Climate Crisis: Dead Med Gas, Executive Bonuses, Coal Exports, Aviation Loophole
Welcome back to TRNN’s Climate Crisis News Roundup. In recent weeks, this column has focused heavily on the intersection between COVID-19 and the climate crisis, and that will continue as the pandemic sweeps through the world. But climate change and the politics of surrounding this monumental issue are still happening outside of the context of COVID-19 too, and we will use this space to tell those stories too.
If you have a story you think deserves a spot in the roundup or story pitches in general, get in touch with me at [email protected] or on Twitter at @SteveAHorn. You can read the previous edition here.
Med Gas Dead?
Several months ago, drilling for natural gas in the eastern Mediterranean Sea appeared to be the next great offshore frontier for Big Oil. With Israel, Cyprus and Greece on board, a new geopolitical alliance had greenlit drilling at the behest of major companies like ExxonMobil, Eni, and Total.
We covered these developments back in February in an investigation published jointly with The Intercept. That piece covered how the American Chamber of Commerce in Cyprus—a U.S. Chamber of Commerce offshoot financed by the U.S. Embassy in Cyprus—helped ExxonMobil and Noble to forge a three-country alliance to fend off Turkey’s presence in these contested waters and tap into the gas.
It looked like a formidable troika. And then COVID-19 happened. Now, offshore drilling in this region may not happen at all, or at least not anytime soon. This is due to a topic covered previously where we looked at the United States’ oil industry and the demise of fracking as we know it. That is, unconventional drilling like fracking and deepwater offshore extraction is expensive and requires a high global price of oil, a price which currently doesn’t exist with the global economic system is in turmoil due to the coronavirus.
Put simply, offshore drilling in the Mediterranean no longer appears economically viable.
Industry publication Platts reports that “activity has all but ground to a halt, with drilling by players such as France’s Total, Italy’s Eni and the US’ ExxonMobil postponed until at least next year” due to the economic dynamics at play.
It’s not just an economics issue. As covered in last week’s roundup, the European Commission—the legislative body for European Union countries—has proposed a green stimulus plan to grant billions of dollars to transition member states off of fossil fuels and hit zero greenhouse gas emissions by 2050. Offshore drilling for gas, due to concerns over methane leakage, may not fit under the banner of the European Commission’s green stimulus planning and financing.
“I was very dubious about East Mediterranean gas even at pre-2019 prices. Now forget it,” Jonathan Stern, Distinguished Research Fellow for the Natural Gas Research Programme at the Oxford Institute for Energy Studies, told Platts.
Stern also said that by the time a commercial-scale industry is set up in the region, “CO2 constraints would add further costs and complexity.”
Eight EU countries have pushed back against taking natural gas out of the body’s Green Deal stimulus plan. One of them is Greece, while the other are Eastern European countries heavily reliant on gas imports sent from the United States and Russia. They include Bulgaria, the Czech Republic, Hungary, Lithuania, Poland, Romania, and Slovakia, which co-signed a position paper titled the “Role of natural gas in climate-neutral Europe.”
“While transitioning away from solid fossil fuels, we need to ensure the security of energy supplies as well as to address the social and economic aspects of this process with particular emphasis on overcoming the consequences of the current situation caused by COVID 19,” the countries state in the paper. “As the Member States and their regions vary significantly, the EU energy and climate policy should recognise the existence of national and regional differences and should allow tailored solutions to be implemented leading to the achievement of climate-neutral European Union by 2050.”
The countries’ letter goes on to say, “Natural gas can curtail greenhouse gas emissions (60% less CO2 than coal) but also of dusts and other pollutants such as [nitrogen oxide] and [sulfur dioxide] (up to 99% less than coal).”
But as we covered previously here at The Real News, deepwater offshore drilling for gas is a major emitter of methane, a greenhouse gas dozens of times more potent than CO2 during its first 20 years in the atmosphere.
Methane emissions go unmentioned in the position paper.
The oil industry is in economic freefall, but the executives running many of America’s top fracking companies could still walk away with bonuses. That’s according to a March 27 story by Reuters, pointing to a metric the industry uses called total shareholder return.
The metric is not measured against companies in other industries, though, but only the oil industry itself. So, if a company is failing economically, it is measured only relative to how badly other companies in the industry are failing. This enables “executives to get big payouts even if their companies’ stocks lose value,” Reuters explained.
“That system means the heavy shareholder losses expected this year will likely not translate to big reductions in CEO stock awards because the pandemic hit all oil companies in roughly equal measure,” the publication further detailed.
The energy industry is not the only industry which does bonuses this way: “One-third of S&P 500 companies benchmark relative [total shareholder return] against a broad index of firms,” the piece explained.
In practice, this has led to the CEOs of the 15 largest oil and gas producers landing more than $2 billion in bonuses over the past decade under this system of incentives.
One example is Devon Energy, the Oklahoma City-based company and namesake of its Devon Energy Center skyscraper office building. In January, its CEO David Hager took home $1.3 million in stock awards as a bonus in January even after the company’s stock value fell 41% in the past three years. Fellow Oklahoma City-based fracking company Chesapeake Energy also doled out $25 million in bonuses to its executives for work performed in the previous year even as it may soon enter bankruptcy proceedings.
