New study charts a stark pathway towards an equitable end of global oil and gas production

Oil Change International and allies around the world have been calling for years for an equitable phase-out of global fossil fuel production in which wealthy, economically diversified countries take the lead. A crucial new report released today provides the first scientific assessment of when countries should phase out their oil and gas production on the basis of their respective capacities to handle a Paris-aligned transition. 

The paper, published by Dr. Dan Calverley and Professor Kevin Anderson of the Tyndall Centre for Climate Change Research, first considers how fast oil and gas production must be phased out globally to stay within the remaining carbon budget for 1.5°C degrees of warming. Then, they group countries by their differing capacities to manage that transition, according to both wealth and degree of economic dependence on oil and gas. 

For a 50% chance of staying below 1.5°C, they find extraction should no longer occur anywhere by 2050. Crucially, in order to make this necessarily rapid transition as fair as possible for people, the wealthiest countries – including the United States, Norway, the United Kingdom, and Australia – need to phase out their domestic production by 2034 and provide significant finance to countries with low capacity. The finance is equally as important as the faster phase-out.

At a time when fossil fuel supply is at the top of the global political agenda because of Russia’s unprovoked invasion of Ukraine, this report is also a reminder that building up new fossil fuel infrastructure is not a viable way to cut off Russian oil and gas – not only because cleaner solutions can be scaled up faster, but also because new fossil fuel development is utterly incompatible with limiting warming to 1.5°C. 

In this blog, we highlight some of the key conclusions of the report and what they mean for the global fight against the climate crisis. 

More than ever, the world needs to get off of fossil fuels

The recent report from the IPCC Working Group 2 confirms what millions around the world have known for a long time: Our continued reliance on fossil fuels to power the world economy is already driving deep climate impacts, and the damage is disproportionately affecting the most vulnerable populations that are also the least responsible for the climate crisis. This is on top of the fossil fuel industry’s role in funding Russia’s war against Ukraine and propping up dictators, corruption, environmental degradation, and human rights abuses around the world. Until governments address our collective dependency on fossil fuels, climate and human impacts will continue escalating.

The report highlights the scale of the challenge that the world faces in phasing out fossil fuel production at the pace that carbon budgets dictate: Retaining a 50% chance of limiting warming to 1.5°C, which would already lock-in devastating impacts around many parts of the world, means global oil and gas production needs to be phased out by 2050 at the latest. For a 67% chance, oil and gas needs to be phased out by 2042 globally. Tackling this challenge means that countries should be planning and implementing measures to enable a just phase-out of oil and gas production that protects affected workers and communities, and ramp up their support to renewable energy. Instead, as the recent Production Gap report shows, countries are collectively still planning to increase their production of oil and gas.

This new report warns that any further delay in taking decisive action to phase out fossil fuels may lead to potentially socially devastating disruption down the line as carbon budgets become even more depleted and even more urgent action is required. The current geopolitical situation and volatility in oil and gas markets is a preview of what happens when governments fail to address their reliance on fossil fuels. 

The Tyndall report also confirms the recent findings from the International Energy Agency that limiting warming to 1.5°C requires a rapid phase-out of coal-powered electricity and is incompatible with opening up new oil and gas fields. Despite the ongoing push from the oil and gas industry and producing nations to leverage the necessary move away from Russian fossil fuels to justify opening up new production, the report is a stark reminder that unless the expansion of fossil fuel production immediately comes to an end the world will be locked into escalating and devastating climate impacts. If governments once again fail to adopt the measures to reduce both the production and demand of fossil fuels and instead pursue strategies to boost production, the “atlas of human suffering”, as described by UN Secretary General Guterres, will only grow worse.

Rich countries have both a moral responsibility and the means to phase out their production faster

The Tyndall report allocates countries into five broad groups, ranging from countries with the highest capacity to implement the transition to the lowest, using the country’s GDP per capita that is not from oil and gas revenues as a proxy. This reflects the principle developed by Greg Muttitt and Sivan Kartha that an equitable transition means production should be reduced “fastest where doing so will have the least social costs.”

