Robin Mills: Oil industry must back workable climate policies

If the oil industry does not support sensible climate policies, it will suffer from stupid ones. Rex Tillerson, the chief executive of ExxonMobil, last week complained about a "hodgepodge" of climate policies. But large oil companies have only themselves to blame for failing to seize the initiative on climate.

American ones in particular have instead lobbied against climate action in general, tried to cloud the science and continue to back Donald Trump’s energy illiteracy. But the voice of Middle Eastern oil firms, with the most to lose in the long term, is not being heard either.

The resulting mishmash often does little good for the climate, is expensive for consumers and businesses, and obscures the true cost.

These include unnecessary subsidies to mature forms of renewable energy, preference for costly technologies over straightforward changes in behaviour or energy efficiency, and biofuel mandates that have led to deforestation and rising food prices.

Meanwhile, promising low-carbon technologies outside the renewable energy and electric-vehicle lobby fail to secure support.

As renewable energy industries grow in size, they will exert increasing political power, particularly in North America and Europe, where they already benefit from strong public and environmentalist support. That is their right, as for any other business, but it raises the danger of counter-productive policies designed to favour certain companies, or protect profits more than the environment and consumers.

The cleanest approach would be an across-the-board tax on carbon dioxide emissions globally or, more realistically at first, regionally, with revenues used to reduce other taxes. Such a levy is moving up the agenda in North America. Washington state votes next month on imposing a charge at US$25 a tonne on carbon dioxide. The Canadian prime minister Justin Trudeau announced last month a federal tax, starting at $10 a tonne and reaching $50 by 2023.

The European Union and now China are using schemes with tradable permits, similar but more complicated.

For comparison, a $25 per tonne tax would, in my calculations, add about 3 fils per kilowatt-hour to the cost of electricity from gas, about 22 fils per litre to petrol prices, and about Dh80 to a Dubai to London return flight ticket.

Mr Tillerson said that a cost on carbon was the best way to reduce greenhouse gas emissions. Shell and BP have long backed such a tax, with BP last year saying a charge of $40 a tonne would make gas more affordable than dirty coal.

But John Watson, the chief executive of Chevron, the second-largest US oil company, last year opposed carbon taxation. Emails leaked from Hillary Clinton’s campaign record an internal campaign debate on whether to support a carbon tax, eventually rejected because of unfavourable polling.

A carbon tax would hit gas’s main competitor – coal – hardest. At a time of depressed US gas prices, it is surprising that, by opposing carbon charges, gas companies are so charitable towards a rival industry.

The Middle East can benefit from, or at least adapt to, the use of carbon pricing worldwide. Canadian willingness to tax its oil sands’ higher-carbon oil production favours the Middle East. An increased cost of carbon in Europe and Asia would reduce the attractiveness of coal, favouring liquefied natural gas exporters such as Qatar. And a long-term sustainable role for the region’s vast hydrocarbon endowment, including carbon capture and storage, will come about only with supportive policies.

Ten oil and gas companies issued a statement last October backing effective action on climate. This included four state petroleum firms, but only one from the Middle East – Saudi Aramco. The region’s national oil companies have traditionally been reticent to engage in public debates. But as they become more international, and like Aramco seek to sell shares, they need to back workable climate measures more vocally, at home and abroad.

Robin Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis.

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