Welcome to the beginning of the fossil fuel endgame
Some momentous news from the fossil fuel world, in recent weeks. BHP is planning to merge the oil and gas extraction part of its business with Australia’s biggest oil and gas company, Woodside. That makes Woodside a newly massive fossil fuel company, comfortably now the largest oil company on the ASX and one of the world’s largest suppliers of oil and gas by volume.
This is a big deal. A really big deal. It’s not the last time we’ll see this — companies are hurling their fossil liabilities at whoever will take them, but there are plenty of other companies happy to hoover them up.
What’s going on?
What we’re seeing is a type of climate anxiety manifesting among the bosses of high emitters. Carbon musical chairs is a game they’ve been playing for some time, but they can hear the song’s denouement approaching, and some of them are terrified.
That’s for two reasons. The first is the growing backlash against the people, processes and companies that are causing climate disasters, including the rising prospect of litigation against the people who’ve knowingly caused serious and immediate harm to humanity.
The second is the massive clean-up cost associated with shutting down fossil extraction projects. The article notes buyers didn’t want to purchase BHP’s Bass Strait holdings, “given the estimated $US3.9bn worth of rehabilitation liabilities attached to its petroleum division and end-of-life decisions looming for older fields and facilities in Australia”. A few drips of remaining oil and gas from these old assets won’t pay for these clean up costs.
Emissions do not go down during a panicked, frantic game of asset swapping. They go down when demand for fossil fuels is eradicated through policy, activism and behavioural change. But that first step is stifled until suppliers of fossil fuels stop trying to grow their activities and dedicate themselves to winding them down (it’s hard to give up that drug when your supplier keeps texting you, telling you that you need it).
We know this because the IPCC released a twenty billion page report about what greenhouse gases do to our habitat, last week. We also know this because the International Energy Agency called for the immediate cessation of growth in fossil fuel extraction projects in May this year.
The United Nations Environment Program’s “production gap” report highlights that, around the world, companies and countries are still aggressively trying to expand the extraction of fossil fuels, betting hard on the total failure of global climate action. But we need to reduce fossil production by about 6% a year, to keep warming under 1.5C.
Instead of a controlled wind down, companies with flashes of panic in their eyes are hurling their fossil fuel projects to others totally unbothered by planetary destruction.
It’s a bad situation. But we’re seeing the heads of fossil fuel companies finally hear the music coming to an end. We can say with confidence that this moment marks the beginning of the endgame for the most dangerous industry our species has ever created.
Now, we need to figure out how to make it go faster.
The growth problem
In the hearts of the leaders of fossil fuel extraction companies is a terror that relates to decline. It is a deeply unnatural state to be openly planning to ‘degrow’ or shrink projects, and this is reflected in companies that simultaneously claim to be doing the right climate things, but also growing their fossil fuel business.
So: a company like Woodside, likely to soon be saddled with an increase in its fossil footprint, has to create a way to promise wide-eyed visions of spectacular growth to its investors, while also spinning a compelling tale of climate action. Woodside’s new CEO and former Exxon executive, Meg O’Neill, said:
“What I think is really important and will be valuable for our ESG-oriented shareholders to understand is that our decarbonisation targets will be applied to the entire portfolio. So we’ve committed to reduce our emissions by 15 per cent by 2025, 30 per cent by 2030 on a pathway to net zero by 2050, and we will deliver on those commitments for the totality of the portfolio.”
The company’s investor announcement includes a handy graphical illustration of how they plan to enact their “decarbonisation targets”:
The first thing that stands out is the dark grey rectangle on the top right: “2021–2030 net production growth”. Woodside is incredibly clear about their plans to expand their extraction of fossil fuels, rather than aligning with the IEA’s plea for an end to new projects.
How can Woodside claim to be reducing its emissions, despite the fact that it’s planning to massively grow its business?
By not actually reducing its emissions
Woodside’s climate targets only cover “scope 1 and 2” emissions. That is, the emissions that come about when fossil fuels are extracted and processed. That is substantial, particularly for LNG plants.
