Our carbon market experts explain why it’s so important that companies in the oil and gas sector invest in nature in addition to reducing their Scope 1 and Scope 3 emissions.
Achieving the goals of the Paris Agreement requires every sector of the economy to transition toward a cleaner, greener path. Last year’s IPCC report on limiting temperature growth to 1.5C clarified the urgency of this transition.
There is no doubt that this transition will be financially and technically challenging for heavy-emitting sectors, such as the oil and gas industry. But that does not excuse inaction. Indeed, these sectors are where high ambition is most valuable and most necessary. The good news is that there are a number of opportunities for immediate action that companies in this sector can take – not least of which is investing in nature.
Major oil and gas companies have increasingly looked to natural climate solutions – such as reforestation or avoiding deforestation – as part of their corporate strategies to reduce greenhouse gas emissions. For example, in April, Royal Dutch Shell announced a $300 million investment over three years to restore forests in the Netherlands and Spain, with the potential to source additional reductions from Malaysia’s Sarawak region.
Investments in nature are imperative. Under three percent of current climate finance to developing countries goes to forests. Yet, forests could represent a third of the reductions in GHG emissions necessary over the next decade to stay within reach of the Paris Agreement’s goals.
None of this is to say that investment in natural climate solutions can be a replacement for ambitious actions companies within carbon-intensive industries need to make. Not only do these companies need to reduce the carbon emissions of their own operations, they urgently need to explore ways to reduce the emissions caused by consumers of their products.
The fact remains, though, that we’re at a point in the climate struggle where it is not “either, or.” It’s “both, and”. We need both greater emissions reductions AND greater emissions removals using the nature’s power to remove carbon from the atmosphere.
Climate Advisers has prepared a new report — The Role of Nature in Climate Action for the Oil and Gas Sector — to establish the relationship between industry and nature in fighting the climate crisis. We envision a role for companies to invest in nature alongside transformative shifts in their business model, not instead of.
Specifically, we recommend the following:
- Oil and gas companies should advance ambitious greenhouse gas targets consistent with the Paris Agreement’s long-term vision, including a roadmap for addressing Scope 3 emissions.
- Leading companies should encourage commitments from their peers within the oil and gas sector and other carbon-intensive industries.
- NCS could form part of the commitments as supplemental ambition to what companies achieve through their own operations and by transition of their business models.
- NCS commitments should prioritize investments in developing countries, where sources of finance for interventions to halt deforestation, conserve standing forests, and promote reforestation are desperately needed.
- Looking more broadly at their operations, oil and gas companies should commit to minimize impacts on natural protected areas and indigenous peoples’ territories and recognize the rights of indigenous peoples and other local communities to their lands.
- Further work is required by civil society and experts to develop a set of “policy guardrails” to clarify what constitutes a high-quality commitment to external investment by carbon-intensive industries, including in NCS.
Achieving new sources of finance for nature would enable significant progress. This is welcome as long as it does not come at the expense of carbon-intensive industries making the necessary and rapid transition that is required.