Bernard Looney, BP's new chief executive, stood behind the podium in a London hotel in February and announced that the company would dramatically shift the way it did business.
Framed by a multi-hued green background, Looney described a transformation of BP's structure and operations that would steer the oil giant to spend more on clean energy and less on fossil fuels. By 2050, he said, BP would achieve net-zero greenhouse gas emissions, joining a growing list of governments and corporations committed to tackling climate change.
Much of the world saw BP as the problem, Looney said. Now it would become part of the solution.
"We have got to change, and change profoundly," he told a room full of investors and journalists, "because the world is changing fast, and so are society's expectations of us. But it is more than having to change. We want to change."
Looney's speech launched a rapid-fire game of one-upmanship among Europe's largest oil and gas companies. Within three months, Total and Royal Dutch Shell had announced their own plans to reach net-zero emissions by 2050, building on previous pledges to increase spending on low-carbon energy sources like wind, solar and biofuels.
Two of their American counterparts, ExxonMobil and Chevron, have also announced goals to reduce climate-warming pollution, although much more modest ones.
But many of the pledges are misleading, and misrepresent how much the oil giants are changing. Most glaring is that none of the companies has committed to cut its oil and gas output over the next decade, the simplest and most reliable way—one might say the only way—to cut emissions, and a must if the world is to avoid dangerous warming. In fact, the stated net-zero "ambitions," as the companies generally call them, do not require that greenhouse gas emissions fall to zero at all. They rely instead either partly or largely on capturing or canceling out these emissions with unproven technologies and reforestation at a questionable scale.
Meanwhile, through industry associations the companies have continued to lobby against policies that would hasten a shift away from oil and gas: All the companies, for example, retain membership in the American Petroleum Institute (API), which has lobbied against incentives for electric vehicles, supported the Trump administration's rollback of methane regulations and backed expanded drilling in the Arctic.
"There's really nobody in this industry planning for a true transition away from fossil fuels," said Andrew Logan, senior director of oil and gas at Ceres, which works with investors to advocate for sustainable business practices.
"To what degree are these scenarios truly independent thought exercises and to what degree are they just attempts to rationalize a strategy that the companies are kind of trapped in by decisions that were made years or even decades ago?" he said. "I think it's pretty clear that for a lot of companies it's more the latter."
What the Fine Print Says
The big oil companies' pledges to help address climate change come as the petroleum industry is under unprecedented assault.
Even before the coronavirus pandemic crashed the oil market, investors were pressing companies to adapt, as returns lagged and renewable energy became an increasingly appealing alternative.
Climate activists and local governments have targeted oil companies with lawsuits seeking billions of dollars in damages for their alleged deception about climate change. National governments, particularly in Europe, have adopted policies to rapidly cut greenhouse gas emissions and shift away from oil and gas.
The pledges to eliminate climate-warming emissions are an attempt to fight off this onslaught, and they sound impressive. But the fine print shows they are much weaker than they seem. In fact, the pledges don't require that the companies reduce their emissions by any specific amount, or even, in some cases, at all.
The vast majority of the emissions from oil come from fuel burned by cars, trucks or planes. But the net-zero pledges of most of the big oil companies do not cover these emissions. Instead, they apply to the direct emissions from producing, refining and processing oil and gas.
For the much larger share of consumer-driven emissions—known as scope 3 emissions—the companies have said only that they'll reduce the "carbon intensity" of their products, or the pollution per unit of energy they sell. That means total emissions could stay level or even grow, as long as a company sells more low-carbon energy like solar or biofuels to compensate for its oil and gas.
The French company Total, for example, has driven down its emissions intensity by nearly 6 percent in recent years by expanding its portfolios of natural gas, biofuels and electricity. At the same time, total emissions have increased by 8 percent, according to a report by the Transition Pathway Initiative, an investor-led effort to track corporate climate plans.
BP's net-zero pledge illustrates other ways that a company's stated targets can add up to less than they seem to promise: BP's pledge does include some "scope 3" emissions, but only a portion of those the company is responsible for. The pledge excludes more than 40 percent of its oil production and 15 percent of the gas that come from its stake in the Russian energy giant, Rosneft. It also excludes all the oil and gas that BP's refineries and service stations buy from other producers before selling it to customers.
Together with other exclusions, BP's pledge would cut the emissions intensity of its products by less than 30 percent by 2050, not the 50 percent the company advertises, according to the TPI report. And none of the pledges made by any of the big oil companies aligns with the Paris Agreement's goal of limiting warming to well below 2 degrees Celsius from pre-industrial times, the report said.
