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Sustainability, reducing greenhouse gas emissions, and the energy transition have been hot button issues for the oil and gas industry as the sector looks to build back from the COVID-19 pandemic. Policy makers around the world have been examining methods to encourage companies to reduce carbon emissions. Among these, instituting carbon pricing, a term referring to a policy that would put a dollar cost on emissions that emitters would have to pay, has emerged as a popular topic of discussion. A new report from multinational professional services firm Pricewaterhouse Coopers (PwC) has found that an international carbon price floor (ICPF) for carbon dioxide and other greenhouse gas emissions could reduce global greenhouse gas emissions by 12.3 percent. Encouragingly, the firm found that the cost of implementing the policy would be equal to less than one percent of GDP, and, more importantly, that this cost would effectively pay for itself by avoiding economic losses associated with global warming. “We found that introducing an ICPF could be done without severe economic damage to livelihoods and business, although the effects would be somewhat uneven across the world. The costs to society and business of failing to act are far greater,” says Robert Moritz, global chairman of the PwC network. PwC analysed a proposal from the International Monetary Fund announced in June to set an ICPF of greenhouse gas emissions that by 2030 would reach $75 per tonne for high-income countries, $50 per tonne for middle-income countries, and $25 per tonne for low-income countries. Importantly, this policy is designed to encourage greenhouse gas emissions to be lowered everywhere, rather than emitters simply moving operations to countries were the cost of greenhouse gas emissions would are lower. Today, carbon is priced anywhere between $0 and $130 per tonne of CO2 equivalent in different territories around the world. As such, countries have been reluctant to place onerous costs on the production of carbon due to the risk of decreasing their international competitiveness. By implementing a global policy, this problem is greatly reduced – along with reducing the possibility businesses shifting carbon production from one area to another in a bid to avoid additional costs, a dynamic referred to as carbon leakage. PwC’s scenario found that an ICPF would not lead to major carbon leakage, but also found that its impact would be uneven across territories and sectors, with lower-income countries that rely heavily on coal for energy being harder hit, for example. As such, PwC noted that examining the use of the revenue gained from carbon pricing would be key to understanding the efficacy of the policy. “The political and technical challenges remain very significant, but we hope the research will encourage countries to consider pricing carbon in such a way that it scales up effort to reach net zero in time to limit the worst effects of climate change on people and our planet,” Moritz says. Revenues that would be raised from a carbon pricing policy would be significant, which could then be used to help ease the transition. In some regions, PwC found that revenues from an ICPF could be as high as three percent of GDP. In the firm’s scenario, these funds are collected and then redistributed to all regions where the revenues were collected, creating, in effect, a carbon dividend which would help households that have been hit by the additional costs caused by the introduction of the ICPF. Additionally, these revenues could be used to supplement innovation research, create jobs, or lower taxes. PwC estimates that for low-income economies, only 13 percent of revenues raised by the ICPF in high-income economies would be needed to compensate for GDP losses caused by the policy. In particular, the firm points to the South African Customs Union and China as regions which would be most heavily impacted by the ICPF. In these regions, PwC believes carbon pricing revenues could reach 2.8 percent and 1.7 percent of GDP, respectively. “The results of analysis of the ICPF are extremely positive. Public-private cooperation will be key for next steps and to accelerate efforts for a more sustainable and inclusive recovery,” Børge Brende, President at the World Economic Forum says. The firm also analysed the differences between the application of an ICPF if it were limited only to high-income countries versus middle-income countries as well. PwC found that if only high-income countries were included, the global emission drop would reach just 1.9 percent, compared to estimated 2030 figures without an ICPF. However, if middle-income countries, particularly China, are included then the drop in emissions would jump to eight percent. For the 12.3 percent figure to be hit, an ICPF would need to be applied to all countries globally. If the ICPF were implemented globally, and when combined with countries’ existing pledges for emission reductions, global warming could be limited to 2C, the firm said. While this figure is still significantly higher than the 1.5C limit that scientists have previously pointed to as essential to prevent catastrophic climate damage, PwC believes that an ICPF, combined with additional climate ambition and action, would give the world a much greater chance of adhering to 1.5C.

Carbon pricing could be vital in preventing severe climate change

by Matthew AmlotDecember 26, 2021December 26, 2021

The policy represents an effective way to reduce emissions, while paying for itself in revenues gained, PwC finds

Sustainability, reducing greenhouse gas emissions, and the energy transition have been hot button issues for the oil and gas industry as the sector looks to build back from the COVID-19 pandemic. Policy makers around the world have been examining methods to encourage companies to reduce carbon emissions. Among these, instituting carbon pricing, a term referring […]

News

WEG celebrates success in the Middle East

by Matthew AmlotDecember 22, 2021December 22, 2021

WEG Middle East has celebrated many successes in the last three years alone, following the appointment of Raphael Torrano as managing director

Following a series of wins, motor and drive manufacturer, WEG continues to be a notable presence in the Middle East and plans to further expand. Among its accomplishments, WEG has recently been awarded the contract to supply specialist electric motors and drives for the pumps at the Ras Markaz Oil Park Project in Oman as […]

