6

Governments: Acting in the Public Interest

GOVERNMENTS ARE IN a position to contribute to a global energy transition in ways that no other actors can, by crafting a robust regulatory and oversight environment for oil and gas giants to operate in. To date, however, most governments have stumbled and not yet delivered. In 2015, Paris hosted the United Nations (UN) Climate Change Conference, where nearly all nations made their initial pledges on greenhouse gas (GHG) emissions. Despite the achievement that the first global climate accord represented, failure lay in the wings.

Taken together, the commitments that these 196 countries made were woefully insufficient to meet the goal of limiting average global temperatures from rising by no more than 2 degrees Celsius above “preindustrial levels” and the dangerous levels of global warming a major temperature hike would usher in.1 While half of all nations declared their intention to increase emissions through 2030, the agreement furnished no enforcement mechanism to hold countries accountable for their pledges.2 Moreover, nations did not secure commitments from any oil and gas firms, and therefore, mitigation measures from producing, processing, refining, and shipping oil and gas were essentially missing in action. National commitments were voluntarily being updated in 2020, the first of ongoing five-year nationally determined condition (NDC) revisions under the Paris Agreement. As of spring 2021, just over 100 countries had updated their NDCs.3 Eighty-five nations are uncertain or have stated that they have no plans to revise their NDCs in 2020.4 Despite the coronavirus pandemic, atmospheric GHG levels continued to rise in 2020,5 and it is unclear whether COVID-19 will ultimately disrupt NDC efforts or accelerate them through economic recovery packages that fund low-GHG energy systems and infrastructure investments.6 If supply-side oil and gas emissions continue to go unaccounted for, the earth will greatly exceed its carbon budget.7

To compound matters, even as global governance involving carbon dioxide (CO2), methane, and other GHGs (along with their oil and gas sources) remains feckless, the ways that national, state, and local governments have responded to climate change have been poorly targeted and politically unsustainable.

Climate solutions cannot rest on the shoulders of the public (especially motorists) when the direct target (the oil and gas industry) carries on with business as usual. In 2018, protests erupted in Paris over a long-touted proposed solution: fuel taxes. The yellow vests protesters—gilets jaunes, a nickname coined for the safety vests French motorists are required to carry in their cars—wanted to repeal the green tax on diesel. Rural workers who regularly drove long distances said they could not afford higher fuel prices. Although the protest morphed into a larger movement about declining standards of living, it was sparked by ineffective governance. Fuel taxes, especially on working-class people, are regressive, taking a proportionately higher toll on those with lower incomes. Pollution fees and other policies directed at the oil and gas industry are not.

Like with any policy issue, governments are tasked with balancing private interests and the public good in calibrating their responses to rising GHG emissions. To arrest climate change, policymakers, regulators, monarchs, and dictators have to reform the oil and gas industry, and this is a difficult role for them to play because governments are not neutral parties. Oil and gas profits play an outsized role in political decision-making. Petroleum royalty payments and resource rents stock government coffers. Petroleum trade buoys regional economies and is a source of geopolitical bargaining power. Government subsidies work to keep petroleum flowing.

Government researchers are well positioned to study and formulate a safer path forward for oil and gas in a warming world. Chapter 6 discusses prospects of progress on climate policymaking in the face of hard truths about the oil and gas industry. Oversight of and regulations on the international petroleum sector are lacking. Although there are notable exceptions, most nations are not successfully wrestling with oil and gas. While every nation has a role to play, the United States, Canada, Saudi Arabia, Norway, and Russia stand at the fore with their abundant oil and gas supplies. A failure to act forces local communities to pay the price from both petroleum development and the ensuing climate impacts. Beyond governance, the public sector is instrumental to long-term research and development (R&D), the root of most innovation in the oil and gas sector.

Concerning Global Climate Governance

The challenge of climate change and rising GHG emissions demands concerted policy action.8 Yet such action is unfortunately hampered by free-riding, when actors benefit from the positive effects of mitigation measures regardless of whether or not they pay their fair share of the costs.

A given government may conclude that it faces few incentives to restrain its own oil and gas sector even though the specter of climate change endangers everyone: if such reforms are perceived as costly and other parties may be willing to foot a good share of the bill, such government officials may be tempted to remain on the sidelines.

Successful climate policy requires deft navigation between competing public and private interests.9 In 1992, participating countries at the Rio Summit in Brazil adopted the UN Framework Convention on Climate Change (UNFCCC) treaty to prevent “dangerous” human interference with the global climate.10 The UNFCCC entered into force in 1994 with ratification by 197 parties.11 Only North Korea, Kosovo, Vatican City, and Taiwan are not currently parties to the UNFCCC.12

But the treaty’s emission limits are nonbinding and unenforceable. The parties meet annually at gatherings called the Conference of the Parties (COP) to adopt agreements (protocols), assess progress, and renegotiate the UNFCCC’s climate objectives. When the 2015 UN Conference on Climate Change was convened in Paris, its participants struck the landmark multinational agreement that invited countries to submit their current emissions trajectories and routinely update their plans (NDCs) to keep future emissions in check to meet future climate targets.13 Of the 186 NDCs initially submitted,14 analysis of these submissions finds that nearly one in two nations intends to increase their GHG emissions between 2015, when the agreement was reached, and 2030.15 Given another shot, countries are generally not upping their ambitions in their 2020 NDC updates.16 Furthermore, NDCs are voluntary and countries can withdraw at any time, as the United States temporarily did during the Trump administration.

Tallying NDCs is complicated because emissions are calculated according to different baselines that must first be standardized.17 Even after NDCs are aligned and totaled, a gaping hole remains to meet the agreement’s target ceiling of 2 degrees Celsius in temperature rises. Governments need to exert policy pressure to durably reduce GHG emissions. Absent a direct enforcement mechanism, civil society (discussed in chapter 7) is largely tasked with holding countries accountable.

National Affiliations That Matter

There are meaningful differences between countries’ NDCs. There are also differences in their affiliations with membership groups, some of which are more supportive of climate action than others. Nations join forces and form affiliations for different reasons. With respect to energy policy and the environment, economic and political security tend to take precedence over climate action. Figure 6.1 charts the range in various countries’ national climate commitments when grouped by their multinational group affiliations. The significance of membership in each of these groups is discussed next.

