A new partnership to make a difference

OUR PLANET 9.3 - Climate Change

A new partnership to make a difference


calls for industry to meet the challenge
and opportunity of global warming and
outlines what his oil company is doing


At the end of the 1980s following the collapse of communism in Europe and the fall of the Soviet Empire, the American academic Francis Fukuyama wrote a book with the ironic title The End of History. A decade later we can see that history did not cease. But it has changed character. In the post-communist world rigid left-right ideology is no longer the ultimate arbiter of analysis and action. Instead we are coming to realize that we are all citizens of one world.

With this realization has come growing acceptance that all of us - governments, companies, non-governmental organizations and individuals - must take greater shared responsibility for the future of the planet and its sustainable development. Global warming has proved a catalyst in this trend. For too long climate change has been shunted aside by those in positions of power and influence. Its very ambiguities seemed to offer an excuse to leave it to someone else. Now, increasingly, a consensus is emerging that no one should ignore the challenge. We must all work together to take precautionary action.

Maintaining equilibrium

Collective responsibility is a corporate goal too - not least in the oil industry. To be sustainable we need a sustainable world. This means a world where the environmental equilibrium is maintained and the population enjoys the heat, light and mobility which the industry helps to provide. These are not incompatible goals. No commercial organization can be really successful unless it has the capacity to keep using its skills and growing its business. That requires a competitive financial performance. But corporate leadership also requires realism. And that means responding to demands and concerns.

At British Petroleum (BP) people want to feel good about the company. They want to believe BP is a positive force in the world. In restaurants or at their children's schools, they do not want to hear that the company is ruining the world. The same is true of our customers. Moreover, denying the concern does not make it go away. Using uncertainty as an excuse for doing nothing only marginalizes us in an important and rapidly moving debate. Global warming is a fundamental strategic challenge to the oil industry and we need to be constructively engaged.

Two broad approaches are possible. One is dramatic, sudden and wrong - drastic restrictions on carbon emissions or a ban on the use of fossil fuels, for example - both of which are unsustainable because they would crash headlong into the realities of economic growth and expectation. The other is gradual and constructive and involves partnership with anyone who can make a difference. We are committed to this second course at BP.

Business is based on facts. Two facts about climate change are clear. The concentration of carbon dioxide (CO2) in the atmosphere is rising, and the temperature of the Earth's surface is increasing. The conclusion of delegates from 96 countries at the 1995 Intergovernmental Panel on Climate Change was unanimous: 'The balance of evidence suggests a discernible human influence on global climate.' Over the next century, predicted the IPCC, temperatures may rise by a further 1.0 to 3.5oC and sea levels by 15 to 95 centimetres. Some of that impact is probably unavoidable because it results from current emissions.

oil rig

Energy demand rising

Meantime the world population is swelling, living standards are growing and demand for energy shows no sign of slackening. By 2010 there may be 1.3 billion more people on Earth - equivalent to another China. By then energy demand is likely to be more than 30 per cent higher than in 1997 - another 2.5 to 3 billion tonnes per annum of oil equivalent, or extra demand equal to twice Europe's present consumption.

A few qualifications are also in order. Of total CO2 emissions caused by burning fossil fuels only one-fifth comes from transportation. Four-fifths come from static uses of energy - the energy we use in our homes, factories, offices and power generation. Of the total, less than half - 43 per cent - comes from petroleum. In addition there are wide margins for error in all these predictions; the science of climate change is still very provisional.

Inevitably, any remedial actions BP takes by itself will have limited impact. As a company our own operations in exploration, refining and chemicals produce around 9 million tonnes of carbon annually. Even if you add carbon produced by the consumption of products we make, the total is 95 million tonnes - just 1 per cent of total CO2 emissions.

Still, the steps we are proposing are substantial and measurable. First, we plan to improve our own CO2 emissions record. Over the last decade we have favoured the indirect approach, achieving 20 per cent improvements in the energy efficiency of our major manufacturing processes. Now we aim to better this record by setting specific targets across BP and creating a monitoring process based on benchmark data. Some of the targets will be straightforward matters of efficiency such as the reduction of gas flaring. But others - like our efforts to remove CO2 from large compressors - require new investment.

