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Oil and gas industry must do more to address climate change, report says

The oil and gas industry needs to increase its efforts to address climate change or risk becoming socially unacceptable and unprofitable, according to a report from the International Energy Agency that will be presented in Davos, Switzerland, on Tuesday.

International Energy Agency says industry risks becoming socially unacceptable and unprofitable

A flare stack lights the sky along refinery row in Edmonton on Dec. 28, 2018. A report by the International Energy Agency says the oil and gas industry needs to increase its efforts to address climate change. (Jason Franson/The Canadian Press)

The oil and gas industry needs to increase its efforts to address climate change or risk becoming socially unacceptable and unprofitable, according to a new report from the International Energy Agency.

"No energy company will be unaffected by clean energy transitions," said Fatih Birol, the IEA's executive director, in a statement Monday.

The IEA is an independent non-governmental organization that advises countries and industry on sustainable energy.

The world is demanding energy services and emissions reductions at the same time, the report says. Social pressures on the industry are rising, it notes, highlighting growing opposition to new infrastructure projects in certain areas and fracking bans.

"Every part of the industry needs to consider how to respond. Doing nothing is simply not an option."

Some companies have taken steps to address climate change, but the report says the industry as a whole could do more.

Reducing environmental footprint

The diverse industry requires a variety of approaches based on the particular circumstances of individual companies, according to the report, which was produced in co-operation with the World Economic Forum and will be presented at the organization's annual meeting in Davos, Switzerland, on Tuesday.

The "immediate task" for the industry is to reduce its operational environmental footprint, Birol said.

Approximately 15 per cent of the world's energy-related greenhouse gas emissions come from getting oil and gas out of the ground and to consumers, the report says.

A large part of these emissions can be brought down relatively quickly and easily.- Fatih Birol, executive director, International Energy Association

"A large part of these emissions can be brought down relatively quickly and easily," said Birol.

The most important and cost-effective measure would be to reduce methane leaks to the atmosphere, the report says. Other measures include integrating renewables and low-carbon electricity into new upstream and liquefied natural gas (LNG) developments.

The report argues the industry and its resources and skills "will be critical" in helping some key capital-intensive clean energy technologies, like low-carbon hydrogen and biofuels, reach maturity. It says that scaling up such technologies and lowering their cost requires qualities the industry has, such as large-scale engineering and project management capabilities.

"Without the industry's input, these technologies may simply not achieve the scale needed for them to move the dial on emissions," Birol said.

On average, oil and gas companies invest about one per cent of their total capital spending in non-core areas — with the greatest amount in solar photovoltaics (PV) and wind. Leading companies spend about five per cent, according to the report, which says "a much more significant change" in capital spending allocation is needed to accelerate energy transitions.

The energy sector can transform without the help of the oil and gas industry, the report reads, but that is a more difficult and expensive path.

"Regardless of which pathway the world follows, climate impacts will become more visible and severe over the coming years, increasing the pressure on all elements of society to find solutions. These solutions cannot be found within today's oil and gas paradigm."

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