BP low carbon plan prompts share price jump
BP’s announcement to slash oil and gas production and increase investment in renewables prompted a 6.5% share price increase. This comes after the British energy giant reported its worst quarterly results on record, a coronavirus impacted loss of £12.8 billion, compared with a profit of £1.3 billion for the same period last year.
The significant share price rise off the back of the announcement shows the lack of risk in pursuing clean energy futures and the financial markets willingness to respond. Alongside the slashing of asset values by fossil fuel companies around the world, a low carbon investment is clearly the smarter, safer and more productive option.
BP’s new chief executive, Bernard Looney, promised to grow low-carbon investments eightfold by 2025, and tenfold by 2030, while cutting its fossil fuel output by 40% from 2019 levels as part of his plan to reinvent BP as an Integrated Energy Company, and “net zero carbon” company by 2050. The company says it will no longer carry out any exploration for oil and gas in countries where it doesn’t already operate (currently 79).
However, BP still has a stake in Russian oil company Rosneft which accounts for a third of BP’s fossil fuel production and the figures for cuts in oil production do not include the Russian energy company. If factored into the numbers used for the 40% claim, the reduction in oil and gas production is more like 30%.
BP also plans to increase spending on low-carbon energy to around £3.8 billion per year by 2030, although this remains only 3% of its total spending. By 2030, BP says it aims to have developed around 50GW of net renewable generating capacity – a 20 fold increase from 2019 – and to have doubled its consumer interactions to 20 million a day.
While green groups have welcomed the announcement, they argue BP must go further. For instance, BP is still backing hydrogen made from methane, a fossil fuel, instead of the greener option of making it from water and renewable power. It is also putting faith in carbon capture and storage, as other companies are doing, which is risky because this technology is not zero emissions, is not proven, and does not exist anywhere near the scale that’s required.
Green groups are also asking BP to scrap its investment in biofuels “because so far these have boosted palm oil use and hence deforestation, in particular in Indonesia,” says Greenpeace.
This announcement does, however, make BP the first major oil company to go some way to treating climate change as the emergency it is instead of offering, like its counterparts have, lukewarm ambitions for 2050.
Mark van Baal, of the green shareholder group Follow This, said “BP shows a sense of urgency and imagination beyond oil and gas. It seems that other oil majors want to stay oil and gas companies, only [not] look like one.”
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