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FIGURE 6.1 NDC Pledges of Countries with Multinational Affiliations

Note: Updated NDC updates (starting in 2020) are underway and not included here. Single entry for the European Union because in 2015, all EU nations pledged a 14 percent GHG emission reduction by 2030. APEC, Asia-Pacific Economic Cooperation; EITI, Extractive Industries Transparency Initiative; EU, European Union; GHG, greenhouse gas; IEA, International Energy Agency; NDC, nationally determined contribution; OPEC, Organization of Petroleum Exporting Countries;

Sources: L. King and J van den Bergh, “Normalisation of Paris Agreement NDCs to Enhance Transparency and Ambition,” Environmental Research Letters 14, no. 8 (July 26, 2019); European Union, October 5, 2020, https://europa.eu/european-union/about-eu/countries_en; Organization of Petroleum Exporting Countries, “Member States,” https://www.opec.org/opec_web/en/about_us/25.htm; International Energy Agency, “Membership,” April 24, 2020, https://www.iea.org/about/membership; Extractive Industries Transparency Initiative, “Members of the EITI Association – 2019-2022,” https://eiti.org/files/documents/2019-2022_eiti_members_registry-22_09_2020.pdf; Asia-Pacific Economic Cooperation, “Member Economies,” https://www.apec.org/About-Us/About-APEC/Member-Economies.

Keeping Good Company

Intergroup dynamics may be a means of promoting good stewardship. Member groups like the European Union and the International Energy Agency (IEA) are composed nearly unanimously of countries that are committed to making GHG cuts. Some of these nations also handle large volumes of oil and gas production, processing, or refining, including Norway, Australia, Mexico, the Netherlands, and Canada. In 2015, these nations pledged NDC reductions that, by 2030, would cut their emissions by 5, 10, 12, 14, and 30 percent, respectively. While the EU nations submitted a relatively-weak unified commitment in 2015 of a 14 percent GHG reduction, in 2021, their mitigation pledge was significantly strengthened to 55 percent.18 Along with the IEA nations commitments and increased targeting of oil and gas in their 2020 NDC updates, these efforts could help shape climate leadership in other oil and gas nations.19

The European Union, with its twenty-seven (post-Brexit) member countries, was founded in 1958 to promote stability in a postwar world.20 Energy security looms large in the European Union due to Europe’s scant oil and gas supplies, a paucity that bolsters the call for energy diversification, integration, and interconnection. Climate mitigation measures may even open up some opportunities. European oil and gas companies are ahead of the pack, as discussed in chapter 5. EU policymakers can creatively engage these international oil companies (IOCs) in their host countries’ NDCs, especially when it comes to promoting new net-zero GHG pledges.

Also, it is not surprising that nations affiliated with the IEA subscribe to sustainable energy development and climate security. The IEA, with its thirty member countries, is focused on combating climate change through energy planning, analysis, and policymaking.21 In 2020, the IEA published analysis targeting the oil and gas industry and what it must do to combat climate change.22

Pushing Associates to Do More

But not all organizational camaraderie has given rise to lofty aspirations. Countries that are members of the Organization of Petroleum Exporting Countries (OPEC), Asia-Pacific Economic Cooperation (APEC) forum, and Extractive Industries Transparency Initiative (EITI) could rub off on each other in more positive, climate-friendly ways like the EU and IEA members are. Virtually all OPEC members, except for Equatorial Guinea and the Republic of Congo, submitted their first NDCs that projected increases in their GHG emissions between 2015 and 2030.23 These nations remain at odds with the goals of the Paris Agreement. Of these, Iraq is the most concerning with its pledge to increase emissions by 170 percent.24 APEC nations, with their highly disparate climate commitments, tilt toward increased GHG levels overall. Chile is the outlier, with a nearly fortyfold increase in emissions planned between 2015 and 2030.25 And although EITI members have pledged some of the largest emission reductions in their NDCs, more EITI members plan to increase rather than decrease their GHGs by 2030.

It is not an easy pitch for these groups to refocus their priorities on climate change. OPEC, with its thirteen member countries in the Middle East, Africa, and South America, was founded in 1960 to stabilize oil markets and provide steady revenues for oil and gas producers.26 Russia and the ten other nations that have since affiliated themselves with a less formal bloc known as OPEC-plus are not likely to be climate leaders.27 But this reluctance may be slowly changing. In 2019, OPEC Secretary General Mohammed Barkindo stated that “the oil industry must be part of the solution to the climate challenge . . . and race to lower greenhouse gas emissions.”28 If just a few dominant oil and gas suppliers recommit to reducing their GHG emissions—countries like Saudi Arabia and Qatar, for example, as discussed later—that would contribute mightily to global climate progress.

APEC, a group formed in 1989 that currently boasts twenty-one members, has historically set its sights on economic growth. But with rising sea levels, worsening storms, and the spread of disease threatening the 3 billion combined residents of the APEC members,29 the bloc’s priorities are shifting when it comes to dealing with climate change.30

While some members seem to have elevated climate concerns, APEC nations have widely divergent priorities. The various members who put a premium on energy production (like Russia, Canada, and the United States), on climate risks (like Papua New Guinea, Indonesia, and the Philippines), and on broader economic objectives (like China, Japan, and Australia) confound APEC members’ ability to exercise collective oversight on matters pertaining to the climate. A major opportunity exists for APEC nations to band together and avoid becoming the last place to unload the most GHG-intensive and highly polluting residual petroleum products, including fuel-grade petcoke and high-sulfur fuel oils.31

EITI, with its fifty-two members, was launched in 2002 to promote public resource management and accountability to reduce corruption.32 In 2019, EITI reiterated its commitment to environmental monitoring and impact disclosure.33 Similar to the APEC nations, billions of people live in countries that have adopted EITI’s transparency standards. However, EITI can do more to promote climate action because over one-half of its member countries have made NDC pledges to increase their GHGs by 2030.

Climate Oversight Lacking on Oil and Gas Operations

The enticing riches that oil and gas offer can blind nations to their climate responsibilities. Mentions of mitigation strategies by the oil and gas sector are glaringly sparse in essentially all NDCs. Most nations have not specified or sufficiently covered supply-side oil and gas emission reduction measures in their NDCs.34 This is particularly problematic for national oil companies, where the government exerts direct decision-making power over the petroleum industry. Specifically, in a survey of fifty-seven countries, fewer than half (twenty-one countries) crafted some sort of oil and gas interventions to reduce their production-related GHGs, and eighteen resource-rich countries—including Angola, Colombia, Iran, Kuwait, the United Arab Emirates, Canada, France, and Mexico—stated their intentions to continue oil and gas operations.35 Others, including Australia, Norway, Russia, and Brazil do not discuss oil and gas in their NDCs. The United States does not mention oil and calls out natural gas only once.36.

The more oil and gas that a given country supplies, the larger its climate footprint tends to be. Climate pledges from the ninety nations with the largest oil and gas enterprises (each operating over 100,000 barrels of oil equivalent [BOE] per day) have projected an estimated production-weighted GHG increase of 18 percent by 2030.37 A subset of thirteen countries—including the United States, Canada, Russia, and Saudi Arabia—dominate the petroleum sector worldwide, producing and refining nearly 170 million BOE per day of oil and gas. Figure 6.2 plots the relationship between the amounts of oil and gas these nations supply and their projected 2030 GHG emissions levels. Five countries (marked with a negative sign) expressed their intention to reduce their GHG emissions under the Paris Agreement, while the others (marked with a plus sign) plan to increase their GHG levels.