A key conclusion of the Tyndall report is that more than a third of global oil and gas production currently takes place in countries with both very high levels of income and low dependency on oil and gas revenues, primarily countries in the Global North. While transitioning away from fossil fuel production will have undeniable economic and social costs, it is clear that countries in the first group have the financial means to initiate that transition without endangering their social fabric. Rich, economically diversified nations therefore have a responsibility to not only drastically reduce their consumption of fossil fuels but also lead the way in phasing out their fossil fuel production. 

The wealthiest countries need to have phased out their production by 2034 at the latest, or by 2031 for a higher chance to stay below 1.5°C of warming. The report is also clear that immediate action is needed: their production must go down by 74% by 2030. 

Source: Oil Change International, adapted from Calverley and Anderson 2022.

None of these countries have plans to align with this requirement. In fact, aggregate oil and gas production for Group 1 countries is poised to increase in the next decade: These countries are on track to together produce close to five times more oil and gas by 2030 than is compatible with the trajectory outlined in this report (Figure 1). 

The war in Ukraine is currently being used to justify further expanding production in many of these same countries: The UK government is planning to open up more oil and gas fields in the North Sea, Norway is planning to increase production to supply the European market, while the US oil and gas industry is clamoring for the Biden administration to green light more drilling. Further delaying the inevitable and urgently needed transition away from fossil fuels will only make the transition more expensive and more difficult to manage, and will continue feeding the economic and political volatility that has come to define the fossil fueled global economy.

Figure 1. Source: Rystad UCube (March 2022) and Calverley and Anderson 2022.
 

Ending the expansion of fossil fuel production in Group 1 countries is an urgent and essential step towards limiting warming to 1.5°C. However, that step alone will not be enough to align production with the conclusions of this new report. In Figure 1, we use data from Rystad Energy to show how much of Group 1 countries’ projected oil and gas production would come from extraction projects that are 1) already developed (gray), 2) under construction (dark brown), or 3) not yet approved (golden brown). This analysis shows that these countries must also cancel projects currently under development and close down some already producing projects ahead of schedule to achieve a complete phase-out by 2034. 

Currently, virtually no country or jurisdiction has plans to align with the proposed timeline. Even the members of the Beyond Oil and Gas Alliance, which have taken the necessary and bold step to end new licensing for oil and gas exploration, and which are predominantly from the Global North, have generally not adopted timelines for phasing out their production in line with what is required for an equitable phase-out. Denmark plans to end production by 2050, France by 2040, California by 2045. BOGA countries need to further increase their level of ambition by aligning with these new recommendations and to create an international framework for the urgent conversation on how fossil fuel dependent countries will be supported in their own phase-out. 

Delayed action will further jeopardize the ability of countries to enact a just transition away from fossil fuel production 

Our ability to limit warming to 1.5°C hinges on total cumulative emissions in the next decades. End dates are an important indicator, and are critical to policy and economic planning, but, as the authors point out, “strikingly different budgets and pathways can have the same end date”. This has profound policy implications for countries as it implies that immediate action is required to reduce production and that any delay in action will require steeper cuts in production down the line. 

As we have argued for years, a managed decline of global oil and gas production is the safest and least costly route towards achieving the objectives of the Paris Agreement. This requires governments to immediately end the expansion of production and to design a just transition for workers and communities whose livelihoods depend on fossil fuels. Delaying the inevitable phase-out of fossil fuel production will make it increasingly difficult to meet our climate objectives and will make doing so more economically and socially painful through increased stranded assets and sudden disruptions in jobs and revenues. 

Source: Oil Change International, Big Oil Reality Check, 2021

Global North countries must both accelerate their phase-out and pay their fair share of international transition costs

One of the key conclusions of the report is that decades of climate inaction by historical emitters has shrunk the remaining carbon budget for 1.5°C to such an extent that the phase-out timeline required for the poorest producing nations is fundamentally unfair. These countries will need to phase out their production just 15 years or so after the richest nations, despite having far greater dependency on oil and gas revenues and fewer resources to buffer the effects of the transition. In the case of a 50% chance to stay below 1.5°C, a country like Mozambique (GDP per capita: USD 450) would need to phase out oil and gas production a mere 16 years after Norway (GDP per capita: USD 67 000). While the phase-out dates for Group 1 countries sound challenging, asking countries in Group 5 – which are also amongst the most vulnerable to climate impacts and therefore need to fund urgent adaptation needs – to end their production by 2050 is arguably a much more difficult undertaking. This is yet another demonstration of the deep injustice of the climate crisis. 

