EU, US oil giants take diverging paths on climate

John Thys/AP
European Commissioner for Energy Kadri Simson talks during a press conference with Commissioner for the European Green Deal Frans Timmermans at the European Parliament in Brussels, Sept. 17, 2020.
  • Quick Read
  • Deep Read ( 5 Min. )

BP announced recently that it would cut its fossil fuel production by up to 40% over the next decade. It joins several European oil and gas companies promising drastic reductions in greenhouse gas emissions and steep investments in renewable energy, with a goal of carbon neutrality by 2050. 

But this zeal isn’t shared by U.S. oil companies. Far from giving up on hydrocarbons, they are doubling down on efforts to extract oil and gas while pursuing technologies to capture and store carbon emissions.  

Why We Wrote This

As oil and gas companies around the world finally begin to reckon with the climate crisis, their proposed solutions offer a glimpse of the social values that guide them.

The result is a bifurcation between U.S. and European companies over the future of a $5 trillion industry.  

“There’s never been such a wide disparity in strategy between major oil companies, and it reflects where they live,” says oil historian Daniel Yergin.

Neither path guarantees success. Following the crash of oil prices this year, European fossil fuel companies may not have enough cash on hand to effectively shift to renewables. The U.S. approach relies on technology that has yet to be proven to work at scale.

“To make that pivot [to green energy] takes a lot of investment and a lot of equipment,” Dr. Yergin says. “From that point of view, 2050 is not that far away.”

When BP recently unveiled a strategic makeover for an era of rising alarm over climate change, environmentalists were on guard for greenwashing by a global oil titan.

But BP’s announcement that it would increase its renewable energy assets tenfold – and slash oil and gas output by up to 40% over a decade – gave even its sternest critics reason to cheer. Greenpeace, which in February picketed BP’s London offices with solar panels and oil barrels to protest its climate policy, called it a “credible and encouraging start.”

The British company is one of several European oil and gas companies that have pledged to achieve net-zero carbon emissions by 2050. They are racing to embrace renewable sources of energy for a future of smart grids, electric cars, and digital commerce.

Why We Wrote This

As oil and gas companies around the world finally begin to reckon with the climate crisis, their proposed solutions offer a glimpse of the social values that guide them.

That zeal isn’t shared by U.S. oil companies, though. Far from giving up on hydrocarbons, they are doubling down on them in the belief that demand will be back, even as the deleterious effects of their emissions attenuate. The result is a rift between U.S. and European companies over the future of a $5 trillion industry that powers a world beset by climatic crises.

“There’s never been such a wide disparity in strategy between major oil companies, and it reflects where they live,” says Daniel Yergin, an oil historian and author of a new book, “The New Map: Energy, Climate, and the Clash of Nations.”

In Europe, a “survival strategy”

European governments have set ambitious goals to decarbonize their economies and are asking oil companies, some of which are state-owned, to develop cleaner forms of energy. That political consensus is underpinned by public concern over climate change and environmental degradation; pension funds are also pushing oil companies to account for climate impacts.

“All companies pay attention to their shareholders. But European companies pay attention to their stakeholders,” says Kevin Book, director of research at ClearView Energy Partners, a Washington-based consultancy. “To be a European company is to think about European people and European values.”

This month, the European Commission presented a plan for emissions cuts of 55% by 2030, compared to 1990 levels, a target that would require massive investments in low-carbon energy production. The 27-member European Union aims to be carbon neutral by midcentury. (Britain, which left on Jan. 31, has set the same goal.)

By contrast, the Trump administration has belittled climate scientists, rejected the Paris Agreement on emissions cuts, and rolled back regulations on oil, gas, and coal producers.

Public opinion and government policy aren’t the only reasons why companies like BP, France’s Total, and Royal Dutch Shell are trying to reinvent themselves as clean energy providers. They are also making a virtue out of necessity, having written off billions of dollars in investments after oil prices plunged from nearly $70 a barrel in January to briefly going negative in April.

Evan Vucci/AP
House Minority Leader Kevin McCarthy of Calif., left, and Chevron CEO Mike Wirth, right, listen to President Donald Trump speak during a meeting with energy sector business leaders in the Cabinet Room of the White House, April 3, 2020, in Washington.

The risk they face going forward is that investors in Europe may see loss-making oil companies as dinosaurs who left it too late to diversify, says David Goldwyn, a former State Department official for international energy affairs. “It’s an economic reality and a survival strategy,” he says.

