We should harness oil companies to reduce greenhouse gas emissions

The U.S. is nowhere near on track to meet the greenhouse gas (GHG) reduction commitments it made last month at the UN climate summit COP26 in Glasgow. But regulating carbon dioxide emissions from the oil and gas industry, a seemingly obvious step, would go far in achieving these goals. I’ve been in this industry for over 30 years, and it’s clear to me what is needed: government regulation to harness the capabilities of major oil and gas companies. Specifically, the U.S. government should establish a requirement that any oil and gas produced needs to be offset by sequestering an equivalent amount of carbon.

Over 80 percent of U.S. carbon dioxide emissions come from burning oil and natural gas. Global GHG emissions from the manufacture and use of oil and gas sold by just the two largest U.S.-based companies, Chevron and ExxonMobil, total 1.4 billion tons — equivalent to one-quarter of all U.S. emissions. Clearly, oil companies have a major role to play in reducing emissions. Fortunately, they are exceptionally capable at developing and deploying the technologies that are needed to tackle this problem. What is needed is the regulatory driver to make it happen.

Let’s look at a historical example: 50 years ago, pollution from cars was a major health issue in U.S. cities. Los Angeles was blanketed with smog. Deaths from emphysema in New York City had increased 500 percent. The first Earth Day was held in 1970 and citizens were demanding action. In response, Congress passed the Clean Air Act, and the Environmental Protection Agency (EPA) was formed.

The EPA established a standard requiring dramatically lower tailpipe emissions starting with 1975 model year cars. This spurred rapid innovation. The auto companies developed and installed catalytic converters to reduce emissions, but they needed unleaded gasoline for them to work. The major oil companies developed, produced and distributed unleaded gasoline to meet the demand.

Later, the EPA followed a similar path to further reduce vehicle emissions, requiring the removal of sulfur from gasoline and diesel fuel. Once again, the oil industry spent billions of dollars on research, developing processes and building facilities to produce the low sulfur fuels. As a result of these actions, air quality today is much better than it was 50 years ago even though the number of miles driven has increased threefold.

A similar regulatory approach can be used to drive oil companies to reduce carbon dioxide emissions. Failure to offset emissions by sequestering an equivalent amount of carbon should result initially in financial penalties — and ultimately in loss of the right to produce U.S. oil and gas. Given that the U.S. is the world’s largest oil and gas producing country, companies will have a strong incentive to comply.

The standard should be phased in over time. For example, if it started by requiring that 3.5 percent of carbon produced needs to be offset in 2023 and increased 3.5 percent each year, net-zero emissions would be achieved by 2050. This will unleash the innovative capacity of the industry, forcing oil giants to focus their resources on developing and deploying the technologies needed to comply.

There are already several existing methods that companies could use to achieve the goal. Some might use carbon capture and storage, while others would employ nature-based solutions such as planting trees. Yet, others will favor approaches that sequester the carbon within products such as plastics and cement. The point is, many innovative approaches will emerge and, as they are deployed, their unit cost will decrease just as it did for unleaded gasoline and low-sulfur fuels.

Of course, some in the oil and gas industry would oppose such a requirement. They will argue that they are already taking action, and that regulation is not needed. However, the current scale and pace of their efforts is nowhere near what is required to achieve the goal.

But more enlightened companies that are already voluntarily acting to reduce emissions will realize that this regulation would level the playing field by forcing all companies to face higher costs. It’s simple: Companies that meet the requirements most efficiently will be more profitable than their less innovative competitors.

For consumers, the increased cost of fuels will have an impact similar to a carbon tax. This will make alternatives more attractive, accelerating the shift in their direction. While environmentalists may object on the basis that this will prolong the life of the oil and gas industry, it’s important to remember that the goal is to reduce emissions while meeting energy needs, not to shut down an industry.

The Build Back Better bill proposes to spend more than half a trillion taxpayer dollars to facilitate the transition to a lower-carbon world. The bill is currently blocked by Sen. Joe Manchin (D-W.Va.) and should raise the question of how else to make progress. Oil companies have the resources to be contributing to a greener future. The government should use regulation to harness oil industry capability and shift some of this burden to the companies that are producing and profiting from the emissions.

Hugh Helferty, Ph.D., led major research and engineering organizations for ExxonMobil, the largest U.S.-based oil company.