Climate laws could mean higher refining costs
Last year, the landmark Paris Agreement cemented a
commitment by almost 200 countries to cut greenhouse gas (GHG) emissions by
2020 to limit rising global average temperatures to less than 2⁰C. If those
participating countries use higher carbon prices as a way to achieve that goal,
oil and gas producers could face higher production costs.
Carbon dioxide emissions have been named as a significant
cause in global warming. The idea of carbon pricing, or charging for each
metric ton of carbon dioxide emitted, to curb rising emissions has gained
momentum after several companies, including major oil companies, said it is
necessary to kick-start low-carbon energy investment.
However, the impact of carbon costs put in place to achieve
these goals remains unclear.
A model has been developed by The Investment Leaders Group (ILG), a global network of pension funds, insurers and asset managers, and Cambridge University, to determine what those costs would contribute to production costs.
The UN’s Intergovernmental Panel on Climate Change dictates
that a carbon price of €45/mt is the median carbon price needed to remain within
the temperature rise limits. The model was developed around that standard. It
also studied the impacts of existing GHG-limiting measures on oil and gas
producers. The prices, effects and challenges varied by region.
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