Even as climate advocates call for eliminating fossil fuels, companies continue to launch major production plans. Earlier this year, for example, President Joe Biden’s administration approved the $8 billion Willow project on Alaska’s North Slope, which is expected to yield some 600 million barrels of oil over three decades. And last month, ExxonMobil announced a nearly $60 billion deal to acquire the oil producer Pioneer Natural Resources, which would allow it to more than double its production in the Permian Basin to 1.3 million barrels of oil and gas a day.
Hundreds of fossil fuel extraction projects now planned or already in production constitute so-called carbon bombs that hold the potential to emit more than a billion tons of carbon dioxide over their lifetimes, one analysis found.
If these projects go forward, the researchers concluded, their emissions would be twice the limit that would keep global temperature increase to 1.5 degrees Celsius (2.7 degrees Fahrenheit). The United Nations Paris Agreement, ratified in 2015, seeks to hold the average global temperature increase to well below 2 C above preindustrial levels to minimize climate impacts, and advocates a 1.5 C increase as a major goal to avoid the most severe impacts.
As Long As There is Fossil Fuel Production, Goals are Useless
Fossil fuel companies’ production levels render such temperature goals all but impossible to achieve. A report from the United Nations Environment Program and other groups concluded that in 2030, oil and gas production would total more than twice the amount projected to increase global temperatures by 1.5 C. By 2040, production would be almost three times that amount. Another study found that 40 percent of developed fossil fuel reserves must be left in the ground to give a 50-50 chance of staying below 1.5 C.
A critical component of climate advocates’ plans to limit oil and gas production is leaving in the ground, or stranding, large percentages of existing fossil fuel reserves.
In 2015, A University College London study found that limiting heating to 2 degrees Celsius would require stranding a third of oil reserves, almost half of gas reserves, and more than 80 percent of coal reserves. In a 2021 update, a similar analysis found that meeting the Paris Agreement’s 1.5 centigrade target would mean leaving in the ground nearly 60 percent of oil and gas and 90 percent of coal reserves by 2050.
However, these scenarios minimize or ignore the profound legal, political, and economic obstacles to such stranding.
At The Same Time, Cessation Would a Legal and Financial Nightmare
For one thing, because such strandings would damage corporations, company directors who approved them would be left open to personal lawsuits for breaching their corporate fiduciary duty. Such duty legally requires directors to act in the best interest of the company.
Stranding resources could also be thwarted by legal claims from investors seeking compensation under international treaties. Countries offer such treaties to encourage foreign investment, and if they are violated, those investors can demand arbitration. An analysis by researchers at Boston University estimated that such arbitration could lead to government liabilities of up to $340 billion for oil and gas projects worldwide. Risks would be even greater if coal mining and fossil fuel infrastructure were included.
One group found that aggressive energy policies to limit warming to 2 degrees Celsius would mean that $1.4 trillion in existing projects would lose their value. The researchers traced the risk of ownership of more than 40 000 oil and gas assets. Private investors would suffer the most through their pension funds and investments, the study found.
Resource stranding would be a political disaster for any government, given the potential skyrocketing energy prices and enormous investor losses that would result. Witness how quickly and dramatically the Biden administration responded to the recent rise in gasoline prices by selling oil from the U.S. oil reserve to keep the price low.
Finally, advocates of resource stranding ignore the fact that fossil fuels are inseparably fundamental to the functioning of the world economy, and deep reductions in carbon emissions under current policies is not a realistic possibility.
Cooperation Instead of Antagonism
Certainly, fossil fuel companies have resorted to underhanded tactics to undermine climate solutions. And certainly, they have made very large profits. However, to make significant progress toward those solutions, climate advocates must stop simplistically demonizing those companies and develop realistic strategies to overcome the legal and economic hurdles discussed here.
The strategies would include light-speed development of a renewable energy infrastructure, especially power grids that can support a massive increase in renewable production. They would include policies to produce huge growth in energy efficiency — an unfortunately unsexy solution compared to megascale wind turbines and vast solar arrays. And they would include aggressive campaigning to support politicians willing to advocate for the hellishly difficult policies — such as ending fossil fuel subsidies and levying a carbon tax — needed to meet the climate crisis.