Climate Targets Cant be Achieved, Say Energy Companies

Energy companies have privately warned the Government that its climate change targets are "illusory" and "delusional" as global leaders prepare to sign up to stricter guidelines at the Copenhagen climate change conference in six weeks.

By Rowena Mason
Published: 8:07PM BST 24 Oct 2009

In a sign that some of the oil majors, which are preparing to announce 60pc-70pc drop in net profits this week, are becoming bolder in their opposition to international efforts to reduce carbon dioxide emissions by 80pc over the next four decades, a senior executive who spoke to The Sunday Telegraph said there was currently a large degree of wishful political thinking about the changes targeted by the global summit.

"If you look at the Copenhagen targets they are basically completely illusory," he said. "There's no way to hit those targets and it would be very silly to think that we can."

The move comes as analysts expect Shell, which has cut hundreds of jobs in a company-wide restructuring this quarter, to reveal net profits of approximately $2.5bn (£1.52bn), and BP to unveil profits of $3.2bn.

The energy industry has been hit hard by the recession, as demand has weakened and companies have been forced to cut capital expenditure.

Energy companies have in recent years made loud public professions of commitment to tackling climate change.

But disillusionment has begun to build behind the scenes over concerns that more stringent targets at Copenhagen could add to costs and that targets are not achievable.

Writing in The Daily Telegraph last week, Ed Miliband, Secretary of State for the Environment and Climate Change, made clear his commitment to ensuring there is a global deal in December. "Lord Stern estimates that the long-term costs of failing to control climate change could be between 5pc and 20pc of GDP," he said. "Of course there are costs from acting too, but they are far less than the costs of not acting."

The Conservatives are planning a energy green paper in the new year which will have a sharp focus on renewables. Greg Barker, the shadow climate change secretary, said Britain had to become a centre for renewables expertise and manufacture, particularly offshore technology."The North Sea has the potential to be the Saudi Arabia of the 21st century," he said.

Leading energy industry figures speaking at last week's Oil & Money conference in London struck a common note of caution that politicians need to be realistic about industry's ability to shift entirely from using fossil fuels to cleaner, renewable sources of energy.

Several urged governments to consider gas, rather than less reliable, more expensive renewables, because this fossil fuel emits 50pc less carbon dioxide than coal when burnt.

John B Hess, chief executive of the $20bn Hess Corporation, warned that the world "does not have the scale,
time frame or economics" to devote to the complete eradication of carbon emissions from sources of fuel within the next four decades.

Richard Guerrant, Exxon Mobil's director for Europe, said: "Although wind power doesn't emit carbon dioxide, the wind doesn't always blow. Nuclear doesn't have the flexibility to be a suitable option. The greater flexibility of gas-fired plants makes them a better choice to meet this growing requirement."

Tony Hayward, chief executive of BP, insisted that petrol would be the dominant transport fuel for years and said cleaner gas-fired power stations should play the dominant role in helping replacing dirty coal plants.

However, BP has been calling for a floor on the price of carbon emissions permits across all energy sources, rather than subsidies that see wind, hydro and solar projects favoured in the UK.

"We do our fair share of renewables but globally they will be too small to make a real dent in the targets," Christof Rühl, chief economist for BP, said. "Two things I would look for to come out of Copenhagen are a dose of realism and debate over details like what kind of carbon price mechanism to use."

Meanwhile, Abdalla Salem El-Badri, secretary-general of the oil cartel OPEC, attacked alternative energy. "Just wait for one catastrophe and that will be the end of nuclear," he said. "And as far as I'm concerned, who really thinks biofuels will really work in the long run? You can't have food as an energy source."