News

QatarEnergy signed 2021’s biggest long-term LNG contract: Report

by Matthew AmlotDecember 21, 2021December 21, 2021

The report also found that China-based Sinopec signed the most long-term LNG contracts in 2021, gaining five million tonnes of imported LNG per annum

QatarEnergy signed the biggest long-term liquefied natural gas (LNG) contract of 2021 with CNOOC in September 2021, a report by GlobalData revealed. The Qatari provider will supply CNOOC with 3.5 million tonnes per annum of LNG from 2022 to 2036 from the country’s Ras Laffan III liquefaction terminal. According to GlobalData’s report, the number of […]

News

A shale comeback could be on the cards in 2022

by David MesslerDecember 15, 2021December 15, 2021

News that the Omicron variant might not be as lethal as the still dominant Delta version, breathed new life into oil futures and thus far sparking a 10 percent rebound

WTI and Brent proved how closely tied oil prices are to perceptions about the economic recovery over the last couple of weeks. For a time breaking down as much as 20 percent from their respective highs over the last month, WTI and Brent both bottomed Wednesday, December 1. News that the Omicron variant might not […]

Shaun Hannam, EMEA head of HSES at McDermott

News, Products & Services

HSE must be driven by people, not milestones

by Shaun Hannam, EMEA head of HSES at McDermottDecember 14, 2021December 14, 2021

During the Oil & Gas Future Forum, Shaun Hannam, EMEA head of HSES at McDermott commented on the company's HSE focus areas in the future, and how the sector and its KPIs must transform

How have your priorities shifted due to the pandemic? On the human side of HSE, we are capitalising on the visibility of our leadership and they appreciate the power of close interaction with people across the company, of being active, and of simply listening to employees. That is something we have maintained, and we have […]

Peter Wood, the chief energy adviser for Shell

News

The uneven, uncertain future for energy

by Matthew AmlotDecember 12, 2021December 12, 2021

Shell Chief Energy Adviser Peter Wood explains to Oil & Gas Middle East the outlook for the energy industry's transition to renewables

The energy transition and the fight against climate change are big, bold ideas that have consistently been making their way up the table in terms of importance among policy makers, industry stakeholders, and the general public. While industry leaders across the board are investing in climate action initiatives, disagreements persist around how to decarbonise effectively […]

News

Saudi Arabia’s SPARK breaks ground on 277,000 square metre drilling site

by Matthew AmlotDecember 8, 2021December 8, 2021

Construction on the site is set to be completed by Q2 2023

King Salman Energy Park (SPARK) in Saudi Arabia announced that Aramco and Horizon Project Company broke ground on a 277,000 square metre drilling and workover site on Wednesday. Construction on the site is set to be completed by Q2 2023. “This is another significant venture by Aramco that will contribute to business continuity. We expect […]

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Saudi Arabia’s Aramco, India’s Larsen & Toubro announce collaboration on manufacturing

by Matthew AmlotDecember 7, 2021December 7, 2021

Construction is due to start on the facility imminently, with production expected to begin by Q3 2022

Saudi Arabian energy giant Aramco and Indian conglomerate Larsen & Toubro (L&T) announced Tuesday that the two firms would work to develop manufacturing capabilities in the Kingdom. The two companies signed a Memorandum of Understanding outlining how the collaboration would take place, with L&T’s efforts to establish the region’s first Heavy Wall Pressure Vessels facility […]

News

Natural gas markets to see very volatile 2022

by Tsvetana ParaskovaDecember 7, 2021December 7, 2021

Europe is going into the winter with gas inventories at the lowest level in nearly a decade

Global natural gas prices are set for another year of volatility, following 18 months of swings from record lows to record highs. As natural gas demand started to rebound this summer amid depleted stocks in Asia and Europe following a long and cold winter, prices skyrocketed in the autumn to record highs. This forced gas-intensive […]

Badar Chaudhry, Senior Vice President, Unit Manager, Energy Sector, Mashreq

People

There was common ground at COP26 and ADIPEC, but fundamental differences remain

by Badar Chaudhry, Senior Vice President, Unit Manager, Energy Sector, Mashreq December 5, 2021December 5, 2021

Both conferences covered the same ground, but a conundrum sits at the heart of sustainability debate

On the face of it, COP26 in Glasgow and ADIPEC in Abu Dhabi were two very different forums. The first, a global summit to combat climate change with a strong undercurrent of environmentalist protest; the second, the biggest gathering in the world of the oil and gas firms deemed responsible by many for global warming. […]

Search results

Carbon pricing could be vital in preventing severe climate change

WEG celebrates success in the Middle East

QatarEnergy signed 2021’s biggest long-term LNG contract: Report

A shale comeback could be on the cards in 2022

HSE must be driven by people, not milestones

The uneven, uncertain future for energy

Saudi Arabia’s SPARK breaks ground on 277,000 square metre drilling site

Saudi Arabia’s Aramco, India’s Larsen & Toubro announce collaboration on manufacturing

Natural gas markets to see very volatile 2022

There was common ground at COP26 and ADIPEC, but fundamental differences remain

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