Oil major Total ends its membership of the most powerful petroleum lobby
European oil major Total SE has ended its membership with the American Petroleum Institute (API) due to disagreements in positions over climate policies (more details here). In doing so, Total became the first major global energy company to cut ties with the API. Although API has historically played a significant role in developing the oil and gas industry standards for safety and operations, it has also continued to maintain its reputation as the most powerful lobby promoting the interests of the petroleum industry. API has recently faced heavy criticism, as despite the growing concerns over climate change, it’s recent lobbying activities continued to support the rollback of US regulations on emissions of methane (a greenhouse gas 25x more potent than CO2), opposed subsidies for electric vehicles, and has not supported carbon pricing.
Continuing divergence in climate positions of European and American energy majors
Total’s withdrawal from API is yet another indication of the growing divergence in positions between European and American energy majors on climate action. Over this past year, while Total, and other European majors such as Shell and BP, have committed to achieve net-zero carbon emissions by 2050, the US majors such as ExxonMobil and Chevron have largely continued business as usual. The withdrawal from highly visible petroleum lobbies have started becoming a growing trend among the European majors. For example, Shell, Total, and BP have all withdrawn their support of American Fuel and Petrochemical Manufacturers (AFPM), the main oil refining lobby in the US. Similarly, BP has also withdrawn its support of smaller lobby groups such as Western Energy Alliance (WEA), and the Western States Petroleum Association (WSPA) due to differences in positions on climate change.
More needs to happen?
While the majors’ withdrawal from the lobbying organisations are certainly very welcome news, there are also significant remaining concerns that they may still be continuing to fund lobbyists behind the scene, in contrast to their own public position. Indeed, public disclosure of association with lobbies has continued to remain a major issue in the industry. An investigation from Huff Post last year found atleast 8 lobbying organisations that were still being supported by Shell and BP (more details here). Our research team at ESG Base has also concluded that even though the oil and gas industry experienced one of its worst years in 2020 in terms of profitability and valuation, over $83 million was spent on oil and gas lobbying activities at the US Federal government level in 2020.
Oil and Gas lobbying at US Federal level
(data from: OpenSecrets.org)
Here is a breakdown of the $83 million spending on oil and gas lobbying in 2020, as published by a US watchdog OpenSecrets.
Breakdown - Oil and Gas lobbying at US Federal level
(data from: OpenSecrets.org)
Future directions?
Lobbying for rollback of regulations on climate actions is clearly counter productive to facilitating a speedy transition to a more sustainable economy and needs to stop. With the oil and gas industry continuing to face the pressure to respond urgently to climate change, we expect to see more such withdrawals from lobbying activities in the future. Also, with an imminent significant change in US government position toward climate action, we project that it’s only a matter of time before the US majors start taking more decisive actions to respond to the climate crisis.
The inadequate disclosure of association with lobbyists continues to be a major stumbling block in aligning investments with ESG principles. Policymakers have an important role to play to ensure transparency in the industry, so that investors can decisively invest in ESG-aligned companies.
Investors intending to take the lead in sustainable investments can now use ESG Base’s specialised capabilities to identify the policy trends around the world supporting energy transition and sustainability.
About ESG Base
ESG Base is a London-based, global premium provider of technology and data solutions enabling ESG investments in real assets.
ESG Base Ltd.’s mission is to offer scalable technology solutions for fund managers and investors to identify the best ESG aligned investments and to enable performance monitoring of the assets through the investment lifecycle. Their SaaS technology powered by AI and advanced automation draws from a wide range of data sources and provides projections on future performance of investments subject to dynamic policy and technology scenarios.
ESG Base is supported by the Institute of Innovation and Entrepreneurship at London Business School and by Santander UK Universities.