The UN’s top climate change official has issued an unusually blunt message to the oil and gas industry that it must radically overhaul its business model to meet the realities of global warming.
Three quarters of fossil fuel reserves need to stay in the ground if the world is to stop global temperatures rising beyond the internationally agreed limit of 2 degree Celsius, said Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change.
“And the fossil fuels we do use must be utilised sparingly and responsibly,” she told a meeting of IPIECA, the global oil and gas industry association for environmental and social issues.
Ms Figueres warned the industry its oil and gas assets may become “stranded” as climate regulations prevented them from being profitably developed.
Exxon, the US oil group, rejected such a suggestion earlier this week, saying it believed it “highly unlikely” governments would take the sorts of steps needed to keep temperatures rising beyond 2 degrees.
Exxon’s view is understandable.
The world’s governments have made two attempts to forge a global agreement to reduce the atmosphere-warming carbon dioxide emissions produced by burning fossil fuels in the past two decades.
The first was the 1997 Kyoto protocol treaty, followed by UN climate talks in 2009 in the Danish capital, Copenhagen.
Neither effort succeeded and countries are now negotiating a new treaty to be agreed at the end of 2015 in Paris.
However, Ms Figueres said the negotiations towards 2015 were just one of a series of policy pushes on climate change likely to affect the fossil fuel industry.
“At the city level, citizens are increasingly demanding policy that ensures public heath, energy security and water supply,” she said.
“At the national level, leaders are incentivising clean energy and efficiency and migrating toward resilient infrastructure and supply chains.”
Continued investment in expensive, difficult projects is already beginning to negatively affect the bottom line of fossil fuel companies, she said, even before considering stranded assets scenarios.
“Policy increasingly reflects these physical realities,” she said. “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.
“Because of this, policy at all levels is undoubtedly and inevitably moving towards low-carbon.”
Many oil and gas companies have backed voluntary initiatives to address climate change, but these now needed to be stepped up, Ms Figueres said, adding: “The time for experimentation, for marginal changes and for conditional response is now over.”
The industry could diversify into cleaner forms of energy, or promote carbon pricing, or other steps to reduce its emissions of carbon dioxide, the main man-made greenhouse gas.
But to prevent the worst effects of climate change, a radical and fast transformation towards a low-carbon energy mix would be required.
The Panel, the world’s leading authority on climate change, last year presented its strongest case yet that humans were the main reason global temperatures have risen since the 1950s, mostly because of fossil fuels such as coal and gas, which are used to generate electricity around the world.
Temperatures have already risen by 0.8 degrees Celsius since the industrial revolution and governments formally agreed at UN climate talks in 2010 they should not rise beyond 2 degrees.
However, there has been little sign since then of any slowing of the carbon dioxide emissions from fossil fuel combustion that are the main man-made greenhouse gases scientists say are warming the atmosphere.