The first, most important point is that this is only a small fraction of the company’s total greenhouse gas emissions. Most emissions relate to the normal use of the product, when it’s sold and burned for energy:
Even the small sliver of emissions that Woodside will address has been fudged. ACCR has previously highlighted that Woodside intentionally deflates the size of this emissions reduction task by choosing a way of measuring its targeted emissions in a way that results in far less effort on their part. As ACCR’s Dan Gocher said:
“Woodside’s operational emissions (8.84 Mt CO2-e) are nearly three times larger than its equity share emissions (3.31Mt CO2-e). Its 2030 target only applies to its equity share. As the operator, Woodside has the ultimate responsibility for reducing emissions at those facilities”
As I wrote for RenewEconomy earlier this year, it has an extremely substantial impact, because the company is responsible for far more emissions than it holds ‘equity’ in:
Woodside’s tiny emissions reductions pale in comparison to the worsening of emissions through the growth of its massive West-Australian gas projects.
There is a real-world utility to this tactic of climate ‘plans’ that lead to worse climate impacts. The Western Australian government approved Woodside’s ‘greenhouse gas abatement plan’ using a dodgy baseline year that allows for an increase in emissions, and that plan only address scope 1 and 2 emissions, and excludes scope 3. It’s a mini version of Woodside’s grand greenwashing project, and it helped get their project approved.
As we saw above, Woodside plans to be selling more fossil fuels in 2030 than it is today. It’ll increase emissions from product use by around 3 times more than it’ll decrease emissions from digging up and processing fossil fuels. It’s a net worsening of climate impacts:
Woodside’s key offering here is to dress up actions that make climate change worse in a way that presents them as climate solutions.
But aside from these scoping and account tricks, one particular problem stands out in its sheer insidiousness.
The Offsets Problem
Of the measly 2.7 megatonnes of CO2-e reductions Woodside is offering between now and 2030, three quarters come purely from the category “offset”.
There’s no detail on what this entails, beyond a line suggesting “~2,400 hectares of native reforestation in 2020”. Generally, ‘offsets’ entails planting a tree to suck the carbon from the air.
Offsets are no substitute for reducing emissions. There’s a growing body of evidence demonstrating severe problems in the offset industry, with double-counting of carbon credits, dubious claims of “avoided” deforestation and many, many instances of companies purchasing offsets when those emissions would have been very easy to abate.
More recently, the growing trend of severe wildfires and extreme heat around the world means a collection of carbon offsets are literally being combusted, re-releasing the carbon they captured back into the air. “Buffer pools” designed to account for this through the planting of extra trees are wildly insufficient.
There are also some very severe impacts of planting carbon offset trees on people and ecosystems that rely on that land for food, or biodiversity. As the IPCC’s AR6 report said:
“CO2 removal approaches, particularly those deployed on land, can have undesired side-effects on water, food production and biodiversity”
That was backed up in a report from Oxfam, which found that:
“The ‘net-zero’ climate promises of four of the world’s largest oil and gas corporations ―BP, Eni, Shell and TotalEnergies― could require them foresting an area of land equivalent to more than twice the size of the UK to achieve net zero by 2050”
Sorry, we’re not done yet. There are more problems. Notably, the fact that removing a single tonne of carbon dioxide from the atmosphere doesn’t actually prevent all of the damage caused by that tonne. The IPCC’s recent AR6 Working Group 1 report went into some detail on this. If carbon were to be removed from the atmosphere through natural or technological means,
“Some climate change trends, such as the increase in global surface temperature, would start to reverse within a few years. Other aspects of climate change would take decades (e.g., permafrost thawing) or centuries (e.g., acidification of the deep ocean) to reverse, and some, such as sea level rise, would take centuries to millennia to change direction”
“CO2 removal approaches, particularly those deployed on land, can have undesired side-effects on water, food production and biodiversity”
FAQ 5.3
At every single level, Woodside’s climate plan is doing far more harm than good. The goal, of course, is not to protect the planet and reduce emissions. The goal is to convince investors, media outlets and politicians that the goal is to protect the planet and reduce emissions.
Have BHP escaped the climate consequences of their fossil fuel projects, by handing them to a major greenwashing dry cleaning outfit?
No, they have not.
Climate change is a time machine. You cannot escape the past.
The recent IPCC report details the physical consequences of two centuries of greenhouse gas emissions. The comfortable bulk of emissions, around 2,500 gigatonnes of carbon dioxide, have occurred in recent history.
