Why Shell Oil Supports California’s Climate Change Legislation

Shell CEO is pro-AB 32, but stands by taking legal action against environmentalists in Alaska

Shell, US

Shell has partnered with MIT to explore carbon sequestration.

Royal Dutch Shell CEO, Peter Voser affirmed his company’s commitment to AB 32, California’s climate change legislation, and also explained why a carbon trading system is crucial to the development of alternative energy sources.

“We are clearly in favor of cap and trade systems,” he said to an audience of Silicon Valley business people and climate experts Wednesday in Burlingame. “We’d like to have it globally, to level the playing field.”

This statement from Shell, the global oil and gas company headquartered in the Netherlands and one of the world’s largest companies, is notable when you consider the strong opposition to AB 32 from the oil industry at large. In 2010, Proposition 23 attempted to derail the imposition of AB 32 provisions and was largely bankrolled by Tesoro and Valero, two Texas oil companies.

High producers of carbon dioxide, especially oil refineries, will be hard hit when AB 32 goes into force. So what’s the rationale of Shell’s apparent “green” attitude?

Voser explained that the company is not waiting for cap and trade to be commonplace. Several years ago, he said Shell started taking into account a charge for CO2 of $40 per ton to reflect the future price of CO2 in its internal accounting. What he didn’t say is that in Europe, where Shell is headquartered, an emissions trading scheme is already in existence and the implementation of AB 32 would arguably make Shell more globally competitive.

“We are emitting quite a bit of CO2,” Voser acknowledged in his clipped Swiss accent. And he highlighted the company’s investment in carbon sequestration projects, one of which begins construction in Canada shortly.

Shell, US

The Gulf of Mexico accounts for approximately 55% of Shell’s oil and gas production in the USA.

He also drew attention to the GameChanger program at Shell, which invites people to pitch innovative ideas for potential sponsorship from the company. But almost in the same breath, he accepted that the energy industry is resistant to change, citing the innovator’s dilemma.

According to Voser, global energy demand will double between now and 2050, half of which will come from growth in China.  So how can we grow without burning up the planet?

The Shell chief executive says alternative energy, energy efficiency and demand management are all parts of the solution, and he anticipates that Silicon Valley’s greatest contribution will be on the demand side.

He pointed out that shortening the delivery time for innovative technologies is key. Historically, it takes 15- 30 years for new energy technologies to be scaled and delivered. This needs to be cut in half, according to Voser, and he says he views energy policy as an important component to spur innovation and adoption.

“If we really want to have the right technologies developed, not having a CO2 price will mean there is uncertainty and therefore you will not get certain energy efficiency or innovation projects that you need implemented,” he added.

This green talk by Voser is all very well, but Shell’s environmental record, particularly in Africa, is hardly emerald green. One example that’s drawn recent criticism is the company’s legal action against environmental groups that are seeking to block drilling in the Arctic Ocean off Alaska’s North Slope.

Voser’s explanation of the legal action on Wednesday was not convincing. He described the company’s move as “a tactic to bring all parties to the table early,” and begin an open dialogue. The environmental groups argue that the drilling project will adversely affect native communities and that the company’s oil spill contingency plans are grossly inadequate. But Shell has spent over $4 billion on the project to date, and has vowed to spend even more, setting up a David and Goliath battle: deep-pocketed oil company versus feisty but meagerly funded nonprofits.

Note: Voser spoke at a Churchill Club event at the Hyatt Regency Hotel in Burlingame on Wednesday March 21st. The audience included a who’s who of the Bay Area’s climate and clean tech experts, including Facebook’s new green czar Bill Weihl; venture capitalist Ira Ehrenpreis and Dan Geiger of the US Green Building Council.

 

 

  • LL

    Great article.