"These companies are finding more and more convoluted ways to carve out loopholes and minimize the amount of emissions that they're actually taking responsibility for," said Kelly Trout, a senior research analyst at Oil Change International, an advocacy group.
Jason Ryan, a BP spokesman, said the company believes that the commitments it has made "set out a path that is consistent with the Paris goals." He added that the TPI report "focused too heavily on carbon intensity," and not enough on BP's net-zero pledges, and that the company will announce more details about its plans in September.
Ryan also noted that Looney, in his speech in February said, "You can expect oil and gas production to decline gradually over time."
However, later in the speech, when Looney addressed the company's lack of short-term targets, he said, "We don't expect progress to be a straight line."
Another key piece of the pledges is "carbon removal"—investments in reforestation or technologies to remove carbon dioxide from the air—which oil companies say they will use to achieve some of their emissions-reduction goals. Such offset strategies are a quiet admission that the companies expect to continue selling large volumes of oil and gas for decades to come, so emissions cuts will have to come from paying for reductions by others.
Shell's annual securities filing, for example, says its direct emissions may actually increase in the future, a trend the company says it would counteract with investments in emissions-cutting technology.
The Intergovernmental Panel on Climate Change has said that counting on these types of carbon removal measures may be neither realistic nor sustainable, and has warned that large-scale deployment "could have significant impacts on land, energy, water or nutrients." Massive reforestation projects, for example, could compete for land with agriculture, or if planted in less fertile areas could harm ecosystems and watersheds. Shell's chairman, Charles Holliday, recently said that for the company to cut its emissions in line with the Paris Agreement goals, it would need to reforest an area the size of Spain.
"I have grave misgivings about gigaton-scale natural solutions," or forestry offsets, said Rob Jackson, a professor of earth system science at Stanford University who chairs the Global Carbon Project, which tracks emissions. "And gigaton-scale is the only thing that matters when we're talking about the coal and oil and natural gas industries."
Shell declined to answer questions about their emissions pledge, but a spokeswoman, Natalie Gunnell, said in a written statement: "Despite the immediate challenges of today, our focus on climate change remains resolute."
The pledges to address global warming made by American oil giants Exxon and Chevron lag far behind those of their European competitors, reflecting a growing trans-Atlantic rift when it comes to the oil industry's response to climate change. In addition to their net zero pledges, the European majors have begun to grapple more openly with a transition away from fossil fuels, with several companies recently announcing that some of their oil and gas assets are worth less than they once believed.
American companies, in contrast, have not yet even uttered the words "net zero." Chevron, for example, has said only that it will reduce emissions intensity by 5-10 percent for oil and 2-5 percent for gas by 2023, and that doesn't cover emissions from its products. Exxon's only corporate-wide emissions pledge has been to reduce flaring and the release of methane—a potent greenhouse gas and the primary component of natural gas—through this year.
Casey Norton, an Exxon spokesman, declined to comment, but pointed to the company's Energy and Carbon Summary, which describes Exxon's emissions pledges and support for the Paris Agreeement.
Sean Comey, a spokesman for Chevron, said, "Our management and board considered a wide range of different [greenhouse gas] reduction metrics and felt it was important to adopt targets that were equity based, "that matched a date when nations will assess their progress under the Paris accord and that "reduced the carbon footprint for both oil and gas."
Some industry critics say they believe the European companies' plans may represent real change, while still falling short of where they need to be.
"Talk is cheap, as we all know," said Mark Lewis, global head of sustainability research for BNP Paribas Asset Management. But, he added, the pressure on the industry has grown so great that the companies have no choice but to narrow the gap between rhetoric and action.
"There is still a gap, but it's getting smaller and I think that gap will close much sooner than people realize," Lewis said
Convincing the Public and Political Elites
While it's unclear how serious oil executives are about transforming their companies, there's little doubt about their efforts to transform their image.
"Want to drive carbon neutral? With Shell, now you can," says one advertisement for the company. The ad promotes a program that allows drivers in the Netherlands and the United Kingdom to offset their emissions through reforestation when they buy gasoline from Shell.
Chevron, which refers to itself as "the human energy company," has been promoting its "search to transform farm waste into renewable natural gas" in a prominent marketing campaign.
An API advertisement boasts that "Innovators in America's natural gas and oil companies have teamed up with the country's brightest minds and reduced carbon emissions levels to the lowest in a generation."
Environmental sociologist Robert Brulle argues that these marketing efforts have been integral to countering government action on climate change over the last few decades.
