The Observer: Tough job of saving the world: “…Shell's environmental report shows its emissions rose thanks to more flaring - and that its target cut, 5 per cent below 1990 levels… will be achieved only in 2010 - nine years later than BP's.” (ShellNews.net) 20 Feb 05

The protocol is in force, but there are diverging views on cleaning up energy generation. Here Observer writers consider problems from the threat of outsiders like China, to the councils reluctant to bite the bullet on waste

Oliver Morgan

Sunday February 20, 2005

It was not a glorious start for a measure designed to save the world. The Kyoto protocol came into force on Wednesday amid transatlantic recriminations between the refusenik United States and the 140 signatory counties.

But even in nations that want to take the lead in tackling climate change, such as Britain, the atmosphere was less than euphoric. As Tony Blair argued that a precautionary approach to greenhouse gas emissions was vital to prevent environmental disaster, the European Commission threatened legal action because the UK wanted to raise the amount of carbon that industry is allowed to pump out under the European emissions trading scheme.

The government was accused of caving into business led by the Confederation of British Industry. Stephen Tindale, director of Greenpeace, says: 'Business as represented by the CBI and the trade associations has a Neanderthal attitude to climate change. What is really depressing is that people like Patricia [Hewitt], who should know better, are now spouting the nonsense about competitiveness themselves.'

But is the emissions trading row an accurate representation of business's attitude to the environment, and its ability to persuade apparently Kyoto-friendly governments to slow things down? Perhaps. There are significant differences in the attitudes of companies in different sectors and operating in different markets, some of which are fixed to favour non-emitting energy forms. And there are significant differences between companies in the same sectors.

Tindale says: 'We already see a divergence in the oil companies. Exxon is the worst. BP and Shell are marginally less backward-looking.'

Much has been made of BP's stance, adopted in 1997, in which chief executive Lord Browne said the problem was 'very serious' and that 'precautionary' action was justified. BP's approach involves cutting its own emissions from such practices as 'flaring' off gas - it set a 10 per cent reduction target compared with 1990 levels by 2010, achieving this by 2001 (it made $650m in the process). It is also making its hydrocarbon fuels less dirty and investing in non-fossil fuel sources.

In its environmental report, BP says it will also introduce a system to measure the emissions of the products it sells. It highlights research and investment into non-fossil forms of fuel such as solar panels and hydrogen power for cars.

Meanwhile, Shell chairman Lord Oxburgh recently called climate change an 'angry beast', but he claimed it was up to politicians to put in place measures to halt climate change that would force companies's hands. Shell's environmental report shows its emissions rose thanks to more flaring - and that its target cut, 5 per cent below 1990 levels, in other words half of BP's, will be achieved only in 2010 - nine years later than BP's.

Both companies receive qualified praise from Greenpeace. The group's Emily Armistead says: 'It is incredibly important that companies like BP and Shell give a lead on this, and these kinds of statements are part of that.'

Its importance may lie in the fact that Exxon, the US giant, has not accepted a cautious approach. 'Exxon is resolutely against acting,' says Armistead. 'it is by far and away the worst.'

Exxon says: 'ExxonMobil recognises that the risk of climate change may prove to be significant. While studies must continue to better understand these risks and possible consequences, we will continue to take tangible actions and work with others on ways to bring scientific and technological expertise to energy-related solutions that are technically and commercially viable.'

Some of these studies, such as the climate-change research programme at Stanford University, has attracted support from across the industry. Others have attracted controversy. According to the website Exxonsecretas.org, the company funds more than 100 organisations, many of which claim global warming is unproven, and some of which even claim it is beneficial. Among them is the Washington-based Competi tive Enterprise Institute, which has claimed 'Kyoto was a power grab based on deception and fear'.

In London, the International Policy Network, run by a former researcher at the CEI, and which received $50,000 from the ExxonMobil foundation last year, published a paper arguing that falla cious modelling techniques meant 'the public is being fed a series of exaggerated claims regarding likely future climate change based on inaccurate models'.

IPN's Kendra Okonski argues that the precautionary principle can be misleading. 'If you think the greenhouse effect is exacerbated by our actions, then, according to the precautionary principle, you should take some action.

'But that is not proved, and that action may well turn out to have harmful effects in other areas today, while its benefits are not provable for many decades,' she says, adding: 'I think the British companies have taken this position in order to curry favour [with the UK governments]. In the US, people take a different view. And remember, 95 per cent or more of [the oil companies'] revenue still comes from hydrocarbons, so you have to ask what does it all mean.'

