The Paris Accord: A Blessing in Disguise for Energy Companies

The Paris Accord: A Blessing in Disguise for Energy Companies

While hardcore anti-climate change activists have celebrated it as the holy grail of the fight against carbon emissions, and their contribution to global warming, the Paris Agreement, originally “L´Accord de Paris,” may be a blessing in disguise for the oil and gas industry.

The Paris Agreement was signed by 177 UN members in December 2015. Adopted during the last meeting of the United Nations Framework Convention on Climate Change, the initiative aims to hold the global temperature increase at a maximum of 2 °C above pre-industrial levels, to better prepare the world for the potential effects of climate change, and to ensure that consistent finance flows are in place to foster programs and policies connected to clean energy and the reduction of carbon emissions.

One key aspect of the Accord is that it was carefully crafted to carry legal force without requiring approval from the U.S. Congress, which would most certainly have stood in its way. Thus, it is fair to say that the Agreement stands a chance of being actually implemented, provided 55 out of the 177 states that signed it proceed with ratification.

According to the International Energy Agency, “The Paris Agreement is nothing less than a historic milestone for the global energy sector. It will speed up the transformation of the energy sector by accelerating investments in cleaner technologies and energy efficiency.” The Agency´s mission is to ensure reliable, affordable and clean energy for its 29 member countries and the rest of the world. If an organization devoted to, among other things, environmental awareness, believed the Accord is good news for energy companies, perhaps those who hail the document as a sign of impending doom for the oil and gas sector are somewhat misguided.

In fact, we can see the Accord as an opportunity. Before the text was approved in Paris, some of the world´s most powerful oil companies pronounced themselves in favor of the 2-degrees goal. It is nothing new that the industry needs to adapt faster to shifting environmental policy scenarios. It is also worth noting that the document does not demand full decarbonisation, but rather a decrease in emissions and an increase in absorption by way of fostering forests and wetlands.

Perhaps the most interesting aspect of the Paris Agreement for energy companies that wish to thrive in global energy´s new playing field is its third declared goal, as stated in its 2nd article:

“(c) Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development."

Simply put, what this means is that the Accord inaugurates a new era of investments in the energy sector, with a huge potential of government subsidies in many regions around the world. This presents tremendous opportunity for oil and gas companies interested in improving technology and moving towards cleaner processes for both energy production and consumption.

In fact, energy companies are already committed to investing billions of dollars in both expanding to cleaner energy sources and making their current operations increasingly environmentally friendly. It remains to be seen whether the world may be up to the task of reaching peak emissions by 2030 as the Paris Agreement proposes.

From my perspective, the idea of having a level playing field where energy companies know what to expect from policymakers over the coming decades can only be seen as a positive development.

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Attorney Jimmy Vallee is an energy Mergers & Acquisitions lawyer, oil and gas industry commentator, and frequent resource for media outlets including USA Today, U.S. News & World Report, Oil & Gas Monitor and others. His new book, Giant Shifts: Energy Trends Reshaping America’s Future, released in May, 2017 hit #1 in two Amazon categories the week of its launch. Connect with Jimmy at [hidden email]  “Noted Energy Futurist” – Mensa AG 2016


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