Brulle, a visiting professor at Brown University, analyzed 30 years of advertising by the oil and gas industry and found that the most powerful determinants for how much was spent were activity in Congress regarding climate change and media coverage of the issue. In 2010, when Congress was considering climate legislation, the oil industry spent $315 million on advertising.
"What they're trying to do," Brulle said, "is to convince the public and political elites that they're being responsible actors and that there's no need for legislation or regulation."
From 2016 through 2019, Exxon, Chevron, BP, Shell and the petroleum institute spent more than $440 million on corporate promotion advertisements in the United States, according to data from Kantar Media, analyzed by Brulle for InsideClimate News.
Spending by Exxon accounted for more than half that total. The company's ads often focused on how its products made cars more efficient or on its algae biofuels research. While exact spending on that research is not publicly available, it represents a miniscule portion of Exxon's business.
Frank Maisano, a media specialist at Bracewell LLP who has worked with energy companies for decades, said the net-zero pledges and the talk about biofuels or CCS are ways for the industry to influence climate policy at a moment when government action on climate change has stalled in the United States and in international negotiations.
"I think a lot of the companies see that paralysis in the U.S. and internationally as an opportunity to talk about what they want to do," he said, "and spell it out in a way that works for them."
Oil Under Pressure
On Looney's first day as chief executive, BP's employees were welcomed at the company's London headquarters by Greenpeace activists in red jumpsuits who had chained themselves to oil drums, blocking the building's entrance.
Looney is a trim Irishman who projects an air of humility and collegiality and favors open-collared shirts. In announcing the company's new direction in February, he said his mother had taught him that, "We were given two ears and one mouth, and we should use them in that proportion." His response to the activists seemed to take account of that advice: The protests, he said, were a sign of the company's problems.
"They are not the only ones who believe we are out of step with society," he said. "Some investors do as well, and some of our own staff. And that is an uncomfortable place to be."
Propelled by the youth climate movement, the public pressure on oil companies to address climate change took a quantum leap last year. Every major company faces lawsuits in multiple jurisdictions over its record on climate change, as well as an endless series of shareholder resolutions pressing for more ambitious action. In May, BlackRock, one of Chevron's largest shareholders, helped pass a climate resolution during the company's annual shareholders meeting.
The most significant pressure, however, is coming not from activists but from investors who see a widening gulf between corporate business models, which continue to revolve around growing production, and a looming peak in global demand for the industry's products. While an energy transition will take decades, said Lewis, of BNP Paribas Asset Management, markets can price that change much more quickly. "That's really what's been happening already over the last couple of years," he said.
The energy sector's share of the S&P 500 index has fallen from about 12 percent a decade ago to 3 percent today. Returns have lagged behind the broader market. Exxon's market value has plummeted from more than $500 billion in 2007 to less than $200 billion today, and the company's valuation was recently overtaken by Tesla. Lewis argues that this is a reflection of large, structural challenges that the industry faces.
Even as the U.S. population has grown over the last 15 years, oil consumption in the United States has flattened. In the future, Lewis said, electric vehicles will push down consumption not only in the United States and Europe, but in China, too, where oil demand has so far continued to climb. Meanwhile, wind and solar energy are fast becoming competitive with or cheaper than natural gas for power generation in much of the world.
The sharp contraction in energy demand and economic growth that came with the coronavirus pandemic has driven many analysts to rethink the pace at which these shifts may occur. Goldman Sachs says investment in renewable energy will surpass that in oil and gas production next year, and some are predicting that oil demand may never again climb higher than it was in 2019. Even Looney has said that possibility can't be discounted.
Energy companies have responded to the collapse in oil prices by cutting more than a hundred billion dollars in spending on exploration and production this year, and analysts are projecting a wave of bankruptcies among smaller firms that could ensnare more than 200 companies before the end of next year in the United States alone.
In May, Exxon reported its first quarterly loss in decades. The following month, BP and Shell each announced that a dimmer outlook for oil and gas prices—driven by the pandemic and governments' stepped-up efforts to address climate change—was forcing the companies to cut the value of their assets, by up to $17.5 billion in BP's case and up to $22 billion for Shell. BP said that some of its oil and gas investments might never be developed, and two weeks later announced the sale of its petrochemicals business for $5 billion. The moves were the biggest signs yet that some oil executives believe the pandemic may accelerate a transition away from their core product.
To find a way out of the current economic havoc, Lewis said, the oil companies "really have to think much more carefully about their business model in the future, because the long-term trends are really starting to assert their power."