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FIGURE 6.2 Major Oil- and Gas-Producing Nations versus Their NDC Pledged Annual Emissions in 2030

Notes: Log-log scale. Countries with “−” pledged reduced GHG between 2015 and 2030; countries with “+” projected GHG increases; China and India are plotted for reference, but they are not calculated into the regression line (polynomial fit) because, while they refine significant amounts of imported oil, they are not major global oil and gas suppliers. BOE, barrel of oil equivalent; CO2e, carbon dioxide equivalent; NDC, nationally determined contribution; UAE, United Arab Emirates.

Sources: Author’s estimates; L. King and J van den Bergh, “Normalisation of Paris Agreement NDCs to Enhance Transparency and Ambition,” Environmental Research Letters 14, no. 8 (July 26, 2019); International Energy Agency, “Statistics,” https://www.iea.org/data-and-statistics; Oil & Gas Journal, “2018 Worldwide Refinery Survey”; US Energy Information Administration, “What Countries Are the Top Producers and Consumers of Oil?” https://www.eia.gov/tools/faqs/faq.php?id=709&t=6; US Energy Information Administration, “Petroleum and Other Liquids,” https://www.eia.gov/international/data/world/petroleum-and-other-liquids/annual-petroleum-and-other-liquids-production; and International Energy Agency, “Data and Statistics,”  https://www.iea.org/data-and-statistics?country=ALBANIA&fuel=Natural%20gas&indicator=Natural%20gas%20final%20consumption; EIA; International Energy Outlooks (various),https://www.iea.org/topics/world-energy-outlook

Many countries stated that they intend to increase the share of renewable electricity in their domestic energy supplies. Uptake of renewable energy sources is concentrated in developing countries, however, and not in the major oil and gas supplying nations plotted in the figure. Many nations aim to increase gas use while also reducing methane emissions.38 But they do not offer sufficient assurances as to how they plan to prevent leakage of this potent GHG, which increases climate uncertainty.

The second round of updated NDCs began in 2020.39 If past is prologue, countries will not obligate their domestic oil and gas suppliers to shrink their climate footprints. This would validate business projections to spend some $25 trillion on oil and gas infrastructure between 2018 and 2040.40 Not only do national subsidies by the world’s major economies make up a significant portion of these funds, but also governments are saying one thing and doing another.41

National Climate Leadership Prospects on Oil and Gas

The world’s high-volume oil and gas value chains (supply plus consumption) are largely a product of around thirty-five countries discussed later. Taken together, these national actors emitted nearly 40 Gt of carbon dioxide equivalent (CO2e) in 2015, just over 80 percent of total reported GHG emissions.42 Figure 6.3 charts oil and gas supply and demand for every nation. Bars on the right of the figure depict domestic volumes of oil and gas supplied and those to the left depict the volumes consumed. Oil and gas makers supply more hydrocarbons than they consume, which permits them to export a significant share of their resources. Oil and gas takers consume more oil and gas than they domestically produce and refine. And oil and gas sustainers are the rarity that supply and consume relatively similar amounts of oil and gas. In 2018, the United States stood alone as the world’s largest oil and gas maker and taker, as shown in Figure 6.3. This distinction continues to hold despite the handful of countries like Russia and China that produce or consume meaningful but much smaller oil and gas volumes than the United States. Most of the rest of the world (150 nations) constitute a relatively small share of oil and gas supply or demand and are only sizeable in the aggregate.

Disaggregating nations’ positions can help identify specific strategies for reducing GHG emissions. For example, gas-producing nations will require the most stringent methane rules and regulations, while oil-refining nations need to tightly regulate these industrial complexes.

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FIGURE 6.3 National Oil and Gas Actors by Category and Volumes (2018)

Notes: Consumption volumes noted in parentheses to differentiate them from volumes in the oil and gas supply chain. Sustainers, production and consumption volumes within 1 billion BOE/day of one another; Maker, production greater than 1 billion BOE/day, but consumption is significantly less; Taker, consumption greater than 1 billion BOE/day, but production is significantly less; Maker and Taker, production and consumption volumes greater than 1 billion BOE/day, but not within this range of one another. US Energy Information Administration data do not distinguish between oil and gas industry consumers and all other consumers. BOE, barrel of oil equivalent; UAE, United Arab Emirates.

Sources: International Energy Agency, “Data and Statistics,” https://www.iea.org/data-and-statistics; US Energy Information Administration, “What Countries Are the Top Producers and Consumers of Oil?,” April 1, 2020, https://www.eia.gov/tools/faqs/faq.php?id=709&t=6; and Oil & Gas Journal, “2018 Worldwide Refining Survey.”

Although nations (as well as states, provinces, and regions) have historically focused on cutting their oil and gas demand, no government to date has successfully dealt with the climate risks of its supply-side oil and gas activities—extraction, processing, refining, and shipping. While many governments exhibit weak oversight of their petroleum sectors, focusing efforts on the countries with leadership potential could offer the world a possible way forward. Several governments are discussed later, including the potential leaders, as well as where action is plausible and where the greatest climate risks lie.

Acts to Follow?

National governments are not the only relevant policymaking actors on climate change and the oil and gas supply chain. Many energy and climate policies are implemented by subnational state and provincial governments.

To merely govern is not enough. Effective climate governance is indispensable.43 Although no countries have perfected climate leadership, a few notable cases are worthy of mention. Canada, Norway, Australia, and the state of California, for example, have ample oil and gas resources (including unconventional supplies). They have also undertaken efforts to address climate change. Looking to the future, these governments could lead the way to provide greater resource transparency, target the oil and gas supply chain in their climate policymaking, and further bolster their strong R&D capabilities. R&D is especially crucial for developing and demonstrating the innovations in industrial processes needed to reduce the climate risks emanating from their oil and gas enterprises. Table 6.1 summarizes these nations, their affiliations, their NDC pledges, and their best respective courses of action.

Table 6.1 Improving Climate Governance of Oil and Gas among Global Leaders

State Actor

Oil and Gas Status

Affiliations

Total Supplya (MBOE/day)

2015 NDC

Best Courses of Action

Canada

Maker

IEA, APEC

10.5

−30%

End political wavering; strengthen climate change priorities; increase R&D to advance in situ production innovations

Norway

Maker

IEA, EITI

4.5

−5%

Become lowest-GHG producer; fund oil and gas innovation with sovereign wealth fund; protect the Arctic

Australia

Maker

IEA, APEC

2.5

−10%

Prioritize climate change in resource development plans; reduce GHGs from LNG

California

Taker

b

2.3c

−40%d

Collect and publicize oil and gas data; convert refining infrastructure to green hydrogen; conduct joint R&D with Canada

a Includes total volume of domestic oil and gas production plus refined oil in MBOE per day.

b California is indirectly in the IEA and APEC as part of the United States, but it does not enjoy full membership benefits.

c California refines 1.9 million bpd of oil and produces 0.4 million BOE per day of oil and gas.

d California is not required to submit an NDC to the UN, but the legislature passed a law called AB 398 in 2017 setting a new GHG target of at least 40% below the state’s 1990 emissions by 2030.

