The phrase “unburnable carbon” has gained currency among climate-minded investors, popularized by a U.K.-based nonprofit called the Carbon Tracker Initiative. It refers to the vast fossil-fuel reserves that, if burned, would probably push the global climate into the danger zone.
Some investors are concerned that stock-market valuations would plummet if oil companies continue to spend hundreds of billions of dollars on exploration while the world lunges away from oil. Last week, a coalition of 70 large investors representing more than $3 trillion in assets said they had dispatched letters to 45 of the largest fossil-fuel companies and utilities, asking them to explain how they plan to deal with the risk. This morning, Al Gore and Generation Investment Management co-founder David Blood published a paper on the topic.
One of them was Suncor Energy, the Canadian oil-sands producer that assesses its work toward climate change goals in an annual sustainability report, which you can read here. Oil sands mining is more expensive to produce than conventional fuel and puts out between 14 percent to 20 percent more greenhouse gas emissions than conventional gasoline, according to the Congressional Research Service.
Steve Douglas, vice president for investor relations, told an audience at the SRI Conference in Colorado Springs yesterday that even if investors, governments, the public or all three decided to leave up to 80 percent of fossil fuels in the ground globally, it wouldn’t be fatal for the company. (Note that it’s difficult to imagine an official providing any other possible answer.)
Carbon Tracker and the environmental nonprofit Ceres, which are coordinating the investor campaign, haven’t shared the correspondence they’ve received back from about 30 companies. So it was kind of interesting to hear a Suncor official provide an assessment.
Hypothetically, shrinking global oil production to 20 percent of reserves -- the level identified by Carbon Tracker to keep the worst of climate change at bay -- would create an artificial shortage, Douglas said, resulting in higher prices and steep competition for the right to produce the remaining, burnable carbon. Suncor would still compete barrel for barrel, BTU for BTU with any competitor, which he says it could do. "I wouldn't see that actually as an existential threat," he said.
Douglas said that Suncor in the mean time is trying to find collaborative ways for the industry to lower production costs of oil sands and carbon emissions. In particular, Suncor has sought collaboration in an oil-sands industry group called Canada's Oil Sands Innovation Alliance (COSIA), which is focused on how companies can share technology that leads to savings in time, money and carbon pollution across the industry. "The reality is we're going to get painted with the same brush," as other oil companies. "It doesn't matter if we're different.”
Andrea Moffat, a vice president at Ceres who was on the same collegial “extreme energy risk” panel, asked Douglas to explain why Suncor's own policies are more climate-friendly than the leading Canadian petroleum group.
Douglas didn't dispute the suggested differences, or say that they were an impediment to Suncor's continued membership. "I'm not going to tell you we've distanced ourselves," he said.
He distinguished the Canadian group from two U.S. counterparts, American Fuel & Petrochemical Manufacturers (formerly known as the NPRA) and the American Petroleum Institute. "Certainly in the U.S., organizations like NPRA," now called AFPM, and "API are very strident and that's not particularly helpful at times."
Visit www.bloomberg.com/sustainability for the latest from Bloomberg News about energy, natural resources and global business.