{"id":12223,"date":"2016-11-04T16:39:49","date_gmt":"2016-11-04T20:39:49","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/chevron-from-fossil-fuels-to-a-low-carbon-future\/"},"modified":"2016-11-04T16:39:49","modified_gmt":"2016-11-04T20:39:49","slug":"chevron-from-fossil-fuels-to-a-low-carbon-future","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/chevron-from-fossil-fuels-to-a-low-carbon-future\/","title":{"rendered":"Chevron: From Fossil Fuels to a Low-Carbon Future"},"content":{"rendered":"

Chevron: From Fossil Fuels to a Low-Carbon Future<\/strong><\/h3>\n

Chevron is one of the world\u2019s largest integrated oil and gas companies.\u00a0 As a global energy company that produces fossil fuels and consumes a large amount of energy in its own operations, Chevron\u2019s business contributes significantly to climate change.\u00a0 The scientific community broadly agrees that anthropogenic increases in greenhouse gases (GHGs) have been the primary driver of climate change, and the main source of these GHG emissions is the burning of fossil fuels.\u00a0 Currently, fossil fuel consumption generates more than 25% of the world\u2019s GHG emissions.[i]<\/p>\n

Climate change implications <\/u><\/strong><\/p>\n

To respond to growing climate concerns, many countries have committed to developing policies that will limit climate change to 2\u00b0C (3.6\u00b0F) above pre-industrial levels.[ii]\u00a0 While new regulatory restrictions are necessary to limit climate change impacts, they also pose significant risks to Chevron by increasing operating costs and possibly even restricting some of the company\u2019s operations.\u00a0 This has the potential to increase prices for oil and gas products and also decrease consumer demand.\u00a0 Regulation could also limit Chevron\u2019s ability to capitalize its proven oil and gas reserves. The Carbon Tracker Initiative, for example, estimates that \u201cunburnable carbon\u201d could potentially cause a 40-60 percent loss in market value for oil and gas companies.[iii] [iv]<\/p>\n

In addition to these regulatory risks, Chevron faces a number of operational challenges due to climate change.\u00a0 Increases in extreme weather events, as well as rising temperatures and sea levels, have the potential to damage Chevron\u2019s infrastructure, put its employees at risk, and disrupt its operations.\u00a0 Because oil and gas companies depend heavily on water for their operations, Chevron is also particularly exposed to declining water availability.[v] Climate change impacts like these not only increase costs, but can contribute to environmental accidents and tensions with communities.<\/p>\n

Chevron\u2019s current climate change strategy<\/u><\/strong><\/p>\n

Like many of its peers, Chevron recognizes the physical and regulatory risks that climate change poses to its business, and has taken a number of mitigation steps.[vi]\u00a0 Chevron\u2019s climate change strategy is guided by three overarching objectives:<\/p>\n

    \n
  1. Greenhouse gas management<\/li>\n<\/ol>\n

    The primary sources of GHG emissions from Chevron\u2019s operations come from the combustion of fuels and the flaring of natural gas.\u00a0 To reduce its GHG emissions, Chevron seeks opportunities to use more efficient fuels in its operations and capture natural gas before it is emitted to the atmosphere.<\/p>\n

      \n
    1. Energy Efficiency<\/li>\n<\/ol>\n

      To enhance the company\u2019s energy efficiency, Chevron focuses on cutting energy costs, enhancing equipment reliability and investing in new energy efficient technologies.\u00a0 This includes operating cogeneration units, which generate electricity much more efficiently than local utility companies.<\/p>\n

        \n
      1. Renewable Energy and Emerging Technology<\/li>\n<\/ol>\n

        Chevron has also started to invest in renewable energy, focusing specifically on technologies that leverage the company\u2019s strengths and have competitive economic returns.\u00a0 These technologies include geothermal energy, advanced biofuels, wind power and solar energy.<\/p>\n

        Moving towards a low-carbon future<\/u><\/strong><\/p>\n

        Increasing pressure to curb GHG emissions fundamentally threatens oil and gas operations, however, these changes also present opportunities for companies that embrace a longer-term view of value-creation.[vii]\u00a0 While Chevron has taken some positive actions, there are a number of additional steps they should consider.<\/p>\n

        Currently, Chevron is focused on renewable technologies that have competitive economic returns.\u00a0 Because many renewable technologies are in relatively nascent stages and haven\u2019t reached scalable levels in terms of economic viability, Chevron should look to invest more broadly in the development of renewable energies.\u00a0 Resulting technology advancements will enhance Chevron\u2019s operational efficiency, and will also place the company in a strong position to transition to more renewable energy over time.\u00a0 This will be particularly important as new GHG regulations come into effect.<\/p>\n

