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Money

How Warren Buffet Made his Billions

Warren Buffett is on the short list of the wealthiest people in the world, joining the ranks of Bill Gates and Jeff Bezos as figures who transformed their ideas into tremendous amounts of money.

Oil and Gas Plant

How Oil and Gas Companies are Grappling with Climate Change

Climate change presents a major problem for nearly every industry in the world, but the oil and gas industry is perhaps the most directly affected one. As the burning of fossil fuels is the most significant contributor to the greenhouse gas effect, oil and gas companies remain the target of blame for the crisis around the world. As such, these companies are faced with the challenge of reconciling their responsibility to the planet with their obligation to generate profits. Although the science on climate change and the activities that contribute to it has been settled for a long time, it has only been in the past few years that oil and gas companies have come to an agreement about the nature and urgency of the crisis. How they are adapting to a near-global consensus about the need to reduce carbon emissions, however, is more disparate, with some companies investing in alternative energy solutions and others focusing on improving the efficiency of oil and gas consumption.

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Perhaps the most striking example of the oil and gas industry’s involvement in shaping the future of energy consumption is the Oil and Gas Climate Initiative, which was formed by many of the world’s largest oil and gas companies, and whose members include BP, Shell, Exxon Mobil, and Chevron, to name just a few. The initiative’s stated goal is to “deliver solutions for a sustainable low-emissions future,” and their member companies are “dedicated to the ambition of the Paris Agreement to progress to net zero emissions in the second half of this century.” The initiative’s plan for reaching this goal includes three components: reducing the energy value chain footprint, accelerating low-carbon solutions, and embracing a circular carbon model.

The first objective refers to reducing the amount of methane released into the atmosphere during each stage of the process of energy production, from transport and distribution to usage by final customers. Of all of the greenhouse gases, methane traps the most amount of heat in the atmosphere, making its release a primary concern for oil and gas companies looking to reduce their impact on climate change. The second objective refers to optimizing the efficiency of fossil fuel use by investing in technologies that are more energy efficient and researching new low-emissions pathways for the mid and long-term. The last objective refers to capturing carbon emissions and storing them safely or using carbon in products, and then neutralizing any remaining carbon.

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While the Oil and Gas Initiative is certainly a step in the right direction, the organization has plenty of room for improvement. Though many of the world’s major players in the oil and gas space are represented by the initiative, the organization accounts for only 30% of the world’s oil and gas production. And the initiative is mostly focused on making existing fossil fuel consumption methods more efficient rather than switching over to renewable energy platforms, like wind and solar, though they consider renewable energy as a necessary component of the future of energy production. 

Many critics, however, suggest that the approach taken by oil and gas companies is inadequate, and insist that the transition to the energy economy of the future necessitates intervention from governments around the world. These critics, which include organizations like the Climate Action Network, blame the oil and gas industry for suppressing research about the effects of carbon emissions, and claim that major political change is necessary, as meaningful change will not come from oil and gas companies acting alone. The Climate Action Network, as well as other environmental organizations around the world, call for policies like a carbon tax, government investment in renewable energy, and an elimination of subsidies on oil and gas. That being said, global demand for energy, and specifically fossil fuels, is higher now than it’s ever been, and even the most ambitious plans for reducing carbon emissions still recognize that fossil fuel use must continue in some capacity for decades to come.

Climate

EPA Rollbacks Threaten to Accelerate Climate Change

On Thursday, the EPA is set to announce rollbacks on regulations on methane emissions, which are a major contributor to climate change. As it stands, oil and gas companies are required by federal regulations to install and maintain technology that inspects and fixes wells, pipelines, and storage facilities with the potential to leak methane. With these regulations gone, companies would have no legal requirement to ensure that excess methane is not released into the air.

Although these changes are required by law to undergo a period of public comment and review, this process is unlikely to change the outcome of the rollback. (In 2017, 99.7% of public comments opposed rolling back net neutrality regulations; the FCC dismantled these regulations anyway, suggesting that governmental agencies’ public comment periods can have little to no impact on their ultimate decisions.) Notably, several companies in the oil and gas industry oppose this regulatory change. While the American Petroleum Institute praised the proposed change in rules, calling it “a smarter way of targeting methane emissions,” Exxon, BP, and Shell have urged the Trump administration to maintain key elements of the regulation.

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While it may seem counter-intuitive for these companies to oppose loosening restrictions on the emission of greenhouse gases, oil and gas companies have given several reasons for supporting environmental regulations. One reason has to do with messaging: as the arguments favoring the belief that climate change is both man-made and potentially disastrous become increasingly irrefutable, oil and gas companies are re-branding themselves as favoring renewable sources of energy. As such, it would be hypocritical for them to oppose environmental regulations. Additionally, the view that natural gas is a cleaner source of energy than oil requires that methane emissions are curtailed as much as possible, as the process of extracting and refining natural gas has a strong potential to cause methane leaks if not handled carefully.

This is not the only case where companies have opposed the Trump administration’s rolling back of environmental regulations that impact their business. This summer, Ford, Volkswagen, Honda, BMW, and Mercedes-Benz teamed up with the state of California to oppose auto emissions rollbacks. These rollbacks, which have not yet been implemented, would reverse a rule requiring automobiles to reach an average of 54.5 miles per gallon by 2025, lowering the standard to just 37 miles per gallon. However, 13 states, including California, have vowed to continue to enforce the regulation, leading to a potential disparity in regulations between states and a splintering of the automobile market. As such, some auto manufacturers have sided with California over the Trump administration, seeking to abide by standards that would allow them to continue producing a single fleet of vehicles for all 50 states.

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Additionally, the Trump administration has sought to roll back regulations on mercury emissions that were instituted by the Obama administration in 2011. As human exposure to mercury leads to serious health problems, the regulations on the permissible amount of mercury in the environment were strict, and as a result of these regulations mercury pollution has fallen by 70 percent. Although coal companies such as Duke Energy opposed the regulation, due to the substantial financial burden of installing the technology necessary for compliance, they now oppose rolling back the regulation, as they fear that the money they spent will go to waste if they are not obligated to continue monitoring and reducing mercury emissions.

While somewhat surprising, the shift of oil, gas, and automotive companies towards a more environmentally friendly and consumer-oriented approach is part of a larger trend created by the vacuum of leadership in government combined with worsening environmental and economic conditions. Recently, Business Roundtable announced that many of the world’s major CEOs would shift their focus away from prioritizing shareholders to prioritizing stakeholders in an effort to ensure a healthier and more inclusive economy. This announcement was made in the context of tax cuts that benefited the wealthy at the expense of the middle and lower classes; fearful that the rise of income inequality would lead to an unstable economic situation, the free market reacted by reorganizing its priorities to support a growth in consumer’s spending power. A similar philosophy is driving energy companies such as BP to focus on “green” solutions for harnessing energy. The long-term viability of this practice of self-regulation remains to be seen.