BERLIN – Fossil-fuel companies have lobbied hard – and often successfully – against effective climate policies. But a recent report by the environmental research group CDP revealed that at least 29 major companies, including five major oil producers, are basing their internal planning on the assumption that such policies – specifically, a government-mandated carbon price – will be a reality as soon as 2020. The question now is whether oil-producing countries’ governments and citizens share this expectation.
World leaders are ostensibly committed to keeping the increase in average global temperature below 2°C relative to pre-industrial levels – the threshold beyond which the most catastrophic effects of global warming would be triggered. Indeed, they endorsed the limit at the 2009 Copenhagen Climate Change Conference, and again in Cancún the following year.
Success will require that up to 80% of proven oil, gas, and coal reserves not be consumed. This conclusion shapes the risk analysis of these carbon assets, which are a major contributor to their owners’ market capitalization. It is also driving a global campaign to lobby municipalities, public universities, and pension funds to divest from fossil fuels.
While the introduction of a more responsible climate-change policy may seem far off, serious work by senior officials and business leaders to formulate one has begun in many advanced countries. This is because, unlike news cycles (which are measured in days or weeks) or electoral politics (which plays out over months and years), extractive industries’ investment timelines are typically 20-25 years.