OCTOBER 2019

Oil and Gas Industry

Engagement on
Climate Change
Drivers, Actions, and Path Forward

AUTHOR
Stephen Naimoli
Sarah Ladislaw

A Report of the CSIS ENERGY AND NATIONAL SECURITY PROGRAM

OCTOBER 2019

Oil and Gas Industry

Engagement on
Climate Change
Drivers, Actions, and Path Forward

AUTHORS
Stephen Naimoli
Sarah Ladislaw

A Report of the CSIS Energy and National Security Program

About CSIS

Established in Washington, D.C., over 50 years ago, the Center for Strategic and
International Studies (CSIS) is a bipartisan, nonprofit policy research organization
dedicated to providing strategic in­sights and policy solutions to help decisionmakers
chart a course toward a better world.

In late 2015, Thomas J. Pritzker was named chairman of the CSIS Board of Trustees. Mr.
Pritzker succeeded former U.S. senator Sam Nunn (D-GA), who chaired the CSIS Board of
Trustees from 1999 to 2015. CSIS is led by John J. Hamre, who has served as president and
chief executive officer since 2000.

Founded in 1962 by David M. Abshire and Admiral Arleigh Burke, CSIS is one of the
world’s preeminent international policy in­stitutions focused on defense and security;
regional study; and transnational challenges ranging from energy and trade to global
development and economic integration. For eight consecutive years, CSIS has been named
the world’s number one think tank for defense and national security by the University of
Pennsylvania’s “Go To Think Tank Index.”

The Center’s over 220 full-time staff and large network of affiliated schol­ars conduct research
and analysis and develop policy initiatives that look to the future and anticipate change. CSIS
is regularly called upon by Congress, the executive branch, the media, and others to explain
the day’s events and offer bipartisan recommendations to improve U.S. strategy.

CSIS does not take specific policy positions; accordingly, all views expressed herein should
be understood to be solely those of the author(s).

© 2019 by the Center for Strategic and International Studies. All rights reserved

Acknowledgments
The authors would like to thank the workshop participants for their insight and feedback.
This report was made possible by the generous support of JPMorgan Chase & Co.

Center for Strategic & International Studies

1616 Rhode Island Avenue, NW
Washington, D.C. 20036
202-887-0200 | www.csis.org

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | II
Contents

Introduction 1
Major Factors Driving Oil and Gas Company Climate Strategy Development 4
Policy and Regulation 4
Competition from Renewables 6
Investor Pressure 8
Company Climate Engagement Strategies 11
Oil and Gas Emissions in Context 13
Perspectives on Company Action 17
Equity Investor Perspective 17
Environmental Investor Perspective 18
Evaluation of Trends and Categories 20
Categories of Action 24
Contributions to the Energy Transition Challenge 25
Perception of Oil and Gas Company Investments 27
Opportunities for Further Action 29
Electric Vehicle Charging 29
Electrification 30
Hydrogen 30
Direct Air Capture 31
Carbon Capture, Use, and Sequestration 31
Offshore Wind 32
Conclusions 33
About the Authors 34

Stephen Naimoli & Sarah Ladislaw | III

Introduction

The most important strategic issue facing the energy industry today is climate change. As
the earth’s average temperature continues to rise with the accumulation of greenhouse
gases (GHGs) in the atmosphere, the stable functioning of earth’s natural systems adjusts
to the new, high-carbon reality and society begins to witness the effects of an altered
natural environment and its impact on our lives and livelihoods. Left unmanaged, the
impacts of climate change threaten the operation of the energy system in multiple
ways. Increasing drought will make water scarcer, decreasing the resources available
for hydropower generation and for cooling in thermal power generation.1 Increasing
temperatures will decrease the technical efficiency of thermal and solar power generation
and will drive cooling demands that could further stress power grids. Stressed power
grids will not only hurt residential and commercial customers but will also affect the
supply of power to oil and gas operations that rely on grid power. Sea level rise and
increasingly frequent extreme weather events such as wildfires, hail, and flooding will
damage physical infrastructure and inhibit operations all along the energy supply chain.2
The Gulf of Mexico, where 44 percent of U.S. oil refining capacity is located, could see four
feet of sea level rise between now and 2100—flooding the likes of which could severely
hamper refining operations.3 Flooding and melting permafrost also threaten the integrity
of transmission infrastructure like pipelines.4 Increased temperatures will also affect
operations in the Arctic, and indeed are already interfering with land transportation
routes for oil and gas companies operating in the region.5

1. Intergovernmental Panel on Climate Change, Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part
A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental
Panel on Climate Change, eds. C.B. Field, V.R. Barros, D.J. Dokken et al. (New York, NY: Cambridge University Press,
2014), https://www.ipcc.ch/site/assets/uploads/2018/02/WGIIAR5-PartA_FINAL.pdf.
2. Craig Zamuda et al., “Energy Supply, Delivery, and Demand,” in Impacts, Risks, and Adaptation in the United
States: Fourth National Climate Assessment, Volume II, eds. D.R. Reidmiller, C.W. Avery, D.R. Easterling et al. (Wash-
ington, DC: U.S. Global Change Research Program, 2018), 174–201, doi: 10.7930/NCA4.2018.CH4.
3. Council on Foreign Relations, “Climate Risk Impacts on the Energy System,” June 14, 2019, https://www.cfr.
org/report/climate-risk-impacts-energy-system.
4. Matthew Brown, “Exxon Agrees to $1 Million Penalty for 2011 Yellowstone River Oil Spill,” Billings Gazette,
Associated Press, April 26, 2019, https://billingsgazette.com/news/local/exxon-agrees-to-million-penalty-for-yel-
lowstone-river-oil-spill/article_16709b8d-03f7-59f3-80c7-b5453ad0755a.html.
5. Dipka Bhambhani, “Energy Companies Could Feel the Effects of Climate Change on Their The [sic] Bottom
Line,” Forbes, October 25, 2018, https://www.forbes.com/sites/dipkabhambhani/2018/10/25/energy-companies-
feel-the-effects-of-climate-change-where-it-hurts-the-bottom-line.

Stephen Naimoli & Sarah Ladislaw | 1

Measures to address climate change, namely policies and investments designed to reduce
the flow of greenhouse gases into the atmosphere to reach a stable equilibrium, also
impact the energy industry. These policies, by design, limit the amount of carbon dioxide-
emitting energy resources that companies can use—of which oil and natural gas are two;
the other major source is coal. By mid-century, estimates are that society must reduce
the flow of GHGs into the earth’s atmosphere by 80 percent and then quickly decline to
zero shortly thereafter to avoid the most catastrophic effects of climate change. This is a
monumental challenge in scale alone given that a large portion of the capital stock that
would contribute emissions between now and 2050 has already been built. According to
International Energy Agency (IEA) estimates, getting the world on a pathway to address
climate change by 2040 would only require 15 percent more investment than a scenario
based on today’s policies, but the mix of those investments would be drastically different
(see Figure 1 below). Both demand for and investment in oil and natural gas decline
in this outlook, but the fuels remain in use well into the second half of the century,
particularly in the case of oil use for petrochemicals and natural gas with carbon capture,
use, and sequestration (CCUS) in multiple sectors.

Figure 1: Investment to Achieve 2040 Climate Goals

Source: International Energy Agency, World Energy Outlook 2018 (Paris: OECD/IEA, 2018).

Today, it is broadly recognized that the trend towards lower-carbon fuels is growing in
momentum and likely to force the oil and gas industry to change or lose market share.
However, according a 2019 UN Intergovernmental Panel on Climate Change report, global
emissions today are not on track with where they should be to avoid dramatic damages
from climate change.6 Whether and how society shifts from inadequate action today to
something more commensurate with the pace and scale of the challenge is still unknown,
but as pressure mounts to take further action, those operating in the energy sector will be
expected to reduce emissions or face backlash from the public and policymakers.

6. Intergovernmental Panel on Climate Change, “Summary for Policymakers” in Global Warming of 1.5°C: An IPCC
Special Report on the Impacts of Global Warming of 1.5°C above Pre-Industrial Levels and Related Global Greenhouse
Gas Emission Pathways, in the Context of Strengthening the Global Response to the Threat of Climate Change, Sustain-
able Development, and Efforts to Eradicate Poverty, eds. V. Masson-Delmotte, P. Zhai, H.-O. Pörtner et al. (Geneva:
IPCC, 2019), https://www.ipcc.ch/site/assets/uploads/sites/2/2019/05/SR15_SPM_version_report_LR.pdf.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 2
The oil and gas industry is made up of a broad and diverse set of companies that are
responsible for producing 81 percent of today’s energy supplies.7 They differ in size,
governance, theater of operation, function within the supply chain, and value proposition.
For example, today approximately 90 percent of global oil and gas reserves are held by
state-owned oil companies.8 In the United States, 46 percent of oil production comes
from integrated oil majors, while the rest comes from independent and small oil and gas
companies that most people have never heard of.9 The vast majority of investment in the
industry takes place in the exploration and production phases of development. However,
none of that product would be put to productive use were it not for the midstream and
downstream players that invest in pipelines and refineries that turn the raw materials
into useful products like gasoline, diesel fuel, jet fuel, and material for plastics and other
petrochemicals that society consumes.

Throughout its history, the oil and gas industry has adjusted to the emergence of new
competitive pressures that shaped the production and consumption environment for the
fuels and services it provides. Whether by moving to deepwater oil and gas developments,
upgrading heavier crudes like oil sands, producing tight oil, or incorporating biofuels into
the liquid fuel distribution mix, the industry has made adjustments to survive.

