Clean-energy transition is in danger
Major oil firms, tech giants struggle to meet climate goals as demand for fossil fuels on rise
WASHINGTON — A wave of corporations, from oil companies to tech giants, are struggling to meet their climate goals amid society’s continued reliance on oil and other fossil fuels, putting efforts to shift the world almost entirely to clean energy by 2050 into increasing question.
European oil giant Shell this year pulled back its emissions reductions targets, citing “uncertainty in the pace of change in the energy transition.” And companies including Microsoft, Walmart and United Airlines have had their climate goals decertified by the United Nations’ Science Based Targets initiative, following concern the plans to achieve emissions reductions were too vague.
Underlying the examination of corporate climate targets is a global economy that continues to remain hugely reliant on fossil fuels, even as wind and solar energy continue to grow at a rapid pace, said Andrew Logan, oil and gas director at the nonprofit climate group Ceres.
“We’re seeing the rubber hit the road between companies’ net-zero aspirations and whether they have a coherent and defensible plan to get there,” he said. “There are companies that thought this was going to be simpler and you could just convert to 100% renewable or rely on efficiency to drive down emissions more than was realistic.”
After years of stagnant crude demand in the United States, oil consumption is rising again, up 1.5% last year from 2021. And natural gas demand continues to rise, up 4.5% over the past five years, with Goldman Sachs projecting an even larger surge in gas demand coming this decade as power grids try to keep up
with boom in new data centers.
Oil and gas companies dominate the Texas economy and have struggled in recent years to convince investors of their longterm viability amid global decarbonization efforts. Now, the years ahead are suddenly looking bright.
“Sometimes the experts seem to be basing the forecast on what they want to see happen and not what’s actually happening,” said Stanley Chapman III, COO of natural gas at pipeline giant TC Energy. “We see continued demand for assets in a way we’ve never seen before.”
The increasing consumption of fossil fuels, nine years after nations around the globe pledged to shift to clean energy to combat climate change, follows a volatile period of pandemic, war in Europe and the Middle East and rapid inflation, driving interest rates to their highest level in more than two decades.
That has has made the cost of building projects of all types more expensive, prompting analysts at investment bank J.P. Morgan to caution last month that expectations of rapid decarbonization need a “reality check.”
“Shifting the global energy system is highly complex and is a process that should be measured in decades or generations, not years,” they wrote.
The less rosy outlook by analysts follows a forecast by the International Energy Agency last year that oil demand would peak by 2030, with Fatih Birol, the Paris-based agency’s executive director, declaring, “the transition to clean energy is happening worldwide and it’s unstoppable.”
But the world’s largest oil companies appear to be betting on a very different future, with BP, Shell and Total adjusting their emissions reductions targets amid increasing pressure from investors to increase oil and gas production. That brings them closer to the view of the future held by Spring-based Exxon Mobil, which predicts oil and gas demand will actually hold steady over the next 26 years, even as wind, solar and other clean energy sources take up an increasing share of the world’s growing energy demand.
That point of view had until recently widely been seen as wishful thinking. But with inflation, high interest rates and increasing energy demand, plans by corporations to shift into clean energy suddenly look far more complicated than they did a few years ago.
“These companies have plenty of money, but it turns out building things in the real world is really hard,” said Logan, of the climate group Ceres. “Were trying to fundamentally change how the world procures and consumes energy, and so far there’s been an over reliance on incremental progress instead of overall change. This could be a wake-up call.”