The world's largest oil companies gathered in New York City on Monday. At the same time, global leaders met at the UN Climate Summit.
Executives from thirteen fossil fuel companies talked about how to defend their industry as countries around the world planned to cut carbon dioxide emissions.
The chief executive of the sustainability-focused think tank based in Colorado, Jules Kortenhorst, was there for the conversation among oil executives. He talked to Colorado Public Radio climate reporter Sam Brasch about being in New York, talking to leaders in the fossil fuel industry during the climate summit.
Sam Brasch: So to be specific, you attended this party in New York. What was it like to be around oil executives during a week of protests and pointed conversations about climate change?
Jules Kortenhorst: I attended two events. There was a reception the night before and then on the day of the climate summit there was a round table with the CEOs of the 13 oil and gas companies. And as you can imagine, there was tension in the air, there was some angst in the air and there was a clear sense of a dramatic set of developments coming together in New York, at the UN, and as well at these meetings.
Brasch: What were you doing there? Because you're a sustainability guy, right?
Kortenhorst: Yes, I am a sustainability guy, but we do believe at Rocky Mountain Institute that the transition to a low carbon energy future has to involve the transition of the current companies in the industry.
This can not only be done by startups and disruptors. As cool as those companies are and as much as they are doing, we're going to need to shift the balance sheets and the business activities of many of the incumbent companies as well.
Now some of the companies around the table are already convinced of that and are starting to make that migration -- not fast enough maybe, but are definitely on the move. Others are still stuck in the old mindsets. And if you think about the influence that these companies have, it is good to challenge them to engage with them and to work with them to accelerate their transitions.
Brasch: So overall, are oil companies optimistic about the future of their industry, given all the attention this week and last week about climate change?
Kortenhorst: I think there is a mix. There are some of the companies, particularly a few of the European ones that have embarked on a transition, they understand the magnitude of the climate challenge. They understand the influence of an accelerating energy transition and they are worried, but they have turned that worry into a positive attitude to try to figure out how it can be part of the transition.
On the other hand, there are other companies that essentially are talking about this as a very long-term evolution. They believe that they can carry on a business as usual for times to com, which I think is highly unrealistic.
Brasch: I'm seeing evidence of that as well. The Carbon Tracker Initiative, I'm sure you’ve heard of them, they're a fiscal think tank, recently found that since 2018, oil and gas companies have invested at least $50 billion in new fossil fuel projects and they think that those can't be fiscally viable under UN climate goals. If these companies are making those sorts of investments, what makes you think some of them are genuine about this transition?
Kortenhorst: So that is the crux of the matter. I've seen the report of the Carbon Tracker, and it lays out fairly accurately the fact that we have to rapidly shift from investing in more fossil fuels to investing only in the solutions, the assets, the technologies that we need for a sustainable energy future.
Many of the investments that are currently being made will not be profitable. The hard limits that can be distilled from the Paris Agreement and the goal of 1.5 degrees © do no jive, do not match with more exploration of new fossil fuels. And that dilemma is staring these companies in the face. Some of them are starting to think about it and others are still ignoring it.
Brasch: Yeah, I mean it's a tough place to be because we were talking about balance sheets. Some of these companies have promised stockholders and executives and workers that they can count on these billions of dollars of oil and gas reserves now locked in the ground. Are they facing the reality that they might have to abandon those assets?
Kortenhorst: On the whole I don't think so. But there is maybe some interesting news coming from the financial world. While the oil and gas executives met in one part of New York, on the other side of town, the financial industry, and specifically on behalf of some of the largest asset managers in the world, the CEO of Allianz announced that he and his fellow executives from the financial industry had committed to shift their portfolios to be in line with the Paris Agreement.
Big shareholders of oil and gas companies are starting to say, we will divest from fossil fuels over the course of the next decades in order for our portfolios to help deliver the one and a half degrees. That simply means that by the middle of this century, these investors will no longer be willing to hold the stocks of companies that add further emissions to the atmosphere.
So in that sense, the writing is on the wall from maybe the most powerful stakeholder group, namely financial investors and shareholders.
Brasch: So maybe some changes happening upstream of these companies where they get their money. The cost of wind and solar energy has been falling, as I'm sure you know. Did you hear about these fossil fuel companies investing in those sorts of renewable energy options?
Kortenhorst: There again there is a mix. Absolutely, some of the companies are already pushing forward aggressively ways to transition to electricity companies based on renewables. In fact, the CEO of Shell has announced that he envisions that his company will possibly be a larger electricity company in the near future than an oil and gas company.
But on the other hand, when in discussions we had earlier into week I brought up the lower and falling cost of wind and solar, some of the other executives, specifically for example the CEO of Exxon, pooh-poohed the idea that the energy technologies of the future could ever replace his business.
Brasch: So what do you think is the best path forward for these companies, given everything we've talked about?
Kortenhorst: In the end they have to face the brutal facts. It's both their license to operate and their investors that are at risk if they don't make this transition. That means that they will have to slow down, rapidly their investments in fossil fuels, they should stop the exploration for new reserves. But that would mean that by the middle of the century they will essentially disappear.
Or alternatively they have to shift their business from fossil fuels to the renewable and sustainable technologies that provide energy for all over the long haul.
Brasch: How confident are you that, that can happen and these companies can be part of the effort to combat climate change?
Kortenhorst: My prediction is that some of these companies will be able to do that. They'll have the foresight and the courage to make that transition and that most others will actually come too late to the party and will not be part of the energy future.
Brasch: You were also at the UN event where teenage activist Greta Thunberg spoke. What did you think of her speech and what did you make of the youth strikes across the country about climate change?
Kortenhorst: It is very clear that younger generations are now telling us that we are not dealing with the science and that we're not taking responsible decisions that need to be taken to address this crisis. In fact, one of the best lines that I've heard Greta say over the last couple of days is, "If you're not acting like adults, then we have to."
When Greta spoke on the floor of the UN General Assembly, you could hear the unease, you could feel the tension among the delegates. And it was very clear that she hit home a very powerful message: That we have to step it up. We have to start leading.
Brasch: We're talking about really big national and international oil companies. What can you tell us about the scene on the ground here in Colorado, are oil and gas companies here considering how to make the transition away from fossil fuels?
Kortenhorst: I would say that like in among the big companies, there is a different set of perspectives. I think some of the smaller and local companies are starting to think of the implications for their business, but I would say that on the whole it is particularly some of the larger international oil and gas companies that are seemingly taking the lead and many of the smaller and maybe local gas companies, oil companies are not yet totally clear what the implications for the business are.
It may well have something to do with having the skills and the knowhow necessary to make this transition. That is of course a very challenging task for any CEO and I could imagine that a number of Colorado companies are still pondering what this means.