The consequences of the warming effect of these emissions has been severe. Australia burned for an entire summer. Remember that? Europe is burning as I type this. This year alone, floods, heatwaves and various other disasters are manifesting with a new severity and we know precisely who is to blame.
Jettisoning fossil fuel assets instead of rapidly winding them down and sealing them off forever will affect decision makers at those companies in an extremely literal sense. Following the ‘bad’ curve of production growth, from UNEP’s report, the planet warms far worse than it already has. There is no escaping this. Rich countries, poor countries. That heatwave won’t care that you divested your oil field. That bushfire won’t listen to your pleas about carbon intensity and scopes.
Just like the time Australia’s largest corporate emitter AGL Energy saw gleamingly positive climate headlines when it announced a plan to split itself in two, despite that action making no difference to emissions, Woodside’s merger with BHP has at times attracted an uncritical and glowing response.
“I think this provides another point of example..about the transformations that Australian companies are achieving as they go down their path of being profitable on energising Australian industry and at the same time reducing emissions” — Prime Minister Scott Morrison
But media coverage has not been quite as credulous as the PM. The Australian Financial Review’s Tony Boyd wrote, comparing Woodside to AGL:
“The AGL coal-fired plants and Woodside’s reserves of LNG and its newly acquired oil and gas reserves from BHP are going to have to be shut down if we are to avoid catastrophic consequences for the global economy, environment and biodiversity”
Boyd points out that there’s simply no room for a Woodside in a 1.5C degree world, “no matter how big it is”. It was scrutiny on the fact that this mega-business is purely dedicated to producing a harmful product that shaped the nature of this deal.
In addition to the climate consequences of letting oil and gas fields expand uncontrollably, there is the other problem of decommissioning costs.
BHP still digs up plenty of coal, used for both thermal power stations and steel manufacturing (“metallurgical” or “coking” coal). Its Mt Arthur coal mine has plummeted in value because once it’s depleted, it’s going to be extremely expensive to clean up.
BHP is now at the point where it will pay someone $275 million Australian dollars purely to take the coal mine off its hands. A few years ago, it was worth $2 billion. At the same time, BHP is also trying to put off the inevitable, by extending the mine licence from ending in 2026 to ending in 2045.
That’s a reflection of the massive rehabilitation costs that must be born once it’s shut down. You can get a feeling for why those costs are so high in the timelapse above, which shows what the area looked like in 1984, prior to the growth of the coal mine.
Woodside faces increasing scrutiny on decommissioning and remediation costs, too. It sold the floating rig Northern Endeavour to a company that very quickly collapsed. In a rare moment of actual governance, the Australian federal government applied a levy on the entire offshore oil and gas industry for the clean up costs for that rig. The suggestion of the oil and gas lobby group APPEA: taxpayers should fund its decommissioning. Incredible.
Now, BHP are in the process of offloading a collection of old and extremely risky Bass Strait oil rigs, and Woodside — a member of APPEA — is nervously promising that it’ll clean those up instead of selling them off in a moment of carbon musical chairs panic. It’ll be harder, in the future — there is legislation in the works to prevent another Northern Endeavour. There’s really no escaping the past.
The incredible manifestation of Reverse Climate Anxiety
The fundamental physics of this problem are a reminder that the greenhouse effect does not weaken or strengthen depending on which company extracts fossil fuels. The simple act of unlocking carbon from the ground is the first necessary step in a chain of events that leads to people dying and being hurt by climate impacts, which we’ve seen so much of, this year.
Global markets may be indeed be turning on fossil fuels. The carbon musical chairs being enacted by these global titans of climate causation certainly suggest the tune is changing. But we know that all fossil fuel extraction growth has to cease — right now — to realise the scenarios of least-harm outlined in every major report over the past decade.
More fossil fuel companies are going to experience this peculiar brand of reverse climate anxiety. It’s a fear not of the impacts of climate change, but of fossil fuel decline — of the avoidance of climate change. A world in which fossil fuels disappear as quickly as we can manage is a terrifying nightmare. It brings on panic, a hurled discard of decaying fossil fuel assets, and no scrutiny of the greenwashing safe-houses that pick up the pieces.
The rate at which the fossil fuel industry shuts itself down is the primary deciding factor in how much physical harm is experienced from the impacts of climate change, over the coming decades. It’s time to make the music stop sooner rather than later.
