Companies worth US$1 trillion call for fossil fuels phase-out as oil and gas firms scale back climate ambition

A group of 131 companies worth just short of US$1 trillion have published a letter urging financial institutions, oil and gas companies and governments to support the phase-out of fossil fuels.

The letter was coordinated by the We Mean Business Coalition and signed by the likes of SAP, Nestlé, Unilever and IKEA to encourage action ahead of the COP29 summit. It explains that while large companies have “an important role to play in sending a clear signal about our future energy use” by setting science-based targets, they cannot transition away from fossil fuels alone. 

Upon releasing the letter, Anders Kärrberg, Global Head of Sustainability at Volvo Cars (one of the signatories), said: “We know that phasing out fossil fuels is the only way forward if we are to limit global warming and keep people safe from climate catastrophe. But businesses cannot do this alone. Together with We Mean Business Coalition, Volvo Cars calls on all Parties attending COP28 to seek outcomes that will lay the groundwork to transform the global energy system towards a full phase-out of unabated fossil fuels.”

Reduced climate ambitions for oil and gas companies

Oil and gas companies have recently been accused of backtracking on their climate commitments, even as they prepare to take centre stage COP28. Shell, for example, went back on its pledge to cut oil production by 1-2% each year until the end of the decade last June, deciding instead to maintain production and invest US$ 40 billion in oil and gas production until 2035. 

Shell’s CEO Wael Sawan tried to reassure concerned employees that the company is still committed to sustainability last week, but there has been a clear reduction in mentions of climate themes in the company’s filings since 2021. 

The president of this year’s climate summit, Sultan Ahmed Al-Jaber, is the CEO of Abu Dhabi oil company ADNOC. In the run-up to the conference, he has been vocal about the need to “phase down” fossil fuel production – though the use of this expression instead of “phase-out” has been criticised in the past for failing to set a clear deadline for the end of production. 

COP28 fossil fuel expectations: all eyes on carbon capture

The We Mean Business Coalition letter makes its signatories’ expectations abundantly clear: “We call on all Parties attending COP28 in Dubai to seek outcomes that will lay the groundwork to transform the global energy system towards a full phase-out of unabated fossil fuels and halve emissions this decade,” it says.

‘Unabated’ fossil fuels are defined by the Intergovernmental Panel on Climate Change (IPCC) as “fossil fuels produced and used without interventions that substantially reduce the amount of GHG emitted throughout the life-cycle; for example, capturing 90% or more from power plants, or 50-80% of fugitive methane emissions from energy supply”.

In using the word “unabated” in the letter, the group mirrors COP28 expectations expressed by the European Union earlier this month, suggesting that carbon capture technologies will be given an increasingly important role in decarbonising energy supply.  

Carbon pricing and fossil fuel subsidies

The letter also provides specific metrics on how to increase ambition: they include tripling renewable electricity capacity to at least 11,000 GW, doubling the rate of deployment of energy efficiency by 2030, and committing to reach 100% decarbonized power systems by 2035 in advanced economies.

“Business and government must take decisive action to transition from fossil fuels to clean energy. By working together, we can create solutions for communities everywhere,” added Renée Morin, Chief Sustainability Officer at eBay.

Interestingly, these companies unanimously ask governments to set “a meaningful price on carbon that reflects the full costs of climate change”, confirming that carbon taxes are seen as an effective vehicle for change by forward-thinking firms. 

(The EU’s Carbon Border Adjustment Mechanism, which entered its transitional phase this October, will soon impose a carbon levy on electricity imports, and could help spur decarbonisation in the power sector.)

Finally, the letter calls for countries to reform and repurpose fossil fuel subsidies toward energy efficiency, renewable energy “and other measures to support a people-centred and equitable clean energy transition”. The request is timely: research by the International Monetary Fund (IMF) shows that global fossil fuel subsidies surged to a record US$7 trillion last year on the back of skyrocketing energy prices provoked by the Ukraine-Russia war.