Tuesday, April 2, 2019

Shell’s exit from US refining lobby a first --- and a sign of the times on climate

Royal Dutch Shell announced plans Tuesday to leave a U.S. refining lobby over climate-related policy positions. Although it’s a first for an oil and gas company, it’s also another sign of increasing climate accountability among companies and investors.

Shell released its Industry Associations Climate Review on Tuesday, announcing the company has “developed a new set of principles to govern the way we manage our relationships with industry associations on climate-related policy issues.” 

In reviewing its current association with 19 industry groups, Shell found “some misalignment” with nine of them. But most notably, the company found “material misalignment” with one particular industry group — refining and petrochemical trade association American Fuel & Petrochemical manufacturers (AFPm). Shell says it has “decided not to renew our membership of AFPm in 2020 as a result.”

Shell gives a number of reasons for leaving AFPm, including AFPm’s lack of stated support for the goal of the Paris Agreement. The review simply states, “Shell supports the goal of the Paris Agreement.” Shell said other factors leading to its decision included:
  • AFPm’s lack of support for carbon pricing.
  • AFPm’s opposition of government action to shape policy frameworks for low-carbon technologies.
  • AFPm’s support of the EPA’s proposed rollback of U.S. fuel economy standards.
  • AFPm’s lack of a position on the role of natural gas and the reduction of methane emissions.
Shell’s review includes a message from CEO Ben van Beurden, in which he writes:
“The need for urgent action in response to climate change has become ever more obvious since the signing of the Paris Agreement in 2015. As a result, society’s expectations in this area have changed, and Shell’s views have also evolved.
We must be prepared to openly voice our concerns where we find misalignment with an industry association on climate-related policy. In cases of material misalignment, we should also be prepared to walk away.”

Growing Trend

Though Shell is the first major oil and gas company to chart this path, investors have already started to move away from oil and gas.

Norway’s $1 trillion sovereign wealth fund made the recent decision to divest in some of its oil and gas holdings. Bloomberg notes that while the country’s Government Pension Fund is “keeping investments in the big, integrated oil companies, it said that’s because of their early commitment to renewable energy.”

Companies that “exist purely to find more oil” are not so lucky — that’s where much of Norway’s divestment is aimed.

A group of Dutch investors wasn’t as picky. The group of 22 wealthy individuals recently decided to take all of their money out of the fossil fuel industry, representing a divestment of about 200 million Euros ($224 million).

And Reuters reports that a group of sovereign wealth funds from oil-rich countries in the Middle East is looking to “diversify into renewable energy, pushed by regulators and pledges on climate change.” Those funds aren’t looking to divest in oil and gas — not a surprise — but even making a push into renewable energy at all is a sign of the times.

We’ve also seen pressure put on public utilities from powerful U.S. pension funds that seek a strong push toward decarbonization, and knowledge of those plans.

Companies are clearly taking note of the shift, as well. Corporations set a clean energy purchasing record last year, and hundreds of U.S. companies joined the recent launch of the Renewable Energy Buyers Alliance.

Electrek’s Take

While Royal Dutch Shell’s announcement is another indicator of a growing worldwide shift in climate awareness, even among oil corporations, Shell and its ilk can’t be given the benefit of the doubt. According to a recent report, Shell was one of a number of oil and gas giants that were found to spend a combined $1 billion on climate lobbying that was “overwhelmingly in conflict” with the Paris Agreement.

Will that change? And what will Shell actually do going forward? That’s the important part. The company recently moved 700,000 U.K. homes to renewable energy. We need more of that.

The bottom line matters, and the decreasing price of renewable energy is making its mark. When combined with widespread public support for green energy policies and growing climate change concerns, there are conditions for change. It may not quite be a perfect storm yet, but you can see the clouds.

We need solutions on multiple fronts, and from a variety of angles. If companies move in this direction, while governments enact policies that set concrete, quantifiable goals toward the reduction of carbon emissions and the further adoption of renewable energy and electric vehicles, we could see some real progress.

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