Relative to the past, today’s challenges are formidable. From the shift of global demand
growth to new countries, to the emergence of new supply sources like tight oil and shale
gas, to the competition from new technologies, to ever-present geopolitical conflict and
uncertainty, the oil and gas industry is in a constant period of change and reassessment.

Over the long term, the type of low-carbon future envisioned to combat climate change
will fundamentally reshape the global energy system and producers of oil and gas will have
to adjust to an entirely new competitive reality and, indeed, existence. And yet, how to
get from the world of today where investors and society at large still demand record levels
of oil and gas for consumption to a world of tomorrow where the energy system provides
the same level of service while meeting the growing energy needs of a developing global
population with a diminished GHG contribution remains difficult to navigate for oil and
gas companies and policymakers alike. While modeling exercises can inform decisions on
policy design, technological change, and the contribution of various fuels, the transition in
reality will likely not be as smooth.

Despite all this uncertainty, more and more oil and gas companies are devising strategies
to deal with climate change. Not all strategies are the same and not all companies have
one. One frequently asked question regarding these strategies is whether oil and gas
companies will continue to exist and even thrive in a low-carbon world. We do not
attempt to answer this question through our analysis, although we agree that it is one
that many oil and gas companies trying to transition to become more general “energy
companies” are working very hard to answer. Instead, this report, based on research

7. International Energy Agency, World Energy Balances 2018 (Paris: OECD/IEA, 2018), https://webstore.iea.org/
world-energy-balances-2018.
8. Silvana Tordo, Brandon S. Tracy, and Noora Arfaa, National Oil Companies and Value Creation (Washington, DC:
World Bank, 2011), https://siteresources.worldbank.org/INTOGMC/Resources/9780821388310.pdf.
9. “Who Are America’s Independent Producers?” Independent Petroleum Association of America, https://www.
ipaa.org/independent-producers/.

Stephen Naimoli & Sarah Ladislaw | 3

and a workshop held at CSIS in February 2019 with industry, investors, academics, and
environmental groups, attempts to explore how oil and gas companies are taking action
to address climate change, how these actions fit with the overall needs of the energy
transition, and whether there is more companies can do to contribute to the solution set
of this problem.

Major Factors Driving Oil and Gas Company

Climate Strategy Development
Oil and gas companies have a variety of reasons to take action on climate change,
including the proliferation of climate-related policies and regulation, competition from
low-carbon energy resources, pressure from investors, and changing societal attitudes and
preferences. Each factor has a different impact on a given company’s business activities,
and some are more urgent than others, but taken together, they warrant greater attention
from the industry as a whole because they will only increase. This section will address how
policies and regulations, market competition, and pressure from investors drive climate
strategy development. Changing societal attitudes and preferences influence development
through each of those drivers, and thus their effect is not discussed independently.

POLICY AND REGULATION

Government policies designed to reduce greenhouse gas emissions have proliferated over
the past few decades. As the threat of climate change grows, governments around the
world face mounting pressure to take dramatic action and have begun setting targets for
emissions reductions and instituting a range of policies to deal with the problem. Policies
already in use to meet a government target include:

▪▪ Carbon Pricing Mechanisms: According to the World Bank’s Carbon Pricing

Dashboard, there are 57 carbon pricing programs implemented or planned around the
world, covering 46 countries and 28 subnational jurisdictions as of April 2019 (see
Figure 2 below for the geographic distribution of policies).10 In 2020, this will mean
that about 20 percent of global GHG emissions will be covered by carbon pricing
schemes. This has grown from only two countries in 1990, when Finland and Poland
implemented the world’s first carbon taxes, covering less than 0.1 percent of the
world’s GHG emissions. While most carbon pricing mechanisms exist at the regional
or national levels, carbon pricing mechanisms have been considered for sectors that
cross national boundaries like the aviation sector. Certain subnational groupings, such
as U.S. states and Canadian provinces, have also sought to coordinate (and eventually
link) carbon pricing programs across borders.

10. “Carbon Pricing Dashboard,” World Bank, 2019, https://carbonpricingdashboard.worldbank.org/.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 4
Figure 2: Carbon Pricing Policies, 2019

Source: “Carbon Pricing Dashboard,” World Bank, 2019, https://carbonpricingdashboard.worldbank.org/.

▪▪ Mandates and Regulations: Governments enact various policies and regulations to

make climate-friendly decisions like boosting the share of renewable energy through
renewable energy portfolio standards, improving energy efficiency through standard-
setting, reducing emissions through a variety of emissions intensive performance
standards, providing subsidies for low-emitting resources and technologies, and
mandating the purchase of renewable or high-efficiency energy resources. As shown in
Figure 3, 41 countries had policies to boost renewables in the power sector in 2004.11
In 2017, that grew to 128. In the transport sector, the number of countries with similar
policies grew from 9 countries to 70 over the same period, and in the heating and
cooling sector, it grew from 3 countries to 24 countries. These policies ranged from
setting ambitious goals and framework targets to enabling regulatory environments.

11. Renewable Energy Policy Network for the 21st Century, Renewables 2018 Global Status Report (Paris: REN21
Secretariat, 2018), http://www.ren21.net/gsr_2018_full_report_en.

Stephen Naimoli & Sarah Ladislaw | 5

Figure 3: Proliferation of Renewable Energy Policies, 2004–2017
140

120

100

80

60

40

20

0
2004 2006 2008 2010 2012 2014 2016 2018
Power Regulations Transport Regulations Heating and Cooling Regulations

Source: Renewable Energy Policy Network for the 21st Century, Renewables 2018 Global Status Report (Paris: REN21
Secretariat, 2018), http://www.ren21.net/gsr_2018_full_report_en.

In general, oil and gas companies are concerned about these policies affecting their
businesses because, by design, taxes and mandates for low-carbon energy resources should
reduce demand for their products, and subsidies can increase demand for alternatives.

COMPETITION FROM RENEWABLES

The second driver of climate strategies at oil and gas companies is the economic
competitiveness of renewable and low emissions energy resources. Clean energy
technologies, particularly power generation technologies such as wind and solar, have
experienced rapid cost declines in the past few years. As shown in Figure 4, the global
weighted average levelized cost of electricity (LCOE) for solar photovoltaics (PV) fell from
37 cents per kilowatt-hour (kWh) in 2010 to 8.5 cents per kWh in 2018—a 77 percent
decrease.12 Onshore wind fell 34 percent from 8.5 cents per kWh to 5.6 cents per kWh and
offshore wind fell 21 percent from 16 cents per kWh to 12.7 cents per kWh. For context,
the LCOE for fossil fuel-powered generation in 2017 ranged from 5 to 17 cents per kWh.

12. International Renewable Energy Agency, Renewable Power Generation Costs in 2018 (Abu Dhabi: IRENA, 2019),
https://irena.org/publications/2019/May/Renewable-power-generation-costs-in-2018.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 6
Figure 4: Selected Renewable Energy Technology Cost Trends, 2010–2018
$0.400
$0.370

Weighted Average LCOE ($/kWh)

$0.350

$0.300

$0.250

$0.200

Fossil fuel cost range

$0.159 $0.126
$0.150
$0.084
$0.100
$0.085
$0.050
$0.055
$-
2010 2018

Solar PV Offshore wind Onshore wind

Data source: International Renewable Energy Agency, Renewable Power Generation Costs in 2018 (Abu Dhabi: IRENA,
2019), https://irena.org/publications/2019/May/Renewable-power-generation-costs-in-2018.

According to the latest estimates from BloombergNEF, a firm that tracks the progress of
clean energy technologies, solar and wind power generation options are increasingly more
cost competitive than new and even some existing coal- and natural gas-fired generation
in more and more parts of the world. As shown in Figure 5, an increasing number of
renewable energy technologies are competitive with conventional fossil fuel generation
in the United States. In fact, the penetration of intermittent renewable energy resources
is becoming so high that it is raising questions about how to increase grid flexibility to
incorporate these resources at even higher levels.

Figure 5: Levelized Cost of Electricity for Technologies by Category

in the United States, 2019

Source: BloombergNEF.

At the same time, the electrification of more economic sectors is expected to accelerate: the
IEA expects electricity demand will make up 40 percent of the increase in total final energy
consumption between 2017 and 2040.13 Most deep decarbonization scenarios (modeling

13. International Energy Agency, World Energy Outlook 2018.

Stephen Naimoli & Sarah Ladislaw | 7

exercises used to inform emissions reduction strategies) include a three-step process of
decarbonizing the economy: (1) decarbonizing the power sector, (2) using low-carbon
electricity in other parts of the economy (like transport, industry, and heating—though there
are alternative solutions for some of these hard-to-decarbonize sectors), and (3) massive
improvements in efficiency. While full electrification of the transportation sector will take
time, will be much harder to achieve in heavy-duty transport, and will not in and of itself
lead to a collapse in oil demand, it can address a significant source of GHG emissions, and
thus has become a policy objective in many locations around the world. Transportation
contributes 14 percent of anthropogenic GHG emissions worldwide as of 201014 and
emerged as the largest source of emissions in the United States in 2017.15 Transport
electrification is also an important strategic opportunity for auto manufacturers and utilities,
both of which see an electrified transportation sector as a future growth market.

