BP’s “net zero” climate plan doesn’t quite add up

LONDON (Bloomberg) - After months of planning, BP’s new CEO Bernard Looney made his big green pitch: Europe’s second-largest oil company will cut its emissions to net zero by 2050, he said earlier this month. Many thought that made BP the world’s first supermajor to take responsibility for all its emissions.

It did not do that.

Every company has three types of emissions. BP’s so-called Scope 1 emissions are those directly produced by the company, such as natural gas used to heat BP buildings. “Scope 2” emissions are created by another entity, for example a coal power plant powering BP refineries. Finally, “Scope 3” emissions are all those that can be directly tied to the company, including emissions customers generate when using BP fuels.

BP is only going to cut some, not all, of its Scope 3 emissions. Sensing some confusion at that concept at his presentation on Feb. 12, Looney took to a drawing board to explain. “I’ve probably drawn this 50 times,” he said.

BP’s Scope 1 and 2 emissions are about 55 million metric tons each year, he explained, drawing a small horizontal bar. Then he drew two much bigger bars—and called both Scope 3. One was about 360 million metric tons and another “around” 1 billion metric tons.

You won’t find the larger number in BP’s annual reports, which for 2018 put the company’s Scope 3 emissions at 437 million metric tons. But it is a number that the CEO is confident enough to mention at his big climate announcement.

The 360 million metric tons was the amount of Scope 3 emissions BP would reduce to net zero; those were emissions from the oil and gas the company extracts itself, Looney said. The higher figure, 1 billion metric tons, includes refinery outputs for crude that BP buys from other producers and additional energy products that BP markets, such as power or gas supply agreements, a spokesman later explained. The company plans to cut its carbon intensity by 50%.

BP does not officially report that higher figure, because, the spokesman said, calculations get “more complex” as you move downstream. That’s why Looney added “around”, he said.

Still confused? You’re not alone. The energy industry has no standard definition of Scope 3 emissions. That means every company is free to choose how they define it, and comparisons of those figures can be like comparing apples to oranges. Crucially, because most emissions reporting is voluntary, many of the largest oil companies, including ExxonMobil and Saudi Aramco, choose not to report Scope 3 emissions at all.

Industry groups have made some attempts at standardization but none have succeeded. A spokesman for the Oil and Gas Climate Initiative, which counts 13 large oil companies as its members, said it has created an “internal benchmark” but there is “no established joint methodology.” Without strict regulation on standards and requirement to report Scope 3 emissions, we are likely to remain confused.

Looney’s reasoning for choosing to cut only 360 million out 1 billion metric tons is that, if the companies BP buys its crude from also take responsibility to cut their respective Scope 3 emissions for the oil they extract, then all involved could double-counting. In effect, we’d all be heading toward a net-zero world.

“In 2050, the world ain’t going to be arguing about Scope 3 or not,” Looney said. “We are going to be arguing about whether we’ve reduced our emissions or not.”

But “oil companies cannot avoid the Scope 3 debate,” said Rory Sullivan of the Grantham Research Institute on Climate Change and the Environment. First, what you can’t (or won’t) count, you won’t cut. Second, as the oil and gas industry looks to renew its social license to operate, it needs to be seen to be taking responsibility for its actions. However you count them, Scope 3 forms the majority of an oil company’s total emissions.

It’s easy for Looney to swat away definitional arguments. He won’t be BP’s CEO in 2050. What we can be sure about is that the climate debate will rage more strongly in the decades ahead, and someone will have to take responsibility for all Scope 3 emissions. The question is whether it will be the oil industry that pays the price for it—or all of us.