Pope Francis’ release of his Encyclical Letter “On Care for our Common Home” raises many issues of interest and concern for the oil and gas industry. Looking deeper into the issue of climate change from the perspective of geologic time provides useful insight and suggests public policy positions and specific strategies for oil and gas executives.
Climate change is a dynamic process and is by no means isolated to the age of industrialization. In fact, climate cycles have occurred across the Phanerozoic eon, the last 541 million years during which life on earth has been abundant1. During that period there have been at least four glacial periods including the more commonly known Pleistocene or Quaternary Ice Age lasting from about 2.58 million years ago (MYA) to the present.
Earth is emerging from this glacial period with the retreat of polar ice evidenced over the last 15,000 years. Even during that brief period there have been cycles of cooling and warming including the “Little Ice Age from 1250 to 1850. It is interesting to note that 1850 coincides with the dawn of the industrial age, rapid economic growth, greater fuel consumption and rising global populations. Global warming activists regularly cite 1850 as the dawn of anthropogenic or human induced climate change. After 1850, global temperatures declined until about 1970 when a new rapid increase commenced.
In point of fact, the drivers of climate change are manifold, far more powerful and longer lasting than anthropogenic (man made) processes. Variations in earth’s solar orbit, rotation on its axis, tectonics along with mountain building, variations is solar activity, fluctuations in ocean currents and naturally occurring changes in atmospheric gases have all been posited as contributors to climate change on a geologic time scale. Thus climate change is nothing new.
However, it cannot be denied that human activity has contributed to the latter factor, atmospheric gases. Increased CO2 and methane in the atmosphere do result from human activity and the industrial age has indeed coincided with rising global temperatures. This does not conclusively prove that human activity is the cause, only that it could be contributing. The logical conclusion is that if an activity is doing something to make a problem worse, it is incumbent to make some changes. It is upon this point that the climate change activists and the anthropogenic sceptics can agree.
A closer look at human activity reveals a few simple observations. Greenhouse gases result mainly from energy consumption and production2. The blanket condemnation of “fossil fuels” ignores some important subtleties.
First, not all fossil fuels emit the same amount of carbon per unit of energy. Fossil energy derives from oxidizing two elements: Hydrogen and Carbon. Oxidizing Hydorgen releases H20, water vapor. Oxidizing Carbon releases CO2, Carbon Dioxide gas. Some fuels are mainly carbon. Early in the last millennium, growing economic activity relied mainly on wood, virtually all carbon3. Peat and then low grade coals such as lignite were more readily accessible and while still mostly carbon also contained some hydrogen. The dawn of oil production in 1865 brought a higher relative hydrogen content fuel. The development of the natural gas pipeline and distribution system in the last half of the twentieth century brought the most hydrogen content to the fuel mix, methane CH4, mostly hydrogen.
Economic development from the industrial age to the information age has had another positive impact on human greenhouse gas production, reduced energy intensity. This is a long-term secular trend driven by a number of factors: Less need for energy intensive materials, reduced commuting, more efficient appliances including automobiles, better insulation and heat rejecting glass. The energy consumed per US Dollar of GDP by the OECD countries is nearly one third of the non-OECD countries. The OECD energy intensity has declined by 35% since 1980 while the non-OECD countries have increased by 17%.
Granted, the bulk of carbon emissions derive from the developed countries, but If the human race is to materially impact its contributions to greenhouse gases, the rapidly growing emerging market countries is where the low hanging fruit exists. Certainly the Pope is not suggesting that economic growth in these markets should be arrested. Quite the contrary, his economic justice premise implies it should be accelerated.
The oil and gas sector and the greater energy industry has already done a great deal to bring more efficiency and lower polluting energy to the global market. The public policy initiatives that make the most sense are to promote decarbonizing the fuel mix.
Rather than frustrate the development of infrastructure, the public policy decision makers and influencers (such as Pope Francis), should encourage the use of more, not less natural gas. They should also encourage international trade in LNG so that those with an abundant resource base can serve those without. The misguided restrictions on hydraulic fracturing should be abandoned. Indeed the practice should be encouraged and there is no better place for public research funding to go than into making hydro-fracturing more effective.
Flaring of natural gas is not only bad policy, but bad economics. If more pipeline capacity is not feasible, local power generation is certainly an option. Similarly, modern gas turbines are close to 60% efficient and in combined cycle mode approach 90%. The power generation fleet globally is moving more toward gas. Renewables are far more valuable when supported by and integrated with gas turbines and reciprocating engines generators.
Oil and gas leaders have an opportunity to change the conversation. By engaging with sensible climate change advocates and most importantly by educating the public on what has been done and what more is being done, the tide of opinion can be changed. This will lead to more sensible regulation and a more healthy business climate.
1 Glacial periods also occurred in the Precambrian prior to the emergence of life.
2 Agricultural CO2 is an exception as is methane from decomposing organic material, some human produced, much of it from nature.
3 Subsistence economies continue to rely on high carbon wood and manure.