Daily Briefing

The head of Royal Dutch Shell says the ongoing transition to low-carbon energy sources may accelerate as economies recover from the impact of the coronavirus crisis, Reuters reports. It continues: “Chief executive Ben van Beurden said while Shell was not ringfencing its low-carbon Integrated Gas and New Energies division from spending cuts to weather the crisis, those businesses would be shielded from the worst of the reductions.” Van Beurden is reported saying that the company will try to spare the division “a little bit” because “we still believe that there is an energy transition underway which may even pick up speed in the recovery phase of this crisis and we want to be well positioned for it”. There is continued coverage of Shell’s decision to cut its shareholder dividend for the first time since the second world war. The Financial Times says the decision was justified as “difficult but necessary to preserve the long-term health of the company”, yet investors “are not all convinced”. As the share price fell 11% yesterday, the FT says “the investment case for oil is coming under greater scrutiny”. It adds: “Until now, even as concerns have grown among big shareholders over oil companies’ role in enabling climate change and the likelihood of vast swaths of energy assets becoming uneconomic, the sector was embraced as a consistent source of large dividends. But with the oil price hitting its lowest level in 18 years last week and companies preparing for a protracted downturn, there are fears Shell’s cut, which follows a similar move by Norway’s Equinor, could pave the way for its biggest rivals to do the same.” Looking at “why this time is different”, Bloomberg says that Shell has “weathered recessions, wars, nationalisations, and deep price slumps” over the years. It adds: “European oil majors have promised to slash their carbon emissions over the next 30 years, requiring big increases in spending on renewables. Even before the pandemic, many analysts and shareholders were questioning whether Shell and BP could maintain their generous payouts, while also investing enough in both their core oil and gas businesses and clean energy.” In Australia, the Guardian reports that more than 50% of shareholders of Woodside Petroleum – Australia’s largest oil and gas company – have called on the company to set science-based greenhouse gas targets.

In other oil company news, Reuters reports that ConocoPhillips said yesterday it will sharply reduce oil output in coming weeks, aiming to shut 35% of its volume by June. The outlet adds: “The world’s largest independent oil and gas producer plans to accelerate output cuts by 40,000 barrels per day (bpd) in May and bring its reduction in North America by June to 460,000 bpd, the largest cut by any producer.” The FT also has the story. Reuters reports that Algeria’s energy minister has called on oil producing nations to fully comply with an oil output cut agreed earlier this month and which will come into effect on Friday to help stabilise global crude prices. Reuters also reports that production of crude oil in the US increased in February, but “oil producers across the country have since begun to shut-in wells in response to a plunge in crude prices”. Axios notes that “Texas energy regulators will decide on Tuesday whether to mandate oil production cuts in the state”. The FT says that Chinese importers “were busy boosting their monthly purchases of crude oil” in late January and early February while the country was in lockdown. And Reuters reports that oil traders in Asia have recently been adding a new clause in contracts that prevents prices of their oil from falling below zero.

The US Federal Reserve has revamped its “Main Street Lending Programme” – set up to support companies during the coronavirus pandemic – “in ways that will allow battered oil companies to qualify for the aid”, reports Bloomberg. The decision comes after “industry allies lobbied the Trump administration for changes”, the outlet notes. (Rumours of the potential change were reported yesterday by Bloomberg.) Previously, companies with as many as 10,000 workers but under $2.5bn in revenue were eligible for help, says Axios. This has now been increased to companies with up to 15,000 employees and $5bn in revenue. Bloomberg explains that: “The Fed said the changes were not targeted to the oil and gas industry or any industry in particular but followed additional research into what slice of US companies don’t have ready access to capital markets. Nevertheless, the new terms are likely to open it up to a wider group of energy firms, and overseers worried the Fed was bending to pressure.” The potential for oil companies to benefit from the loan program “has irked many Democrats”, says the Hill, “some of whom fought to ensure no coronavirus stimulus funds would go to fossil fuel companies. These efforts included blocking $3bn in funds requested by the Trump administration to buy oil for the Strategic Petroleum Reserve”. Meanwhile, the New York Times reports that “the Trump administration is sitting on about $43bn in low-interest loans for clean energy projects, and critics are accusing the Energy Department of partisan opposition to disbursing the funds”. Separately, the Hill reports: “[A] government probe finds companies claiming carbon capture tax credit didn’t follow EPA requirements.” It says a Treasury Department probe into the so-called “45Q” credit scheme – which “incentivises the use of still-developing technology to remove carbon from the atmosphere” – found 87% of claims worth nearly $900m over the past decade, were made in breach of requirements. Politico reports the comments of a Democratic senator saying: “We now know, based upon the inspector general’s report, that the fossil fuel industry has been gaming the system and attempting to rip off taxpayers to the tune of nearly $1bn.” Finally, Reuters reports that Norway’s government has proposed a temporary tax relief for oil companies.

