What Net Zero Goals Mean for Oil and Gas Companies
November 08, 2021
By Richard Stepler
Experts predict that governments' net zero pledges will lead to clean energy sources becoming a more efficient, cheaper, and stable option.
These government commitments are pushing many oil and gas companies to consider implementing net zero pledges as part of their larger ESG strategies. BP, Shell, and Total have all announced plans to reach net zero emissions by 2050.
Reducing emissions has become a crucial part of their business strategies and many oil and gas companies are moving quickly to adapt.
Keep on reading to learn what the net zero standard means for these organizations.
What Is Net Zero?
In simple terms, net zero refers to balancing the amount of greenhouse gas produced with the amount removed from the atmosphere.
Net zero is reached when what we add is no more than what we take away. It is a similar concept to carbon neutral. However, net zero looks further than carbon dioxide to include all greenhouse gases such as methane and nitrous oxide.
Net Zero Standards for Oil and Gas Companies
With their science and engineering know-how, oil and gas companies are well placed to address the issue of climate change.
Backed by leading investors, the IIGCC's 'Net Zero Standard for Oil and Gas' was published in September 2021. Minimum expectations for oil and gas companies across several areas are outlined in this document. It includes emissions targets, decarbonization strategies, capital expenditure, governance, and disclosures.
A net zero strategy should involve:
Diversifying into renewable energy Reshaping global demand for oil and gas Developing technology to reduce emissions Ceasing exploration and running existing assets down
The IIGCC document calls for net zero strategies that include "clearly defined" short-, medium-, and long-term targets. These targets must cover direct as well as value chain emissions. Limiting the planet's warming to 1.5 degrees Celsius is the goal, and all targets must align with this.
It is likely that net zero strategies will be an increasingly relevant factor for investors in the oil and gas industry going forward. This new standard is a template for oil and gas companies to make progress on their net zero goals.