President Donald Trump has shown reluctance toward addressing the climate change issue. Regardless of his attitude, various energy companies have teamed up on a voluntary program launched by The American Petroleum Institute (API) to lower methane emission. This is the first time that the API has initiated a pollution check to address the burning issue of climate change.
Methane — a Potent Greenhouse Gas
Energy companies have started switching to natural gas since it is touted to be the cleanest among all fossil fuels. Less amount of carbon dioxide is released during the burning of natural gas compared to oil or coal. Methane, which is around 84 times more potent than carbon dioxide and accounting for 25% of global warming today, is a key component of natural gas.
Unburnt methane can escape into the atmosphere during the production process, thanks to leakages. This might lead to hazards like rising sea levels, changing landscapes, higher global temperatures and increased risk of storms and droughts.
Trump's Anti-Climate Policies
Minimizing such emissions had been a priority of the Obama administration. However, Trump’s anti-climate policies — by undoing Obama’s Clean Power Plan and withdrawing from the Paris Climate Change agreement — has received much censure from both environmentalists and investors.
While Trump’s policies may help companies reduce costs in the near term, these are likely to have long-term implications. When energy consumers, investors, environmentalists and citizens want companies to resort to cleaner energy practices, scrapping rules might end up endangering the industry’s social license to operate.
Energy Companies Start Responding
With environmentalists holding energy firms responsible for most of the methane emission, various companies have started taking steps to switch to cleaner energy policies.
Last month, two groups of energy firms signed a set of guiding principles for lowering emissions. The first group comprised Royal Dutch Shell (RDS.A - Free Report) , ExxonMobil Corp. (XOM - Free Report) and Zacks Rank #1 (Strong Buy) BP plc (BP - Free Report) , while the other included Eni, Statoil ASA (STO - Free Report) and TOTAL S.A. (TOT - Free Report) . Per the agreement, they not only vow to curb methane emission, but also ensure proper regulation and improved accuracy of data. You can see the complete list of today’s Zacks #1 Rank stocks here.
The API Initiative
The initiative which is also known as The Environmental Partnership , has more than a dozen energy players including oil supermajors Shell, BP, Chevron Corp. (CVX - Free Report) , TOTAL and ExxonMobil. These have agreed to monitor and control methane emissions from wells, pipelines and other sources of U.S. onshore production.
The program which is set to commence from January 2018 will also provide replacement and associated services to upgrade outdated equipment responsible for air pollution. While significant reduction of pollutants is expected, no target numbers have been released.
However, many environmentalists believe that such voluntary programs will fail to address the critical issue of climate change adequately. They are of the opinion that the move is a cynical ploy for public goodwill as API continues to work with Trump to undermine methane safeguards.
The Environmental Protection Agency also initiated a similar voluntary program named One Future in 2016. However, only around 10 energy companies joined to support the cause but failed to deliver the desired results.
The environment protection groups believe that only stringent regulations and their effective implementations will help to reduce carbon emissions in the future and facilitate effective transition to cleaner and renewable energy sources. They believe that corporate governance and environmental management should work together to solve the problem.
The companies should regularly and accurately disclose their non-financial metrics including carbon and methane emissions. These companies should also strive toward focusing both on environment and profits to gain competitive advantage and brand loyalty.
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