If the fossil fuel energy sector thought things were tough now, they could be about to get much worse, unless it takes decisive action.
Although many people may not have given December’s climate change summit in Paris (COP21) more than a cursory glance, the agreement made by almost 200 countries to keep global warming below 2°C could change the face of the industry within little over a decade.
It seems almost impossible to imagine life beyond fossil fuels now, particularly with the current glut of global oil and coal, but whether we like it or not change is on its way. The change needs to be embraced and acted on now to avoid a “Kodak moment”. In 1975 a Kodak Engineer, Steve Sasson, invented the digital camera. Kodak commissioned a report which said they had 10 years to change. Kodak were not prepared to accept the technology as disruptive nor a threat to their “golden egg” of photographic film and paper and as a result filed for Chapter 11 bankruptcy in January 2012.
Countdown to carbon neutral
To have a fighting chance of keeping global warming below 2°C, power generation will have to be largely carbon neutral within the next 10 years. That means the elimination of most unabated coal and gas fired power generation, while industrial emissions, notably from refineries, steel and cement, will need to be substantially reduced.
Carbon Capture and Storage (CCS) has a part to play for both power and industrial emissions reduction. Low carbon electricity can also support carbon transition in the transport and heat sectors.
But it doesn’t end there. To sustain sub 2°C temperatures, indications are that we will have to be carbon neutral across society within just 30 years. Think petrol and diesel pumps at the filling station completely replaced by biofuels, hydrogen and electric chargers, all heat and electricity generated from sustainable sources and all businesses having to prove that they’re zero carbon.
Embracing the low carbon transition
So what does this mean for the fossil fuel energy sector?
We have to face the facts – the days of fossil fuel domination are numbered. Rather than ignoring the drive to being carbon neutral, the industry has an opportunity to embrace the transition.
It can start by taking a more transparent approach to assessing its carbon footprint, particularly in improving reporting on its unproduced hydrocarbons. Companies also need to progress their sustainability approaches beyond the Corporate Social Responsibility plans and instead develop an effective low carbon programme that forms a core part of their business culture and strategy. The strategy should focus on minimisation through efficiency and innovation, followed by implementation of low carbon solutions both within and outwith their supply chain.
Into the unknown
The UK Government, along with all of the other countries who have signed up to the COP21 pledge, have to set out what they are doing about greenhouse gas emissions every five years. These targets are not mandatory so rely on national and international scrutiny and comparison with other nations. Their success will be down to public opinion resulting in political, commercial and financial pressure.
These emissions reductions are undoubtedly challenging and there are many unknowns to navigate in the low carbon transition. This shouldn’t be a surprise. When the World Wide Web was conceptualized by Tim Berners Lee in the 1980s, it wasn’t possible to predict the future that it would unlock. We’re on the verge of the same type of revolution in the Low Carbon Transition.
In this instance, we have the combined forces of political commitment, business support and financial pressure to drive change. Political commitment comes from global agreement at COP21; at the same time a considerable number of global businesses indicated strong support for action on climate change and; financial investors in fossil fuels are becoming wary of stranded assets and reduced reserve value impacting share price.
It’s time for the fossil fuel energy sector to take action and show leadership in securing our low carbon energy future.
This article was written by Sam Gomersall.