Oil major BP (BP.) plans to go net zero on dangerous greenhouse gas emissions by 2050. Net zero implies that any emissions produced by the company would be offset by removing greenhouse gases from the atmosphere.
Incoming chief executive Bernard Looney set out his bold strategy that not only focuses on reducing emissions from BP’s own activities, but to help tackle emissions generated by use of its products, with a target of cutting the carbon intensity of products it sells by 2050 (or sooner).
The ‘or sooner’ bit is relevant as it is open to question whether or not BP has three decades to achieve this goal given the increasing pressure from asset managers, politicians and the public.
Other goals include installing methane measurement at all its major processing sites by 2023 and increasing the proportion of investment into non-oil and gas businesses over time.
TALKING TRANSFORMATION
Changes to the structure of the business that these plans involve would be transformative, yet the likelihood of success is almost impossible to determine at this stage.
That probably explains today's muted 1% rise in the BP share price today, to 475.15p.
Ultimately, Achieving the kind of transformation BP is looking for will take cash and lots of it. As Looney notes ‘trillions of dollars will need to be invested in re-plumbing and rewiring the world's energy system’.
While the burden of that investment may not all fall on BP solely, there may be questions about its ability to make the necessary changes while keeping up its generous dividend payments. The company says it can square this circle but there is likely to be healthy scepticism in the market.
VAGUE MEASUREMENT
Perhaps the most telling statement from Looney which accompanies the new plan is his admission that in terms of milestones, near-term targets and ways to measure progress ‘we do not have those for you right now’.
In fairness, Looney is only a matter of days into the job but he may have to be more forthcoming when the company hosts a big investor day in September.
