Big Oil Uses Old Narratives to Derail Climate Action
Investors must hold companies to account for the lobbying activities of their trade associations, InfluenceMap says.
Fossil fuel lobby groups are using decades-old techniques to derail the energy transition, and investors should hold companies to account for their membership of the worst-offending industry associations.
That’s the message sent to asset owners through an extensive report by think tank InfluenceMap, which identified three common narrative methods with which the oil sector casts doubt on clean energy technologies.
The study (‘How the Oil Industry Has Sustained Market Dominance Through Policy Influence’) analysed the activities of three of the world’s most powerful oil and gas sector industry associations – the American Petroleum Institute (API), FuelsEurope, and Fuels Industry UK. It named the three core narratives used to prolong dependency on carbon-emitting fuels: ‘solution scepticism’; ‘policy neutrality’; and ‘affordability and energy security’.
Many of the tactics hark back to the 1960s and ‘70s, but the sector continues to use them to this day – often to considerable effect, said Tom Holen, Programme Manager for Energy Transition at InfluenceMap.
“What was most surprising is how similar the arguments were in the 1970s to what they are today, despite public understanding of how serious the climate crisis is now,” he said. “As long as these narratives are being used, we shouldn’t assume climate policy is suddenly going to magically improve.”
The research comes at a moment of urgency in the fight against climate change. At current emissions levels, the carbon budget for 1.5°C will be exhausted within five years. Keeping temperatures below that threshold would require an immediate and sharp reduction in use of fossil fuels.
But according to recent research by Goldman Sachs, oil demand is expected to rise for another decade, after which it will plateau for “another few years”. This is in part thanks to energetic lobbying by the sector, and asset owners with holdings in the oil majors therefore have an opportunity and responsibility to intervene, Holen argued.
“I hope this report encourages investors to gain a greater understanding of the relationship between the companies they own and industry associations themselves,” he said.
Old dogs, old tricks
Of the three narratives, ‘solution scepticism’ is the oldest – having been around for 57 years, according to InfluenceMap. This narrative downplays the potential impact and viability of clean energy technologies, casting doubt on their efficacy and emphasising challenges and uncertainties.
The research quoted the first identified example of this narrative as having been used by the API in US Congress in 1967. “We in the petroleum industry are convinced that by the time a practical electric car can be mass-produced and marketed, it will not enjoy any meaningful advantage from an air pollution standpoint,” the API said at the time, adding that emissions from internal-combustion engines “will have long since been controlled”.
The second method, ‘policy neutrality’, insists that the focus should not be on promoting clean over dirty energy – but should rather be on consumer choice, market solutions, and minimal government intervention.
FuelsEurope used this method in 2022 in an attempt to persuade the EU to allow gas to be included in the Energy Performance of Buildings Directive (EPBD). “The inclusion would ensure a more effective level playing field among the various technological solutions available for heating vulnerable households and off-grid communities, in line with the European Commission’s commitment to a technology neutral approach and a just transition for all,” FuelsEurope argued.
Meanwhile, the third narrative – ‘affordability and energy security’ – directs attention away from environmental impact and towards cost and reliability. It presents fossil fuels as cheap and reliable, and a shift to clean alternatives as risky and expensive.
The API used this method in 2023 to attempt to stall the transition to electric vehicles, saying in a statement to the US Environmental Protection Authority that proposed changes “could negatively impact US energy security if vehicle technologies are shifted to zero emissions vehicles in the exponential rate that the proposal would likely entail, as it would increase the country’s dependence upon foreign sources for needed minerals forgoing the use of existing US resources”.
“[These findings] confirm that oil and gas companies continue to rely on trade associations to do much of their work on lobbying,” Rory Sullivan, CEO of Chronos Sustainability, told ESG Investor.
What should investors do?
Investors may not have power to control the acts of industry associations, but they can pressure the oil and gas companies that are members of those bodies, Holen said – adding they should focus on those who are clearly misaligned with the associations they are members of.
For example, InfluenceMap gave the API an ‘F’ – the lowest score possible – for its lobbying activities. This is lower than many of its members, including oil majors BP and Shell, and highlights a clear conflict and an opportunity for engagement, Holen argued.
Meanwhile, Sullivan suggested investors looking for guidance on how to approach fossil-fuel lobbying should use the Global Standard on Responsible Climate Lobbying.
The 14-point standard was set up in 2022 by Swedish pension fund AP7, BNP Paribas Asset Management and the Church of England Pensions Board, with support from Chronos. It calls on companies to make formal commitments to responsible climate lobbying, disclose funding and other support they provide to trade associations, and take action if lobbying contradicts the goals of the Paris Agreement.
“The new research from InfluenceMap confirms many of the concerns that led to the development of the global standard,” Sullivan told ESG Investor. “While companies may have clear commitments to reducing emissions and aligning with Paris, these are not being reflected in the messages that they are supporting, the tactics they are using, or the way they are overseeing their trade associations.”
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