The UN’s climate chief has urged the oil and gas industry to clean up its act and lead the transition to a low-carbon future, or risk their vast underground fossil fuel reserves becoming stranded assets.
Speaking to an audience of fossil fuel executives at the International Petroleum Industry Environmental Conservation Association in London, Christiana Figueres said an “urgent transformation” is required.
“The systemic risks of unabated climate change are potentially so unmanageable that the world has no other option but to address the challenge,” she said.
“We need, and are undoubtedly moving towards, a new, sustainable energy mix. What is exciting is that the oil and gas industry can actually be part of the solution.”
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Figueres argued that oil and gas companies are well placed to lead this transition if they see the opportunities to invest in new, clean technologies and growing markets.
“Oil and gas can preserve their legacy as enablers of growth,” she said.
“Legacy implies solutions that persist over time. We must look past the next quarter, past the end of the decade, into the second half of the century by which time the global economy must be carbon neutral.”
Figueres warned that the alternative, the result of continuing business as usual, could be devastating.
She referred to the findings of the Intergovernmental Panel on Climate Change’s (IPCC) report published on Monday, a sobering document that warns no nation will be spared from the impacts of climate change.
In addition, there are great financial risks for fossil fuel companies and their investors in ignoring the climate problem.
“The highest CO2 concentration in over 800,000 years is potentially an unmanageable systemic risk not only to the environment but also to the global economy,” Figueres said.
Scientists estimate that three-fourths of the world’s fossil fuel reserves must remain underground if runaway climate change is to be prevented. Despite this, companies across the world spent over $650 billion (£441 billion) trying to find new reserves in 2012.
As international efforts are stepped up to combat climate change, there is a chance these reserves will be left as unburnable, stranded assets.
Investors have also been warned of a ‘carbon bubble’ that could arise as a result of fossil fuel assets being overvalued.
“Continued investment in high-cost, high-carbon projects is already beginning to negatively affect the bottom line of fossil fuel companies, even before considering stranded assets scenarios,” Figueres said.
Figueres added that companies must be transparent with investors about these risks.
Earlier this week, oil giant ExxonMobil issued a landmark shareholder report in which it admitted that “the risk of climate change is clear and the risk warrants action.”
It said that investing in energy efficiency and low-carbon technologies was the answer, but argued that fossil fuels would still be needed to meet global energy demand.
“All of ExxonMobil’s current hydrocarbon reserves will be needed, along with substantial future industry investments, to address global energy needs,” William Colton, ExxonMobil’s vice-president of corporate strategic planning said.
Photo: UN climate change via flickr