Today's oil prices are too low to justify most new drilling projects, and in some cases, they don't even cover the cost of operations.
"Whereas in the past, the oil and gas companies have been able to say 'We have this great business model, we dig stuff out of the ground and we refine it and sell it and we make 15 to 20 percent returns,'" Lewis said. "You can't make that argument anymore."
What About Renewable Energy?
Oil companies might be talking about a transition, but their investments have largely remained the same. The day after Shell announced its net-zero ambition, the company also announced it would build a $6.4 billion gas project in Australia that is expected to operate for nearly 30 years, part of a joint venture with PetroChina. That project alone would draw more investment from Shell than all of its renewable energy ventures to date. The company boasts that its oil and gas production arm "has a strong development funnel of projects that offers long-life, resilient growth opportunities," and will generate "robust cash flow for decades to come."
The oil giants' spending on clean energy, by contrast, remains paltry. An analysis by Wood Mackenzie, a research and consulting firm, found that BP, Shell, Chevron and Total spent a total of $7.9 billion on clean energy acquisitions since 2016, while Exxon spent nothing at all. That compares to the total capital spending by the five companies' of $350 billion from 2016 through the end of last year. And while Total says it will devote at least 10 percent of its spending to clean energy this year, each of the other four companies' share is in the single-digits.
In fact, the industry as a whole accounted for only about 0.5 percent of global investment in renewable energy from 2015 through 2018, according to the International Energy Agency, and a little more than a third of the investment in carbon capture technology during that period.
Valentina Kretzschmar, vice president of corporate research at Wood Mackenzie, said that while the industry has been increasing its investment in renewable energy, its current spending falls far short of what's needed.
"They will have to commit a lot more capital to achieve these targets," she said.
It's too soon to say whether the companies will substantially alter their long-term outlooks, given the effects of the coronavirus pandemic: Shell's chief executive, Ben van Beurden, said the likelihood has increased that oil demand will peak in this decade. But in general, the companies project that oil use will remain robust for decades. By contrast, in order to limit warming to 1.5 degrees above pre-industrial times, modeling published by the IPCC shows that oil demand must fall sharply by 2030, even with widespread deployment of carbon capture technology.
The executives of big oil companies like to say they must respond to the demands of the global energy market. But that view ignores the role that the companies play in shaping that market through their monumental investments, said Tim Buckley, an analyst with the Institute for Energy Economics and Financial Analysis, a clean energy think tank.
"Those top five companies are going to determine the success of the Paris Agreement," Buckley said, noting that, taken together, their planned spending on oil and gas over a decade is close to $1 trillion. If the companies were to reallocate that and direct even a much smaller amount to renewable energy, he said, it would shift the landscape.
"All of a sudden instead of spending $1 trillion over here, you're actually spending $200 billion or $300 billion on the solution," Buckley said. "I would say a $1.2 trillion dollar shift is huge for the world."
A Kinder, Gentler Image
Looney is not the first chief executive of BP to promise transformation in the face of climate change. In 1997, seven months before governments adopted the Kyoto Protocol agreement to reduce greenhouse gas emissions, John Browne, BP's chief executive at the time, gave a speech at Stanford University in which he promised to cut corporate emissions and to invest in renewable energy, much as Looney did this year.
In 2000, the company launched a marketing campaign that promised to move "beyond petroleum" and ushered in branding symbols that suggested environmental awareness, including the green hues and sunburst logo that Looney would stand in front of two decades later.
The rebranding worked.
"BP's kinder, gentler image touched a nerve with American consumers," wrote Miriam Cherry and Judd Sneirson, two law professors, in a 2010 article about the campaign. "For whatever gas-guzzling SUVs they or their neighbors might own, for however many trips consumers made in their cars, they at least aspired to be kinder to the environment. And these consumers wanted to patronize a 'green' gasoline brand, and BP seemed to be that brand."
The company plopped some solar panels on the roof of a gas station in Los Angeles, Cherry and Sneirson wrote, and doubled sales. BP's stock price tripled during Browne's tenure.
The company left the Global Climate Coalition, an industry group that opposed the Kyoto Protocol, and increased spending on renewable energy.
But the change didn't last long. A new leader took the helm in 2007, and the company struggled financially. Within a few years of the 2010 explosion of the Deepwater Horizon rig in the Gulf of Mexico, which killed 11 people and unleashed the worst offshore oil leak in history, BP had sold off its solar assets, part of an "effort to become a more focused oil and gas company."