APEC, Asia-Pacific Economic Cooperation; EITI, Extractive Industries Transparency Initiative; GHG, greenhouse gas; IEA, International Energy Agency; LNG, liquefied natural gas; MBOE, million barrels of oil equivalent; NDC, naturally determined condition; R&D, research and development; UN, United Nations.

Sources: Author’s calculations; United Nations; L. King and J. van den Bergh, “Normalisation of Paris Agreement NDCs to Enhance Transparency and Ambition,” Environmental Research Letters 14, no. 8 (July 26, 2019); California Energy Commission, “California’s Oil Refineries,”, https://www.energy.ca.gov/data-reports/energy-almanac/californias-petroleum-market/californias-oil-refineries; US Energy Information Administration, “California,” July 15, 2021, https://www.eia.gov/state/data.php?sid=CA

Canada: Where Innovation Could Pay Off

Canada, one of the world’s largest gas producers and the holder of massive reserves of oil sands, could be an act to follow if the nation ceases political infighting on climate change. National policies to price carbon, promote clean electricity, and make buildings as energy efficient as possible rank Canada as a climate leader.44 But when it comes to oil and gas supplies, the country’s succession of elected leaders has tended to vacillate between protecting the environment and maximizing commercial energy development. Market forces prevail over climate policy as Canada struggles to prevent oil and gas spigots from turning on whenever global prices rise.

Nevertheless, given its strong research capabilities, Canada is well positioned to leapfrog others. For example, to the extent that methane is closely regulated,45 Canada’s natural gas supply could shape up to be one of the world’s cleanest.46 And future underground production of gas from oil sands—a process (discussed previously) designed to sequester the carbon in oil sands while producing only gas—holds out the promising possibility that Canada could ultimately become the world’s top climate leader, bar none.47

Norway: Upping Its Game

Norway staked out a leadership claim on oil and gas management decades ago. In 1972, the country’s oil industry regulator adopted a Ten Commandments of sorts: commandment number five required oil industry development to protect nature and the environment, and number six made flaring Norway’s offshore exploitable gas unacceptable.48 Such environmental oversight remains a priority for offshore oil and gas development, and gas flaring is still prohibited except on an emergency basis.49 In 1991, Norway was the first to introduce a carbon tax to prompt the oil industry to reinject (not dump) and electrify offshore rigs using renewable hydroelectric sources.

What is Norway doing now to shrink its oil and gas climate footprint? The country’s carbon pricing scheme has not reduced its petroleum production, gas production is on the rise, and Norway is considering venturing into more sensitive ecosystems where an estimated two-thirds of its undiscovered hydrocarbon resources reside.50 As discussed in chapter 5, Norway’s own state-owned oil company (Equinor) emits far more GHG emissions on foreign soil,51 which are not accounted for by the nation itself even though these revenue streams enrich its sovereign wealth fund.52 How exactly its sovereign wealth is invested and spent,53 whether Norway ventures deeper into the Arctic, and how aggressively Equinor reduces its emissions in other nations will determine if Norway remains a global climate leader that other nations can follow.54

Australia: Canary in the (Gas) Mine

Australia has wavered on climate protection over the past decade. But its recent title as the world’s largest liquefied natural gas (LNG) exporter could squash its future role as a climate leader.55 Australia is a resource-rich nation that is well situated geographically to export its oil and gas (and coal) to energy-hungry Asian neighbors. This situation strengthens the position of the nation’s fossil fuel lobby and explains its relatively small 10 percent NDC climate reduction goal.56

However, the increase in severe droughts, record-breaking heatwaves, and destructive wildfires has left Australians growing impatient for their national leaders to strengthen the country’s climate governance. All eyes are on this ecological disaster–prone nation, which is already accommodating millions of migrants displaced by rising sea levels, water and food shortages, armed conflicts, and natural disasters.57 Australia is the proverbial canary in the coal mine. How will its government play its oil and gas (and coal) hand to mitigate global warming in the decade ahead?

California: Refocusing Climate Success on Oil and Gas

California produces, imports, and refines millions of barrels a day of some of the world’s most GHG-intensive oil.58 Yet, curiously, the oil and gas sector has not been the primary focus of the state’s renowned climate leadership. Instead, California has focused its efforts on curbing the GHG emissions of the transportation sector, adopting regulations, like the Zero-Emission Vehicle mandate (ZEV), which promotes electric vehicles (EVs) and gave rise to Tesla,59 and the low-carbon fuel standard (LCFS), which reduces the carbon intensity of California’s pool of transport fuel.60 And in 2020, the government announced plans to prohibit the sale of new gasoline cars by 2035.61

Meanwhile, oversight of the state’s fifteen refineries and their climate footprints has been too lax.62 Much more needs to be done to convert California into an overall climate leader whose achievements can be replicated elsewhere. The state needs greater data transparency on the oil it produces, refines, and imports so that supply-side GHG emissions can be fully assessed. The state needs to adapt its refining infrastructure to produce and use carbon-free green hydrogen.63 And joint government R&D will be key: there are natural affinities between California’s and Canada’s heavy oil resources. Pooling research funds and demonstrations could offer the two potential partners tangible climate gains toward a clean energy transition.

Where Greater Government Action Is Possible

All governments can—and should—more prudently oversee their oil and gas supplies in the future. The nations with powerhouse petroleum sectors that matter most in this regard include the United States, Brazil, and Mexico. Moreover, Saudi Arabia, the United Arab Emirates, Qatar, and Oman have the capacity to become frontrunners on climate mitigation. If these national governments, plus a host of states and provinces, commit to reducing the GHG emissions of their supply-side oil and gas operations, they could lower global climate risks given the large volumes of hydrocarbons they control. Table 6.2 summarizes these nations, their affiliations, their NDC pledges, and their best respective courses of action.