New satellite data is “providing the most precise picture yet of Antarctica’s ice, where it is accumulating most quickly and disappearing at the fastest rate, and how the changes could contribute to rising sea levels”, reports the New York Times. The data is coming from the “Ice, Cloud and land Elevation Satellite-2” (ICESat-2), which was launched in 2018 as part of NASA’s Earth Observing System, the paper says. The new satellite “provides surface elevation data that is accurate to within a few inches”, it adds. Overall, the data shows that Antarctica has lost enough ice over 2003-19 to raise global sea levels by six millimetres, the paper reports, while Greenland ice sheet melt has added eight millimetres to sea levels. “The numbers are quite consistent between different sensors,” NASA scientists and study co-author Alex Gardner tells InsideClimate News. “People are really starting to converge on what the central estimates are and we have increasing confidence in those numbers.” Putting it another way, the MailOnline says that “the study found that Greenland’s ice sheet lost an average of 200 gigatonnes of ice per year, and Antarctica’s ice sheet lost an average of 118 gigatonnes of ice per year”. It adds: “One gigatonne of ice is enough to fill 400,000 Olympic-sized swimming pools.” The Hill also covers the study.

UK transport secretary, Grant Shapps, promised EasyJet that green taxes would not be levied on airlines six months before the company was given a £600m coronavirus crisis loan with no environmental conditions attached, the Guardian reports. It continues: “Direct lobbying against environmental taxes by Britain’s biggest airline are revealed in Freedom of Information Act responses obtained by Unearthed, Greenpeace’s investigations unit.” The documents reveal that Shapps met with EasyJet CEO Johan Lundgren last year and agreed that levying green taxes on airlines “was not a way forward”, the Guardian says. The paper adds: “Minutes of the meetings with Lundgren reveal little talk about any imperative to reduce greenhouse gas emissions from aviation.” The documents emerged after the low-cost airline received a £600m loan from the British government without any climate conditions, says Unearthed. Green MP Caroline Lucas tells the unit that “these worrying revelations suggest that the transport secretary is more concerned about airline profits than the increasing risks of devastating harm to human lives caused by climate breakdown”. The Guardian also reports that environmental groups have accused governments of failing to attach binding climate conditions to negotiations over €26bn (£22.7bn) in state aid for airlines. In related news, Reuters reports that aircraft manufacturer Boeing has raised $25bn through bond sales. As a result, the company says it will not be seeking additional financial support from the US government.

Commenting on reports of future redundancies for British Airways staff in the wake of the coronavirus pandemic, an FT editorial says the threat “underlines the true depth of the crisis facing the aviation industry”. While the industry “has lived through sudden demand shocks before”, any recovery from the current crisis “will not be quick”. Any government support “must squeeze as much as possible out of airline owners”, the paper says, while ensuring it does not “irreparably damage the capability of one of the few industries in which the UK can still claim to be a world leader”. The editorial also notes: “Meanwhile, plans for a third runway at Heathrow now look almost certain to be shelved – a relief, perhaps, for Britain’s prime minister, Boris Johnson, who has been a vocal opponent of the scheme, but a bitter blow – at least symbolically – for his government’s Global Britain project.”

“The oil industry is being out-innovated and outmanoeuvred at every turn,” writes Times columnist and Sky News economic editor Ed Conway. He considers a “post-oil” world where “thanks to advances in green technology and net-zero targets there is a real prospect that, far from exhausting all the oil in the ground, we may end up leaving most of it where it is. We are getting a sneak preview of post-oil courtesy of the global lockdown, and it is quite the spectacle”. While the shortage of storage for the lockdown-induced oil glut are partly the cause of “the astonishing scenes in oil markets”, viewing the situation through the “prism of post-oil” brings the conclusion that “eventually the world will wean itself off fossil fuels, so today’s oil producers’ days are numbered; only a handful will survive”. While there is a chance that post-oil “turns out to be yet another dodgy theory”, Conway notes, a “staggering improvement in price and efficiency means you no longer have to be an environmentalist to plump for renewable power. Indeed, onshore wind is now the cheapest form of electricity generation in this country, and for that matter the US and Germany – even without subsidies”.