These two factors combine to raise the profile of alternatives to oil and gas companies’
products. Oil and natural gas are, however, forecast to play a significant role in the economy
for decades to come, even in 2-degree or 1.5-degree warming scenarios. Take, for instance,
the International Energy Agency’s Sustainable Development Scenario (SDS): the SDS assumes
GHG emissions will decline to half of today’s level and reach net-zero by 2070, then models
the least-cost pathway to achieving these emissions reductions. In this scenario, renewables
and nuclear supply 39 percent of primary energy demand, but oil still contributes 23 percent
and natural gas makes up 25 percent (compared to 32 percent and 22 percent, respectively, in
2017). The remainder comes from coal (12 percent) and solid biomass (1 percent).16

That being said, the model-estimated least-cost pathways to reducing emissions may not
actually be how this transition occurs. Regardless of the likelihood that oil and gas will
maintain a share of energy consumption in decades to come, market competition for
alternatives to natural gas in power generation or liquid fuels in transport has created
pressure on the industry to adapt to a changing market. Oil and gas companies are
therefore seeking to hedge their bets by buying into the burgeoning clean energy market
and heading off challenges to their products without abandoning their core businesses.

INVESTOR PRESSURE
Finally, publicly traded oil and gas companies face investor pressures. Environmental,
Social, and Governance (ESG) is gaining prominence in investment decisions, most
notably among major institutional investors. Activist groups have long pushed
shareholder resolutions at oil and gas companies, but lately major investors like Blackrock,
State Street, Vanguard, and the Church of England have joined them.17 As shown in Figure

14. Intergovernmental Panel on Climate Change, Climate Change 2014: Mitigation of Climate Change. Contribution
of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, eds. O. Eden-
hofer, R. Pichs-Madruga, Y. Sokona et al. (New York, NY: Cambridge University Press, 2014), https://www.ipcc.ch/
site/assets/uploads/2018/02/ipcc_wg3_ar5_full.pdf.
15. U.S. Environmental Protection Agency, “Sources of Greenhouse Gas Emissions,” https://www.epa.gov/ghgem-
issions/sources-greenhouse-gas-emissions.
16. International Energy Agency, World Energy Outlook 2018.
17. Charles McGrath, “More Asset Managers Voting for Shareholder Climate-Change Proposals,” Pensions & Invest-
ments, April 8, 2019, https://www.pionline.com/article/20190408/INTERACTIVE/190409848/more-asset-man-
agers-voting-for-shareholder-climate-change-proposals; “Church of England Files Shareholder Resolutions at
BP and Shell on Climate Change,” Reuters, December 4, 2014, https://uk.reuters.com/article/britain-climat-
echange-church/church-of-england-files-shareholder-resolutions-at-bp-and-shell-on-climate-change-idUKL3N-
0TO5CM20141204.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 8
6, 182 shareholder resolutions concerning climate change were introduced at oil and
gas companies from 2015 to 2018. Of these, 48 asked for political activity disclosures, 47
related to carbon asset risk, 44 related to methane emissions or hydraulic fracturing risks,
31 concerned sustainability oversight and management, and 12 requested setting GHG
reduction goals.18

Figure 6: Climate-Related Shareholder Resolutions at Oil and Gas Companies,

2015–2018
GHG management 12

Sustainability oversight and management 31

Methane emissions/hydraulic fracturing risks 44

Carbon asset risk 47

Political activity 48

0 10 20 30 40 50 60
Source: “Engagement Tracker,” CERES, 2019, http://engagements.ceres.org.

These resolutions were introduced at companies such as Anadarko, Chevron,

ConocoPhillips, ExxonMobil, Noble Energy, and Valero. While many did not make it to
a vote, and most of those that did failed, shareholder resolutions are clearly pushing
companies to take more action. Of the 182 resolutions, 59 did not make it to a vote, and
of those, 47 were withdrawn by the shareholders because of a commitment from the
company or an ongoing dialogue. In one notable case of shareholder pressure, in 2018 and
2019, after pressure from climate-minded investors, BP, Equinor, and Shell announced
they would set new emissions reduction targets, ensure that investments align with the
Paris Agreement, and link executive pay to emissions targets.19 Shareholder resolutions are
not going away: investors filed more than two dozen climate-related resolutions with oil
and gas companies for 2019.

When looking at the data from the past few years, a few patterns emerge. Many
shareholders will put forward the same resolution repeatedly until it passes—climate risk
reports and sustainability reports being chief among these. Resolutions are more likely
to pass or get commitments if they ask for reports on things like climate risks, strategies,
or sustainability disclosures rather than making specific demands like linking executive

18. “Engagement Tracker,” CERES, 2019, http://engagements.ceres.org.

19. “Engagement Tracker,” CERES; Nerijus Adomaitis and Simon Jessop, “Oil Firm Equinor Agrees Climate Change
Targets with Investors,” Reuters, April 24, 2019, https://www.reuters.com/article/us-equinor-carbon/oil-firm-
equinor-agrees-climate-change-targets-with-investors-idUSKCN1S01ZR.

Stephen Naimoli & Sarah Ladislaw | 9

pay to sustainability metrics, increasing dividends, or adopting GHG targets. One notable
exception is that no resolutions asking for reports on political activity have passed in
this time period (although a few have secured commitments). Many shareholders want
disclosure of methane emissions and reduction targets, but these resolutions rarely pass.
About half of the requests for methane emissions disclosures or targets were withdrawn
with a commitment from their companies and only two passed outright.

According to many companies and investors, these resolutions, along with voluntary
reporting programs like the Financial Stability Board’s Task Force on Climate-related Risk
Disclosure, are meant not only to garner greater attention to the issue of climate change
but also to open a dialogue between investors and companies about risk mitigation and
climate strategy. Rather than there being any one “right answer” to the question of how a
company is prepared to deal with climate change, there is an overarching desire to make
sure that companies are properly stewarding the long-term value of the company by, as
one company put it, “performing today and preparing for tomorrow.”

These drivers—policy and regulation, competition from renewables, and investor

pressure—interact with and often reinforce one another. For example, policy can help to
drive technology deployment, which can drive down cost, which can increase investor
interest. When combined with the growing societal concern over climate change, the
reinforcing interaction of these drivers leads to a vision of the future where the risk of
inaction is much greater than it is today. The cumulative impact of these factors on the oil
and gas industry has heretofore not led to an entirely transformed industry, but instead
one in which the strategic importance of preparing for a low-carbon future, the risks of
climate change policies, and increasingly the impacts of climate change on the sector
more broadly are taken much more seriously.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 10
Company Climate
Engagement Strategies

Oil and gas companies are not all subject to these pressures in the same way, and not all
oil and gas companies take the same approach to dealing with climate change. We have
identified five general categories of oil and gas companies when it comes to their climate
strategies. While there is overlap between certain categories, this categorization offers a
framework for understanding the heterogeneous nature of the industry.

▪▪ Strategy Leaders - The first category includes companies that are engaging in creating
and executing a broad strategy to move from being an oil and gas company today
to being an energy services company tomorrow. These companies are seeking to
reduce their operational emissions, invest in technology development, set emissions
reduction goals, and diversify their supply into renewable energy. They may be
prioritizing one or two individual technologies, but they tend to spread their bets
over many categories. They also tend to be companies motivated by the idea that the
energy system is transforming in a way that will challenge the oil and gas industry at
a fundamental level. These tend to be the companies taking the most ambitious steps
to investigate new business opportunities.

▪▪ Technology Investors - The second category of company is investing in R&D and

supporting regulatory constructs that encourage development of those technologies
but has not yet developed a comprehensive climate strategy. These companies have
shown some commitment to climate investments but are more hesitant to dive into
broad strategies to transform their companies or to experiment a great deal with
new business models. Oftentimes, these companies hold the view that neither the
policy environment nor the technologies are yet at a state of maturity to achieve
scale or provide adequate returns for the oil and gas industry. This can also be said of
the Strategy Leaders in some cases, but Strategy Leaders see taking more aggressive
actions to transform their business as providing some competitive benefit, whereas
the Technology Investors group seeks only to stay on top of learning about the
evolution of certain technology applications.

▪▪ State-Owned Enterprises - The third category is the state-owned enterprise—a

large and diverse set of companies. It is also important to note that state-owned

Stephen Naimoli & Sarah Ladislaw | 11

 enterprises and the governments than run them own the vast majority of world oil
and natural gas reserves and are, for the most part, not subject to investor pressure.
Instead, these companies are driven by the priorities of their owner governments
and, to some extent, business strategies. The countries in which these companies are
located frequently have separate state-owned entities dedicated to renewable energy
development, so to the extent that state-owned oil and gas companies are addressing
GHG emissions, it is largely through reducing their operational emissions. There are
some notable exceptions, however. For a deeper analysis of state-owned enterprise
climate strategies, see our joint publication with the Payne Institute.20

▪▪ Limited Resources Firms - The fourth category is composed of financially constrained,

limited resource companies. These include small producers, pipeline companies,
service companies, and some natural gas companies. They may be genuinely
committed to reducing GHG emissions, but given their revenues, resource bases,
or place in the supply chain, they have less capacity for change. Despite the limited
purview of these companies, over the course of this research, we found that more
and more of these companies are in the early stages of developing climate change
strategies to satisfy growing investor interest. Most of these strategies focused on
more conventional ESG and emissions reduction measures.

▪▪ Sideliners - The final category is companies not actively engaged in developing a

climate change strategy or spending much time talking about the energy transition.
These are companies that do not see a strategic reason to engage in actions to address
GHG emissions and often operate against a much shorter economic time horizon.
Many of these companies are small, onshore producers.

The diversity of entities within the oil and gas industry is important to keep in mind as
the vast majority of attention and pressure to take action on climate change is focused
on a relatively small but influential number of companies. In general, this fact illustrates
why public policy is an important driver of emissions reduction behavior in changing the
motivations and actions of a broader array of actors across the industry.

20. Ensieh Shojaeddini, Stephen Naimoli, Sarah Ladislaw, and Morgan Bazilian, “Oil and Gas Company Strategies
Regarding the Energy Transition,” Progress in Energy 1 (July 2019): 1–19, https://doi.org/10.1088/2516-1083/
ab2503.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 12
Oil and Gas Emissions in Context

First, it is important to set some context for how much the companies discussed in this
report directly contribute to the climate crisis. Our research focused primarily on the
activities of seven major international oil companies (IOCs) between January 2017 and
May 2019: BP, Chevron, Eni, Equinor, ExxonMobil, Royal Dutch Shell, and Total. As shown
in Figure 7, world GHG emissions were approximately 55 gigatons of CO2-equivalent
(CO2e) in 2014.21 About 34 percent of that is non-energy-related, and another 34 percent
come from coal combustion. Emissions from oil and gas make up the remaining 32
percent of world emissions. The use of oil and gas by consumers and industries other than
the oil and gas industry contributes 22 percent of world emissions. Oil and gas production
by producers other than the seven IOCs we studied makes up about 9 percent of world
emissions, and production by the IOCs emits about 1 percent.22

Figure 7: Breakdown of Global GHG Emissions

60,000.0
55,442.1 18,987
GHG Emissions (million tons of CO2-equivalent)

50,000.0

40,000.0
18,618

30,000.0

20,000.0 12,637

10,000.0
4,764

437
0.0
World Non-Energy- Coal O&G Combustion Other O&G IOCs
Related Combustion (non-industry) Producers

Data source: International Energy Agency, CO2 Emissions from Fuel Combustion 2018 (Paris: OECD/IEA, 2018); Interna-
tional Energy Agency, World Energy Outlook 2018 (Paris: OECD/IEA, 2018); CSIS research from company reports.

21. International Energy Agency, CO2 Emissions from Fuel Combustion 2018 (Paris: OECD/IEA, 2018).
22. International Energy Agency, World Energy Outlook 2018.

Stephen Naimoli & Sarah Ladislaw | 13

The seven IOCs we studied also do not make up a majority of the oil and gas market. In
2017, the world produced 152.1 million barrels of oil-equivalent per day, 92.6 of which
were oil and 59.5 of which were gas.23 The seven IOCs contributed approximately 13
percent of this production. Similarly, these companies do not emit the majority of GHG
emissions from oil and gas operations. Oil and gas operations emitted approximately 5.2
billion tons of CO2e in 2016.24 According to the data reported by the seven IOCs, their
operational emissions account for 8 percent of that total.

Although these companies do not have an outsized impact on world GHG emissions, they
are major international corporations and they have the potential to drive change in the
industry. In addition, we chose these companies because they are among the major oil
and gas producers most engaged in the energy transition in some way, whether it is with a
broad strategy and clear vision or more cautious, targeted investments.

Many companies have set goals to address these direct, operational emissions, also
called Scope 1 emissions, often through methane management and increasing efficiency.
However, Scope 1 emissions are a small part of the problem. Indirect emissions, ranging
from embedded emissions in the supply chain to the use and end-of-life processing of sold
products, also called Scope 3 emissions, make up a much greater portion of emissions.
Scope 2 emissions, which are emissions from imported heat and electricity, are negligible
in the industry compared to Scope 1 and 3 emissions.

The distribution of Scope 1, 2, and 3 emissions is not dramatically different between

oil and gas and other industries. According to the World Resources Institute, Scope 3
emissions constitute more than 70 percent of many businesses’ GHG emissions.25 Take
the pharmaceutical and tech industries, for example. As shown in Figure 8, Eni’s Scope
3 emissions are about 85 percent of the company’s total—representative of the average
breakdown in the industry.26 Italian pharmaceutical company Sanofi’s Scope 3 emissions
are quite similar, at about 91 percent,27 and tech giant Apple reports that Scope 3
emissions make up more than 99 percent of its emissions.28

23. BP, BP Statistical Review of World Energy 2018 (London: BP, June 2018), https://www.bp.com/content/dam/bp/
business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2018-full-report.pdf.
24. International Energy Agency, World Energy Outlook 2018.
25. Christian Aldridge, “You, Too, Can Master Value Chain Emissions,” Greenhouse Gas Protocol, April 4, 2016,
https://ghgprotocol.org/blog/you-too-can-master-value-chain-emissions.
26. Eni, “Eni SpA - Climate Change 2017,” CDP, 2018.
27. Sanofi, “SANOFI - Climate Change 2017,” CDP, 2018.
28. Apple Inc., “Apple Inc. - Climate Change 2017,” CDP, 2018.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 14
Figure 8: GHG EmissionsGHG
by Company, 2016
Emissions by Company, 2016
100%

90%

80%

70%
% of Company's GHG Emissions

60%
Scope 3: 85.39% Scope 3: 90.66% Scope 3: 99.74%
50%

40%

30%

20%
Scope 2: 0.25% Scope 2: 4.92%
10%
Scope 1: 14.37% Scope 2: 0.14%
Scope 1: 4.43% Scope 1: 0.12%
0%
Eni Sanofi Apple

Source: Eni, “Eni SpA - Climate Change 2017”; Sanofi, “SANOFI - Climate Change 2017”; Apple Inc., “Apple Inc. - Climate
Change 2017.”

However, not all Scope 3 emissions are created equal. The sources of these Scope 3
emissions pose a unique problem for the oil and gas industry. As shown in Figure 9, about
92 percent of Eni’s Scope 3 emissions come from the “use of sold products” category.29
Less than 1 percent of the company’s Scope 3 emissions come from the “purchase of goods
and services” category, which measures the emissions that come from the manufacturing
of the inputs to their products. By contrast, the Scope 3 emissions of Sanofi look quite
different. About 10 percent of Sanofi’s Scope 3 emissions come from the “use of sold
products,” while 54 percent come from the “purchase of goods and services.”30 Apple shows
a fairly similar profile to Sanofi—17 percent come from the “use of sold products” and 77
percent come from the “purchase of goods and services.”31

29. Eni, “Eni SpA - Climate Change 2017.”

30. Sanofi, “SANOFI - Climate Change 2017.”
31. Apple Inc., “Apple Inc. - Climate Change 2017.”

Stephen Naimoli & Sarah Ladislaw | 15

Figure 9: Scope 3 Emissions by Category, 2016
100%

90%

80%
Purchase
of goods
and services:
70%
54%
Purchase
of goods
60% and services:
Use of 77%
sold products:
92%
50%

40%

30%

Other: 46%
20%

Other: 23%
10%

Other: 8%
0%
Eni Sanofi Apple

Source: Eni, “Eni SpA - Climate Change 2017”; Sanofi, “SANOFI - Climate Change 2017”; Apple Inc., “Apple Inc. - Climate
Change 2017.”

What this distinction means is that although most of these companies’ emissions
are indirect emissions from somewhere in their value chain, the strategies to address
them differ. In pharmaceuticals or technology, reducing Scope 3 emissions from the
purchase of goods and services requires companies to convince their suppliers to reduce
their emissions or change their suppliers. In the oil and gas industry, reducing Scope 3
emissions from the use of sold products requires the companies themselves to reduce
the carbon intensity of the products they sell or convince their customers to use less of
their product. There are a number of different ways oil and gas companies can address this
problem, but one that many have identified as part of a climate strategy is investing in
renewable or lower-emission energy resources to sell to customers. Another example is to
invest money from surcharges on consumers of gasoline and diesel in nature-based carbon
sinks like reforestation projects or mangrove ecosystems to offset the emissions impact
of driving. Reduction of Scope 3 emissions is the most important in terms of overall
emissions impact and the most difficult area to address for the oil and gas industry.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 16
Perspectives on Company Action

There are many ways to contextualize and interpret the different ways in which oil and
gas companies are looking for value in new business areas and branching out into clean
energy. We explore a few ways to consider oil and gas company climate activities before
carrying out an analysis of our own.

Equity Investor Perspective

First, the equity investment community by and large evaluates the climate strategies
of different companies in the context of their overall competitiveness. For example,
JPMorgan’s equity research team used three metrics relevant to the investor community
to evaluate European oil and gas companies.32 The first category weighs each company’s
carbon footprint against its non-oil net asset value exposure. The second category
evaluates each company’s upstream flaring intensity. The third category estimates each
company’s portfolio change to 2025 in terms of its anticipated oil/gas split and non-oil
and gas spending. Equinor performs well across all categories, earning the top spot in their
aggregate ranking, and Repsol and Shell receive high marks as well.

Goldman Sachs conducted a similar analysis, which not only evaluated oil and gas
company strategies but also suggested types of actions that companies can take to address
scope 1, 2, and 3 emissions. This analysis also suggested that a “successful” climate
strategy for a company, and for the sector, means reducing emissions at a rate that is on
track with 2-degree target modeling estimates. The report also suggests that the largest
oil and gas companies can expect greater returns from their traditional business segments
as consolidation occurs, offsetting lower returns from renewable energy investments.
These analyses are useful beyond the market observations they provide because they offer
insight into how the financial community is starting to consider these factors alongside
more conventional performance metrics.