Table 6.2 Improving Climate Governance of Oil and Gas among Powerhouse Actors

State Actor

Oil and Gas Status

Affiliations

Total Supplya (MBOE/day)

2015 NDC

Best Courses of Action

United States

Both maker/taker

IEA, APEC

50.9

−31%

End political wavering; strengthen climate change priorities; align federal agency efforts; convert refining infrastructure to green hydrogen

Saudi Arabia

Maker

OPEC

17.0

+63%

Reduce NDC; publish durable climate plan; use renewables in oil and gas operations; minimize flaring; commercialize CCUS

Brazil

Maker

IEA

6.0

−10%

Regain climate leadership role; develop low-GHG deepwater methods; maintain low-GHG biofuels production

UAE

Maker

OPEC

6.0

+53%

Reduce NDC; use renewables in oil operations; increase R&D to advance in situ production innovations

Qatar

Maker

OPEC

5.5

+69%

Reduce NDC; reduce systemwide methane leakage; reduce GHGs from LNG

Mexico

Sustainer

IEA, APEC, EITI

3.6

−10%

Strengthen climate priorities; reduce methane leakage; adopt California’s and Canada’s heavy-oil low-GHG innovations

Alberta

Maker

b

6.3

−30%b

End political wavering; strengthen climate change priorities; increase R&D to advance in situ production innovations

Texas

Maker

c

14.4

n/a

Low-methane fracking; zero-routine flaring; tighter MRV; convert refining infrastructure to green hydrogen

Other US Statesc

Makers

c

8.6

n/a

Low-methane fracking; zero routine flaring; tighter MRV; employ methane feebates

Japan

Taker

IEA, APEC

4.0

−23%

Convert refining infrastructure to green hydrogen; purchase low-GHG certified oil and gas; increase low-GHG biofuels production

a Includes total volume of domestic oil and gas production plus refined oil in MBOE per day.

b Total supply includes how Alberta set a GHG reduction target of 30% below 2005 levels by 2030. Alberta is indirectly in the IEA and APEC as part of Canada, but it does not enjoy full membership benefits.

c The US states with major gas fracking operations, including New Mexico, Colorado, North Dakota, and Pennsylvania. Texas and other US states are indirectly in the IEA and APEC as part of the United States, but they do not enjoy full membership benefits

APEC, Asia-Pacific Economic Cooperation; CCUS, carbon capture, utilization, and storage; EITI, Extractive Industries Transparency Initiative; GHG, greenhouse gas; IEA, International Energy Agency; LNG, liquefied natural gas; MBOE, million barrels of oil equivalent; MRV, measuring, reporting, and verification; NDC, naturally determined condition; OPEC, Organization of Petroleum Exporting Countries; R&D, research and development; UAE, United Arab Emirates.

Sources: Author’s calculations; United Nations; L. King and J. van den Bergh, “Normalisation of Paris Agreement NDCs to Enhance Transparency and Ambition,” Environmental Research Letters 14, no. 8 (July 26, 2019).

The United States: Hitting the Oil and Gas Lottery, Struggling on Climate Progress

As of 2014, the United States has held the world titles for being the single-largest oil producer, gas producer, and oil refiner.64 This notable record has endured ever since the shale oil and gas production grew in the 2010s, and no other country has ever claimed this trifecta. This may seem like the perfect recipe for self-sufficiency, but it is not—even though the country’s on-the-books oil and gas supplies outpace domestic consumer demand. Despite a favorable energy balance sheet, the United States imported 40 percent of the oil it refined in 2019 and exported roughly one-quarter of the oil it produced.65 Likewise, by the end of 2019, the United States produced one-third more gas than Americans demanded, yet the country still imported 9 percent because infrastructure is lacking in certain locations to ship gas domestically, while building infrastructure to export gas has a higher profit margin.66 The future concern is that the United States’ ongoing quest for energy security, real or perceived, will block climate progress—both at home and abroad.

US political parties and their priorities constantly change over time, making climate progress a stop-and-go affair.67 For example, the country dramatically withdrew from the Paris Agreement just a few years after leading the charge to draft it at the 2015 UN Climate Change Conference. Regulatory agencies have recently been working at cross-purposes. For example, as the Department of Interior opens up protected federal lands to oil and gas development and the Environmental Protection Agency (EPA) momentarily backtracks on methane rules and then picks them up again, National Aeronautics and Space Administration (NASA) researchers are establishing the world’s preeminent Carbon Monitoring System (CMS) using satellites and other measurement and modeling methods to track oil and gas (and other) sources of global warming.68 Like others, the United States can make great strides on climate change by focusing efforts on methane and applying its deep scientific knowledge in the oil and gas sector.

Other US States to Follow

Aside from California, there are other oil- and gas-endowed US states to watch, including Texas, New Mexico, Colorado, North Dakota, and Pennsylvania. Each is engaged in fracking. All have inadequate governance structures and data collection systems that predate fracking and heightened climate concerns. None of them has entirely mastered managing the climate super-pollutant methane, which is inadvertently leaked and purposefully released throughout the value chain.69 Fracking infrastructure and management practices need to be renovated now to significantly reduce the GHG intensity of oil and gas supplies from these states. And if states pursue massive infrastructure buildouts, including pipelines, LNG terminals, chemical plants, and other oil and gas systems, their investment plans will have to be reconciled with US climate targets and mitigated using carbon capture and storage (CCS) or other techniques to avert a dangerous increase in global temperatures.

Texas’s fate and fortunes have long been tethered to oil and gas supply chains.70 Still, the unbridled pace of development that occurred prior to the coronavirus pandemic was alarming—even by Texan standards. New Mexico, which shares the Permian Basin with Texas and also produces hydrocarbons from its Four Corners region, has recently emerged as a top oil-producing state. Although significant production occurs on federal lands that state policymakers cannot directly control, New Mexico’s governor signed an executive order in 2019 for a comprehensive clean energy transition strategy.71

Colorado is adopting landmark methane rules and making up for prior mistakes on oil and gas governance by concurrently granting and denying permits for new oil and gas drilling.72 North Dakota continues to experience clashes over building new pipeline infrastructure to move its (and Alberta’s) oil bounties to distant markets in North America and beyond. Strict limits on methane flaring and venting could help North Dakota reduce GHG emissions from its oil production.73 In the case of Pennsylvania, which went from mining coal (in the 1700s) to striking oil (in the 1850s) to fracking gas (in the 2000s), the state is an energy powerhouse that is unlikely to ever get off hydrocarbons. Given its abundant resources, Pennsylvania policymakers must overhaul their regulations so that the climate intensity of their oil and gas operations statewide are as low as best practices allow. How these other US oil and gas states tackle—or mismanage—their climate responsibilities will be telling. Success in one place can spawn more success in others, especially in basins that span state borders.

Mexico and Brazil: Protecting the Climate during Political Shifts

While Mexico and Brazil pledged GHG reductions in 2015, this pair of oil- and gas-rich nations has undergone political transitions since the Paris Agreement was signed. The Mexican government has not been able to offer sustained attention to climate change. Although economic development is a top priority, other considerations like access to international finance, local pollution, and reputational pressures are driving Mexico’s oversight on GHG emissions.74 As a result, the Mexican government continues to struggle to deal with the adverse climate impacts of its predominantly heavy oil production.

