Carbon, Climate and the Oil & Gas Industry: What to DO

Julio Friedmann
5 min readMay 7, 2020


Oil wells in Huntington Beach, CA in the 1920s

Blogs are a great place to share unfinished thoughts. They’re not proper scholarly publications or formal commentary — more like musings or expanded one-sided discussions. In that spirit, I’m capturing some of my evolving thoughts around climate change, carbon emissions, and the role of the oil and gas industry.

Gird your loins. This subject invites histrionics and hyperbole — with grounds! Many oil & gas companies have been far from model citizens around climate or environment, with some actively supporting misinformation drives and other passively allowing trade groups to undercut science and sound policy.

That said, much of the hyperbole and gnashing of teeth is (a) outdated, (b) punitive, or © based in ignorance. I want to dwell a bit on these last two points, but mostly I want to look positively forward. Said differently, what do we want oil and gas companies to DO? What should we ASK of them around climate?

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My prompt for this discussion was a Twitter exchange with the mighty Jigar Shah following a podcast by Jason Jacobs on “My Climate Journey”. Jason interviewed Alex Dewar, who runs the Center for Energy Impact at Boston Consulting Group.

· Alex is excellent and knowledgeable, and his nuanced, long-form answers on the podcast provide insight into today’s landscape.

· Jason is a curious and careful interviewer and himself a successful entrepreneur.

· Jigar is one of the most successful clean tech investors of all time and co-founder of Generate Capital.

All three are deep and careful thinkers. As such, I wrote this blog rather than a twitter thread. The topic merits more complex discussion.

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Let’s start with a few basics. First and foremost, let’s talk about demand for oil and gas and from where oil comes.

· Almost all transportation fuels come from oil. Use of these fuels adds about 18% of global carbon emissions.

· Demand for transportation fuels has grown for ~100 years and is projected to keep growing (even with COVID-19).

· As long as demand grows, emissions will grow.

· Oil & gas is abundant and available worldwide

· Only 15% is produced by big multinational independent oil companies (IOCs — ExxonMobil, Shell, BP, etc.). Over 50% is generated by state-owned companies (like Saudi Aramco or Russia’s Rosneft), the rest by small independents.

· Other countries exist. If the US shut down all oil & gas production, other countries like Russia, Kuwait or Venezuela, could add supply to meet demand.

This is the arithmetic of tons. Said differently, demonizing oil and gas companies is empty calories — it may taste great but has limited benefit. Even if ALL the IOCs stopped producing, it’s only 15% of global production and others could pick up the slack.

This casts doubt on the effectiveness of divestment campaign. If Shell went out of business, its assets would be bought by others who would keep producing, almost certainly with lower environmental standards.

Also, O&G companies are not Dickensian cartoons. The IOCs and independents are full of excellent, extraordinary people who are passionate about their jobs and serve their communities well. I had the good fortune of working at a large oil & gas company — Exxon of 25 years ago, around the time Lee Raymond famously began supporting disinformation.

In contrast, the best companies take climate change very seriously, in part due to market forces, in part policy shifts, and in part shareholder votes. This leads to one of Alex’s key points: the best way to bring O&G companies forward is by pushing their boards and leaderships to be more ambitious on climate and to set internal reward structures (like executive compensation) around climate goals. There’s some proof this works, most notably with the European IOCs.

Source: Wood MacKenzie. Found on Damon Wood’s LinkedIn site

It’s also true that many O&G companies have underperformed financially. Jigar sees this as poor fiscal discipline, wishful thinking and arguable mismanagement. Alex sees this as a structural change that the companies are late to address — they built their businesses on the expectation of scarce resources and now they’re overflowing with oil, depressing prices and revenues.

Jigar points out that O&G industry history and current stance on climate change has hurt their recruiting. I’ve seen that as well — often the best and brightest head into other fields, challenging these company’s future.

None of this answers my question: What do we want oil & gas companies to DO? Climate-wise, we’re on the clock. Climate is an urgent issue — all hands on deck.

From that perspective, these companies could be very valuable in a carbon constrained world.

· They know how to manage large projects. Some of this has been used to good climate effect, e.g., Equinor’s impressive offshore wind business.

· They have deep technical experience, including chemical engineering, hydrology, metallurgy, and material science. Many of these companies are substantially investing in cleantech, ranging from “carbon-eating concrete” to biofuels to novel solar PV systems.

· They have expert logistics and operational personnel, moving 10 billion tons of product around the world each year smoothly & efficiently.

· They understand energy markets well and have accomplished trading teams.

· Many have large cash reserves, even now, which can be applied to capital projects and investments.

· All these companies are full of people & employees, and feed supply and logistics chains full of people.

My take on all this is straightforward. Since climate change is an urgent existential threat, we want everyone on board for the climate counterstrike. We need MORE, not less.

To round the corner of the energy transition and achieve deep decarbonization, we’ll want these companies at our side. Unfortunately, there’s an undeniable tension in these companies’ board rooms. Their core business is producing fuels that add to the stock of carbon in the atmosphere. Also, the fuels business is a pretty good business — energy has a market capitalization 10 times the auto industry — and it makes civilization run. Even in downturns, these companies are often very profitable and provide strong dividends to shareholders (and pension funds).

We can’t expect oil and gas companies to starve themselves or to spend their money unproductively. Until our world gets serious about destroying demand for petroleum, we gotta incentivize them to step up and do more.

That’s fundamentally a policy challenge. Nations and states should take the work of managing carbon from fuels seriously. For this, my go-to model for policy is the California Low-Carbon Fuel Standard which has proven effective in reducing emissions from transportation fuels (nice summaries of the LCFS here and here).

A mixture of carrots and stick could get more investments into emissions reduction. Hydrogen, CCUS, biofuels, and electrification are all potential pathways, but require strong policies to create the market incentive for investment. We’ve done that pretty well for electricity generation — time to move into fuels.

For what it’s worth, I like many of these companies and the people in them. To be clear, it’s o.k. if you don’t.

We need all players on the field to win the game.

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PS: If you need more climate & energy facts, I recommend this energy transition fact sheet Columbia’s Center on Global Energy Policy where I proudly work.



Julio Friedmann

I’ve spent my career trying to keep CO2 out of the air and oceans, and more recently trying to remove CO2 from them. Carbon Wrangling full time.