BP’s Net-Zero Pledge: A Sign of a Growing Divide Between European and U.S. Oil Companies? Or Another Marketing Ploy?-LoTradeCoin

In the last month, BP said it had “set a new ambition” to get to net-zero emissions by 2050, and the company withdrew from three oil industry trade groups that have a history of opposing action to fight climate change.

The announcements are the latest signs that a gap may be opening between European and U.S. oil giants over climate change, with the European companies—like the governments of their home countries—committing to much steeper emissions reductions than their American counterparts.

But it is far from clear whether the European companies will take action that matches their commitments.

Environmental advocates say they are skeptical, while energy analysts say the extent of the transformation by BP and others will depend on how well this strategy works in terms of profits and investor response.

“We don’t have time, given the urgency of the climate crisis, to give companies that have a history of spreading disinformation and seeking to block action, the benefit of the doubt,” said Kathy Mulvey, director of the corporate accountability campaign for the Union of Concerned Scientists.

She noted that this is the same BP that just two years ago used its lobbying muscle to help kill a carbon tax in Washington state. The company also has a history of embracing the language of sustainability and clean energy, using the branding “Beyond Petroleum” in the 2000s, only to abandon it later after minimal efforts to invest in clean energy.

United Kingdom-based BP joins Royal Dutch Shell, Total and other European oil companies that have made public statements in recent years about the need to reduce emissions and take seriously the threat of climate change.

At the same time, U.S. oil giants such as ExxonMobil and Chevron “have really dug in their heels” in denying responsibility for their emissions, Mulvey said.

The contrast between the European companies and their U.S. peers could be attributed to many factors, including that European consumers and shareholders, reflecting the far more unified and widespread concern about global warming in Europe than in the United States, are more likely to demand that their large corporations have a plan for dealing with climate change.

“Europe is where ESG [environmental, social and governance] pressure is the strongest,” which means it is “not surprising” to see the European companies leading the way, said Pavel Molchanov, an analyst for the investment bank Raymond James, in a note to its clients.

But a larger driver may be the desire of oil companies to distinguish themselves from competitors in an economy where oil and natural gas prices have long been low and investors are restless, said Michelle Michot Foss, an energy economist and research fellow at Rice University’s Baker Institute for Public Policy.

“It’s a brutal reality right now,” she said. “The oil majors need to show the kind of returns that investors expect.”

And BP is distinguishing itself by saying it has a plan to grow during the transition to clean energy, according to the company’s statements.

‘We Do Have a Direction’

BP announced on Feb. 12 that it was going to transform its business, with a goal of getting to net-zero emissions by 2050. Since the production of oil and gas generates substantial emissions and is the core of BP’s business, the company is obviously proposing a big change.

“We all want energy that is reliable and affordable, but that is no longer enough. It must also be cleaner,” said Bernard Looney, BP’s CEO, in a statement. The announcement came a week after Looney officially began as the company’s CEO, following a decades-long rise through the ranks.

He said BP now supports putting a price on carbon and intends to become a leader in transparency in regard to accounting for its emissions.

Even with drastic changes to its operations, BP would continue to have some emissions, as long as it is producing oil and gas. To reach net-zero, the company would need to take other actions that remove greenhouse gases from the air, which could include burying carbon, capturing methane from landfills, tree-planting and methods that are not yet widely available or even known. BP has not yet said how it would do this.

One of the key caveats in BP’s statement is that the net-zero goal applies to its operations, but it does not cover the much greater emissions generated by usage of the products it sells. Instead, the company has said it will reduce the emissions intensity—or emissions per unit of energy—of its products, a step that could be achieved simply by producing vastly more renewable energy.

On Feb. 26, BP said it was leaving three oil industry trade associations—Western Energy Alliance, Western States Petroleum Association and American Fuel and Petrochemical Manufacturers—because of differences on issues related to climate change.

BP said it reviewed its membership in all trade groups and determined that the three it is leaving are “misaligned” with the company’s stance on the need for carbon pricing and whether the U.S. government should regulate methane.

But the company is remaining in several other trade groups it says are either completely aligned or partially aligned with BP’s views. These include some prominent opponents of regulations that would reduce carbon emissions, like the American Petroleum Institute and the U.S. Chamber of Commerce.

Geoffrey Supran, a research fellow in the history of science at Harvard University, said BP is undermining the idea that this was a thoughtful review by choosing to remain in the American Petroleum Institute and other groups with dreadful climate track records.

“This is like pledging to lose weight by saying you’re going to stop eating at three of your favorite 30 fast food joints,” he said.

Contacted for a response, a BP spokeswoman pointed to public statements Looney has made about how some people question BP’s sincerity on its stance on climate change.

In one of those statements, posted on LinkedIn, Looney said he has repeatedly heard people say, “We don’t trust you.”

“People have told me that they think we care more about profits than people,” he said. “That not only are we the source of the problem of climate change, we are an obstacle to solving it. That we say one thing and do another.”

But, Looney said, although he understands why some people feel this way, BP intends to demonstrate that the company is serious about its new path.

In a television interview with Bloomberg the day of the net-zero announcement, he said, “We do have a direction. It has been set, and it is, I think, quite different. And we will come back to the marketplace in September with an update.”

‘I’ll Believe it When I See it’

BP will provide more information about its net-zero plan at a presentation for investors in September. Until then, there are almost no details about how this shift will affect the company’s operations.

If BP can make progress toward meeting its climate aspirations, and can increase profits while doing so, it could influence the whole industry.

But longtime observers of the company are not yet ready to say that’s likely.

“The old adage ‘fool me once, shame on you; fool me twice, shame on me,’ comes to mind,” said Supran. “I hope BP proves my evidence-based pessimism wrong, but I’ll believe it when I see it.”