Brazil was an early leader on global warming, hosting the historic Rio Summit in 1992, setting ambitious GHG reduction goals in 2009, and submitting one of the region’s more ambitious NDCs in 2015. But in 2019, Brazil’s current president, Jair Bolsonaro, citing fiscal constraints, refused to host the annual follow-on Conference of the Parties (COP 25) meeting, which had to be moved to Spain.75 Brazil’s oil and gas sector supplies roughly double that produced by Argentina, Venezuela, or Colombia.76

Setting aside the thorny question of whether Brazil should curtail development of its oil riches, the country could markedly lift its climate status by cutting GHG emissions if it were to adopt similar offshore drilling and flaring techniques that producers use in the Gulf of Mexico.77 Increasing the production of biofuels, both ethanol and biodiesel, and integrating these gains into the petroleum industry could be a lift to the leadership standing of Brazil’s oil sector.78 Latin America’s oil- and gas-rich nations look to Brazil for technical support. As such, the fate of the continent’s climate potential may largely rest in Brazil’s hands.

The Middle East: A Need for Greater Climate Progress

Climate change could seriously disrupt life in the Middle East, one of the hottest regions on Earth.79 Average temperatures here have already risen more than 2 degrees Celsius since preindustrial times.80 Mass migration poses real security risks, and rising sea levels threaten to damage oil and gas supply infrastructure.81

Yet major oil and gas producers have failed to act decisively so far. Saudi Arabia has not exerted climate leadership—far from it.82 Currently listed as a “very low performer,” ranking sixty out of sixty one, Saudi Arabia lags in the Climate Change Performance Index, a collaborative nongovernmental organization (NGO) assessment tool that surveys countries’ efforts on climate change.83 In 2015, Saudi Arabia pledged a 63 percent increase in its GHG emissions by 2030.84 And in 2019, Saudi Arabia disputed the findings of the global scientific community when it attempted to block the Intergovernmental Panel on Climate Change’s (IPCC’s) consequential move to lower the global climate target to 1.5 degrees Celsius temperature rise.85 Today, volatile global oil prices, regional unrest, and future reductions in oil demand have Saudi Arabia questioning its economic and political future.

While the climate intensity of its oil production and refining is one of the lowest globally, because it produces a huge volume of oil, Saudi Arabia has a massive annual carbon footprint, some 215 million metric tonnes reported in 2015.86 Getting off oil is not a viable option for Saudi Arabia, at least not in the near term. Instead, the nation is pursuing other avenues: using renewables to power gas production, minimizing flaring, developing CCS and utilizing the captured carbon, and investing in R&D.87 But the country’s self-proclaimed “ultra-clean energy” efforts are not enough. Saudi Arabia needs a robust climate plan, one that squarely addresses its oil sector, transparently tracks emissions, and funds R&D to achieve progress toward a durable low-GHG energy transition.88

Like Saudi Arabia, Qatar, the United Arab Emirates, and Oman are major global oil and gas suppliers with insufficient pledges that would increase their GHG emissions in 2030 by as much as 69 percent.89 While they are not on the right path, their climate leadership on oil and gas matters.90 Gas-rich Qatar is the largest global emitter of GHG emissions per capita when its huge volumes of exported LNG are included. While Qatar is adding natural gas capacity faster than solar energy, it announced plans to capture and store millions of tons of carbon from its LNG facilities and reduce methane leakage across its gas value chain.91

Meanwhile, the oil-rich United Arab Emirates is planning to use solar energy for up to 30 percent of its energy needs by 2030, including to power its own oil operations.92 And Oman is planning major solar installations, including some to generate clean steam for its depleting oil fields.93 In the sunny Arab Gulf, these efforts could significantly cut oil sector emissions in the short term. But over the long term, these oil and gas nations’ economic ambitions must be complemented by loftier climate goals.94 Otherwise, they will be relegated to the ranks of other precarious laggards on climate change.95

Alberta: Capable of So Much More

Alberta is the province primarily tasked with slashing the climate impacts of Canada’s heavy oil. Political wrangling has gone on for decades; one premier tightens the reins, and the next loosens them. Carbon taxes are adopted and then rescinded. Research funds flow and then dry up. Infrastructure is planned and then abandoned. The province—with its costly oil and long distances to market—is very sensitive to oil market conditions, which can rapidly accelerate (or halt) development cycles. For example, a nine-year project to extend oil sands mining was abandoned in 2020 when investors raised political, economic, and environmental concerns. Such on-again, off-again plans hamper Alberta’s climate progress.96

Studies comparing Canada’s oil and gas sector have found that Alberta has historically underreported its methane emissions by as much as 50 percent.97 Still, Alberta has at least committed itself to tighter methane regulations.98 Given its advanced R&D capabilities through government laboratories in partnership with local universities, Alberta could become a climate leader if it ultimately develops underground methods for extracting hydrogen and keeping the carbon buried. But oil-rich Alberta will never be a climate leader if it freely extracts its hydrocarbon resources using current methods, regardless of government restrictions.99

Japan: The Preeminent Oil and Gas Taker

Japan’s innovative capacity should not be overlooked, as this nation has little in the way of a domestic oil and gas supply but a large energy appetite. While biofuel substitutes for oil and gas remain a focus, Japan’s refineries (which process nearly 4 million barrels of crude per day) together with its significant imports of petroleum products underscore that Japanese policymakers need to selectively do business with suppliers that certify low-GHG oils.100 The government is working to assess the climate impacts of future crude oil production and has expressed interest in using the Oil Climate Index + Gas (OCI+) in its policymaking efforts.101

Where the Greatest Climate Risks Lie

The rest of the world’s oil and gas majors—Venezuela, Nigeria, and Russia—are climate laggards that pose serious climate risks. While, at present, China and India are not major oil and gas suppliers beyond their own borders, they could make meaningful climate progress if they lower the GHG intensity of the significant volumes of oil they refine. Table 6.3 summarizes these nations, their affiliations, their NDC pledges, and their best respective courses of action.

Table 6.3 Improving Climate Governance of Oil and Gas among High-Risk Nations

State Actor

Oil and Gas Status

Affiliations

Total Supplya (MBOE/day)

2015 NDC

Best Courses of Action

Nigeria

Maker

OPEC, EITI

3.3

+26%

Reduce NDC; zero routine flaring; reduce systemwide methane leakage; reduce GHGs from LNG; improvements from technical assistance

Russia

Maker

OPEC+, APEC

29.3

+12%

Reduce NDC; zero routine flaring; reduce systemwide methane leakage; avoid developing in the Arctic; strengthen climate change priorities

Venezuela

Maker

OPEC

3.3

+70%

Reduce NDC; strengthen climate change priorities; adopt California’s and Canada’s heavy-oil low-GHG innovations

Iran

Maker

OPEC

10.5

+48%

Reduce NDC; reduce systemwide methane leakage; zero routine flaring

India

Sustainer

IEA

6.3

+229%

Reduce NDC; convert refining infrastructure to green hydrogen; purchase low-GHG-certified oil and gas; enforce petcoke and residual bans

China

Sustainer

IEA, APEC

17.5

+24%

Reduce NDC; convert refining infrastructure to green hydrogen; purchase low-GHG-certified oil and gas; reduce GHGs from LNG; enforce petcoke and residuals bans

APEC, Asia-Pacific Economic Cooperation; EITI, Extractive Industries Transparency Initiative; GHG, greenhouse gas; IEA, International Energy Agency; LNG, liquefied natural gas; MBOE, million barrels of oil equivalent; NDC, naturally determined condition; OPEC, Organization of Petroleum Exporting Countries.

