Why Is Big Oil Backing The Paris Climate Agreement?

Steel pipes heading towards an oil factory

Joining the ranks of former Exxon CEO, and now Secretary of State, Rex Tillerson, the chief executive of another big U.S. energy company, ConocoPhillips, is saying that the U.S. should stay in the Paris Climate Agreement.

“It would be good for the U.S. to stay in the climate agreement,” ConocoPhillips chairman and CEO Ryan Lance told reporters on the sidelines of the CERAWeek conference in Houston, Axios reports.

While on the campaign trail, President Trump repeatedly criticized the Paris Agreement which enlisted almost every country in the world to make efforts to curb global warming. In his ‘An America First Energy Plan’ from May 2016, one of the actions he had vowed to take during the first 100 days in office was to “cancel the Paris Climate Agreement and stop all payments of U.S. tax dollars to U.N. global warming programs.”

“This agreement gives foreign bureaucrats control over how much energy we use right here in America,” Trump’s campaign pledges said.

Now, the White House’s ‘An America First Energy Plan’ does not mention the Paris accord, and although we’re halfway through the first 100 days of President Trump’s term in office, the word is that his advisers and executives are divided over that particular campaign pledge.

For ConocoPhillips and Exxon—as well the non-U.S. oil and gas heavyweights; BP, Royal Dutch Shell, Eni, Total, and Statoil—backing the Paris Agreement is not just riding the trend of increasingly environmentally-conscious businesses. Those companies with operations all over the world stand to benefit from the Paris Agreement because the nations’ efforts to cut carbon emissions will lead to transitioning from coal-fired plants to gas-fired plants. And natural gas is quite a substantial portion of all those majors’ businesses, investments and profits.

So it’s no wonder that Big Oil has pledged US$1 billion over the next ten years to fighting climate change under the Oil and Gas Climate Initiative that includes BP, CNPC, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil, and Total.

Although U.S. companies are not part of that initiative, Exxon and ConocoPhillips have identified opportunities in the global climate change actions. ConocoPhillips says that it sees opportunities and value in lower carbon emission energy in its existing business of natural gas exploration and production.

On the day which the Paris Agreement entered into force, Exxon—at the time still led by Tillerson before he was tapped for Secretary of State—said:

“ExxonMobil supports the work of the Paris signatories, acknowledges the ambitious goals of this agreement and believes the company has a constructive role to play in developing solutions.”

At his confirmation hearing a couple of months later, Tillerson said that the U.S. would be better off sticking with the Paris agreement to tackle climate change.

In his first blog post on the company website, Exxon’s new chairman and CEO Darren Woods said a national revenue-neutral carbon tax would be good, and that his company was encouraged:

“The pledges made at last year’s Paris Accord create an effective framework for all countries to address rising emissions”. Of course, he singled out natural gas as one of the “powerful tools for meeting global energy demand while reducing emissions”.

Regarding the White House’s policies on the Paris deal, it is said to be divided. President Trump’s senior adviser, Stephen Bannon, is pushing to back the U.S. out of the deal while Tillerson and Ivanka Trump fear that a withdrawal may damage some of America’s diplomatic relations, according to the New York Times.

According to The Wall Street Journal, Ivanka Trump and her husband, and close adviser of President Trump, Jared Kushner, have convinced the President to remove language from an upcoming executive order that would have criticized the Paris Agreement.

While it is nearly impossible to predict the White House’s future stance on the Paris climate deal, it is certain that energy companies with big exposure to natural gas exploration and production should benefit from the global efforts to switch from coal to gas in the fight against climate change.

This article was originally published on Oilprice.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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