Cutting the emissions, keeping the oil

That reality looks different in Houston, the U.S. oil capital. Companies like ExxonMobil and Chevron Corp. also anticipate greater scrutiny of their own emissions and that of the products they sell, say analysts. But they’re not about to reinvent a business model that goes back to John Rockefeller and has been reinvigorated by shale production. Instead they will keep drilling and selling oil and gas while investing in new technologies to capture and store carbon. 

“For the U.S. majors, the goal is to reduce emissions, not to promote renewables,” says Mr. Goldwyn.

In July, Chevron CEO Mike Wirth assured the Texas Oil & Gas Association that a global transition toward cleaner forms of energy wasn’t an existential threat. “We’ll find ways to make oil and gas more efficient, more environmentally benign,” he said.

Unlike Europe, which imports 75% of its oil, the U.S. has ample domestic reserves. And the vertiginous market crash – prices are now around $40 a barrel – has wiped out smaller players, squeezed speculators, and created opportunities. In July, Chevron agreed to pay $4 billion for Noble Energy, which produces natural gas in Israeli waters in addition to shale assets in the U.S.

Ultimately, the calculus for U.S. oil producers is about cost and efficiency. “There is a view that if they can make this business profitable at as low an oil price as possible, at $30 a barrel, they can survive,” says Atul Arya, chief energy strategist at IHS Markit, a research firm.

That business-as-usual approach could prove risky if a Biden administration prioritizes climate and Congress legislates to put a price on carbon. The former vice president has set a target of net-zero carbon in electricity generation by 2035, the same year that California says it wants to end the sale of new gasoline-powered vehicles. Another risk lies in Europe’s plan to introduce a carbon border tax that could set global standards for trade in goods.

Set against those risks is the near-certainty that the world will need more natural gas, which emits less carbon dioxide than oil but consists mostly of methane, a potent heat-trapping gas. U.S. producers also see upsides in supplying energy-importing countries in Asia and Africa after the pandemic recedes and in being profitable even if crude prices never soar as high again.

“Exxon believes there will be more days of gold and milk and honey. Shell and BP and Total don’t. ... They think we’re moving into an era in which oil and gas will not generate those returns,” says Clark Butler, a corporate adviser in Sydney who studies the industry.

What sets apart multinationals like BP, founded in 1908 as the Anglo-Persian Oil Company, is a global trading mindset, says Mr. Book. While Standard Oil and its descendants competed on world markets, their production hub was the world’s largest economy and their corporate culture was one of engineers. Europe had fewer resources and its oil companies began as traders, a legacy that endures in the commodity trading desks they run today, akin to Wall Street banks.

“It’s easy for them to make this leap,” he says.

“Been there, done that”

The 1973 oil shock spurred U.S. oil companies to invest in alternative energy, including solar panels. The lithium-ion battery on which today’s electric cars depend was invented by Exxon, back when it seemed possible that the world might run out of gasoline.

This time “there’s a sense of been there, done that,” says Dr. Yergin, referring to U.S. oil majors. “They’re also saying, why would it be better for us to be in the electricity business?”

That BP and its peers can succeed in this business is far from certain. They have the advantage of huge retail networks – Shell has 44,000 gas stations around the world that can offer electric vehicle charging – but are entering a regulated sector with lower profit margins than oil and gas during a global recession.

Shell and Total “aren’t pivoting sufficiently towards renewables to hit their [decarbonization] goals at the moment. One of the reasons is that the returns may not be there,” says Mr. Butler.

Shell recently cut its dividend for the first time since World War II. BP also faces a cash crunch that could complicate its green makeover, says Mr. Arya, a former BP executive who was its chief adviser on climate and energy policy. “In an ideal world, you have a high oil price and you take those profits and invest aggressively in renewables,” he says.

A transition to cleaner forms of energy is as much about technology as corporate strategy since many of the pathways to decarbonization, such as carbon capture at power plants, are unproven at scale and fossil fuels still provide 84% of the world’s energy, says Dr. Yergin.

“To make that pivot [to green energy] takes a lot of investment and a lot of equipment. From that point of view, 2050 is not that far away,” he says.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to

QR Code to EU, US oil giants take diverging paths on climate
Read this article in
QR Code to Subscription page
Start your subscription today