Source: Author’s calculations; United Nations; L. King and J. van den Bergh, “Normalisation of Paris Agreement NDCs to Enhance Transparency and Ambition,” Environmental Research Letters 14, no. 8 (July 26, 2019).

Nigeria, Russia, and Venezuela: Mismanaging Their Vast Resources

Nigeria is the only nation in the world that reportedly made initial commitments to both wind down its oil and gas production and reduce production-related emissions.102 However, the government provided no details, calling its climate commitment into question. Worse yet, since 1990, it is reported that Nigeria’s GHGs have increased by 270 percent, a troubling trend that the government deserves help to reverse.103

As the world’s second-largest oil and gas producer and refiner,104 Russia is planning to vastly expand its oil and gas development in the Arctic. Hundreds of billions of dollars in investments are being tapped to create a major new Arctic company (Vostok Oil). Efforts to underwrite a massive new Arctic hydrocarbon development present a clear warning that climate progress cannot be left only to national leaders.105 International governance will be required to safeguard such fragile ecosystems. Moreover, if petroleum resources with the lowest carbon intensities (like Saudi stocks, for example) are replaced by Russia’s GHG-intensive Arctic oil, the planet’s climate will pay the price.

Unlike Russia, which uses oil and gas to reinforce its geopolitical power, several other nations struggle to manage the climate impacts of their vast resource endowments due to political instability and civil unrest.106 Venezuela, Iran, and Nigeria also depend on oil and gas to prop up their economies. But these nations, with NDCs projected to increase emissions by up to 70 percent, have not proven stable enough to balance their energy and climate goals.107

Their different types of unconventional oil and gas lead to assorted climate problems. Venezuela’s heavy oil requires solutions along the same lines as Canada’s wares. The light oil, condensate, and gas in Nigeria and Iran face challenges from excess methane emissions like those of Qatar—or Texas. For example, it is reported that temperatures in the already sweltering nation of Nigeria are 12 degrees Celsius (22 degrees Fahrenheit) higher in the vicinity of gas flares.108 These nations will require technical assistance to reduce the climate risks of their resource endowments, but first they have to stabilize their political scenes and improve on governance.

Taymyr: The Climate Bomb You Haven’t Heard of

Few have heard of Taymyr, a northern Russian province located at the mouth of the Arctic Ocean. Here, land temperatures have already hurdled past a perilous point by about 4.5 degrees Celsius since 1960.109

Despite these alarming numbers, Taymyr is also where Russia is planning to build fifteen new towns, a pair of airports, thousands of kilometers of pipelines and electrical lines, and a seaport to sail a fleet of top ice-class tankers. The goal is for Vostok Oil, a newly established Arctic division of the major Russian energy company Rosneft, to export millions of tons of northern Ural tundra oil.110 India is a big investor in the venture, and Western investors are also expected to participate. Such projects could push the global climate over the edge. Russia cannot be trusted to safely govern in ways designed to mitigate climate change and protect its far northern regions. Instead, financing for such projects needs to come under greater scrutiny, so potential investors—Japanese, Indian, and Western backers—understand that developing this region’s oil and gas supplies poses inordinately high climate risks.111

India and China: Greening Oil and Gas Supplies through Refining

While they do not supply vast volumes of oil and gas to the rest of the world, India and China loom large when it comes to safeguarding the climate. These major oil and gas consumers have been busy building out their oil-refining capacities, where they stand in second and third place after the United States.112 They have been pursuing oil and gas purchase agreements and joint ventures with other nations to fill up their growing refining capacity.

How these nations supply their energy will have huge climate implications. In 2015, India and China respectively pledged 229 and 24 percent increases to their already massive GHG footprints by 2030.113 But then in 2020, China pledged to zero out its GHGs by 2060 and to transform its economy away from fossil fuels.114 India would benefit by following China’s lead, if for no other reason than it would help clean up their dangerously polluted air.115

To achieve this, these economic giants could do several things to reduce their supply-side oil and gas GHG footprints and bolster their leadership credentials. China and India can preferentially trade with low-GHG producers; require greater oil and gas data transparency from their trading partners; ban imports of bottom-of-the-barrel, dirty petroleum products like petcoke and high-sulfur fuel oil; and invest in R&D to transform the refining sector beyond twentieth-century techniques. These supply-side measures could make a significant dent in global GHG emissions.

Local Communities Pay the Price

For all this focus on how major countries worldwide can curb GHG emissions, the effects of environmental problems like smog, polluted water, and climate change are predominantly felt locally. Cities, suburbs, and rural communities feel the effects of various links in the oil and gas supply chain from daily operations, intermittent upsets, and horrific accidents. They also experience the fallout of climate disasters, like storm surges, droughts, fires, electricity outages, and pandemics. Often, local governments are well positioned to provide oversight in ways no other government actor can. But reducing GHG emissions is rarely their top priority—or actual charge. Climate resilience is the immediate focus in many localities. To follow are a few of the many stories about the clash between oil and gas supplies and climate change told by local journalists and countless residents.116

Oil and Gas Hot Spot

Houston has one of the highest per-capita levels of GHG emissions in the United States.117 The city is also extremely hot and getting hotter.118 And Houston also took the brunt of a polar vortex that created a deep freeze in Texas in the winter of 2021.119 But despite being inundated by storms and floods from record-breaking rainfall and despite suffering repeated triple-digit temperatures on an annual basis and recently without heat, power, water, and phone service for a full week,120 Houston is not taking climate change seriously enough. Sometimes dubbed the “energy capital of the world,”121 Houston is jam-packed with hydrocarbon infrastructure: refineries, gas plants, chemical facilities, pipelines, tank farms, company headquarters, and one of the country’s busiest ports.122 Rather than tightly govern the oil industry, Houston has the nation’s highest-emitting refineries, has issued new permits for major LNG terminals, and is planning to expand its port.123

The area’s climate footprint is as wide as it is large. Neighboring Beaumont, dubbed “cancer alley,”124 is home to dozens of chemical plants.125 And more facilities are in planning for the Gulf Coast region around Houston.126 Beyond CO2, chemical facilities pump out other powerful GHGs—methane and volatile organic compounds (VOCs)—by the ton. In addition to air pollution, these toxins continue to contaminate water and elevate risks of explosions and fires.

