BP has announced it will cut its annual renewable energy investment by $5 billion, while increasing annual investment in oil and gas by $10 billion. BP has been under mounting pressure from its shareholders after it suffered lagging share prices compared to its competitors. BP has seen a much lower 36% total return since February 2020, compared to ExxonMobil’s 160% or Shell’s 82%. BP’s CEO, Murray Auchincloss, justified the move by saying the company had moved “too far too fast” on net zero and that BP’s optimism in green energy had been “misplaced”. BP’s Chair, Helge Lund, commented that the move “places free cash flow growth, returns and value at its heart.” BP has also announced that it has signed a $20 billion deal with the Iraqi government. The deal involves BP working on at least four major new oil and gas fields in the Kirkuk region and rehabilitating existing fields. BP aims to be producing 2.4 million barrels of oil and gas a day by 2030, around 60% higher than the target set out by its net-zero plans 5 years ago.
In 2020, BP was recognised as a leader in the fossil fuel sector’s transition to net zero. The company had announced ambitious targets including reducing its oil and gas production by 40% by 2030 and achieving net zero by 2050. However, BP’s new strategy follows a concerning market trend already demonstrated by Equinor and Shell: diluting green pledges and monopolising on the US President Trump’s “drill, baby, drill” slogan. Trump has declared a “national energy emergency” in order to support American oil and gas extraction, and the US’s withdrawal from the Paris Agreement, again. Immediate returns, both politically and commercially, are being prioritised over long-term sustainability.
BP’s decision has come under scrutiny. UKSIF’s James Alexander has warned it is not only “misaligned” with global climate goals, but “should sound alarm bells for investors and UK policymakers alike”. Climate action group 350.org has also criticised BP arguing that this “demonstrates why super-rich corporations and individuals, chasing short-term profit… cannot be trusted with fixing the climate crisis.” Decisions such as BP’s will significantly delay climate goals. BP’s disregard for its previous climate commitments sets a concerning precedent. It may mean other companies, or even governments, are emboldened to dilute their green targets too. BP has historically promoted climate disinformation and delaying climate action, so this injustice is felt even more keenly.
The implications of this reset extend far beyond the oil and gas market. The announcement highlights the precarious balance between short-term financial pressures and long-term climate goals. There is a danger that this precedent will lead to more companies announcing the same dilution of climate targets. The real-time effects of climate change are being felt all over the world and we need to secure a path to a sustainable future quickly. Will the oil and gas industry rise to the challenge? It seems unlikely.