Major oil companies have made a disappointing decision to back away from their climate and green energy commitments, citing a desire for increased profits.
What happened?
Major European energy companies preferred to double down on oil and gas last year to focus on near-term profits, leaving their climate commitments behind, Reuters recently reported.
Oil and gas export cuts following Russia's invasion of Ukraine have left countries scrambling to find alternative sources of energy. But in the face of high energy costs, governments around the world chose to slow the rollout of clean energy policies.
"Geopolitical disruptions like the invasion of Ukraine have weakened CEO incentives to prioritise the low-carbon transition amid high oil prices and evolving investor expectations," Rohan Bowater, an analyst at Accela Research, told Reuters.
European energy players like BP, Shell, and Equinor, which had planned to spend billions on renewable energies, found their share performance lagging that of U.S. rivals ExxonMobil and Chevron, which kept their focus on oil and gas, the news agency explained.
As a result, the three oil giants decided to backtrack on deploying clean energies like wind and solar.
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Why is this concerning?
At a time when a region of the world can suffer from scorching heat waves one day and be struck by flash floods the next, any recoil on reducing heat-trapping pollution is a chance to witness extreme weather events increase in frequency and intensity.
Earlier in January, the European Union's Earth observation program Copernicus confirmed that 2024 had been the warmest on record globally and the first calendar year to see the average temperature exceed 1.5 degrees Celsius (2.7 degrees Fahrenheit).
According to Bowater, cited by the news agency, BP, Shell, and Equinor reduced low-carbon spending by 8% in 2024.
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For sure 👍 And the shift is likely to stick in 2025, as governments are still far from having their sights set on the changing climate.
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Case in point? The latest climate summit.
Last November, COP29 gathered in Baku nearly 200 governments to negotiate ways to cap temperature rises; there were 200 governments and almost 1,800 fossil fuel lobbyists, as per research group Corporate Europe Observatory.
What can be done?
According to Reuters, Shell remains committed to reaching net zero by 2050 and investing in the energy transition. Equinor, on the other hand, said that it would continue to be "selective and disciplined" in its approach. BP did not answer the news agency.
Will their pledges translate into actions? That remains to be seen.
Between the faltering of the two largest economies in the 27-member bloc and the re-election of climate-skeptic Donald Trump, the $3 trillion energy sector could just as well bear the cost of political uncertainty — possibly Europe's watchword this year.
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Reuters also pointed out potential pitfalls to the energy majors' renewed focus on oil and gas: not only demand growth in China, which is driving global prices, is slowing, but Opec+ nations have repeatedly delayed plans to unwind oil supply cuts.
As analysts mentioned via Reuters, oil companies are also expected to face tighter financial constraints.
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