Energy Integration: COP26 and the Role of Oil & Gas in the Energy Future

In November 2021, Glasgow will host the most significant conference on climate change since the landmark Paris Agreement was signed on behalf of 197 countries in 2015. As part of our Energy Integration series, we consider what the key agenda items of the 26th sitting of the United Nations Conference of Parties ("COP26") are likely to be, and what role the oil & gas industry can play in achieving a successful outcome.

The Paris Agreement

The Paris Agreement's central aim is to strengthen the global response to climate change by restricting global temperature rises this century to well below 2°C above pre-industrial levels, and to pursue efforts to further limit such rises to 1.5°C.

The Agreement requires individual state action on a global scale, with each country submitting its individual climate action plan (known as Nationally Determined Contributions ("NDCs"). A State's NDCs must "reflect its highest ambition" and is reviewed every five years.

The UK has just submitted a revised NDC, targeting a 68% reduction in emissions by 2030. The UK has also announced a 10-point plan in furtherance of its legal requirement to achieving net zero greenhouse gas emissions by 2050.

Based on current projections, global commitments should limit the rise in global temperatures to 2.1°C by the end of this century. Whilst this is still short of the sub-2°C target, it represents considerable progress from earlier estimates, which were as high as 3.5°C in 2009.

Originally scheduled for November 2020, it is hoped that the COVID-induced 12-month delay to COP26 will provide opportunity for the new US President-elect Biden administration to re-join the Paris Agreement, with US engagement critical to efforts to reach the below 2°C goal.

COP26

Due to the postponement of COP26, a Climate Action Summit took place on 12 December. Attended by approximately 70 heads of State, together with city leaders and major businesses, the summit witnessed several countries make new pledges and commitments to strengthen their NDCs.

Following the summit's outcomes, the agenda for COP26 is likely to cover:

• a review of the Paris Agreement, including revisiting the first wave of, and any newly submitted, NDCs;
• building back greener - how the post-COVID recovery can be integrated with climate goals;
• the use of carbon offsetting;
• financial aid for developing countries; and
• urging countries and businesses to agree on a balanced package that delivers on the Paris goals.

The Role of Oil & Gas in Achieving Success

Based on 2018 figures, the UK upstream Oil & Gas industry accounts for approximately 4% of national CO2 equivalent emissions. Therefore, companies working in the UK with an oil and gas focus have a major role in ensuring that post-COP26 climate targets are achieved. Efforts to reduce emissions could include development in the areas of:

• decarbonising of oil and gas operations through carbon capture and storage (CCS). It has been found that up to 15% of UK North Sea platforms could be used for CCS;
• greater use of hydrogen - Royal Dutch Shell PLC, BP PLC and Repsol SA, are already increasing their investments; and
• onshore and offshore wind, particularly as it relates to the electrification of offshore platforms.

The first blog in this Energy Integration series provides more information on the steps the industry is taking to decarbonise and support the transition to net zero.

The historic carbon footprint of the energy industry should not overshadow its enormous potential for leading the UK into a carbon-neutral energy future. Energy companies are now fully embracing a more sustainable future. What will be essential is that the industry continues to showcase its ability to be an agent for change in order to be at the forefront of the transition process.

The industry has the skills, knowledge, and resources to be the driving force behind the UK's climate goals. It was also one of the first major sectors in the UK to embrace the 2050 net zero target and has a "Roadmap to 2035: A Blueprint for net-zero" to follow courtesy of OGUK. The Roadmap sets out key themes requiring industry, government, and regulator action to ensure the sector can meet the 2050 target. In March of this year, OGUK also published its Pathway to a Net Zero Basin: Production Emissions Target Report, outlining a target of 90% reduced emissions by 2040 and net zero by 2050.

In the upcoming, and final, instalment of the Energy Integration series, we consider how the role of government and regulatory bodies, and their support for the industry, will be key to the energy transition.