The Business Case of Integrated Oil Investing in Carbon Capture and Storage due flawed Carbon trading and Government Policies.
In the evolving landscape of global energy and climate policy, the role of fossil fuel companies like Exxon Mobil has come under intense scrutiny. At the COP28 climate summit in Dubai, Exxon Mobil CEO Darren Woods rebuffed criticisms from the International Energy Agency (IEA), particularly regarding the feasibility of carbon capture strategies. Woods' stance underscores a broader trend among fossil fuel companies to resist the energy transition, shifting responsibility to consumers and advocating for the continued use of traditional energy sources.
One central argument by Exxon Mobil and similar companies is that the scale of current renewable energy solutions, such as electric vehicles and solar power, needs to be revised to address climate change effectively. Woods emphasized that while carbon capture technology and renewable energy sources have potential, they must still be at a scale to solve the problem adequately. This perspective aligns with a narrative suggesting that climate action's burden falls primarily on technological advancements and individual consumer choices.
Moreover, fossil fuel companies like Exxon Mobil have attempted to recast themselves as part of the solution to global warming rather than the cause. Woods highlighted Exxon's substantial investments in low-carbon businesses, including carbon capture initiatives, as evidence of the company's commitment to addressing climate change. By framing greenhouse gas emissions as the core issue rather than fossil fuels, Exxon aims to justify its continued reliance on traditional energy sources while pursuing incremental shifts toward cleaner alternatives.
One of Exxon Mobil's key strategies involves carbon capture and sequestration (CCS) projects, which aim to capture carbon dioxide emissions from industrial processes and power plants and store them underground. Despite the high costs associated with CCS, Exxon Mobil sees it as a crucial component of its low-carbon strategy. By investing in CCS infrastructure and securing long-term contracts with industrial partners, Exxon hopes to demonstrate the economic viability of carbon reduction services.
Thermodynamics is never considered, resulting in a deadweight loss to the Environment and anyone not tied to Integrated Oil.
When cleaning something, something else gets dirtier.
It is a fact that removing CO2 from the air, which has been produced by consumption, requires more energy than the amount of energy initially obtained from using fossil fuels. It takes more BTUs to remove CO2 from combusting fossil fuels than those that initially produce a ton of CO2. Burning more fossil fuels so that they could be removed for profit only produces more emissions and exacerbates the problem. Even if alternative energy sources are utilized, there is always an opportunity cost, as this energy could have been alternatively used to decrease the consumption of Fossil fuels.
CCS infrastructure may appear to be a promising solution for capturing CO2 emissions from industrial sources, compressing them, and transporting them to geological storage sites for long-term underground storage. The thermodynamics of CCS infrastructure is primarily focused on the energy required for CO2 capture, compression, transportation, and injection into geological formations. These processes require significant energy, resulting in energy losses and reduced efficiency. It is essential to consider the energy-intensive nature of CCS infrastructure, which can impact its overall feasibility and environmental footprint. As it may increase greenhouse gas emissions and resource consumption, it is crucial to address these challenges to ensure that CCS infrastructure is a viable and low-environmental impact solution.
CCS technology is a process that captures and stores carbon dioxide (CO2) emitted from industrial processes, power generation, and other sources. The installation and operation of CCS can provide an additional revenue stream through Carbon offset and a ready supply of CO2 that can be used to pump into depleted oil wells, which can enhance oil recovery. Fossil fuels provide the extra energy required to run the CCS installation, as per Thermaldynamics. A profitable business integration involves getting paid to produce the CO2 needed to extract fossil fuels, making it more efficient in extracting fossil fuels and saving money for companies like Exxon. Investment in CCSs can be inferred as a positive step towards achieving net-zero carbon emissions. Companies can get paid to remove their carbon footprint from their immediate and direct corporate activities. It is important to note that the carbon footprint of the products supplied by the oil and gas industry is the responsibility of the consumer, not the industry.
However, critics argue that Exxon Mobil's emphasis on carbon capture and incremental changes overlooks the urgency of the climate crisis and the need for systemic transformation. The reliance on CCS projects and continued exploration of fossil fuel reserves perpetuate a business model fundamentally incompatible with the goals of the Paris Agreement and the broader transition to a low-carbon economy.
CCS projects are financed through various mechanisms by the Canadian Government.
Carbon capture and storage (CCS) presents a promising avenue for investment within Canada's oil industry, particularly in reducing emissions from oilsands projects. While the economic viability of CCS has been a subject of debate, recent analyses suggest that CCS initiatives could yield substantial returns for oilsands companies, making them economically viable without additional government subsidies.
CCS technology involves capturing carbon dioxide emissions from industrial processes and storing them underground, providing a means to reduce the carbon footprint of oilsands operations. By retrofitting existing oilsands facilities with CCS infrastructure, companies can generate significant net earnings, enhancing their cost competitiveness in the global market.
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Canada's suite of climate regulations and incentives, including the rising carbon price, bolsters the economic feasibility of CCS projects. Cash-flow models demonstrate that CCS investments align with the increasing carbon price trajectory, making them economically viable against regulatory frameworks.
Government policies play a pivotal role in facilitating the deployment of CCS infrastructure. While proposed federal incentives and tax credits can help mitigate risks associated with large-scale decarbonization projects, they are not the primary drivers of CCS viability. Instead, carbon pricing mechanisms and clean fuel regulations credits emerge as significant incentives for CCS implementation without imposing additional burdens on taxpayers.
Investments in oilsands CCS projects offer compelling private shareholder returns, underscoring their potential as a cost-effective means of emissions reduction and regulatory compliance. However, governments must exercise caution in designing policies to ensure that public incentives do not lead to excessive profits for oil companies. Striking a balance between incentivizing CCS deployment and minimizing financial risks is essential for navigating the evolving landscape of climate policy and energy transition in Canada's oil sector.
The resistance to energy transition also extends to broader societal narratives surrounding individual responsibility and consumer choices. Fossil fuel companies like BP's popularization of the "carbon footprint" concept has shifted the focus away from systemic change and onto individual behaviors. By framing climate change as a consequence of personal consumption habits, fossil fuel companies deflect attention from their contributions to environmental degradation.
In contrast to the emphasis on individual actions, the need for collective, systemic change is paramount in addressing climate change effectively. While individual choices can contribute to broader shifts in societal norms and consumption patterns, they are insufficient to drive the transformative changes needed to mitigate the climate crisis. As author Rebecca Solnit aptly notes, "The revolution won’t happen by people staying home and being good."
Ultimately, the business case for resisting the energy transition and shifting responsibility to consumers is fraught with challenges and contradictions. While fossil fuel companies like Exxon Mobil may emphasize their investments in low-carbon technologies, their ongoing dependence on traditional energy sources perpetuates a cycle of environmental degradation and worsens the climate crisis. Real progress necessitates a fundamental shift from incremental adjustments to bold, systemic transformations prioritizing environmental responsibility and fairness. As stakeholders wrestle with the intricacies of the energy transition, the importance of collective action and genuine engagement with fossil fuel companies becomes more evident.
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