Many investor analyses focus on the shifting role of natural gas in oil and gas company
portfolios both as a normal part of their evaluation but also as part of companies’ climate
strategies. Indeed, natural gas plays an important role in the transition strategies of
many companies for many reasons. First, in the near- to medium-term, the relatively
lower carbon intensity of natural gas consumption compared to oil is a way to reduce

32. JPMorgan Europe Equity Research, Global Energy Analyzer - Big Oil Trilemma (JPMorgan Chase & Co, 2018).

Stephen Naimoli & Sarah Ladislaw | 17

their overall emissions profiles. Second, natural gas used for power generation serves as
a concrete link between the company and the electric power sector, similar to how gas is
used in the petrochemical sector. Third, to the extent that natural gas can displace coal use
in the power sector, help balance renewables on the grid, or serve as a source of hydrogen,
it can play a role in a low-carbon transition strategy. To the extent that companies view
natural gas as a part of a long-term transition strategy in a world of deep decarbonization,
methane emissions management strategies and CCUS become increasingly important.

Environmental Investor Perspective

For some, the most important metric to judge company performance is simply spending
on low-carbon energy. CDP, a group that has been at the forefront of climate-related
corporate reporting, has carried out analysis of companies’ climate strategies that focuses
on this. As shown in Figure 10, CDP chose investments in low-carbon technologies as
a proportion of total capital expenditures as the most relevant metric and examined
companies’ investments from 2010 to the third quarter of 2018.33 In this analysis, Total
leads the pack at 4.3 percent of capital expenditures. While many in the oil and gas
industry use these figures to show how much the industry is investing, others use the
same data to show that during this period, oil and gas companies have spent the vast
majority of their capital expenditures on their traditional oil and gas business rather than
on low-carbon technologies.

Figure 10: Percent of Capital Expenditures Spent on Low-Carbon Energy,

2010–Q3 2018

Source: Luke Fletcher, Tom Crocker, James Smyth, et al., Beyond the Cycle (London: CDP, 2018).

33. Luke Fletcher, Tom Crocker, James Smyth, et al., Beyond the Cycle (London: CDP, 2018).

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 18
As noted in the analyses put forth by the equity investors, the carbon intensity of a
company’s portfolio and investments also matters. Some environmental and mainstream
investors have chosen to no longer invest in certain categories of fossil fuels—namely
coal, oil sands, and tight oil. While the total number of investors taking this position is
small and they usually do not have material positions in those industry segments to begin
with, these types of activities are often considered alongside the low-carbon investments
companies make.

Many companies suggest that capital allocation to low-carbon investments will grow as
the returns on investments do. Companies and investors do not have the same views on
the value proposition of these investments today or their prospective value going forward,
which explains some of the difference in approach. For example, some view the returns
on low-carbon energy projects as too low, while others see the risk-to-return ratio as
carrying positive benefits for their portfolios. In addition, some companies see the returns
on their low-carbon business as growing quite rapidly, which supplements the increased
commercial opportunities a more distributed electric power system potentially affords to
make low-carbon investment look more attractive. Other companies do not share these
views and need to see more evidence that the business models and value propositions will
evolve along these lines.

Stephen Naimoli & Sarah Ladislaw | 19

Evaluation of Trends and Categories

Both of these perspectives are useful but fail to illuminate, in our view, the most
important questions about oil and gas company engagement on climate change. If the
purpose of taking action on climate change is to reduce emissions, one very key part of
how oil and gas companies are spending money is whether or not those expenditures
contribute in material ways to other climate solutions (in addition to achieving their own
emissions reductions). Our approach to this question involved first seeking patterns in the
major oil and gas company climate-related investments.

Table 1: Existing & Proposed Assets, 2018 (excluding R&D)

BP Chevron Eni Equinor ExxonMobil Shell Total
Solar
Manufacturing
Energy storage
Wind
Solar
Other (Biomass, Geothermal,
Deployment
Hydropower, Hydrogen)
CCS
Grid-connected storage
Electricity sales (renewables)
On-site generation
Electricity Retail
Other services
(e.g., demand response)
Public EV charging
Transportation Private EV charging
Alternative fuels

Source: CSIS research from company reports, websites, press releases, and news articles.

Table 1 shows the companies’ existing and proposed asset expenditures across various
sectors and technologies. In this case, spending includes venture capital investments
but excludes research and development (which is not publicly reported). This does
not represent the size or monetary value of investments, which is not always publicly
disclosed—particularly in the venture capital category—but it does show the areas in
which companies have existing or planned future projects. There are some clear linkages
between these investment categories and core competencies of oil and gas companies.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 20
CCUS, a technology with a clear benefit to the oil and gas industry, is a popular destination
for funds. Public charging infrastructure for electric vehicles (EV) is also prevalent, given
that it is a part of the value chain in which companies have expertise and, in some cases,
can be integrated into existing fueling stations. Most of the companies have invested
in some kind of clean energy generation but investing in manufacturing and electricity
retail have not emerged as larger industry trends. All of the companies are engaged in at
least two places in this chart, but BP, Equinor, Shell, and Total have spread investments
across a majority of categories, while Chevron, Eni, and ExxonMobil have so far chosen to
focus their investments in a narrower range of technologies. In addition, one category not
included in this analysis in which oil and gas companies have invested in recent months
is direct air capture (DAC). Chevron announced an investment in DAC company Carbon
Engineering in January 2019.34

Also of interest is the geographic distribution of investments, as investments in high-

income countries are much more common than those in low-income countries. As shown
in Figure 11, the IOCs are developing clean energy projects across six continents. So far,
they have generally been concentrated in the United States and Europe, but development
is spreading to Africa, East Asia, and South America. North America, specifically the
United States, is a popular destination for onshore wind projects, where IOCs own 18
projects. Europe has traditionally been the destination for offshore wind farms, with 11
operational or in development, but the United States has begun offshore wind leasing
off its northeastern coast, and Equinor and Shell have moved in to propose projects.
IOCs have generally been less eager to build solar projects but have begun to build in
sunny regions such as northern and southern Africa, Brazil, and the UAE. Most biofuels
and biopower development from IOCs has been in Brazil, making use of their sugarcane
resources, but Eni has begun converting some of its refineries in Italy to create biofuels.
There are three major operational CCUS projects supported by IOCs (one in Canada and
two in Europe) with at least two more full-scale projects in development in Europe and
one in Australia.

34. Geoffrey Morgan, “Chevron, Occidental Buy Stake in Carbon Capturing Firm Backed by Bill Gates and Murray
Edwards,” Financial Post, January 9, 2019, https://business.financialpost.com/commodities/energy/chevron-occi-
dental-buy-stake-in-carbon-capturing-firm-backed-by-bill-gates-and-murray-edwards.

Stephen Naimoli & Sarah Ladislaw | 21

Figure 11: Geographic Distribution of Directly-Owned Projects, 1H 2019
Country Project
Algeria 1 solar
Australia 1 CCS
Brazil 3 bio, 2 solar
Canada 1 CCS
Chile 1 solar
Germany 1 wind
Ghana 1 solar

Wind Italy 1 solar, 2 bio

Japan 1 solar
Bio
The Netherlands 3 wind
Solar Norway 3 CCS, 1 wind

CCS Poland 3 wind

South Africa 1 solar
U.A.E. 1 solar
U.K. 4 wind
Powered by Bing
© GeoNames, HERE, MSFT, Microsoft, Navinfo, Thinkware Extract, Wikipedia
U.S. 20 wind, 5 solar

Source: CSIS research from company reports, websites, press releases, and news articles.

One of the ways in which oil and gas company strategies differ is in how they choose to
spend their money—not just on what technologies, but on what kinds of assets. There
are many different ways to invest. From publicly disclosed data as of May 2019, the
seven IOCs we studied owned at least a partial interest in 40 operational projects and 23
companies (see Table 2 below). This definition of projects includes large-scale projects the
IOCs own directly (rather than utilities or developers they have acquired). Companies are
those that have been acquired or started as joint ventures. Projects include solar arrays,
wind farms, biofuel refineries, and CCUS projects. BP has developed the most projects,
a majority of which are onshore wind farms in the United States. Companies include
project developers, alternative vehicle fueling or charging networks, energy technology
manufacturers, and biofuel companies. Most of the IOCs choose to own more projects
than companies, but Total’s acquisition strategy has given them more companies than
directly-owned projects for now, including solar manufacturing, utility, and clean energy
project development companies. We recognize that this information may not be entirely
complete or conclusive but believe it usefully illustrates the different ways in which oil
and gas companies invest in clean energy or climate-related investments. It is important
to note that this analysis does not account for the size of projects. Some companies may
build numerous small projects or take small shares in projects while others may build a
few large projects.

Table 2: Projects & Companies, 1H 2019

BP Chevron Eni Equinor Exxon Shell Total
Projects 14 8 2 5 2 9 6
Companies 4 0 0 1 0 6 8

Source: CSIS research from company reports, websites, press releases, and news articles.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 22
Another useful way to look at this data is to review how it has evolved over time, since it
reveals investment trends within individual companies as well as across the industry. A
timeline of oil and gas company involvement in clean energy can be seen in Figure 12 below.

Many oil and gas companies choose to develop, own, and operate a portfolio of clean energy
projects. Oil and gas companies began developing clean energy projects in the early 1990s,
but development picked up in the early to mid-2000s. Among the IOCs, Chevron was an
early actor in buying clean energy projects. The company began operating geothermal fields
in Indonesia in the mid-1980s and built or acquired geothermal power plants there in the
mid-1990s.35 The company ultimately sold its geothermal assets in 2016 and, although it has
built a 16.5 megawatt (MW) wind farm and some kW-scale solar farms in the United States, it
has been less eager than most of its peers to build projects since the 1990s.36 BP, on the other
hand, stands out for its flurry of U.S. onshore wind projects that came online in the late 2000s.