        Legislation also poses an opportunity for Chevron.\u00a0 Unlike many of its peers, the company should be preemptive and advocate for a global carbon price that puts a price on all carbon equally.\u00a0 This type of carbon price would incentivize both producers and consumers, create a level playing field for everyone, and make energy efficiency and alternative energy sources much more cost competitive.[viii] [ix]\u00a0 Proactive efforts like these will also give Chevron leverage with policy makers, allowing them to participate in the legislative process.<\/p>\n

        Lastly, I believe Chevron should invest\u00a0additional resources in\u00a0carbon capture and storage (CCS) technology.\u00a0 CCS captures CO2<\/sub> either by recycling it from wells or sourcing it from company operations or other commercial suppliers.\u00a0 Once captured, the CO2<\/sub> is injected into the reservoir to enhance oil recovery, and the majority of it remains permanently sequestered underground.[x]\u00a0 Currently, CCS technology faces many barriers including high costs, commercial complexity, and a lack of economical sources of CO2<\/sub>.[xi]\u00a0 If these challenges can be resolved, however, this technology has the potential to enable the continued use of fossil fuels while simultaneously reducing GHG emissions.<\/p>\n

        Given that energy demand is increasing and fossil fuels are expected to continue their primary role in meeting energy needs, actions like these are necessary to address climate change and make Chevron\u2019s business model sustainable in the long-term.<\/p>\n

         <\/p>\n

        Word Count: 800<\/strong><\/p>\n

        Endnotes:<\/strong><\/p>\n

        [i] Henderson, R., Reinert, S., Dekhtyar, P., & Migdal, A. (2016). Climate Change in 2016: Implications for Business. Boston: 性视界 Business School.<\/p>\n

        [ii] United Nations Environment Programme. (2013). GEO-5 for Business: Impacts of a Changing Environment on the Corporate Sector. UNEP.<\/p>\n

        [iii] Ibid.<\/p>\n

        [iv] Carbon Tracker Initiative, Unburnable Carbon: Are the world\u2019s financial markets carrying a carbon bubble?, March 2012, http:\/\/www.carbontracker.org\/wpcontent\/uploads\/downloads\/2012\/08\/Unburnable-Carbon-Full1.pdf<\/a> ; Will Nichols, HSBC: BP, Shell, Statoil at risk from \u2018unburnable\u2019 reserves, GreenBiz.com, January 30, 2013, http:\/\/www.greenbiz.com\/news\/2013\/01\/30\/bp-shell-statoli-riskunburnable-reserves<\/a>; Jeremy Lovell, Risks of U.S. coal companies examined as Oxford starts study of stranded carbon assets, ClimateWire, February 12, 2013, www.eenews.net\/climatewire\/2013\/02\/12\/<\/a> archive\/2; Rachel Alembakis, Assessing fossil fuel value in an \u201cunburnable carbon\u201d world, The Sustainability Report, April 12, 2013, http:\/\/www.thesustainabilityreport.com.au\/assessing-fossil-fuel-valuein-anunburnable-carbon-world\/3601\/<\/a><\/p>\n

        [v] United Nations Environment Programme. (2013). GEO-5 for Business: Impacts of a Changing Environment on the Corporate Sector. UNEP.<\/p>\n

        [vi] Chevron. (2016). Climate Change. Retrieved 11 2, 2016, from Chevron: https:\/\/www.chevron.com\/corporate-responsibility\/climate-change<\/a><\/p>\n

        [vii] Henderson, R., Reinert, S., Dekhtyar, P., & Migdal, A. (2016). Climate Change in 2016: Implications for Business. Boston: 性视界 Business School.<\/p>\n

        [viii] BP. (2016). Working towards a lower-carbon future. Retrieved 11 2, 2016, from BP: http:\/\/www.bp.com\/en\/global\/corporate\/sustainability\/the-energy-challenge-and-climate-change\/working-towards-a-lower-carbon-future.html<\/a><\/p>\n

        [ix] Shell. (2016). Morocco Climate Talks: Five Things that Must Happen. Retrieved 11 2, 2016, from Shell: http:\/\/www.shell.com\/inside-energy\/morocco-climate-talks.html<\/a><\/p>\n

        [x] Occidental Petroleum Corporation. (2016). Carbon Dioxide Sequestration. Retrieved 11 2, 2016, from Occidental Petroleum Corporation: http:\/\/www.oxy.com\/SocialResponsibility\/Environmental-Stewardship\/Pages\/Carbon-Dioxide-Sequestration.aspx<\/a><\/p>\n

        [xi] BP. (2016). Working towards a lower-carbon future. Retrieved 11 2, 2016, from BP: http:\/\/www.bp.com\/en\/global\/corporate\/sustainability\/the-energy-challenge-and-climate-change\/working-towards-a-lower-carbon-future.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

        As a primary contributor to climate change, Chevron and other oil and gas companies are under increasing pressure to adapt their business practices and significantly reduce their GHG emissions. 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