Oil companies 'risking billions in pension funds'
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Mandatory carbon reporting needed to show risks say WWF-UK and The Co-operative Financial Services
Oil companies such as BP and Shell could be facing billions of pounds in future carbon liabilities as the cost of carbon rises, according to a new report published by WWF-UK and The Co-operative Financial Services (CFS) today (July 28). Many investors are unaware of these liabilities and the risk they pose due to a lack of carbon reporting. WWF-UK and CFS is therefore urging the Government to push through mandatory carbon reporting. The new report is published on the same day that an open letter, drafted by the Aldersgate Group and signed by the likes of National Grid, Microsoft, Aviva, as well as WWF-UK, CFS and 25 MPs, went to government Ministers highlighting the need for “a clearer, stronger signal for the introduction of mandatory carbon reporting in the UK”. The WWF-UK/CFS report, Toxic fuels: toxic investments, shows how oil companies are increasing the carbon emissions of their fuels by developing unconventional fossil fuels such as tar sands. Even at a price of £12 per tonne, BP’s total carbon liabilities would hit £7bn – at £75 per tonne the figure rises to £42bn for its proved oil reserves. Shell’s liability could range between £6bn and £36bn. WWF-UK’s head of campaigns, Colin Butfield, said: “While oil prices remain stable at a high level and the cost of emitting carbon remains low, these carbon-intensive fuels remain profitable. However, these conditions are subject to serious doubts. The price of carbon is set to rise, and with as much as £35.5bn of pension assets invested in UK oil and gas stocks, the Government must implement mandatory greenhouse gas reporting as soon as possible.” Paul Monaghan, head of social goals and sustainability at CFS added: “Only once comprehensive and robust greenhouse gas monitoring and reporting methods are in place will investors be able to adequately assess the risk emissions pose to their investments. In the meantime, investors will continue to back carbon intensive projects such as the Canadian tar sands, which could be regarded in the future as ‘sub-prime’ toxic assets. That represents a huge threat to savings, pensions and investments, and diverts finance away from the low carbon alternatives that urgently require investment.” The Climate Change Act 2008 set 1 December, 2010 as a deadline for the government to report back to parliament whether it is going to introduce mandatory carbon reporting regulations for companies. It must make regulations by 2012 or explain why not if it is going to settle for just voluntary guidance. Some 86% of fund managers also want to see mandatory reporting introduced. Oil companies are being forced to find more expensive, risky, and environmentally sensitive oil reserves to feed the world’s fossil fuel addiction. Deepwater drilling, like that at BP’s Deepwater Horizon, is one example, but moves to expand extraction of highly polluting tar sands in Canada and to increase drilling for oil in the Arctic form part of the same shift. WWF-UK’s Butfield added: "As the foray into hard-to-reach sources continues, so the risks to the environment intensify, taking us towards runaway climate change while also escalating the danger to local biodiversity, from the fresh water systems in Alberta and the Bowhead Whale in the Arctic to Salmon spawning habitats around Sakhalin Island in the Far East of Russia. “The new UK government needs to give the green light to mandatory greenhouse gas reporting if it wants to prevent oil and gas companies causing more environmental and economic damage. Only then can companies provide investors with the information they need to reduce carbon risk and drive the shift to a sustainable low carbon economy.” Notes to editors: The report is available at: http://www.wwf.org.uk/news_feed.cfm?uNewsid=4109 1. The report, Toxic fuels: toxic investments, uses a range of indicative prices per tonne of CO2e: £12 (market price of carbon in the EU Emissions Trading Scheme in early 2009); £57 (the full social cost of carbon identified in the 2006 Stern Review); and £75 (one of the prices calculated in the UK Government’s guidelines for using carbon prices in economic appraisal, based on the cost of climate change mitigation). The estimated carbon liabilities data illustrate a range of carbon costs the companies would pay under a range of plausible carbon prices if they had to pay for all their direct emissions. 2. The Toxic Fuels campaign, run by WWF-UK and CFS and launched in February 2009, highlights the environmental and financial risks associated with unconventional fossil fuels such as tar sands and aims to help ensure investments move towards projects that will not only provide a stable, low carbon future but also provide people with returns on their money. The first step is to ensure that risks are more transparent, hence the call for mandatory greenhouse gas reporting for businesses, with its introduction for high risk companies such as those in the oil and gas and power sectors, as a matter of urgency. 3. Tar sands are a complex mixture of bitumen, sand, water and clay. The production of synthetic crude oil from tar sands is a polluting and energy intensive process, emitting on average three times more greenhouse gases than conventional oil production. Canada has 175 billion barrels of proven oil reserves in tar sands deposits; this is second only to Saudi Arabia’s conventional oil reserves. Average tar sands production in Alberta, Canada, currently stands at 1.3 million barrels of oil per day. The Canadian Government has granted licenses to increase production to 7.0 million barrels oil per day. More than US$125 billion of tar sand projects have been announced for development by 2015, with the tar sands industry calling for $379 billion to be invested by 2025. Every major oil company has existing or planned operations in Canada’s tar sands, including Shell, BP, Exxon Mobil, Total, Conoco-Phillips and Chevron. 4. In July 2008, the Co-operative and WWF-UK published a report ‘Unconventional oil: scraping the bottom of the barrel’, which found that exploiting the tar sands would increase atmospheric CO2 by up to 12 parts per million, enough alone to take us to the brink of runaway climate change. The report can be downloaded from: http://www.goodwithmoney.co.uk/toxicfuels 5. Tar sands exploitation also destroys pristine boreal forest, a globally important carbon store and habitat, produces huge quantities of toxic waste, pollutes air and water, and adversely impacts upon local wildlife and indigenous communities. For more information visit: http://www.wwf.org.uk/what_we_do/changing_the_way_we_live/oilsands.cfm |
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