Figure 12: Oil and Gas-Owned Clean Energy Projects and Companies,
1994-1H 2019
O&G Clean Energy Projects, 1994-1H 2019
18
16
14
12
# of projects

10
8
6
4
2
0

1H 2019
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
BP Chevron Eni Equinor ExxonMobil Shell Total

O&G Clean Energy Company M&A, 1994-1H 2019

10
9
8
# of companies

7
6
5
4
3
2
1
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
1H 2019

BP Chevron Eni Equinor ExxonMobil Shell Total

* Does not include Chevron’s five currently owned joint venture solar projects due to a lack of public data on individual projects.

Source: CSIS research from company reports, websites, press releases, and news articles.

35. Hillary Brenhouse, “Indonesia Seeks to Tap Its Huge Geothermal Reserves,” New York Times, July 26, 2010,
https://www.nytimes.com/2010/07/27/business/global/27iht-renindo.html; “Chevron Expands Geothermal
Operations in Indonesia,” Chevron, August 13, 2007, https://www.chevron.com/stories/chevron-expands-geo-
thermal-operations-in-indonesia.
36. “Chevron Announces Sale of Geothermal Operations,” Chevron, December 23, 2016, https://www.chevron.
com/stories/chevron-announces-sale-of-geothermal-operations.

Stephen Naimoli & Sarah Ladislaw | 23

While project development is more common than company acquisition, certain IOCs have
shown a clear interest in purchasing companies, typically outside their core competencies,
most notably in the electric power sector. BP entered the solar manufacturing space in the
early 1980s, but the trend of acquiring clean energy companies has mostly been a recent one,
with some action in the late 2000s and a significant uptick beginning in 2015. BP started the
recent trend in 2009 by forming a joint venture with DuPont to create biofuels developer
Butamax. Total began a streak of acquisitions in 2010 with biofuels developer Amyris,
followed by solar panel manufacturer SunPower in 2011, and has acquired six companies
since then, ranging from battery manufacturer Saft to utility Direct Energie and alternative
vehicle fueling company PitPoint. Shell also began an aggressive acquisition strategy in 2017
by acquiring EV charging company NewMotion and utility MP2 Energy and has followed up
with seven more since, including three companies just in the first half of 2019.

Categories of Action
In addition to identifying companies’ investment patterns, we classified them into
three levels of action based on the strategic commitment required and provided some
illustrative (but not exhaustive) examples. Our classifications are illustrated in Table 3.

Table 3: Categories of Action

Invest in new approaches to reduce operational emissions
Examples:
Level 1 Chevron has used predictive Shell is testing new methane
analytics and monitoring leak detection methods to
and optimization software better identify leaks in real time
to reduce GHG emissions
Support new technologies through R&D and/or venture capital
Examples:
Level 2
ExxonMobil has invested BP has invested in FreeWire
$250 million in algae biofuels Technologies, a manufacturer
over the past ten years of mobile EV chargers
Develop non-oil and gas projects (organically or through M&A)
Examples:
Level 3 Eni is building solar Equinor is leveraging its Total has diversified
projects at its facilities experience in offshore into battery and solar
exploration to build panel manufacturing
offshore wind projects through acquisitions

Source: CSIS research from company reports, websites, press releases, and news articles.

The first level, reducing operational emissions, is an important building block of mitigating
climate impacts. This means investing in projects, technological or otherwise, to lower
GHG emissions from company operations upstream, midstream, and downstream. This has
long been a priority area for companies, both for environmental and economic reasons.
Chevron, for example, has deployed predictive analytics software alongside monitoring
and optimization software to minimize methane leaks from its operations. Similarly, Shell
is piloting new digital solutions to detect methane leaks in its operations.

The second level, supporting technology development, involves committing resources to

finding new breakthroughs. This means investing in research and development (internally
or as part of a consortium) or investing venture capital into startups developing new

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 24
technologies that lower emissions (either from oil and gas operations or by developing
new clean energy technologies). Many companies invest in in-house research and
development while also partnering with academic and private sector entities to carry
out joint research. For example, ExxonMobil has long supported the development of
biofuels from algae-based feedstocks, spending $250 million in just the last decade both
on in-house research and in partnership with Synthetic Genomics, the Colorado School
of Mines, and Michigan State University.37 BP, through its venture arm, has invested
in mobile EV charger company FreeWire Technologies to support the development of
innovative new products.

The third and most ambitious level is expanding beyond core oil and gas operations. This
means adding new business areas—often, this involves building solar or wind projects,
but it may also mean involvement in manufacturing non-oil and gas energy technologies.
This represents the most ambitious level of commitment in our estimation because it
seeks to actively engage in a business venture outside the core business model of the oil
and gas industry and is therefore furthest along on the path to developing an “energy
company” platform if it is successful. Companies can choose to develop and own assets
or acquire companies that have already established themselves in their technology areas.
Equinor has translated its experience in offshore exploration to building offshore wind
power—both anchored and, notably, floating wind turbines. Total has aggressively taken
the acquisition route, expanding into areas like solar with its purchase of manufacturer
SunPower in 2011 and of battery manufacturer Saft in 2016.

It is important to note that these categories are not mutually exclusive, but rather build
on each other in different ways. For example, Eni has begun a project to build 250 MW
of solar projects at many of its facilities. This involves investing in areas outside of the
company’s core business by building solar power, but because the projects will power
operations at some of Eni’s oil and gas production facilities, it will also serve to lower the
company’s operational emissions.

Contributions to the Energy Transition Challenge

Another important way to look at this activity is to ask what role companies play in the
larger challenge of achieving a low-carbon energy transition. Examining their investments
individually is intellectually interesting but situating them in the context of the larger
goal to decarbonize the energy system helps illuminate their strategic importance. The
IEA runs an initiative called Tracking Clean Energy Progress (TCEP) that evaluates 39
technologies or sectors against targets they need to achieve to meet the 2-degree target.
Categories relevant to the oil and gas industry’s investments include wind power, solar
PV, transport biofuels, CCUS, and battery energy storage. The IOCs have been investing in
a variety of these 39 technologies and sectors, in particular in several areas the IEA has
identified as needing more progress.

One of the most popular low-carbon technologies for the IOCs is wind power. Most of the
seven IOCs own equity stakes in onshore and/or offshore wind power projects. Equinor,

37. “Advanced Biofuels and Algae Research: Targeting the Technical Capability to Produce 10,000 Barrels per Day
by 2025,” ExxonMobil, September 17, 2018, https://corporate.exxonmobil.com/en/Research-and-innovation/Ad-
vanced-biofuels/Advanced-biofuels-and-algae-research.

Stephen Naimoli & Sarah Ladislaw | 25

for example, has been particularly aggressive in growing its offshore wind business,
with an interest in almost 9,000 MW operational or in development.38 Shell has also
ventured into wind power, owning interests in approximately 6,000 MW operational or in
development.39 ExxonMobil does not own any wind power projects but has signed a power
purchase agreement with Ørsted to power some of the company’s West Texas operations
with 500 MW of wind and solar power.40 The IEA believes that more efforts are needed to
ensure both onshore and offshore wind can help contribute to emissions reduction goals.

Solar PV is becoming a more popular choice for the IOCs to own renewable energy, both in
manufacturing and deployment. Total acquired French panel manufacturer and installer
SunPower in 2011 and has augmented its development portfolio with the acquisition
of Eren Renewable Energy (now Total Eren) and the creation of Total Solar.41 BP was an
early entrant into solar manufacturing in 1981 with what would become BP Solar but
then closed the division in 2011.42 In 2017, however, the company took a stake in solar
developer Lightsource (now called Lightsource BP), which operates 2,000 MW of solar
assets and aims to manage 10,000 MW by 2024.43 Eni is currently building solar plants to
power operations at its fields in Italy and across the Middle East and North Africa.44 Solar
PV is one of the few technology areas that the IEA rates as “on track” to meet emissions
reduction goals.

Transport biofuels are another extremely popular destination for oil and gas companies’
non-traditional investments. As stated earlier, ExxonMobil has long pursued research
into algae-based biofuels, investing $250 million into research and development over the
last decade.45 In 2010, Shell and Brazilian sugar producer Cosan established a partnership
called Raízen, which produces ethanol from sugar cane. Eni has begun converting some
of its oil refineries to biorefineries, starting with a plant in Venice that produces biofuels
from vegetable oils.46 Despite the interest from oil and gas companies, the IEA rates
transport biofuels as “not on track” to meet emissions reduction goals.

IOCs have been investigating CCUS technologies for a long time, particularly to neutralize
the carbon emissions from natural gas. Equinor, for example, has been using CCS
technology at the Sleipner gas field with ExxonMobil and Total since 1996 and the Snøhvit

38. “Renewables and CCS,” Equinor, 2018, https://www.equinor.com/en/what-we-do/new-energy-solutions.html.

