This Legal Analysis is Interesting; Oil Companies to Become Utilities?

By Mathew Carr

Feb. 11, 2022 — There might be a nugget in this PDF that may generate a possible G20 solution for climate action … and that could help defray the USA’s financial problems that Senator Manchin is so concerned about, noted here.

It’s all about making polluters pay. Selling carbon allowances creates a new revenue for government.

Will oil companies become like utilities around 2024-2026? The next two-four years are the real “last hurrah” for fossil fuels this time? I won’t hold my breath.

You could search on CarrZee.org for the terms “carbon contracts for difference” , “reverse auctions” “cptpp”, for instance.

I’ve reached out to the author.

Intro:

The EU Emissions Trading System is potentially to be expanded to road transport and buildings from 2026 (known as “ETS2”). The regulated entities will be the upstream providers of fuel, i.e., the oil majors such as Total, Shell, BP, Eni and Repsol. This legal analysis considers whether the oil majors can be required to absorb part of the ETS cost, rather than passing it on entirely to EU citizens. To this end, three suggested options have been provided as examples of how this could be done:

  1. Inserting provisions into Member State corporate governance codes
  2. Using a system similar to the requirement in Belgium that if medicine costs exceed a certain value, that pharmaceutical companies must pay into a social security fund
  3. Regulated tariffs as in France for electricity

See this snip, summarizing option A and B — EUA=EU carbon allowance

Option A fictional example

https://www.transportenvironment.org/wp-content/uploads/2022/02/Opportunity-Green-ETS2-Oil-Majors_final_8Feb22-1.pdf

———–

I will try write something more interesting on it if I can muster the mental strength.

NOTE

On reverse auctions of carbon credit options (see my crazily ambitious fictional polar bear wish list from January 2021):

Dozens of nations announce they’ll participate in reverse auctions to win finance to protect forests and grow new ones, absorb greenhouse gases using new farming techniques, slash industrial emissions, shift away from fossil fuels, Yao hopes.

Theses reverse auctions could spur 100s of billions of euros of finance (though weirdly it’s unclear how much they’ll be used in 2021).

See this: https://www.bloomberg.com/news/articles/2015-07-17/world-bank-reverse-sale-spurs-carbon-credit-price-5-times-market?sref=fcMjhrdB

Such auctions of put options have previously resulted in price guarantees for emission credits at $2.40 (1.97 euros) a metric ton, five times Thursday’s benchmark price on ICE Futures Europe. In an auction earlier this year, the price was lower — fifteen winners paid $0.30 for the right to sell a carbon credit to a facility at $1.98 per credit.

See this: https://www.worldbank.org/en/news/press-release/2020/03/04/pilot-auction-to-help-reduce-42-tons-of-emissions-in-2020

Such auctions could be enough to start investments in 1,000s of emissions projects around the world, especially in poorer nations, where greenhouse gas reductions come cheaper.

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