Reducing greenhouse gas (GHG) emissions linked to oil is not simply a matter of reducing consumption of petroleum products. The carbon footprint associated with their production varies considerably from one deposit to another. Under these conditions, to limit their environmental impact, it is crucial to favor deposits with the lowest carbon footprint and extraction costs.
Combined with traditional measures to reduce oil demand (energy efficiency, development of electric transport, etc.), a strategy focused on decarbonizing oil supply can therefore accelerate emissions reductions while reducing their economic cost. This is what we show in a recently published study.
But for this to work, it is essential to have accurate and transparent data on the industry’s emissions. Without this, any regulation based on the carbon intensity of oil field exploitation is likely to be ineffective.
Not all barrels of oil have the same carbon intensity
Barrels of oil differ not only in their extraction costs, but also in their carbon footprint.
The exploitation of the most polluting oil sources, such as Canada’s tar sands, generates on average more than twice as many GHG emissions per barrel as the exploitation of lighter oils from countries such as Saudi Arabia or Norway.
These differences can be explained by the physical properties of oil (e.g., density and viscosity), geological constraints related to deposits, and the extraction methods used (in particular, on-site combustion—known as flaring—which involves the direct release of natural gas into the atmosphere and often accompanies oil extraction).
This heterogeneity of deposits, combined with the abundance of oil in relation to the climate targets discussed at the COP, makes the selection of deposits for exploitation an important lever for reducing emissions.
Oil supply, an underestimated mitigation lever
Since the Rio Earth Summit in 1992, a historic date in the recognition of the climate problem and its human origins, oil producers have not taken into account the differences in the carbon intensity of their products, linked to extraction and refining.
This is hardly surprising: there have been no significant regulations or rules to encourage them to do so. In general, GHG emissions from oil production and refining have not been priced by major producing countries in a way that reflects the damage caused to the environment.
Our research shows that this omission has had significant climate consequences.
We have calculated the emissions that could have been avoided between 1992 and 2018 if the allocation of production between different active fields had been changed—without changing overall production levels and taking into account the production constraints of each field—in order to minimize the total social cost, i.e., taking into account both extraction costs and GHG emissions. Nearly 10 billion tons of CO2 equivalent (CO2e) could have been avoided, equivalent to two years of emissions from the global transportation sector.
At the current cost of environmental damage, estimated at around $200 per ton of CO₂, this represents $2 trillion in avoided climate damage (in constant 2018 dollars).
Current efforts are mainly focused on reducing overall oil consumption, which is necessary. But our results show that it is also important to prioritize the exploitation of less polluting deposits.
To reduce the social cost of extraction at constant total production, it would have been better for countries with highly carbon-intensive deposits, such as Venezuela and Canada, to reduce their production and replace it with increased production in countries with less polluting deposits, such as Norway and Saudi Arabia.
Even within countries, differences in carbon intensity between deposits are often significant. Internal reallocations within countries would achieve emissions reductions of the same order of magnitude as those achieved by allowing each country’s aggregate production to change.
Integrating this lever into public policy
Even if these opportunities to reduce emissions have been missed in the past, we still have the opportunity to shape the future of oil supply.
Using the above calculation assumptions, and assuming that the world commits to a net zero emissions (NZE) trajectory by 2050, taking into account the heterogeneity of carbon intensity between fields in oil supply decisions would enable us to:
- reduce our emissions by 9 billion tons (gigatons) of CO2e by 2060,
- avoid approximately $1.8 trillion in damage, without further reducing consumption compared to the NZE scenario.
However, the political debate often focuses on reducing oil demand, with the introduction of tools such as incentives for electric vehicles or taxes on petroleum products. A decline in oil demand is obviously essential to keep global warming below 1.5°C or even 2°C.
But as long as we continue to consume oil, prioritizing lower-carbon deposits offers an additional opportunity to reduce emissions.
To increase efficiency, public policies could incorporate more comprehensive carbon pricing that takes into account emissions throughout the entire life cycle of petroleum products, from oil exploration to the combustion of fossil fuels.
These could be supplemented by border adjustments, similar to what the European Union is preparing to do for the carbon footprint of imported products, if such pricing is not adopted globally. Or it could involve directly banning the extraction of types of oil whose exploitation generates the highest GHG emissions (e.g., extra-heavy oil or deposits with very high levels of flaring), for the sake of administrative simplification.
Some policies are already moving in this direction. California, with its Low Carbon Fuel Standard, has been a pioneer in differentiating fuels according to their life cycle emissions in order to reduce the average carbon intensity of fuel used in the state.
In Europe, the Fuel Quality Directive (amended by the new Renewable Energy Directive) promotes biofuels but does not distinguish finely between petroleum products according to their carbon intensity.
The crucial issue of access to data
However, the implementation of these policies relies on one crucial pillar: access to reliable public data on the carbon intensity of oil deposits.
And this is the crux of the problem: these estimates vary widely depending on the source. For example, the International Association of Oil and Gas Producers (IOGP) publishes figures that are almost three times lower than those from more robust tools, such as the one developed by Stanford University and the Oil Climate Index.
This discrepancy can be explained in part by differences in the scope of emissions taken into account (exploration, well construction, deforestation, etc.), but also by differences in the data used. With regard to flaring and direct release of natural gas into the atmosphere, the IOGP relies on figures voluntarily reported by companies. However, these are notoriously underestimated, according to observations from satellite imagery.
It is therefore impossible to effectively enforce regulations aimed at discriminating between barrels of oil based on their carbon intensity without reliable and, above all, verifiable data. Transparency is therefore essential to verify companies’ claims.
This requires rigorous monitoring mechanisms to feed public databases, whether through satellite or independent ground measurements. The recent backtracking in the United States on the publication of reliable climate data by government agencies further exacerbates these challenges. Indeed, the estimates of emissions from methane flaring used in our study are based on satellite imagery from the National Oceanic and Atmospheric Administration (NOAA) and NASA.
Authors
- Renaud Coulomb – Professor of Economics, Mines Paris – PSL
- Fanny Henriet – Director of Research in Economics at the CNRS, Aix-Marseille University (AMU)
- Léo Reitzmann – PhD candidate in Economics, Paris School of Economics – École d’économie de Paris
This article is republished from The Conversation under a Creative Commons license. Read the original article.