39. “Our Projects around the World,” Royal Dutch Shell, 2019, https://www.shell.com/promos/ener-
gy-and-innovation/our-project-around-world/_jcr_content.stream/1559659445588/05a1cdf3809cc8a2d-
997f9a91304610b75a6b5e4/world-map-with-ne-investments-04062019.pptx.
40. Chris Martin and Kevin Crowley, “Exxon Will Use Wind, Solar to Produce Crude Oil in Texas,” Bloomberg,
November 28, 2018, https://www.bloomberg.com/news/articles/2018-11-28/oil-giant-exxon-turns-to-wind-so-
lar-for-home-state-operations.
41. Total, Integrating Climate into Our Strategy (Paris: Total, 2018), https://www.total.com/sites/default/files/at-
oms/files/total_climat_2018_en.pdf.
42. Robert S. Anders, The Long Island Solar Farm (Washington, DC: U.S. Department of Energy, May 2013), Tech-
nical Report DOE/GO-102013-3914, https://www.nrel.gov/docs/fy13osti/58088.pdf.
43. Caisse de dépôt et placement du Québec, “CDPQ and Lightsource BP Form £150 Million Solar Financing
Platform,” PR Newswire, May 13, 2019, https://www.prnewswire.com/news-releases/cdpq-and-lightsource-bp-
form-150-million-solar-financing-platform-300848510.html.
44. Eni, Eni for 2017: Path to Decarbonization (Rome: Eni, 2017), https://www.eni.com/docs/en_IT/enicom/sus-
tainability/EniFor-2017-Decarbonization.pdf.
45. ExxonMobil, “Innovating Energy Solutions: Research and Development Highlights,” 2018, https://corporate.
exxonmobil.com/en/energy/research-and-development/innovating-energy-solutions/research-and-develop-
ment-highlights.
46. Eni, Eni for 2018: Path to Decarbonization (Rome: Eni, 2018), https://www.eni.com/docs/en_IT/enicom/sus-
tainability/EniFor-2018-Decarbonization.pdf.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 26
gas field with Total since 2008.47 Shell runs the Quest CCS project at an upgrader in
Alberta, where Chevron is also a partner.48 BP has invested venture funding in C-Capture,
a company that develops chemicals for CCS technology.49 More investment in this
technology is needed, though—the IEA rates CCS as “not on track” to meet emissions
reduction goals.

Battery energy storage is a relatively new area for IOCs because it applies to a sector in
which they have not traditionally participated: the electricity sector. As they attempt to
shift from oil and gas companies to energy companies, they are seeing an opportunity in
battery storage. Total acquired battery manufacturer Saft in 2016 and has also invested
venture capital in Ionic Materials, which is developing a polymer to improve batteries.50
Both BP and Equinor have begun pilot projects to install battery storage at wind farms
to store excess electricity and balance the supply of power.51 The IEA also rates battery
storage as “on track” to meet emissions goals—one of the few categories that has moved up
from “more efforts needed” since the 2018 edition of the tracker.

While these comparisons are anecdotal, it is important to regard technology investment

from the oil and gas industry as part of a larger challenge to transform the global energy
system to one that is compatible with a 2-degree or 1.5-degree future. As we will go on to
explore, we think there is value in figuring out how to capitalize on oil and gas industry
investments and interests to help advance key technology areas that are falling behind on
the progress that needs to be made.

Perception of Oil and Gas Company Investments

At our workshop, we also sought to understand how perceptions of the industry’s
investments in reducing emissions compared with how companies reported their actions. In
advance of the workshop, we surveyed participants on the IEA TCEP investment areas. We
asked oil and gas companies to indicate whether they had invested in each area, which areas
received the most money, and which areas were considered strategic priorities. We also asked
non-industry participants (academics, environmental NGOs, and investors) to indicate their
perceptions of the industry in each of those categories and compared their answers.

Industry and non-industry participants agreed on most categories. For example, industry
and non-industry participants agreed that the industry had not invested in improving

47. Equinor, Sustainability Report (Oslo: Equinor, 2017), https://www.equinor.com/content/dam/statoil/docu-

ments/sustainability-reports/statoil-sustainability-report-2017.pdf; MIT Carbon Capture and Sequestration Tech-
nologies, “Sleipner Fact Sheet: Carbon Dioxide Capture and Storage Project,” 2016, https://sequestration.mit.edu/
tools/projects/sleipner.html; MIT Carbon Capture and Sequestration Technologies, “Snohvit Fact Sheet: Carbon
Dioxide Capture and Storage Project,” 2016, https://sequestration.mit.edu/tools/projects/snohvit.html.
48. Royal Dutch Shell, Sustainability Report 2018 (The Hague: Royal Dutch Shell, 2019), https://reports.shell.com/
sustainability-report/2018/.
49. Michael Holder, “C-Capture Secures £3.5m Backing from BP, Drax and IP Group,” BusinessGreen, February 4,
2019, https://www.businessgreen.com/bg/news/3070385/c-capture-secures-gbp35m-backing-from-bp-drax-and-
ip-group.
50. Total, Integrating Climate into Our Strategy; Bate Felix, “Total Buys Stake in U.S. Battery Developer Ionic Ma-
terials,” Reuters, April 18, 2018, https://www.reuters.com/article/us-total-batteries/total-buys-stake-in-u-s-bat-
tery-developer-ionic-materials-idUSKBN1HP2B4.
51. BP, “BP Launches Its First Battery Storage Project at U.S. Wind Farm,” April 10, 2018, https://www.bp.com/en_
us/united-states/home/news/press-releases/bp-launches-its-first-battery-storage-project-at-us-wind-farm.html;
Equinor, “Equinor Has Installed Batwind - the World’s First Battery for Offshore Wind,” June 27, 2018, https://
www.equinor.com/en/news/26june2018-equinor-has-installed-batwind.html.

Stephen Naimoli & Sarah Ladislaw | 27

building envelopes or reducing emissions from iron and steel production and agreed that
the industry had invested in solar PV and reducing emissions from chemical production.
There were only two categories in which more than half of industry respondents said they
had invested but less than half of non-industry respondents believed they had: improving
the fuel economy of cars and vans and improving the fuel economy of trucks and buses.

Interestingly, there were several areas in which more than half of non-industry respondents
believed companies had invested but less than half of industry respondents said they
had. These included geothermal power, smart grids, reducing emissions from aviation and
shipping, and renewable heat. This may mean that non-industry respondents were incorrect
in believing that the industry had invested in these areas or it may simply mean that they
were aware of companies that had invested but did not respond to our survey.

It is important to note that this evidence is not generalizable to a larger population; our
sample size was too small and was not randomly selected. However, we still believe there
is value in understanding the perceptions of highly-engaged observers and how they align
with the reality of company investments.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 28
Opportunities for Further Action

Our analysis shows that at least some parts of the oil and gas industry have a compelling
set of reasons to develop climate change strategies and make investments in lower-carbon
technologies and new energy business models. While there are many ways to analyze
the investments these companies are making, we have chosen to highlight several areas
where the activities of the oil and gas industry could bear fruit and where opportunities
for further action exist. Before turning to each of the areas we explored in turn, it should
be noted that each of these categories, along with the broader challenge of reducing
emissions, requires the involvement of public policymakers. Several times during the
course of this workshop, participants noted the need for greater policy action and clarity
to bring about a transition to a lower-carbon energy system. We did not endeavor to
address all of the climate- and clean energy-related policy issues that arose (including the
need for things like carbon pricing or other environmental regulation), instead choosing
to focus on several areas where public-private partnerships along with other investments
could yield benefits. Below is a summary of each of these areas:

Electric Vehicle Charging

A recent forecast from BloombergNEF expects EVs will reach retail price parity with
internal combustion engine vehicles by the mid-2020s, allowing EVs to make up
57 percent of passenger vehicle sales by 2040.52 Assuming this is accurate, EVs will
soon become a significant business area for companies willing to enter the segment.
Automakers are best equipped to build the vehicles themselves, but oil and gas companies
can leverage their expertise in engineering, experience managing operational complexity,
and significant capital to integrate EV charging into their portfolios. As mentioned already,
many of the IOCs are already moving into this area by investing in EV charging networks
and manufacturing, but at present the scale is relatively small. Industry participants
argued that EVs still make up a very small part of sales today, and automakers are
currently facing battery constraints that are driving up wait times. Still, they stated that
EVs were the future and the industry should have a role in the segment.

52. BloombergNEF, Electric Vehicle Outlook 2019 (New York: BNEF, 2019), https://about.bnef.com/electric-vehi-
cle-outlook/.

Stephen Naimoli & Sarah Ladislaw | 29

Electrification
Eliminating GHG emissions from the electricity sector will make a difference in combating
climate change, but electricity is only part of the problem—in the United States, only 28
percent of emissions in 2017 came from the production of electricity.53 Electrifying other
end uses like buildings, heating, or industrial processes, then, can provide an additional
avenue to reduce GHGs. Stanford University undertook a project starting in 2015 that
included electrifying its heating system, replacing on-site gas generation with grid power,
and installing solar. This effort reduced the campus’s greenhouse gas emissions by 68
percent.54 One particularly attractive area for electrification is installing high-efficiency
electric hot water heaters. The expected life of a water heater is 8 to 12 years55—a relatively
short timeline compared to larger infrastructure—allowing for rapid replacement and
decarbonization. For infrastructure with longer lifetimes, it is easier to build new electric
infrastructure in developing economies than to retrofit or replace current infrastructure in
OECD nations. Some industry participants were skeptical that there was a role for the oil
and gas industry in electrification, but others felt that the industry was the only one that
can achieve the scale necessary to help build out infrastructure at a global level. Others
noted opportunities for electrification in the industry itself, such as converting diesel
fracking equipment to field gas turbines, reducing emissions by 30 percent and saving
money on fuel costs.

