Protesters at Rio Centro during the UN Summit
The call for the end of fossil fuel subsidies echoed in all venues of Rio+20. The OECD identified more than 250 individual subsidies supporting fossil-fuel production or consumption valued at US $45-75 billion per year, similar to the Gross Domestic Product (GDP) of a country like Croatia or Ecuador. Greenpeace estimates are even higher; the NGO evaluated fossil fuel subsidies in 2012 at $775bn, which is equivalent to the GDP of the Netherlands or Turkey. Stretching over 40 kilometers, from the People’s Summit in Aterro do Flamengo, crossing to the Copacabana Fort all the way to Rio Centro and Parque dos Atletas in Barra da Tijuca, academics and specialists are unanimous in their opinion: fossil fuel subsidies must be extinguished because they are inefficient and prevent the economy from transitioning from the brown to green economy.
Oil & Gas Corporations
Who needs the subsidies? Not the Oil & Gas (O&G) corporations. Half of the top ten largest publicly traded companies in the world by market cap are oil and gas producers. Their annual revenues are higher than most mid-size countries. Even more striking, their revenues are higher than the countries where the oil is extracted. As one example, according to Revenue Watch, ConocoPhillips, a large American producer, revenues are $244.8 billion while Angola, the third largest oil exporting country in Africa, has a GDP of $84.4 billion (http://www.revenuewatch.org/issues/dodd-frank/oilvsworld ). However, their average annual production is relatively equivalent, while ConocoPhillips produced 1.6 million barrels of oil equivalent per day in 2010, Angola averaged of 1.7 in 2011. It is clear that despite high revenues generated by oil extraction it is questionable what value the communities of producing regions get. In terms of GDP, empirical data indicate that developing countries rich in petroleum have not been capable to translate this wealth into citizens’ well being, also called “The Paradox of Plenty.”
Oil in Rio+20
In this context, what did the Oil and Gas companies present in Rio+20? How are they preparing for the transition to a green economy? What are their strategies for migrating from the O&G business to sustainable mobility?
I participated in the Business Day panel on Oil and Gas organized by Business Action for Sustainable Development (BASD). The day started promising with an inspiring speech from Peter Bakker, president of the World Business Council of Sustainable Development, who made a simple request to the gathered executives: “I know you have all done very good work over the last decade to move forward on sustainability goals… But when you look at all our efforts across all the very good work we do, it still doesn’t amount to nearly enough to tackle the pressing global problems we face… unless we move forward in a much bigger way, we will not get there. Therefore, today, I challenge you not to focus on the excellent work you’ve already done, but to focus on the work that needs to be done going forward to allow 9 billion people to live well and within the limits of our planet by 2050.”
The session began with a harsh truth: the International Energy Agency (IEA) predicted that in 2035 oil and gas will meet around half of the world’s energy needs, remaining the largest contributors to the energy mix. No renewable resource can provide the reliability fossil fuels provide today.
The presenters did a great job exposing the strategies, actions and performance that their respective companies have achieved in the sustainability arena. Hege Marie Norheim, Senior Vice President of Statoil, committed her company to reducing gas flaring, which in the case of Africa could provide for 50% of the continent’s energy needs. The French oil company, Total, followed with a commitment to develop photovoltaic solutions market by providing access to solar lamps and kits to 5 million low income families by 2015.
Shell and BP focused their presentations on the energy-food-water nexus, which is the interconnection that exists among these three elements, which implies that to produce one you necessarily affect the other two. (). The companies are attempting to better understand these nexus and define strategies and propose policies that can reduce resource stress.
Ricardo Castello Branco, of the Brazilian Petrobras, discussed the success of the Brazilian ethanol and the company’s plans to expand production. In addition, the biodiesel production for which over 70,000 low-income farmers have been contracted and the $300 million dollars allocated to biofuel research called the audience’s attention. Finally, Eni showed a video with the quality of life improvements of the communities where they operate in Nigeria and Congo.
As speakers laid out their social and environmental deeds, they also reminded us the world needs cheap and dependable energy. Renato Bertani, the moderator from the Brazilian Petroleum, Gas and Biofuels Institute assured industry needs to operate under four principles:
- reasonable profitability,
- create wealth to community,
- zero tolerance with Health Safety and Environment and
- ethical and transparency standards
Banner at Rio Centro
What Was Not Presented
More striking than the deeds presented so proudly by the participants, is exactly what was left out of the PowerPoints. One month before the sustainability summit, Statoil and Eni announced plans to launch an aggressive exploration campaign in the Skrugard area in Norway’s Arctic region. The Arctic is one of the most sensitive ecosystems on the planet, and increase in drilling has led to concerns on the effects of noise pollution on marine life and the difficulty of access in case of oil spill.
Petrobras has directed 87% of the company’s investment to oil exploration and production. The reserves, which have been estimated to contain at least 50 billion barrels of crude, are located 7000 meters deep in the ocean and a large spill can go uncontained for a significant amount of time, as experienced in the Gulf of Mexico at much shallower depths.
In fact, all these companies are still developing most of their affluent resources and knowhow in order to explore deeper and search for the black gold in more sensitive environments. Oil is being extracted applying ever more complex technologies from increasingly remote places, which means increase in risk and GHG emissions.
When Jennifer Morgan, Director of the Climate and Energy Program, challenged the speakers and audience about the depth of their commitments to move away from O&G and into sustainable mobility, the room became quiet. After an uncomfortable silence, companies pointed out that pricing on carbon emissions is essential to begin this strategy shift. They also reaffirmed the lack of reliability of renewables, stating that gas will be with us for a long time. In addition, Total also reminded the audience that solar producers have gone bankrupt this year, and if it weren’t for Total’s additional resources, their solar business would have gone the same way.
The oil subsidies are for those of us who still want cheap and reliable energy. Unfortunately, our society is not ready to accept that carbon is costly, and thus, governments and companies are hesitant to move in that direction. For example, the Australian prime minister is at risk of loosing her job for implementing a carbon tax. Governments are afraid to increase costs, hurt the economy and risk energy security. With no one to take the lead, we are at an impasse. Mr. Bakker’s challenge to discuss solutions for a world with 9 billion people living within the limits of the planet was barred out of the room. With that in mind, who will be the fossil of the day?