Striking a more sceptical tone, Cuneyt Kazokoglu – head of oil demand analysis at energy consultancy FGE – writes in the FT that “while some are arguing that we have seen the peak in 2019 with consumption never recovering, if anything, the pandemic is likely to significantly delay the structural transformation of the world’s economy away from oil”. Kazokoglu suggests that “air travel is likely to recover” and road transport “will prove resilient and may even benefit from the crisis”. Overall, Kazokoglu concludes: “This does not mean a peak in demand is not on the cards. The world is moving to cleaner fuels and climate change will remain high on the agenda. Demand will hit a ceiling, but not until late 2030s. Commenting on Shell’s decision not to pay a dividend, Guardian financial editor Nils Prately says “it looks the correct move”. He adds: “The collapse in global demand for oil isn’t a matter of a few percentage points. It was 30% in April, which obliges a management to budget for lower oil prices for longer.”

In other coronavirus comment, in the FT, “undercover economist” Tim Harford looks at the lessons for economic growth from the pandemic. He writes: “The lockdowns have indeed suppressed CO2 emissions, but less than we might hope. The climate science website Carbon Brief estimates that emissions in 2020 are likely to fall by about 5 or 6% relative to emissions last year. That would be the largest fall on record. What might be a surprise is that it is not enough. If the cuts were compounded at that rate for the rest of the decade, we’d still fall short of what the UN Environment Programme estimates would be needed to restrict global temperature rises to 1.5C.” This suggests that “hitting demanding emissions targets through crude degrowth would be hopeless. The human misery would be immense”. While policies to address environmental degradation may “indeed have the side-effect of bringing economic growth to a halt”, Harford says he doubts it. “But,” he concludes, “the way to find out is to try; we might be pleasantly surprised at how flexible economic activity can be, and how much fun we can all have while respecting planetary limits”. Also focusing on climate change, Richard Black – director of thinktank the Energy & Climate Intelligence Unit – explains for BusinessGreen how international climate negotiations are continuing despite the postponement of COP26. He writes: “In two gatherings whose names don’t trip off everyone’s tongue, the Placencia Ambition Forum and the Petersberg Climate Dialogue, ministers of nations from Britain to Belize have been putting principles forward, declaring what needs to be done and in some cases, setting out vague national plans.”

Finally, writing in the Daily Telegraph, Sam Hall – director of the Conservative Environment Network – and Ted Christie-Miller – a researcher at thinktank Onward – identify “six pro-market ways to ensure our recovery from Covid-19 is clean and green”. And Bloomberg columnist David Fickling argues that the pandemic “won’t bring the end of Big Meat”.

Quantifying changes in Earth’s ice sheets, and identifying the climate drivers, is central to improving sea-level projections. This study provides unified estimates of grounded and floating ice mass change from 2003 to 2019 using NASA’s ICESat and ICESat-2 satellite laser altimetry. They find patterns likely linked to competing climate processes: Ice loss from coastal Greenland (increased surface melt), Antarctic ice shelves (increased ocean melting), and Greenland and Antarctic outlet glaciers (dynamic response to ocean melting), was partially compensated by mass gains over ice sheet interiors (increased snow accumulation). Losses outpaced gains, with grounded-ice loss from Greenland (200 Gt per year) and Antarctica (118 Gt per year) contributing 14 mm to sea level. Mass lost from West Antarctica’s ice shelves accounted for over 30% of that region’s total.

An assessment of the high-sensitivity CESM2 model finds that it fails to effectively replicate the conditions of the early Eocene, a period of high atmospheric CO2, as it shows considerably more warming than is found in climate proxies for the period. The authors suggest that this and other high sensitivity models in CMIP6 may do a poor job at reproducing Eocene temperatures, while models with a climate sensitivity closer to 3C to 4C better match palaeoclimate proxy data.