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BP walks away from three U.S. trade groups over carbon pricing

From Apple to Unilever to Coca-Cola and PepsiCo, more big companies are partings ways with industry associations that support policies at odds with corporate sustainability goals

High-profile corporates have left trade bodies in disagreements over climate policy before. Unilever and Apple have made headlines by heading for the exit door on a number of occasions, while Shell last summer quit the American Fuel & Petrochemical Manufacturers (AFPM) trade body, warning that "in cases of material misalignment" over climate policy the company would be "prepared to walk away."

Now BP has added to the trend as it looks to build on its recent net-zero goal, announcing last week it is to leave three U.S.-based oil and gas trade organizations after conducting an in-depth review that concluded their climate policies and activities no longer align with its own.

The move follows the energy giant's adoption earlier this month of an ambition to reach net-zero across its operations and oil and gas production base by 2050 and will fuel hopes that it is serious about coming forward with a raft of new initiatives to help accelerate its decarbonization efforts, even if campaigners remain skeptical about the pace of emission reduction the company is considering.

The organizations identified by BP as incompatible with its new strategy are the AFPM, the Western States Petroleum Association (WSPA) and the Western Energy Alliance (WEA). Its disagreements with AFPM and WSPA come down to differences regarding policy positions on carbon pricing, the firm said, with both organizations opposing frameworks — such as Senate Bill 5981 to introduce a carbon price in Washington state — that BP supports. 

For its part, the WEA opposes the direct federal regulation of methane, which BP supports, while BP also flagged concerns with differences on asset divestments in the states in which the organization is active.

When differences arise (BP) will be transparent. But if our views cannot be reconciled, we will be prepared to part company.
"Trade associations have long demonstrated how we can make progress through collaboration, particularly in areas such as safety, standards and training. This approach should also be brought to bear on the defining challenge that faces us all — supporting the rapid transition to a low carbon future," said BP CEO Bernard Looney. "BP will pursue opportunities to work with organizations who share our ambitious and progressive approach to the energy transition. And when differences arise we will be transparent. But if our views cannot be reconciled, we will be prepared to part company."

He added that the decision to quit the trade bodies could help spark a rethink about lobbying practices across the industry. "My hope is that in the coming years we can add climate to the long list of areas where, as an industry, we work together for a greater good," he said.

BP's decision is the product of a six-month in-depth review (PDF) of the climate positions of 30 trade associations. As well as identifying three organizations with which it is not aligned, the review identified five more with which it is only partially aligned, including the American Petroleum Institute, Australian Institute of Petroleum and Canadian Association of Petroleum Producers. It committed to engaging with these bodies to encourage them to change their positions on points of disagreement. However, Looney's statement — "if our views cannot be reconciled, we will be prepared to part company" — puts the bodies firmly on notice that the company could leave if an agreement cannot be brokered.

The move follows long-standing calls from sustainable investors and campaigners for BP and others to sever ties with those lobby groups that seek to block climate policies.

Corporates from a host of sectors consistently have been accused of signing up to ambitious environmental goals, but then lending their money and support to trade bodies that lobby against such goals in their name, and in the most egregious cases even enable climate "skeptic" misinformation. Resolving this disconnect and either changing the stance of lobby groups or quitting such organizations has emerged as a top ask of those sustainably environmentally minded investors that are pushing BP and its peers to come up with Paris Agreement-compliant strategies.

The latest move comes as BP's recent raft of green policy pledges were analyzed by sustainable investment think tank Carbon Tracker. The research body published its latest assessment of the oil major's business model.

"While the devil will be in the detail, this certainly appears to be a big step forward for an integrated oil and gas company, moving the dialogue beyond the intensity ambitions we have generally seen to date," researcher Mike Coffin wrote of BP's net-zero commitment. "Shell's ambition to lower intensity by 50 percent still enables the company to increase emissions overall, by producing more, even as they lower the average carbon emissions per unit of energy produced. Conversely, BP has taken pains to point out that their ambition will result in a reduction in the number of tonnes of CO2 entering the atmosphere from their production."

However, the analysis notes that BP's net-zero goal does not encompass hydrocarbons which it refines and markets but that originally were produced by other companies. These are only covered by a third goal, of "halving intensity" — which is open to the same criticisms leveled at Shell's targets. As a result, "as BP's ambitions are currently framed, BP will continue to profit from the sale of hydrocarbon products that have no absolute Scope 3 emissions constraint attached to them," the analysis concludes.

The analysis notes that BP's net-zero goal does not encompass hydrocarbons which it refines and markets but that were originally produced by other companies.
Scope 3 emissions refer to greenhouse gases emitted from the full value chain of an organization, including the end-use of products. In the case of oil and gas majors, end-use emissions account for a huge chunk of the company's overall carbon footprint.

The analysis also questions how BP can expect to meet its goals: For an oil producer, achieving net zero will require the significant deployment of either carbon dioxide removal (CDR) technologies or carbon offsets at an enormous scale.

As significant questions remain over the feasibility of CDR technologies, Carbon Tracker assumes BP will have to reduce absolute production volumes if it is to meet the goal. One way it could do this would be to incrementally move out of hydrocarbon production, while continuing to refine and market the oil and gas produced by others — effectively shifting the responsibility for absolute limits on Scope 3 emissions from the produced hydrocarbons onto others.

Still, the level of ambition of BP's goal, unique in its sector, leads Coffin to conclude that "with this, BP are effectively the first major to acknowledge that oil and gas production will most likely need to be reduced in the short to medium term for the world to reach the goals of the Paris Agreement."

Carbon Tracker itself previously has calculated that absolute oil and gas production will need to shrink by 35 percent by 2040 if the world is to meet the Paris Agreement's goals.

In related news, further evidence of a shift in climate risk awareness among fossil fuel firms came earlier this week, when oil and gas producer Kosmos Energy announced it aims to make its operations "carbon neutral" by 2030.

The firm said it would meet its goal by increasing the weighting of gas in its portfolio while also investing in nature-based offsets such as wetlands restoration and reforestation projects. The Texan oil firm added that it would move on to developing a target for Scope 3 emissions and pledged to publish a Climate Risk and Resilience Report aligned with the Task Force on Climate-related Financial Disclosures later this year.

The credibility of both BP's new net-zero strategy and the similar plans being developed by a growing cohort of oil and gas companies will face its next major test when the companies start to publish more detailed explanations of how they plan to deliver significant and sustained emissions reductions in line with the Paris Agreement. But a week or so on from the initial unveiling of BP's new goal, the decision to quit three major trade bodies and put others on notice suggests changes are afoot. 

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