Beyond this we aim to boost the support we give to scientific research on climate change. Through technology transfer and joint initiatives with other organizations, including governments and environmental groups, we hope to promote a dialogue with all those seeking answers to the climate change problem. Linked to this, we intend to contribute to the public policy debate on global warming, not least by arguing that any approach be anchored in market-based concepts rather than regulation. We also intend to step up our efforts to make alternative energies, such as solar power, commercially competitive.

man with shovel

Working together

Already BP has plenty to show for these commitments. Joint implementation is still in its infancy but we have begun by entering a reforestation programme in Bolivia with three other partners. We are working with the Environmental Defense Fund in America to develop a voluntary emissions trading system, and have joined a partnership with the Electric Power Research Institute and the United States Department of Energy to design the right technology strategy to deal with climate change. BP is also part of a project set up by the International Energy Agency to analyze technologies for reducing and offsetting greenhouse-gas emissions from fossil fuels. Meanwhile BP Solar, with operations in 16 countries, has built up a 10 per cent share of the world market for solar power.

The key to initiatives like these is that they succeed. This is where business has an opportunity and a responsibility. It is what BP and others in the oil industry have done in terms of health and safety. It is what BP, in particular, does in response to local environmental issues in places such as Alaska's North Slope and Wytch Farm in southwest England - using our skills to meet requirements set by local communities as well as public policy. We should adopt the same approach to global warming.

It would be unrealistic, however, to suppose that industry will be left alone to tackle climate change. Governments everywhere are taking an active interest in the topic as public concern grows. Increasingly their focus is on three policy instruments - taxation, carbon trading and joint implementation. Each idea relies on the market to change conduct. How effective they prove will depend on the detail and particularly the incentives for action built into any initiative.

Taxation, of course, is a matter for national governments. It is not a simple tool to use and it has an undoubted impact on behaviour and distribution and economic activity. From our perspective, the test of any tax should be the impact it has on reducing greenhouse-gas emissions. To be effective, such taxation should cover all industry sectors, be based on a level playing field between fuels and be used to give manufacturers and consumers the opportunity as well as the incentive to reduce emissions.

An open market

The second option is the development of a carbon trading system which puts a value on carbon emissions, allocates permits for emissions and sets up a mechanism to trade them on an open market at competitive prices. A company's permit holdings would become one element in business planning. Again the playing field should be level between industries and fuels. The United States already operate two domestic permit trading systems. One aims at curbing sulphur emissions, the other at phasing out ozone-depleting substances. Since the sulphur trading system began in 1992 there has been a 5.6 million tonne reduction in emissions with the prospect of a further 4.4 million tonne improvement by 2010.

The third option - that of joint implementation - really means taking effective action in places where the impact is likely to be greatest. Defining how emerging markets should respond to global warming is a highly political issue. We have to be alive to the reality that it is hard for countries to concern themselves with climate change when they lack clean drinking water. My answer is that by targeting things which can be improved at lowest cost, thereby encouraging technological progress, we can also help control pressing environmental problems like inner city pollution.

Global involvement

What matters now is that we begin to take rational, precautionary, cooperative steps - even if there are areas of uncertainty and disagreement. The Kyoto Conference is important but it should be seen as one step on a long road. If the meeting pursues the chimera of a single solution, it will fail. Success, in my terms, means involving the whole world. But if a target is set for an overall reduction in emissions it will be merely the beginning of the next process - developing the means to achieve that target.

Oil and gas will remain prime energy sources for many decades to come. Demand for energy is growing, and although renewable sources of supply such as solar have excellent long-term potential, it is clear that for the foreseeable future the world will be using oil and gas in increasing quantities. But the people of the world must now be convinced that their needs can be met without destructive consequences for the planet. To Francis Fukuyama, such sentiments are part of the growing sense of common interest which is driving global society following the end of the Cold War. At BP we are part of this trend. We believe we should heed popular expectations and help make a difference. History has not ended. It has moved on.

John Browne is Group Chief Executive of British Petroleum.

Complementary articles in other issues:
Kenneth F. Hine: Green beds and greenbacks (Tourism) 1999
Colin Marshall: Change in the air (Tourism) 1999
Mark Moody-Stuart: Picking up the gauntlet (Climate & Action) 1998
Elizabeth Bravo: Oil troubles waters (Oceans) 1998
Stephen O. Andersen: Industry in the lead (Ozone) 1997

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