Hydrogen
Hydrogen is frequently touted as a solution for electricity generation, heat, and long-term
energy storage, and as an alternative to internal combustion engines, particularly for
heavy-duty vehicles. Hydrogen is most often made through the reformation of methane
but can also be produced by water electrolysis. Oil and gas companies are already making
some investments in hydrogen, including an Equinor-Vattenfall-Gasunie partnership on
hydrogen-powered electricity generation,56 a BP-Nouryon-Port of Rotterdam partnership
on renewable hydrogen from water electrolysis,57 and a Shell-Toyota-Port of Los Angeles
partnership on fuel cells for heavy-duty trucks.58 At present, hydrogen faces several
problems: first, production from steam methane reforming still emits GHGs unless
carbon capture technology is used, and adding it drives up the cost. Second, production
from electrolysis is currently very expensive. Third, the round-trip efficiency of a fuel
cell is currently only 35 percent, compared to 85 percent for a lithium-ion battery, so
its attractiveness as a storage medium is low. Finally, electrolysis requires electricity,
so producing zero-emission hydrogen would require even more electricity generation
capacity. Industry participants indicated that hydrogen is more attractive as a late-century

53. U.S. Environmental Protection Agency, “Sources of Greenhouse Gas Emissions.”

54. Vincent Xia, “Cities Can Follow Stanford’s Energy Makeover to Cut Emissions of Carbon Dioxide Affordably,
New Study Finds,” Stanford, May 7, 2019, https://news.stanford.edu/2019/05/07/campus-energy-advanc-
es-can-optimized-replicated/.
55. Lowe’s, “When to Replace a Water Heater,” 2019, https://www.lowes.com/projects/repair-and-maintain/
when-to-replace-a-water-heater/project.
56. “Evaluating Conversion of Natural Gas to Hydrogen,” Equinor, July 7, 2017, https://www.equinor.com/en/
news/evaluating-conversion-natural-gas-hydrogen.html.
57. Jason Deign, “Oil Giant BP Joins Nouryon in Rotterdam Hydrogen Quest,” Greentech Media, April 15, 2019,
https://www.greentechmedia.com/articles/read/oil-giant-bp-joins-nouryon-in-rotterdam-hydrogen-quest.
58. Susan Carpenter, “Toyota, Kenworth and Shell Partner on Port of L.A. Fuel-Cell Project,” Trucks.com, Septem-
ber 17, 2018, https://www.trucks.com/2018/09/17/toyota-kenworth-shell-partner-port-la-fuel-cell-project/.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 30
solution rather than one for the 2019 to 2050 time frame. Several companies noted,
however, that early stage demonstration projects are needed now to illustrate potential
applications and work out the details of the proper regulatory, policy, and commercial
environments to make some hydrogen applications succeed. As was also noted in a recent
IEA report on hydrogen, these types of hydrogen systems demonstration projects will play
an important role in advancing a viable future for low-carbon (so-called “green hydrogen”)
hydrogen applications.59

Direct Air Capture

Direct air capture (DAC) has a clear utility to the oil and gas industry because it promises
to remove GHGs from the atmosphere, including those that come from the industry’s
operations and the use of their products. DAC technology is modular and scalable, and
it does not need to be located on a power plant, so it can be built at storage sites and
avoid transportation costs. DAC technology is in its infancy, but it has received some
attention from the oil and gas industry. In 2019, for example, Chevron and Occidental
Petroleum invested in the Canadian DAC company Carbon Engineering. DAC is another
area where demonstration projects are needed now to deliver on the longer-term promise
of the technology. Some participants suggested that this was another area where industry
interest could help spawn greater support for those projects.

Carbon Capture, Use, and Sequestration

In addition to energy sources that do not emit carbon, mitigating climate change by or
soon after mid-century requires large-scale carbon capture, use, and sequestration (CCUS).
The IEA estimates that to meet climate goals, the world must sequester 2.3 gigatons of
CO2 per year by 2040.60 Participants pointed out that the question of carbon capture is
entirely separate from use and sequestration. Experts have argued that using captured CO2
for enhanced oil recovery (EOR)—currently the most economical use for captured CO2—
can lead to fewer emissions compared to traditional exploration,61 but it is not primarily
a sequestration strategy and there is not enough EOR opportunity to reduce emissions
enough to meet climate targets. Participants also argued that effective monitoring
techniques are required to verify that CO2 has been sequestered safely and remains
sequestered over time. As mentioned previously in this report, the oil and gas industry is
already testing CCUS technologies. In addition to individual company action, thirteen oil
and gas companies—both IOCs and state-owned enterprises—participate in the Oil and
Gas Climate Initiative (OGCI). OGCI is dedicated to pooling industry funds and knowledge
to invest in, among others, CCUS technologies. As of July 2019, OGCI has invested in
five CCUS companies.62 Ultimately, the field requires significantly more investment
than current levels to reach the scale necessary to meet IEA goals for the technology to
substantively contribute to keeping global warming below 1.5 to 2 degrees. In particular,

59. International Energy Agency, The Future of Hydrogen: Seizing Today’s Opportunities (Paris: IEA, 2019), https://
webstore.iea.org/the-future-of-hydrogen.
60. International Energy Agency, “What is CCUS?” https://www.iea.org/topics/carbon-capture-and-storage/.
61. Deepika Nagabhushan and Kurt Waltzer, The Emission Reduction Benefits of Carbon Capture Utilization and
Storage Using CO2 Enhanced Oil Recovery (Boston: Clean Air Task Force, 2018), http://www.catf.us/wp-content/
uploads/2018/11/CATF_Factsheet_CO2_EOR_LifeCycleAnalysis.pdf.
62. Oil and Gas Climate Initiative, “Our Portfolio,” 2018, https://oilandgasclimateinitiative.com/climate-invest-
ments/#our-portfolio.

Stephen Naimoli & Sarah Ladislaw | 31

CCUS was viewed as an extremely important technology for any company that views
natural gas as a long-term climate solution and therefore a critical area for further work.

Offshore Wind
Offshore wind poses an opportunity for oil and gas companies to leverage their expertise
in offshore exploration. The quickly growing sector also poses a great opportunity to
provide new electricity supply—BloombergNEF expects 115 GW of offshore wind by
2030.63 Offshore wind can perform at capacity factors close to baseload due to reliable
wind resources offshore. As mentioned above, many oil and gas companies have already
begun developing multi-GW pipelines of offshore wind projects. Most projects are
supplying or will supply power to the grid onshore, but one notable idea is a floating wind
project that Equinor is considering that would provide power directly to operations at two
offshore oilfields.64 Currently, wind turbines cannot entirely replace gas at offshore oil and
gas platforms because they cannot also generate heat, but they can cut GHG emissions
from the power used at those platforms and reduce fuel costs. Offshore wind was one
area where participants thought that the unique skill set of the industry was a potential
competitive advantage.

63. BloombergNEF, “Global Offshore Wind Market Set to Grow Sixfold by 2030,” January 8, 2018, https://about.
bnef.com/blog/global-offshore-wind-market-set-to-grow-sixfold-by-2030/.
64. Nerijus Adomaitis, “Equinor Explores Floating Wind Turbines to Power North Sea Oilfields,” Reuters, August
28, 2018, https://www.reuters.com/article/us-equinor-windfarm/equinor-explores-floating-wind-turbines-to-
power-north-sea-oilfields-idUSKCN1LD0HW.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 32
Conclusions

There is increasing awareness of the need for all sectors to act on climate change—in the
public sphere, among investors, and increasingly at oil and gas companies. Companies are
working on how to advance technology solutions and new business areas to be part of the
solution, but it remains to be seen how widespread these investments will be and how
investors and the public will view them as climate change concerns continue to mount.
There are many opportunities for a greater portion of the industry to advance climate
change strategies and many reasons for greater portions of the industry to explore these
options. There are also many opportunities to increase current investments and move
into new areas to make substantive contributions to the development of technologies. To
date, investment taken has been small relative to overall capital spending but has created
a web of clean technology companies, universities, and businesses that rely on the oil
and gas sector for important financial support. The main opportunities identified in this
report are EV charging, electrification, hydrogen, DAC, CCUS, and offshore wind, but the
IEA lists more than 30 other areas in which society needs to make more progress. The
work being done in each of these areas can be expanded to have greater impact on the
overall goal of deploying low-carbon emissions technology through additional spending,
demonstration projects, and public-private partnerships or collaboration. Only through
greater engagement and ongoing effort will these investments yield longer-term benefits.
As stated in this analysis, there are a great many ways to view the drivers and outcomes of
the evolving position of the oil and gas industry’s engagement on climate change. Given
how behind the world is in addressing global climate change, it is worth considering how to
take advantage of the new and emergent strategies of the oil and gas industry to consider
how to help put their interest and efforts to good use in combating this challenge.

Stephen Naimoli & Sarah Ladislaw | 33

About the Authors

Stephen Naimoli is a research associate in the Energy and National Security Program at
the Center for Strategic and International Studies (CSIS), focusing on the electricity sector
and climate change. Prior to joining CSIS, he worked as a research and communications
fellow at the International Council on Clean Transportation. He holds a B.A. from the
University of Texas at Austin and an MPP from Oregon State University.

Sarah Ladislaw is the senior vice president and director of the Energy and National
Security Program, where she leads CSIS’s work in energy policy, market, and technology
analysis. Ladislaw is an expert in U.S. energy policy, global oil and natural gas markets,
and climate change. She has authored numerous publications on the geopolitics of energy,
energy security and climate change, low-carbon pathways, and a wide variety of issues on
U.S. energy policy, regulation, and market dynamics. Her regional energy work includes
publications on Chinese, European, African, and Western Hemisphere energy issues. She
has spearheaded new work at CSIS on climate change, the electricity sector, and energy
technology development.

Oil and Gas Industry Engagement on Climate Change: Drivers, Actions, and Path Forward | 34
COVER PHOTO DANIEL SANNUM LAUTEN/AFP/GETTY IMAGES

1616 Rhode Island Avenue NW

Washington, DC 20036
202 887 0200 | www.csis.org