Climate negotiations take tentative steps to phase out fossil fuel production

by Philippe Le Billon, Päivi Lujala, Nicolas Gaulin. Originally published on Policy Options
January 11, 2022

There has long been an “elephant in the room” at climate meetings: fossil fuel production. None of the United Nations Conference of the Parties (COP) final declarations, including the 2015 “Paris Agreement,” has so far called for a managed decline in the production of fossil fuels. Although they account for about 65 per cent of total human greenhouse gas emissions, fossil fuels are only dealt with through demand management, with the idea that if consumption dropped, production would follow.

Yet, as we know from many industries, production often drives consumption. As long as a product – even if toxic – is put on the market, consumption will continue. For fossil fuel emissions to be rapidly reduced, both demand and production need to be constrained. But according to the Production Gap Report, governments “still plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with limiting global warming to 1.5°C.”

Previous COP meetings paid some attention to fossil fuels. The 1997 Kyoto Protocol recognized fossil-fuel-related emissions but not a duty to phase out production. The Powering Past Coal Alliance, launched in 2017 at COP23, now includes 48 states, 48 subnational governments and 69 organizations, but it only deals with coal consumption, not production.

With more than 500 lobbyists from the fossil fuel sectors officially registered at COP26, a meeting hosted by an oil-producing government and consumers facing high oil and gas prices, there was no guarantee that COP26 would see concrete results on the supply side.

Positive signals

Yet, despite the odds, there was some anticipation that COP26 in Glasgow could be different from previous ones regarding fossil fuel production. A number of early signals were encouraging.

First, the automotive industry is clearly pivoting to electric vehicles, with major announcements and new factories. Many forecasts now expect global oil consumption to peak by the early 2030s.

Second, the International Energy Agency (IEA), created in wake of the 1973-74 oil crisis to ensure secure oil supplies, has called for an immediate halt to new investments into fossil fuel production projects. Rather than oil, the IEA sees solar as key to future transportation energy security.

Third, the climate movement has become more organized around institutionalized means of stopping fossil fuel production. Beyond fossil divestment initiatives, school strikes, climate marches and direct action, the Fossil Fuel Non-Proliferation Treaty initiative (FFNPT) is being endorsed by a growing number of individuals, organizations, Nobel Prize winners, and sub-national governments to put an end to new exploration and production, phase out existing production and ensure a just transition for fossil fuel dependent workers, communities and producing countries.

Positive initiatives

COP26 saw two major supply-side initiatives launched, one with governments pledging to phase out oil and gas production, and the other with governments pledging to end public subsidies for overseas fossil fuel projects. Some critics commented on the irony of marginal producers pledging not to produce and major producers keeping subsidies for their own production. Still, both initiatives mark a turning point in international climate negotiations.

Taking the opportunity of COP26, Costa Rica and Denmark launched the Beyond Oil and Gas Alliance (BOGA), which expects members to commit to a production phase-out, with a legislated end date for existing production. BOGA membership has three levels of commitment.

Core members, including Costa Rica, Denmark, France, Greenland, Ireland, Sweden, Wales and the province of Quebec, need to “commit to end new concessions, licensing or leasing rounds for oil and gas production and exploration and to set a Paris-aligned date for ending oil and gas production and exploration on the territory over which they have jurisdiction.”

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Associate members, including Portugal, New Zealand and the state of California, need to “have taken significant concrete steps that contribute to the reduction of oil and gas production, for example subsidy reform or an end to international public financial support for oil and gas exploration and production abroad.”

Friends of BOGA, including Italy – the co-host of COP26 – as well as Finland and Luxembourg, have to sign the BOGA declaration and commit to support “a socially just and equitable global transition to align oil and gas production with the objectives of the Paris Agreement, taking into account the impact on communities and economies… [and to work] together to facilitate effective measures to this end in line with the Paris Agreement and national climate neutrality targets.”

Current BOGA core members have no major fossil fuel production, with the exception of Denmark. Having already pivoted from natural gas to offshore wind power, this country is in a better position to commit to end its oil and gas production by 2050. Fellow Scandinavian countries Finland and Sweden also joined the alliance, but Norway, a major oil and gas producer (and potential prime mover given its massive sovereign fund), did not. Neither did the other major Western producers (Australia, U.K., U.S. and oil and gas producing Canadian provinces), nor did the other top producers (China, Russia, Saudi Arabia).

For now, BOGA is thus a club of “first movers” including mostly wealthy jurisdictions with low stakes at play compared with major oil and gas producers. Yet BOGA is an important step forward. Beyond BOGA’ s coalition building purpose, the experiences of BOGA members will yield important lessons for others to forego or phase out fossil fuel production. There is much to learn about decision pathways to cut production, avoiding costly compensation for companies with stranded assets, diversifying an economy and achieving a just transition for workers and communities.

To make a difference, BOGA will need to rapidly ramp up membership among producers. Lessons from the Extractive Industries Transparency Initiative and public mobilization through the Fossil Fuel Non-Proliferation Treaty initiative can help. But concrete political and economic incentives, as well as credible phase-out standards, are needed to enroll more producers.

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The second COP26 launched initiative, led by the U.K., brings together a group of 34 countries and five development banks committing to “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.”

Clearly the result of a compromise, abatement requirements only include the direct emissions of fossil fuel production projects, for example through carbon capture and sequestration (CCS), but not those related to the final consumption of produced fuels. The subsidies initiative would see about US$24 billion per year being shifted from fossil fuels to clean energy projects, and the signatories also commit to encourage other governments and multilateral development banks to adopt similar measures into COP27 and beyond.

Going beyond COP’s business as usual?

Overall, COP26 was the first time the issue of fossil fuel production was so directly addressed, but it stopped well short of “calling for,” “urging,” let alone “deciding” to phase out fossil fuel production.

The  first draft had optimistically called “upon parties to accelerate the phasing out of coal and subsidies for fossil fuels.” Yet, under pressure from coal fossil fuel producers and coal power users – especially India, but also China and the U.S., the Glasgow Climate Pact only “calls upon parties to accelerate … efforts towards the phase-down of unabated coal power and inefficient fossil fuel subsidies, recognizing the need for support towards a just transition.”

A crucial challenge for COP27 will be to more concretely phase out fossil fuel production. This means enrolling key producers into a managed fossil fuel production decline.

Using the global fossil fuel cuts database, a recent study confirms that governments dependent on fossil fuel revenues (particularly oil and natural gas) or exports are less likely to have adopted constraint initiatives, especially authoritarian regimes. Founding BOGA members, for example, are not dependent on oil and gas production and have open democratic regimes. Yet, the study also shows that previous experience of resource curse, the presence of national oil companies, and larger per-capita fossil fuel reserves could incentivize supply-side measures.

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Following COP26, the secretary general of the Organisation of Petroleum Exporting Countries (OPEC) reaffirmed that “oil and gas will continue to play a prominent role in the global energy mix for the foreseeable future.” But he also recognized that “[w]ith all the challenges of accessing capital, the industry needs to wake up … and face reality.”

A coalition around the phasing out of fossil fuel production could thus grow, including through the participation of oil, gas and coal producers eager for an international framework facilitating their transition away from fossil fuel dependence. This could include countries or subnational jurisdictions like provinces in Canada that may find it challenging to sustain competitive prices in a post-2030 world of declining demand – especially if facing growing political pressure to transition.

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The newly minted Beyond Oil and Gas Alliance can concretely show how governments can leave extractable fossil fuels in the ground and still prosper. Now is the time to support it and make headway toward an international agreement over a managed decline in fossil fuel production and just transition.

This article first appeared on Policy Options and is republished here under a Creative Commons license.