Statoil Says Biggest Benefit to Come From Deepest CO2 Cut

Updated on

Norway’s biggest oil and gas producer says the most aggressive steps to cut carbon-dioxide emissions will lead to the best results for the global economy over the next 25 years.

Statoil ASA estimates that the world can achieve global growth of 2.9 percent a year, on average, through a “renewal” scenario in which emissions are cut by 39 percent by 2040, according to a report published on Thursday.

In other scenarios, in which emissions rise and the world fails to meet a target of limiting the rise in temperature to 2 degrees Celsius (3.6 degrees Fahrenheit), economic growth would be as low as 2 percent on average, Statoil estimates.

“The 2 degree goal is achievable, but it’s very challenging,” Eirik Waerness, the company’s chief economist, said at a presentation in Oslo. “It implies much higher carbon prices, very strict requirements for energy efficiency in the transportation sector.”

Statoil was among oil companies that this week called for a global carbon-emission pricing plan to curb climate change as governments prepare for talks in Paris later in 2015.

The “renewal” scenario implies a reduction in energy intensity of 2.7 percent a year until 2040. Coal and oil consumption would need to fall by 2.4 percent and 0.6 percent a year, respectively, while natural gas would rise by 0.6 percent and “new renewables” by 11.1 percent.

‘Game Theory’

The scenario would result in the highest economic growth rate because energy subsidies would need to be cut and the direct costs of climate change on the economy would be reduced, Waerness said in an interview. Still, it would require a global agreement and more help from rich countries to ensure emerging economies achieve growth while limiting coal use, he said.

“For each player or country, it could be profitable to not follow the collective policy,” he said. “This is game theory. You can get into a prisoner’s dilemma, where no one benefits from an outcome that nevertheless is the result.”

Even in a scenario where emissions are checked and warming doesn’t exceed 2 degrees, the world will need “significant” investments in oil and gas exploration and production to counter a decline in output of as much as 6 percent a year, Waerness said.

“That’s why we continue to invest in oil and gas even if we believe in the 2 degree scenario,” he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE