The European oil refining industry association, whose members includes Shell, BP, ExxonMobil and Total, outlined on Monday (15 June) a €650 billion plan to completely decarbonise transport fuels by 2050.
The industry has embarked on what it says is the beginning of a journey to reach climate neutrality by mid-century.
“From the beginning we’ve supported the Paris Agreement and Europe’s climate neutrality goal,” said John Cooper, director general of FuelsEurope, whose members include big oil and gas companies active in exploration, production, refining, and chemicals.
With the climate and coronavirus crises “there will be no return to business as usual for the fuels industries,” the association said in a statement on Monday.
By 2050, oil refiners expect automobiles to have shifted to electric mobility, causing a sharp drop in demand for petroleum-based products in transport.
As a result, oil refiners expect the market for liquid fuels in transport to contract to a level which is “about one third and a half of today’s demand,” Cooper said.
This equates to around “150 million tonnes of liquid fuel products per year,” he told EURACTIV in a video briefing, saying this figure also takes account of efficiency gains made in planes, ships and trucks.
All remaining demand – mainly in aviation, maritime and heavy-duty road transport – is expected to be covered by low-carbon fuels, such as second and third generation biofuels as well as clean hydrogen, Cooper said.
€200 carbon price
Over the next three decades, FuelsEurope estimates that up to €650 billion in investment will be needed to bring emissions down to net zero.
Getting there will also require far-reaching changes in taxation and policy, FuelsEurope said, calling for policymakers “to design the enabling policy framework for the deployment of these essential low-carbon fuels.”
“These fuels will cost more than petroleum, there’s no hiding from that,” Cooper told EURACTIV. “But we think it’s achievable and affordable,” he added.
According to FuelsEurope, this should be underpinned by a “progressive taxation” system based on the relative carbon intensity of fuels, as well as other policy incentives.
“An example of things to change is the fuel tax, which calculates today to a carbon price equivalent of €200 per tonne,” Cooper said.
“One of our proposals is to change that and to make it into a proper carbon price,”, saying the fuel tax “doesn’t work properly as a carbon tax today” because it’s levied at the same rate regardless of whether the fuel has low or high carbon intensity.
FuelsEurope also underlined that existing refineries could be used to manufacture low-carbon fuels in Europe, making the transition affordable and based on home production instead of imports.
“This is a sincere proposal,” Cooper said, calling on policymakers to establish a high-level dialogue with customer groups and companies along the energy supply chain.
Big moves are underway in the oil and gas sector. Earlier this year, Shell and BP unveiled plans to reach net-zero emissions by 2050, in line with EU long-term goals on climate change.
Some energy and transport companies have started investing in hydrogen. Last month, Danish energy group Ørsted teamed up with Copenhagen Airports, SAS airline, and shipping giant Maersk to develop a renewable hydrogen facility to deliver clean fuels for buses, trucks, ships and planes.
The Danish facility is expected to be fully operational by 2030, while the first stages of the project could be completed as early as 2023.
Green groups sceptical
But environmental groups were sceptical, calling the plan outlined by FuelsEurope a mere public relations exercise.
“The oil industry’s PR game has improved but there’s nothing new about their proposals which in reality are about perpetuating Europe’s addiction to oil imports,” said William Todts, executive director at Transport and Environment (T&E), a green campaign group.
In an interview with EURACTIV four years ago, Cooper outlined a long-term decarbonisation plan, saying the transition “will be expensive” and require “clarity on the policy objectives” before the industry commits to making major investments.
According to Todts, the only way for big oil companies to thrive in a climate neutral world is to start investing significantly in wind and solar power, recharging infrastructure and green hydrogen.
“Despite all the talk, only a fraction of big oil investment is green. It’s time for regulators to oblige Europe’s top polluters to finally start contributing seriously,” Todts said.