‘Struggling’ oil industry claims it will be destroyed by EU climate measures

April 25, 2008

T&E Director Jos Dings writes in today's Financial Times: European Union officials must be getting used to the familiar refrain they hear every time an industry sector is asked to cut carbon emissions. But when the latest industry to claim it will be “destroyed” by a flagship European climate policy also happens to be one of the richest and most influential, its arguments warrant a closer look.

Jeroen van der Veer, chief executive of Royal Dutch Shell, told a British newspaper recently that the proposed European Union scheme to force companies to pay for carbon emissions permits previously handed out free threatens to destroy Europe’s petrochemicals and refining industry (1). Mr van der Veer, whose company made a profit of $27.6bn last year, thinks that the proposals would harm his “struggling” industry, causing refineries in Europe to close and jobs to leak outside the EU. That doesn’t seem likely. The UK Carbon Trust has said: “The EU Emissions Trading Scheme is unlikely to have much impact on the trade of oil products … Harmonising free allocations could be complex and create perverse incentives. Avoiding free allocation altogether … would avoid these problems and the benefits of this requirement may outweigh any plausible international trade impacts.” Depressingly, the oil industry is also trying to put the kibosh on another very important (but less well-known) EU initiative. Article 7a of the proposed Fuel Quality Directive says that carbon emissions from transport fuel production should be reduced by 10 per cent by 2020. Europia, the industry lobby group, says the law should not apply to oil companies. It argues that biofuels are “the only option to reduce greenhouse gas emissions of road transport fuels”, implying that oil production is already squeaky green. Apparently (and worryingly) the oil majors have never heard of reducing flaring, improving refinery efficiency or cutting back on tar sand oil production, which is three times more carbon-intensive than conventional oil production. For several years the oil industry has been trying to convince the world that it is serious about going green; “beyond petroleum”, as one company famously put it in a multi-million dollar marketing campaign. The sad reality is, they are up to all their old tricks.

1. See the original article in The Times newspaper.