The "beyond petroleum" campaign and similar advertising efforts today are part of a long tradition in the oil industry that Brulle, the Brown professor, traces to the work of Ivy Lee, who in the early 20th century helped John D. Rockefeller Jr. of Standard Oil remake his image from hated robber baron to the philanthropist and patron behind Rockefeller Center.
Much of the promotional push by oil and gas companies, Brulle said, goes into portraying the companies and their products as deeply intertwined with modern life—Exxon's newsletter, for example, recently promoted the use of its petroleum products in the manufacturing of face masks, surgical gowns and hand sanitizer, in an effort to link the oil giant to the coronavirus pandemic.
"That is how they're able to try to shift the public discourse and the public understanding of climate change," he said. "And to the extent they're effective, they delay or obstruct further mandatory actions to limit carbon emissions. And so far it's been pretty successful."
But activists and some public officials are increasingly using the legal system to fight these branding campaigns. Lawsuits filed over the past year by Massachusetts, Minnesota and Washington, D.C., for example, accuse the major oil companies of defrauding consumers through misleading advertising.
The lawsuits, along with complaints filed by advocates with regulators in Europe, say that the ads stand in stark contrast to the companies' actions, particularly their lobbying. In 2018, for example, BP played a central role in blocking the adoption of a carbon tax in Washington State, spending $13 million to help defeat the effort. BP, Chevron and API all supported the Trump administration's weakening of regulations limiting methane emissions from oil and gas operations. The institute has also pressed lawmakers and governors to eliminate incentives for electric vehicles, policies that are among the few in the United States that encourage a shift away from oil.
As the pandemic spread across the globe earlier this year, the Canadian Association of Petroleum Producers, which includes all the major oil companies, pressed Canada's government to postpone implementation of a clean fuels standard, a planned increase in the nation's carbon price, and consideration of any new measures to help reach net-zero emissions by 2050.
"When you see that behavior I find it hugely concerning," said Adam Matthews, director of ethics and engagement for the Church of England Pensions Board and co-chair of the Transition Pathway Initiative.
BP and Shell insist they are now aligning their lobbying with their net-zero goals. Shell, at least, has begun to back this up: The company opposed the Trump administration's methane regulation roll-back and the loosening of fuel efficiency standards for cars. Shell and BP also have announced they will leave the American Fuel and Petrochemical Manufacturers, a trade group, because of its opposition to carbon taxes and its failure to support the Paris Agreement. In February, BP said it would end its "corporate reputation" advertising, and that any future campaigns would "push for progressive climate policy; communicate our net zero ambition; invite ideas; or build collaboration."
But both companies remain members of API, saying they will work from within to change its positions.
Ryan, the BP spokesman, said that the Washington State carbon tax measure was poorly designed, and that the company supported other carbon tax proposals in the state. And he noted that BP had sent a letter to the Canadian petroleum association, saying that it disagreed with the association's request to postpone a carbon price increase.
Matthews said that ultimately, the oil industry will have to press governments to adopt more aggressive policies to bring down emissions for companies to achieve their own net-zero pledges.
"I think that's where lobbying will go," he said. "I don't think it's there yet."
An Opportunity for Change
The pandemic and the resulting global recession could represent a turning point.
The volatility of the oil market and a steep decline in prices have made the stability of renewable energy projects—which generally include long-term contracts for selling electricity at steady prices—all the more attractive to investors. Perhaps the biggest obstacle to transforming oil companies has been the inability to generate the returns from renewable energy that the industry has for decades reaped from oil and gas. But at today's oil prices, the profits from oil projects aren't much better than those from renewables, which are also much less risky.
Oil companies could seize this opportunity to accelerate their shift to clean energy. Or, seeing their profits tumble, they could double down on their core product, treating investments in renewables as an unaffordable extravagance.
Looney and executives at Shell have said the crisis only deepens their commitment to change. But that change remains incremental. BP's "low carbon energy" spending goal for the year, for example, amounts to 4 percent of its budget, and Looney has so far refused to make any commitments beyond that.
Perhaps the biggest problem with the oil companies' pledges is that avoiding dangerous warming will require drastic action within one decade, not three. But the plans are largely silent about the short-term.
Andrew Grant, head of oil, gas and mining with the Carbon Tracker Initiative, a financial think tank, said the pledges fail to spell out any credible path for how they will be met.
"Okay, we've set these targets for 2050, how are we going to get there?" he said. "How's that going to happen?"
Top Photo Credit: Michael Kodas/InsideClimate News
An earlier version of this story misstated the nature of Total's net zero pledge. The company has committed to reach net zero on emissions from products it sells in Europe.