by financial actors. Coverage in Bloomberg highlights the fact that the NGFS includes a 1.5ºC scenario only as an ‘alternate’ scenario. OCI and Reclaim Finance recommend that the NGFS review its scenarios to centre robust 1.5ºC trajectories that prioritize rapid action to phase out fossil fuels and take a precautionary approach to negative emissions technologies. The NGFS is due to release updated scenarios in April.
Geoengineering Monitor highlights feasibility issues with CCS
Complementing the Global Witness and Friends of the Earth Scotland report on CCS featured above, Geoengineering Monitor published two recent articles highlighting some of the major challenges with both the capture and the storage of CO2. Direct air capture is highly energy intensive – often prohibitively so – and once stored, leakage is common and under-documented, contributing to ocean acidification and exacerbating the climate emergency.
International Best Practices: Estimating tax subsidies for fossil fuels in Canada
The International Institute for Sustainable Development released a report examining the Canadian government’s financial support for the fossil fuel industry and setting out best practice in defining fossil fuel subsidies. The report concludes that tax relief and public expenditures for the sector should be measured and reported as subsidies, in line with international guidelines.
Beyond Petrostates: The burning need to cut oil dependence in the energy transition
This Carbon Tracker report investigates the impact of the energy transition on the top 40 most fiscally oil-dependent nations globally. Real revenues under a low carbon scenario could be USD 9 trillion lower than those forecast by industry, driven largely by lower prices. The 19 most vulnerable countries identified in the report are populated by 400 million people who may be at risk from lower government revenue and job losses, underlining the urgent need for domestic and international action to manage and support a fair and just transition. The report will be launched on 24 February.
Risky Bet: National oil companies in the energy transition
The Natural Resource Governance Institute has released a report looking into energy transition risks to state-owned national oil companies (NOCs). NOCs, which produce half the world’s oil and gas, are poised to invest over USD 400 billion on oil and gas projects that rely on an overshoot of 2ºC in order to break even. Governments can act to reduce risks in a number of ways, including through incentivizing lower-risk investment decisions and revisiting cash flow rules.
FracTracker maps the impact of extractive industries on local communities
FracTracker has released two ‘Story Maps’ that document the impact of the fossil fuel industry on local communities. One charts the movement of toxic fracking waste in the Appalachian Basin, and the second maps the multigenerational fight against polluting industries including coal, oil, and steel in southeastern Michigan.