Where energy demand is growing rapidly, oil and gas companies can endeavor to support coal-to-gas switching and investing in infrastructure that enables electrification to meet end user demand and support lower GHG upstream operations. These companies have a range of tools when it comes to engaging with decarbonization efforts in ways which allow their participation in the decarbonizing economy. Oil and gas companies are responding by looking at where and how they do business and confronting a rethink of business models in a decarbonizing world. Stranded asset risk is a significant concern for shareholders as the future energy mix takes shape. Investors are also becoming a strategic driver of decarbonization action, growing increasingly attuned to the demand horizon for hydrocarbons and shifting attention to the environmental impact of oil and gas production through Environment Social Governance (ESG)-focused investing. A third method of decreasing carbon use is the organization of circular economies, in which materials are reused or recycled instead of disposed of at the end of their service life. In addition to disincentives, many governments are encouraging the use of substitute technology and fuel, especially renewable energy. The challenge for the oil and gas industry is to both engage and adapt to a changing policy and investment landscape, but also to evolve in ways which don’t simply support but contribute and perhaps even lead efforts to decarbonize the energy system.Īround the world there is at least a gradual shift from policies that have supported oil and gas production to policies that instead are starting to disincentivize fossil fuels, including carbon pricing and the European Union’s Emission Trading Scheme. In the United States, India, and China-the three largest greenhouse gas emitters-natural gas in particular has the potential to remain an integral component of the low carbon energy transition for decades to come, depending on the policy mechanisms and technologies in place. The International Energy Agency’s Sustainable Development Scenario (SDS) and the Shell Sky Scenario-both aggressive decarbonization forecasts-show an ongoing, long-term role for oil and gas, even while demand levels are reduced from where they stand today. However, even with these obstacles, oil and gas remain an important part of the energy mix, especially in developing regions. Amidst a global energy transition, the demand, financial, and social future of oil and gas companies is increasingly in question. Climate Change & Climate Action Energy & Environment Executive summaryĪs the third decade of 21st century begins, the oil and gas industry faces opposition from a public greatly concerned with the environmental impact of fossil fuels, ever-more skeptical shareholders, and challenges from policy makers seeking to simultaneously meet decarbonization goals and expected oil and gas demand.
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