Global North countries will therefore not make up for their historical responsibility in depleting the carbon budget by achieving an accelerated phase-out alone. A globally just transition will now also require wealthy countries to fund a systemic transition away from fossil fuels in the Global South, over and above their existing debts for climate finance and reparations. The scale of these debts is substantial. The Transnational Institute estimates a fair share of the Global North’s climate finance and loss and damage would already be at least USD 2.3 trillion a year, and this is set to grow. Beyond paying this fair share, Global North countries need to provide robust technology transfer and reform international legal and trade agreements to create the scaffold for a truly equitable transition.

Group 1 countries also need to stop using their finance to push Global South countries into fossil-fueled development, often to the benefit of global north-based corporations. A recent study has shown that between 2016 and 2021, public and private financial institutions poured at least USD 132 billion in lending and underwriting into 964 gas, oil and coal projects in West, East, Central and Southern Africa alone. Over 2018-2020, G20 public finance institutions still funded at least USD 63 billion per year in oil, gas, and coal projects around the world. This was 2.5 times greater than their USD 26 billion a year in support for renewable energy in the same period. 

As African climate leaders Anabela Lemos and Nnimo Bassey recently noted, while the onus of climate action is on global north countries, their continued funding and support of fossil fuel projects in Africa is creating a “fossil fuel trap” on the continent that will only make it increasingly difficult for countries to leapfrog fossil fuels and follow a clean and just development pathway. Even a so-called progressive country such as France, which has ended new oil and gas exploration and joined the Beyond Oil and Gas Alliance, is still lending its diplomatic and financial support to oil and gas projects led by TotalEnergies in Africa. 

This also has implications for the current situation related to the Russian war in Ukraine. With such a limited carbon budget, it would be a profound mistake, from both an economic and climate standpoint, for European countries to support a build up in fossil fuel infrastructure around the world, and in particular in the Global South, to replace Russian oil and gas. Immediate reduction in demand alongside a production phase-out and rapid scale-up of clean alternatives is needed in the Global North in order to avoid creating more stranded assets and fueling the war and oppression machines of petrostates.

CO2 emissions are not the only harmful consequence of oil and gas extraction

The phase-out dates laid out in this report reflect the economic capacities of different countries within the constraints of a dwindling global carbon budget. But economic capacity is not the only factor that should inform the pace of phasing out oil and gas within and between countries. 

Communities in the Global South have been resisting fossil fuel extraction for decades – from Shell’s drilling in the Niger Delta to Chevron’s in the Ecuadorian Amazon – to stop the havoc wreaked on people’s health and livelihoods and to defend the rights of Indigenous peoples. Often, despite promises of economic and social development, the largest shares of profit have benefitted foreign countries and corporations in the Global North. This neocolonial model of development exacerbates the vulnerability of communities most affected by the impacts of the climate crisis, while also typically leading to corruption, human rights abuses, violations of Indigenous sovereignty, militarization and environmental devastation. Indigenous communities, communities of color, and low-income communities within wealthy countries are also on the frontlines of fighting environmental injustice – from the tar sands in Alberta, Canada, to “cancer alley” along the U.S. Gulf Coast. In places where extraction is causing environmental injustice and human rights abuses, and violating Indigenous peoples’ rights, it should also be phased out rapidly. The cost of oil and gas is always much higher than its market price.

Therefore it is clear that CO2 budgets cannot be the only determinant of when a country needs to phased out their production. When the costs of oil and gas extraction far outweigh the supposed benefits to communities, there is a strong case for ending production earlier than the timeline laid out by this report.

Conclusion: a critical report that raises deep questions for the climate movement

This report lays out, in unequivocal terms, how deep the carbon constraints we are collectively facing are, and how deeply unequal and unfair the consequences of a depleted carbon budget will be on the poorest countries. It is a scathing indictment of the moral failure of rich countries. They have failed to address the climate crisis for decades, continued to prop up fossil fuel production at home and abroad, and failed to provide meaningful finance for poor countries to mitigate climate impacts they have not caused and to follow a clean and just development pathway. 

The report also raises deep strategic questions for the global climate movement.