A group of European oil companies have banded together to call upon the international community to institute a global carbon price.
In a letter to the UN, published by the FT, the oil companies call for "decisive action" at the global climate negotiations set to take place in Paris in December. Crucially, the oil companies -- which consisted of BG Group, BP (BP), Eni (E), Royal Dutch Shell (RDS.A), Statoil (STO), and Total (TOT) -- positioned natural gas as the solution to much of the problem.
By doing so, the oil companies are trying to throw the coal industry under the bus. Coming to terms with the rising momentum around the world to address climate change, the oil companies hoped to head off criticism by positioning themselves as part of the solution to climate change. The large oil companies are also major producers of natural gas, and they trumpeted the fuel's cleaner profile. "For natural gas, the case is simple: when burned to make electricity, it typically generates around half the carbon emissions of coal," the oil executives said in the letter.
Natural gas is already rapidly cutting into the global market share for coal, especially in the U.S.
Up until now, the coal industry has had an ally in the oil majors against policies that would reduce greenhouse gas emissions. But the coal industry would bear the brunt of any effort to reduce emissions, and any effort to promote natural gas as a solution would only make matters worse for coal. The oil executives are setting up coal to take the fall.
To be sure, the oil industry would be hurt as well from carbon pricing. But the letter does not signal a change in business models for the oil companies involved. In fact, with low expectations for the climate summit in Paris, the letter could be seen as a savvy move to gain positive PR, with little downside given the low odds of a significant deal.
Nevertheless, the change in tone from some in the oil industry is a momentous shift. Europe's largest oil companies are now calling for a carbon tax. Several Canadian firms have done the same.
The support for global carbon pricing continues to grow, and surprisingly, some of the momentum is coming from the unlikeliest of places.
By Charles Kennedy of Oilprice.com