A resilient recovery means a managed decline of oil and gas production — here’s how we get there

This week the seemingly impossible happened: U.S. oil futures prices went negative for the first time in history. After years of fracking companies going bust and a coal sector in decline, oil prices going below zero, even if temporarily, reconfirms what we already knew: In addition to wreaking havoc on the climate, the volatile fossil fuel industry is a poor bet for long-term jobs and economic resilience. As governments respond to the devastating COVID-19 pandemic, the oil market collapse and the looming climate crisis set critical context for the long road to recovery. In a new briefing, we offer decision-makers a clear list of DOs and DON’Ts to help ensure that workers and communities win over big polluters and corporate profit as we chart our way towards a safer, more resilient economy.    

The fossil fuel sector, like the aviation and motor industry, has been quick to push its corporate agenda and request massive subsidies, bailouts, regulatory rollbacks, and the delay of climate measures in the face of the COVID-19 health crisis.

Governments have a clear choice ahead in responding to these calls. As our briefing lays out, a fossil-free recovery is a better recovery for people and planet. 

Energy efficiency and renewables typically create more jobs than fossil fuels. They increasingly outcompete fossil fuels on cost, and create healthier, more resilient societies that are less dependent on exports or imports of a volatile commodity. Well before COVID-19, fossil fuels were showing signs of permanent decline. The Center of International Environmental Law tells the story of underperformance on stock markets, legal opposition, and accumulation of debt in an excellent report released last week. During eight of the last nine years, oil and gas stocks underperformed the broader market, while last year renewable stocks outperformed the index by 20%. 

The ongoing crash in oil markets on top of these structural challenges exposes the striking risks of an unmanaged decline of the sector. Job loss is rampant with 1,000,000 jobs likely to be cut in the oilfield service industry worldwide — 21% of the current total. Whilst rich producing countries are considering bailouts and subsidies (including the United States, Canada, and Norway), lower-income oil- and gas-producing countries such as Nigeria, Angola, Algeria, Ecuador, Venezuela, and Iraq do not have that option and are less resilient to oil price shocks. They face immediate budget crunches at a time when resources are desperately needed to address the health crisis. Iraq, which relies on oil for 90% of government revenue, is asking for emergency aid to fund its health system.

As dirty industries try to exploit this crisis for a revival that would be short-lived at best, this is the time for governments to plan a just and equitable transition off of fossil fuels that protects workers, communities, and the climate. That is not only imperative to address the climate crisis, but also the only effective route to a just recovery. International equity requires rich producers like the United States, Canada, and Norway to act first and begin a phase-out of oil and gas production, and to provide support to lower-income countries that face tougher transition challenges. 

To deliver this message to decision-makers we have created two key lists: 

DOs: Actions that support a managed decline off of fossil fuels as part of a just recovery,
DON’Ts: Actions that entrench the bad and will fail to deliver on long-term economic recovery and climate goals.

Here’s our guide to a resilient, just recovery that centers people, not big polluters: 

DO support the good and create a world that centers peoples’ wellbeing:

