Can fossil fuel companies find a place in a climate-friendly world?

We have to transform our energy system to avert the worst impacts of climate change. And if oil and gas companies want a place in that future, they must transform themselves—or else be consigned to history. Is it realistic to think fossil fuel companies could be part of the solution? Plenty of reasonable people say no, but I think constructive engagement with some in the industry can speed the transition. A few companies have taken meaningful steps in the right direction. To secure a place in the future, however, they need to think bigger and move faster.

The challenge is urgent and stark: The world’s economy needs to reach net-zero greenhouse emissions early in the second half of the century to achieve what science says is necessary. Net-zero means putting no more carbon into the atmosphere than we can take out. To hit this ambitious global goal, Europe, the U.S. and other advanced economies must get to net-zero, 100% clean economies by 2050.

Public Policy Sets Stage for Private Sector

That’s a tall order, but we should aim for nothing less. Policy remains the crucial foundation, because incentives need to be aligned. As long as companies can pollute for free and have society pick up the cost, dirtier technology will have an unfair advantage.

Strong pollution limits are needed, and they must be backed by performance standards that let entrepreneurs and companies use their knowledge of what works to figure out how to meet those limits efficiently. Economic incentives are needed as well, to reward innovators who build better, cleaner mousetraps. They unleash human ingenuity and drive adoption and scale-up of the best technologies, many of which are already available.

Carbon markets are one way to limit pollution while rewarding innovation, and the good news is, even as the Trump administration tries to roll back climate standards, much of the rest of the country and the world are moving forward. More than 50 countries, states and provinces have carbon markets in place. California and the European Union have strengthened their emission trading systems, and China is now developing the world’s largest.

These policies should be crafted in ways that promote the widest possible set of approaches and technologies, provided they are robust, reliable and environmentally sound. The list of potential tools includes carbon capture and underground storage; carbon credits for forestry and other practices; and a growing list of emerging “negative emissions” technologies that pull carbon out of the air. None of these are substitutes for changing the ways we produce and use energy. But we will need them as part of any successful climate strategy.

Changing the Business Model

Oil and gas companies will need to change in fundamental ways if they expect to prosper in a carbon constrained world. This means not only reducing emissions, but also capturing what remains – carbon dioxide as well as methane, the highly potent greenhouse gas that is the main ingredient in natural gas.

Methane from human activities is causing at least a quarter of the warming we’re experiencing today.

Worldwide, oil and gas companies release an estimated 75 million metric tons of this pollution each year. The International Energy Agency estimates that the industry can achieve a 75% reduction using technologies available today—two-thirds of that at no net cost. In other words, the no-cost reductions alone would have the same climate benefit as immediately shutting down all the coal-fired power plants in China. That’s huge.

Steep reductions are doable thanks to a wave of innovation. Oilfield digitization uses low-cost sensors—on the ground and mounted on drones—to find and stop leaks. And now satellite monitoring is becoming a fact of life. EDF recently created a new subsidiary to launch MethaneSAT, a satellite that will measure and map methane emissions globally, supplying high-resolution data to industry, policymakers and the public.

How Serious Are They?

Methane is a test of the industry’s seriousness. Companies will have a chance to demonstrate their credibility soon, when a wrongheaded Trump administration plan to roll back EPA limits on oil and gas methane emissions is released for public comment. Every company with an interest in natural gas – producers, users, distributors – has a stake in preserving these standards and should publicly oppose deregulating methane.

Some companies, including Shell, have begun to take meaningful steps in the right direction, such as committing to steep cuts in methane pollution, reducing the carbon intensity of their operations and tying executive compensation to emission targets.

There’s been heartening progress, but it’s not nearly enough. Companies must put their money where their mouth is by making sure every dollar they invest aligns with their decarbonization goals; there’s no better measure of a company’s commitment to change than how they’re spending their capital. In the lifespan of energy infrastructure, 2050 is right around the corner. Companies in all sectors, but especially energy, need to be investing for a climate-stable world now.

EDF has a long history working with business and policy leaders to develop effective, efficient solutions to world’s biggest environmental challenges. That includes oil and gas producers, whose actions can accelerate (or slow) the effort to reduce methane and other greenhouse emissions. There are many issues on which we don’t see eye to eye. We don’t accept funding from any company that we work with, or any company that can gain or lose from policies we support. But we have seen the power of results-oriented engagement.

With concern about climate pollution building rapidly among investors and the general public, the fossil fuel industry’s social license to operate is on the line. The time for business-as-usual is over. Incremental progress is not enough. Oil companies must treat climate change as the existential challenge that it is.