Carbon Footprint: The Unequal Impact of Oil Barrels and Its Significance for the Energy Transition

[Un article de The Conversation écrit par Renaud Coulomb – Professor of Economics, Mines Paris – PSL – ; Fanny Henriet – Directrice de Recherche au CNRS en économie, Aix-Marseille Université (AMU) – & Léo Reitzmann – PhD candidate in Economics, Paris School of Economics – École d”économie de Paris]

Reducing greenhouse gas emissions (GHG) related to oil cannot only reduce the consumption of petroleum products. Indeed, the carbon footprint linked to their production varies considerably from one deposit to another. Under these conditions, to limit their environmental impact, it is crucial to favor deposits whose carbon footprint and extraction costs are the lowest.

Combined with traditional measures to reduce the demand for oil (energy sobriety, development of electrical transport, etc.), a strategy focused on the decarbonation of the oil supply can therefore accelerate emission reductions, while reducing their economic cost. This is what we show in recently published research.

But for it to work, it is essential to have precise and transparent data regarding emissions from this industry. Otherwise, any regulation based on the carbon intensity of the exploitation of oil deposits may be ineffective.

Oil barrels do not all have the same carbon intensity

The barrels of oil differ not only by their cost of extraction, but also by their carbon footprint.

The exploitation of the most polluting oil sources, such as the bituminous sands in Canada, generates on average more than twice as much GHG emissions by barrel than the lighter oil exploitation from countries like Saudi Arabia or Norway.

These differences are explained by the physical properties of petroleum (density and viscosity, for example), the geological constraints linked to the deposits and the extraction methods used (in particular on site combustion-called torch-that is to say direct rejection in the atmosphere of natural gas, which often accompanies the extraction of oil).

This heterogeneity of the deposits, combined with the abundance of oil with regard to the climatic objectives discussed during COPs, makes the selection of deposits to exploit an important lever for reducing emissions.

The oil offer, an underestimated attenuation lever

From the Rio Earth Summit in 1992, a historic date in the recognition of the climate problem and its human origin, oil producers have not taken into account the carbon intensity differences in their products, linked to extraction and refining.

It is hardly surprising: no notable regulations or regulation encouraged them to do so. In general, GHG emissions due to the production and refining of oil have not been priced by the large producing countries so as to reflect the damage caused to the environment.

Our research shows that this omission has had significant climatic consequences.

We have calculated the emissions that could have been avoided from 1992 to 2018, if we had changed the allocation of production between the various active deposits-without modifying the global production levels and taking into account the production constraints of each deposit-so as to minimize the total social cost-that is to say, taking into account both extraction costs and GHG emissions. Almost 10 billion tonnes of equivalent CO₂ (CO2E) could have been avoided, which is equivalent to two years of emissions from the world transport sector.

At the current cost of environmental damage, estimated at approximately 200 dollars per tonne of CO₂, this represents $ 2,000 billion in climate damage avoided (in constant dollars of 2018).

Current efforts are mainly aimed at reducing overall oil consumption, which is necessary. But our results show that it is also important to prioritize the exploitation of less polluting deposits.

To reduce the social cost of constant total production extraction, it would have been better than countries with very carbonated deposits, such as Venezuela or Canada, reduce their production, replaced by an increase in countries with less polluting deposits, such as Norway or Saudi Arabia.

Even within countries, differences in carbon intensity between deposits are often important. Internal reallocations in countries would make it possible to obtain programs reductions in the same order of magnitude as those obtained by authorizing the aggregated productions of each country to change.

Integrate this lever into public policies

Even if these opportunities for dropping emissions have been missed in the past, we still have the opportunity to shape the future of oil supply.

If we take up the preceding calculation hypotheses, and assuming that the world engages in a zero net emission trajectory (net zero emissions, nze) in 2050, take into account the heterogeneity of the carbon intensity between the deposits in the oil supply decisions would allow:

• to reduce our 9 billion tonnes (Gigatonnes) CO2E emissions by 2060,
• Avoid about $ 1,800 billion in damage, without further reducing consumption compared to the Nze scenario.

However, political debate is often focused on reducing oil demand, with the implementation of tools such as incentives for the adoption of electric vehicles or taxes on petroleum products. A drop in oil demand is obviously essential to maintain global warming below 1.5 ° C or even 2 ° C.

But as long as we continue to consume it, prioritize deposits with lower carbon intensity offers an additional opportunity to reduce emissions.

To gain efficiency, public policies could integrate more exhaustive carbon pricing, which would take into account emissions on the whole life cycle of petroleum products, from oil exploration to the combustion of fossil fuels.

These could be supplemented by border adjustments, on the model of what the European Union is preparing to make for the carbon footprint of imported products, if this pricing is not adopted worldwide. Or, this could go through the direct ban on extraction of oil types, the most of which emits GHG emissions (for example, extra heavy oil or deposits with very high levels of Torkhage), with a concern for administrative simplification.

Some policies are already going in this direction. California, with its standard Low Carbon Standard, was a pioneer by differentiating fuels according to their emissions on the entire life cycle, in order to reduce the average carbon intensity of the fuel used on the territory.

In Europe, the fuel quality directive (modified by the new renewable energies directive) promotes biofuels, but does not finely distinguish petroleum products according to their carbon intensity.

The crucial issue of data access

However, the implementation of these policies is based on a crucial pillar: access to reliable public data on the carbon intensity of oil deposits.

And this is the node of the problem: these estimates vary strongly according to the sources. For example, the International Association of Petroleum and Gas producers (IOGP) publishes figures almost three times lower than those from more robust tools, such as that developed by the University of Stanford and the Oil-Climate Index.

This difference is partly explained by differences in the perimeter of emissions taken into account (exploration, construction of wells, deforestation, etc.), but also by differences in the data used. Regarding torchage and direct rejection in the atmosphere of natural gas, IOGP is based on figures declared voluntarily by companies. However, these are notoriously underestimated, according to observations from satellite imagery.

It is thus impossible to effectively apply regulations aimed at discriminating for oil barrels according to their carbon intensity if there are not reliable and above all verifiable data. Transparency is therefore essential to verify business declarations.

This involves rigorous monitoring mechanisms to supply public databases, whether by satellite or by independent ground measures. The recent decline in the United States with regard to the publication of reliable climatic data by government agencies further accentuates these challenges. Indeed, estimates of emissions linked to methane torchage used in our study are based on satellite imagery of the National Oceanic and Atmospheric Administration (NOAA) and NASA.