This last point is difficult to dodge, in investment as well as revenue terms. Exxon says it spent $500m in the 1980s on solar technology but abandoned it in the 1990s, and now puts some $100m a year into research into new forms of fuel via the Stanford project. It adds that much of its $600m a year research and development budget goes on looking at ways of making its hydrocarbon fuels cleaner.

BP says it has a £350m fund to increase its own efficiency. It cannot provide figures on investment in making its own fuels cleaner, but it says it has spent $500m on renewables since 2000, and spends $100m a year on researching hydrogen and alternative fuels. In its environmental report, Shell points to a $500m investment when it set up renewables operations in 1997, and states it will spend $500m on renewables this year. It underlines the importance of hydrogen, but gives no figures for investment.

Exxon, BP and Shell each have capital expenditure budgets of about $14bn. It appears that accepting the need to act now has little impact on the amount spent in doing so as a proportion of that spent on getting oil out of the ground.It is still a drop in the ocean. The companies do not accept that it is valid to compare R&D into cleaner and new fuel types with overall capital spending.

However, Greenpeace's Armistead says: 'The fact that these companies cut down on emissions is just good business practice for them. What they need to do is invest in alternative forms of fuel.'

If transport is the fastest growing sector in terms of emissions (25 to 30 per cent and rising) vehicle makers bear responsibility alongside oil companies. Indeed General Motors has its own 'three-pronged' strategy: developing more efficient hydrocarbon engines, developing hybrid engines (diesel/electric) and developing fuel cells. Company spokesman Jerry Dubrowski says: 'We don't disclose how much we spend on fuel cells, hybrids etc, what we can say is that GM's total worldwide R&D spend in 2003 was around $5 billion.' Ford says merely that half of its (undisclosed) global research budget goes on (undisclosed) environmental improvement.

Meanwhile, the power sector is keen to emphasise its move away from fossil fuels. Utilities were at the centre of last week's row over emission caps because, if the UK has to reduce the allowance, it will be them that bear the brunt.

The government is keen to trumpet its partnership with business in developing renewables (largely wind farms), but the figures make for mixed reading. For example, while the government remains one of a minority of EU countries to be honouring its Kyoto commitments, it is unlikely to meet its enhanced target of a 20 per cent cut over 1990 levels by 2010. According to its own figures, carbon emissions increased in 2003. And successive energy ministers have been equivocal about delivering 10 per cent of electricity from renewable sources by 2010 - this currently stands at 3 per cent.

As for the companies themselves, E.On says it will spend some £700m on renewables by 2010. The company says it cannot provide detailed figures on investment on its conventional plant, but lists four projects that will total £1.5bn - double that figure - by then. In 2000, the power sector invested in 930MW of conventional plant, and 89MW of renewables (8.7 per cent of total). Last year the figures were 1,745MW and 231 (11.6 per cent).

The numbers are improving. But Greenpeace's Leone Green believes renewables will only exist at the margin while a centralised energy system is in place. She believes that local generation and distribution - based on low emissions technology - is the only sustainable way, and the only way to break the hold of fossil-fuel or nuclear-dependent providers. It may sound unrealistic, but she points out that, according to the International Energy Agency, half of the $1 trillion investment needed in the EU power sector by 2030 goes towards transmission and distribution - which a decentralised system with renewable generation would massively reduce, and which would in turn waste less electricity.

The other major cause of waste is the housing stock. The government's flagship 'warm front' policy, which looks to improve the energy efficiency of existing homes, has recently been overhauled following harsh criticism from MPs.

As for new homes, housebuilders claim they are now providing efficient homes. Pierre Williams, of the Housebuilders Federation says: 'A rolling programme of toughened building regulations means that new homes are now up to 10 times more energy-efficient than their Victorian equivalents.'

MPs disagree. The Commons Environmental Audit Committee recently criticised the sustainability of the housebuilding sector and demanded new research into making homes more energy efficient.

Williams adds that attention should be focused on improving old homes, and points out that solar panels are too expensive and that it would 'take 70 years for them to pay for themselves'.

Greenpeace's Green says: 'The costs are falling. With attitudes like this it is not surprising that people do not take climate change seriously.'

http://observer.guardian.co.uk/business/story/0,,1418363,00.html