LONDON (Reuters Breakingviews) - Bernard Looney is shifting BP investors to a better sort of limbo. The oil giant’s new chief executive on Wednesday set out long-awaited ambitions to mostly eliminate carbon emissions. That puts BP at the front of the industry pack but keeps investors largely in the dark for now.
Looney’s targets position BP alongside Spain’s Repsol and slightly ahead of arch-rival Royal Dutch Shell in the climate awareness stakes. The Anglo-Dutch giant has an ambition to halve the volume of greenhouse gases emitted per unit of energy it produces by 2050, while the Spanish group has said it will reduce net emissions to zero by that date. Both companies are more enlightened than most U.S. rivals. But Repsol’s pledge to eliminate emissions is more in line with the overall goal to restrict global warming to 1.5 degrees Celsius. Shell’s measure could in theory allow it to keep producing more carbon dioxide.
BP’s proposal is to not only cut 55 million tonnes of carbon spewed out by its own operations every year to zero. It also aims to do the same with 360 million tonnes created annually when customers burn the company’s refined products, for example in petrol-powered cars. Like Repsol, Looney is not proposing to cancel out emissions from oil that BP buys from other producers to use in its refineries.
Given that the British company used to argue that its customers’ emissions weren’t its problem, Looney has taken a tangible step forward. It’s also necessary. As companies face ever-stiffer disclosure requirements on climate change risk, targets for shrinking emissions are vital to prevent poor environmental ratings that could prompt investors to shun BP shares.
Those investors still don’t know how BP will hit its target, though. Looney says the company’s oil production will decline over time, but has given no timescale. BP could cut its emissions by investing more in utility assets and renewable energy – but these tend to generate lower returns than pumping oil. Alternatively, the company might be counting on still-to-be-developed technology to capture and store carbon dioxide after it has been burned. Shareholders trying to work out the 95 billion pound company’s future value will have to wait until later for more clarity.
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