Even though the Texas Oil and Gas Association claims that local companies are committed to a future of lower emissions, Houston and Beaumont are climate laggards. Houston’s first climate action plan does not even mention the oil and gas industry.127 But there are numerous steps the two cities can take to reduce the GHG emissions in this sector, including improving reporting and transparency, requiring companies to conduct R&D on reducing their climate risks, imposing an industrial emissions fee on carbon and methane,128 and retooling the plastics sector.129

Piling Up Petcoke

Petcoke also continues to be a looming concern. In 2013, black heaps of the stuff three stories high piled up along a river in Detroit, Michigan.130 It took some digging for the community to figure out that the substance was petcoke left over from Canadian-refined heavy oil. Since the petcoke was too dirty to secure a permit to be burned in US power plants, Marathon’s oil refinery transferred it to Detroit Bulk Storage, which handed it off to Koch Carbon to be shipped down the Mississippi River, through the Gulf of Mexico, and across the Pacific Ocean to Asia.

In 2017, Detroit’s municipal government issued a local ordinance requiring that petcoke piles be covered to prevent particles from being released into the air. But in 2019, Detroit’s petcoke problem was again in the news, with Marathon requesting a variance to store their petcoke uncovered.131 This chain of events calls into question whether oil and gas companies can effectively self-regulate to protect residents located near their operations. When hazards arise, locals are instructed to say something if they see something. As the case of Detroit and its petcoke shows, this mantra does not always come to the rescue.132

Gas-Induced Earthquakes

One of the world’s largest gas fields lies underneath Groningen, the Netherlands, and has been producing for about sixty years.133 Long before that, windmills powered the region. With vast stores of its natural gas removed, Groningen’s land is now sinking—and the earth beneath is shaking. Medieval churches are being ruined, homes are collapsing, ceilings are crumbling, and chimneys are falling. Costs to repair dwellings have run into the billions.134 Meanwhile, the government is being forced to tear down buildings and halt gas production. This example further shows that the negative externalities of the oil and gas sector can profoundly upend the lives of local communities.

In Search of Public Sector Innovation

The climate challenges that oil- and gas-supplying nations and localities face do not have simple solutions. Hydrocarbons are so thoroughly enmeshed in economies and political structures that surgical approaches are required to disentangle the two. Solving these problems will take deep study. In addition to academia (discussed in chapter 7), the actors best suited to the task at hand are government research laboratories, national academies of sciences, and public agencies.

Twenty-First-Century Government Research

As one journalist observed about the power of public interest knowledge, “we’ve seen projections from non-profits and [private] research outfits before, but now comes the official government confirmation.”135 Tracking data, making projections, and exploring new systems—these are the special abilities wielded by experienced and far-seeing government researchers who have long time horizons and more durable budgets.

Historically, public sector innovation has had a long history of expanding and strengthening the oil and gas supply chain. Ludvig Nobel (Alfred’s brother of Nobel Prize fame) is credited with creating the Russian oil industry, operating research laboratories that invented the oil tanker in the late 1880s. Over the course of a century, government researchers worldwide have contributed several oil- and gas-related advances to foster energy security. In the early 1980s, US government scientists undertook research to hydraulically fracture shale deposits, a technique that industry then commercialized to great effect.136 Government scientists in the United States, Japan, and elsewhere remain focused on unlocking methane hydrates, the most plentiful supplies of natural gas worldwide.137

But not all government researchers concentrate on extending the life of oil and gas supplies. National laboratories have engineered processes that produce crude oil from harvested algae and other nonfossil energy feedstocks.138 Global space agencies like NASA are collecting and studying satellite data to better attribute climate change to fossil fuels and other factors.139 The German and Dutch governments are studying the production of green hydrogen from their offshore wind plants.140 Net-negative GHG technologies like CCS and other climate-engineering approaches are also being investigated in government labs.141

The best and brightest minds are being called to the fore to research the low-GHG energy transition as the world shifts from energy security to climate security. Government scientists can unlock vast troves of data for analytics and can model complex energy systems. This knowledge is essential for developing a coordinated supply-side approach that serves as an oil and gas roadmap for investors, policymakers, and civil society.

Building Back Better

Calls for investments in infrastructure keep growing louder. But such plans need to mitigate and adapt to global warming. For example, US President Joe Biden’s plan to “build back better” rests on an economy that is stronger than the one prior to the start of the 2020 coronavirus pandemic. Accomplishing such an arduous task will entail investing in infrastructure, innovation, manufacturing, clean energy, and more.142 Billions would need to be devoted to research incubators focusing on climate change solutions.

Such public investments in science and technology must be reinvigorated to reverse the major decline in relative spending worldwide (excluding China) over the past two decades143—lowered by a factor of four in the United States alone, as a percentage of both total outlays and gross domestic product (GDP) since 1960.144 Major climate-friendly innovations in the petroleum sector are long overdue, and no other actor has the wherewithal to dig deeply into precommercial, cutting-edge R&D than government laboratories. In collaboration with industry researchers and civil society actors (academics and expert retirees), government laboratories and agencies have the know-how and staying power to develop a clean energy transition strategy.

The United States alone has seventeen national energy laboratories that translate basic science into innovation, and I have benefited from working with many of them.145 This includes the Advanced Research Projects Agency-Energy (ARPA-E), the national government’s advanced research project agency focused on energy. ARPA-E scientists are beginning to study a transition strategy for decarbonizing oil refining.146 This effort and others like it could be further enhanced by the creation of a new federal agency, the Advanced Research Projects Agency-Climate (ARPA-C), an advanced research project agency focused on carbon and climate change.147

Such efforts do not stop at US borders. For example, Saudi Arabia has exponentially increased its R&D spending over the past two decades and launched research centers worldwide. Across the globe, government energy R&D spending has remained relatively flat and grew by only 3 percent in 2019, with the most funds spent in Europe, the United States, and China. The good news is that roughly 80 percent of these funds went to low-GHG technologies, such as CCS and green hydrogen—which took off in 2020.148 However, government R&D tends to wax and wane amid economic cycles, a tendency that poses risks to the development of clean energy technologies, especially in countries that intend to grow their oil and gas sector in the coming decades.

Getting Governments to Act

The sinking city of Groningen is a stark reminder of how little even experts know about the unintended consequences of oil and gas development. Crumbling homes foreshadow what the world will face as the effects of climate change intensify. Drilling, extraction, processing, and shipping of petroleum products are hazardous to people and ecosystems, especially as the quantities involved increase.

Ideally, market forces are supposed to help countries and the world reach and maintain a desirable equilibrium between the production and consumption of products like petroleum and prevent undesirable side effects, like negative environmental externalities.149 Visible environmental fallout, like piles of petcoke, garner public attention and are still difficult to remedy. Invisible GHGs, like methane, are easily ignored.

Climate change and other negative externalities attributed to the oil and gas sector set up markets to fail. Special tools are needed when this happens, as discussed in chapter 8. Getting governments to act, however, involves pressure from civil society, as seen in chapter 7. NGOs, academia, the media, and the public play important roles, alerting others to the harmful aftershocks that accompany oil and gas resources. Many governments foresee an increased role for gas in their energy repertoires in the years to come. Civil society will be instrumental in holding governments and corporations accountable and helping societies around the world tackle this and the other manifold challenges that climate change poses.

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