Responding to the article on Twitter, the Alaska Wilderness League wrote that “U.S. energy executives have received lavish payouts even as they have struggled for years to deliver shareholder returns, and now their compensation is being insulated from the pain of the worst energy crisis in four decades caused.”
U.S. energy executives have received lavish payouts even as they have struggled for years to deliver shareholder returns, and now their compensation is being insulated from the pain of the worst energy crisis in four decades caused by #coronavirus. https://t.co/2QJhfJksG8
— Alaska Wilderness League ❤️🌎 (@alaskawild) May 28, 2020
Meanwhile, the oil and gas industry consultancy firm Rystad Energy predicts that over 1 million oil and gas sector workers could lose their jobs due to COVID-19 economic fallout. Tens of thousands of workers in the industry have already lost their jobs in recent weeks, and the cuts keep coming.
Some have called for a nationalization of the industry as a means of ensuring a just transition away from fossil fuels for the industry’s workforce and to ensure, as Reuters reported, that executives do not come out of this moment with even more wealth at the expense of their workers. We covered that in a recent video report.
The Ninth Circuit has upheld the U.S. District Court’s 2018 reversal of a coal export ban implemented by the Oakland City Council in 2016. The court ruled that Oakland violated its initial contract with the company seeking to build an exports terminal when the City Council subsequently voted to ban exports within city limits. Oakland’s ban inspired a movement around another coal storage ban in the neighboring San Francisco Bay Area city of Richmond. Richmond’s City Council voted for the ban in January of 2016. The Real News Network reported on Mayor Tom Butt’s decision the previous December to delay the vote under political pressure from the coal industry.
The court ruling provides a major lifeline to an industry in steep decline in the United States, with already an announced 13 power plants shuttering in 2020. In this case, that lifeline is the Asian market, the only area in the world still where coal is still king.
Slated as the largest West Coast coal exports terminal in the country after many other proposals have received denials, it is proposed by the company Oakland Bulk & Oversized Terminal (OBOT) and would sit close to the Port of Oakland on a former Army base. OBOT’s real estate developer has business ties to former Governor Jerry Brown, known in many circles as a globally iconic climate leader. The owner of the terminal, businessman Phil Tagami, hosted Brown’s 2005 wedding in which he married Anne Gust.
In response to the court ruling, the volunteer group No Coal in Oakland said in a press release that environmental and climate concerns about the proposed export terminal “remain unaddressed” by the federal judiciary.
“As a third-generation resident, I have fought for environmental justice in West Oakland for over 20 years and will continue to fight the developer’s plans of putting profit over people and his total disregard for West Oakland residents, and the health and safety of all who live, work, play and pray in the city,” Margaret Gordon, the cofounder of West Oakland Environmental Indicators Project, said in the release.
The publication Climate Central reported in February that though coal only “accounted for 31% of energy generated in the U.S. in 2017, it was responsible for 68% of the emissions.”
Lastly, the aviation sector is attempting to obtain a regulatory loophole from a United Nations body created to curb its emissions. Commercial aviation creates 2.5% of the world’s greenhouse gas emissions and at current rates, air travel could grow at a 5% annual rate through 2034.
Called the International Civil Aviation Organization (ICAO), the United Nations-administered group runs an international offsets scheme for the aviation industry known as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA currently mandates that beginning in 2020, airlines must take greenhouse gas emissions mitigation efforts like increasing the efficiency of aircraft or buying credits from the carbon market if company emissions rise above 2019-2020 levels.
Now under CORSIA, the aviation industry has asked for offsets levels to be based upon its high 2019 emissions levels, not its historically low 2020 levels and the accompanying extraordinarily declining number of commercial airline passengers caused by the COVID-19 pandemic. The request comes from the industry’s trade association, the International Air Transport Association (IATA).
Keeping it at 2019 levels, rather than 2020 levels, would allow the industry higher “allowances” to pollute in the future. It is those allowances to emit which critics believe are the root problem with market-based cap-and-trade programs like CORSIA to begin with. First reported on by the UK-based outlet Climate Home News, a coalition of climate groups sent a letter on May 25 to the ICAO requesting that the industry request not get the green light.
“As organisations active in various aspects of the aviation carbon market (including programmes, developers, brokers, NGOs and businesses), we would like to highlight the importance of safeguarding the integrity, stability, and regulatory predictability of CORSIA as adopted by the Assembly,” wrote the signatories, who include the Environmental Defense Fund, Carbon Market Watch, World Wildlife Federation and others. “We, therefore, urge you not to modify the CORSIA baseline.”
Similarly, the Germany-based environmental advocacy think tank Öko-Institut (Institute of Applied Ecology) published an analysis on May 25 about the IATA proposed rule change and concluded that, in effect, this could “could reduce the overall mitigation achieved through CORSIA by about 25-75%.”
The aviation degrowth advocacy group Stay Grounded Network added in a tweet that “CORSIA is almost completely useless anyways – but that does not mean that you have to make it even worse.”