Global oil majors, including BP and Shell, are beginning to transition toward a green energy future as political and environmental headwinds for crude production mount and business demand for renewables accelerates. Compounding that pressure, Exxon shareholders just voted in two new activist board members who are expected to push the company in a more environmentally-friendly direction. Meanwhile, Shell lost an important case in Dutch court regarding its carbon emissions.
Some activists are calling the events a “watershed day” for the oil industry, but it remains to be seen how oil output and demand will be affected in the short term, or if a shift toward solar and wind might be what helps these long-standing energy titans survive and innovate. Regardless, climate-focused energy initiatives at the corporate and regulatory levels will continue to push the oil and gas industry closer to greater dependence on renewable capacity.
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Renewables on the Rise
Deployment of renewable energy resources has been trending upward for the last decade, but the acceleration of the world’s renewable energy capacity in 2020 has the International Energy Agency (IEA) projecting renewable energy will become the “new normal” by 2022.
Per NPR, a recent IEA report found that the world’s renewable energy capacity jumped 45% in 2020, part of an ‘unprecedented boom’ in wind and solar. Wind power expansion surged 90%, while solar panel installations rose 23%, both of which were record-highs.
The report states that renewable power was the only energy source for which demand increased, while consumption of all other fuels declined. That level of demand should only rise further, as the IEA expects renewables to account for 90% of total global power capacity increases in both 2021 and 2022.
Corporate demand for clean energy has also expanded, as companies boost sustainability efforts in an attempt to limit their carbon emissions. According to the Wall Street Journal, businesses purchased a record 25 gigawatts of renewable energy globally last year, up 25% from the previous period.
However, renewable energy still has a long way to go before it truly becomes the new normal. A recent survey conducted by the PEW Research Center found that nearly two- thirds of Americans believe climate change is an urgent problem that needs to be addressed. Yet, only one-third of respondents are okay with completely phasing out fossil fuels, indicating the clean energy transition will be a very gradual process.
Oil Industry Prepares for a Green Transition
As MRP noted earlier this year, big oil companies are beginning to prepare for an increasingly inevitable clean energy future, and events over the last week have accelerated that transition.
On Wednesday, Bloomberg reported that a Dutch court ordered Royal Dutch Shell Plc to slash its carbon emissions much faster than the company had anticipated.
Shell had previously pledged to cut its carbon emissions by 20% within the decade, but the new verdict would order Shell to slash carbon emissions by 45% before 2030, and 72% by 2040. Bloomberg wrote that Shell’s greenhouse gas emissions in 2019 were around 1.65 billion tons, which is roughly the same as Russia, the world’s fourth largest polluter.
Shell has announced they plan to appeal the ruling, but if it is upheld, it could have major ripple effects for Shell’s European competitors, including BP plc and Total SE.
The climate lawsuit came on the heels of another stunning defeat for the oil industry. According to The Verge, Exxon Mobil voted in at least two new board members who are focused on moving the company in a more climate-friendly direction. The New York Times reported this was the first time activist investors successfully voted their picks onto Exxon’s board, which could be a sign the post-fossil fuel world is arriving sooner than expected.
Exxon, the largest fossil fuel producer in the United States, was not the only US oil company to receive bad news last week. Chevron, the second largest fossil fuel producer…