‘The Heat is On’ Initiative: catalysing leadership by fossil fuel companies on climate change
Fossil fuel companies will need to play a central role in helping the world to limit a rise in the global mean temperature to 2°C above pre-industrial levels, an internationally-accepted policy goal. ‘The Heat is On’ initiative aims to support fossil fuel companies to integrate this challenge into their business strategies.The initiative is guided by a Senior Advisory Panel of former and current leaders from industry, government, international organisations and civil society (see below). It is led and coordinated by Critical Resource, an advisory firm supporting responsible practices in the extractive industries.The initiative seeks to add significant value to existing industry climate programmes. It is a quest for ‘big ideas’ on how the industry can transform itself to operate profitably in a carbon-constrained world. It will advocate for meaningful company leadership, working through collaboration. It will focus on the needs of developing countries and the international credibility of companies with their stakeholders. It will be grounded in an understanding of business realities while also recognising the urgent need for action.
‘The Heat is On’ Initiative report – November 2015
The analysis at the core of the report shows a significant disconnect between the changes needed to reduce greenhouse gas emissions to the level required by the 2 degree target and efforts currently underway by the fossil fuel industry. The use of fossil fuels has been the single most important contributor to human-induced climate change. International moves to limit temperature rises to 2°C over pre-industrial levels will create significant challenges for fossil fuel companies. Recent discoveries of fossil fuel resources in developing countries, meanwhile, presents those countries with important questions of how to meet energy and development needs while minimising growth in greenhouse gas emissions.Adapting to a 2 degree emissions scenario will require a fundamental reassessment of the fossil fuel industry’s growth strategies and business models. It will involve shifting from the 3% annual growth in fossil fuel consumption over recent decades to cuts of around 1% per year starting from now through 2050.
The overarching recommendation of the paper is that leading companies urgently develop strategic plans to identify how they can compete commercially in a world of 2 degree climate commitments. It focuses on issues at the heart of the challenge, including the development priorities of emerging economies with recent discoveries of fossil fuels. The aim is to unleash the industry’s creativity and innovation in finding profitable solutions. Curtailing growth in fossil fuel use presents clear challenges for the industry. However, the effect on companies’ profitability and value depend more on the extent to which the industry is able to be proactive in shaping the transition, rather than reacting to external pressures.
A significant opportunity exists for companies to lead the debate about the industry transformation that will be needed to meet the 2 degree target. The industry has so far generally been locked in defensive mode, reacting to external pressures. The recommendations aim to set the basis for the industry transformation which may be needed as a result of international agreements made at Paris.
Specifically, we recommend that companies:
- Establish how they will compete in a world of 2 degree climate commitments
- Drive a new scale of ambition for carbon capture collaboration
- Open up major new markets in helping energy-hungry emerging economies decouple economic growth from emissions
- Pioneer new models of collaboration with low-income, fossil fuel-rich countries
- Create powerful, practical proposals for governments on ways to achieve the 2 degree limit
Critical Resource assembled an Advisory Panel of leading industry and international figures to oversee the process and outputs of the initiative. The Advisory Panel for Phase 1 of the initiative leading up to the publication of the report on November 2015 comprised:
- Lord (John) Browne of Madingley (Executive Chairman, L1 Energy; former CEO of BP) – click here for the transcript of a speech Lord Browne gave at a Critical Resource event, calling for stronger industry action on climate change
- Connie Hedegaard (Former EU Commissioner for Climate Action)
- Julia King, Baroness Brown of Cambridge (Member of the UK’s Committee on Climate Change; former senior Rolls-Royce executive)
- Julia Marton-Lefèvre (Former Director-General, IUCN)
- Dr Bert Metz (Former Co-Chairman, Working Group III, IPCC)
- Sir Mark Moody-Stuart (Former Chairman of Shell and Anglo American)
- Michael Zammit Cutajar (Former Executive Secretary, UNFCCC)
“The goal of the ‘Heat Is On’ initiative is to catalyse stronger leadership by fossil fuel companies on climate change – so that oil, gas and coal companies play a meaningful and important role in helping the world to limit global mean temperature rise to 2°C above pre-industrial levels.
Achieving this limit will require major reductions in greenhouse gas emissions, with a clear pathway to achieving net-zero emissions by 2100. This has critical short- and long-term business implications for fossil fuel companies. The initiative will develop a vision for the industry’s transformation, engaging with industry to achieve progress. It will be grounded in an understanding of business realities and the world’s growing need for affordable energy – and also a recognition of the urgency of catalysing significant industry action on climate change.”
- Financial Times – ‘groundbreaking report’
- The Guardian – coverage of the initiative
- Reuters – ‘gap between plans and climate pledges’
- Financial Times – ‘Energy groups face Kodak moment’
- Wall Street Journal – quote from Daniel Litvin, Critical Resource MD
- BBC – interview with Daniel Litvin, Critical Resource MD