Ensure national and international equity and just transition is at the heart of any government response to the current crisis. Global cooperation is more critical than ever. As we move towards recovery, there will be an urgent need for leadership in setting precedents on just recovery and international solidarity to support a managed and just phase-out of fossil fuel production.
Protect workers and communities affected by the crisis, including those in the oil and gas sector, and create long-lasting green jobs. Governments should ensure a just transition for workers who have lost their jobs through measures such as unemployment insurance, replacement of tax revenues, pension-bridging and worker transfer schemes. In addition, they should invest in energy efficiency, renewable energy, and clean public transport that are typically more labor-intensive sectors that will create jobs for decades to come.
Ensure Green New Deal frameworks provide the basis for stimulus packages to help rewrite the social contract in a people-centered response to the current crisis. Green New Deal proposals that were prepared prior to the arrival of COVID-19 provide regulatory and policy frameworks that can be used as a basis for designing stimulus packages. While at a minimum Green New Deal frameworks and other existing climate policy frameworks need to be protected, the need for additional stimulus provides an opportunity to expand their scope and scale (such as this proposal in the United States), as well as accelerate climate objectives. 
End fossil fuel subsidies and finance and ensure any carbon price reflects climate and equity imperatives in order to ensure renewables remain competitive and incentivize efficient energy use in the context of low oil prices. This can also help generate resources that can be used for recovery. India, for example, has increased taxes on gasoline and diesel consumption by over 50% to respond to the COVID-19 crisis.
Introduce oil and gas production caps as a first step to a managed decline. The world is running out of storage capacity because of the unprecedented contraction in oil demand. The risks of allowing limitless production are high; not only are there massive costs involved in bringing oil and gas fields back online, the potential carbon emissions from the oil, gas, and coal in the world’s currently operating fields and mines would fully exceed carbon budgets consistent with the Paris goals. It is crucial to ensure production caps are not lifted post-COVID-19 and are instead matched with plans for a managed decline.
Ensure decision-making processes and response measures are transparent in order to allow public scrutiny. In countries across the world the COVID-19 crisis is affecting parliamentary oversight as governments are temporarily shut down or are switching to working online. As governments are introducing measures that will shape our societies for decades to come they should ensure that decision-making, including any decision-making linked to the oil and gas sector, is transparent, and that digital tools are used for public participation to enable scrutiny.
Bring the fossil fuel industry into public ownership, in the right circumstances. This shift must be paired with a clear plan for a just transition for workers and communities and a managed phase-out of oil, gas, and coal production to avoid potential pitfalls, but it could ensure direct public control and a swift timeline for the transition to a green economy. Here’s what this could look like in the United States.
Link any support provided to the industry to a requirement to align with climate goals, pay appropriate taxes and plan for a managed decline. Support should go to workers, not shareholders and corporate executives. Shareholder dividends and buybacks should be disallowed until any public finance is paid back in full.
Ensure the polluter pays principle is upheld. Broadly speaking, over the past few decades, the financial rewards of the industry have been privatized, while the risks have been socialized. Policies and relief packages being designed right now must seek every opportunity to increase the share of rewards to the public and force companies to be accountable for the impacts of past and ongoing production.

DON’T entrench bad policies that will not deliver on recovery and climate goals:

Don’t bail out oil and gas companies or increase subsidies. Any support should center workers, not corporate executives and shareholders, and should be made conditional on enforceable plans for a managed decline in line with climate goals and appropriate taxation of the industry. Shareholder dividends and buybacks should be disallowed until any public finance is paid back in full. 
Don’t bail out other polluting industries, such as the aviation and shipping industries. In case of any support, this should be provided on the condition that it gets invested in green technologies, the industry starts paying taxes and reduces emissions in line with 1.5ºC.
Don’t roll back existing policies or regulations, or extend licensing agreements. In the face of the COVID-19 crisis it is crucial that governments uphold environmental regulations to protect public health and provide the regulatory certainty needed for sustained investments in the clean and green industries that can deliver jobs and economic recovery. 
Don’t continue the construction or operation of fossil fuel infrastructure at the expense of the health of workers and communities. In the Wet’suwet’en territories in Canada, for example, hundreds of workers are being sent to work on the Coastal Gas Link endangering the health of both workers and local communities. In Mozambique, 18 of 34 coronavirus cases confirmed as of last week are linked to a coronavirus outbreak at Total’s LNG project site.
Don’t delay responses to the climate crisis amid the flurry of immediate priorities. If anything, the current pandemic has shown that a crisis demands a timely response to prevent it from escalating further. 

For more details on each of these, please read our briefing, “Resilient Societies or Fossil Fuel Bailouts?”

The way out of this crisis is a green recovery that accelerates climate action, helps to create good, long-term jobs, and builds truly resilient economies and societies. Governments have a bad habit of caving to polluters, but the tides are turning and the writing is on the wall for Big Oil and Gas. Now is the time for an unignorable wave of people power demanding that we get this right, for people and the planet.