“You name it, it's got to change”: Lord John Browne on the role of energy companies in the transition to net zero.
In this episode of Cleaning Up, Michael Liebreich talks to Lord John Browne, ex-CEO of BP and now senior advisor at General Atlantic.
This is an abridged transcript of the conversation, edited for clarity.
Michael Liebreich: John, welcome to Cleaning Up. Let's talk about that transition to net zero. Can you characterize what will it look like? And where are we on the long arc from 1990, when it was not something that was on the cards, to now, via your time as CEO of BP?
John Browne: When I first got involved in the topic, I gave a speech in 1997 at Stanford University, and said that the oil and gas companies are part of the problem. We've got to stop generating carbon dioxide emissions and do something about it. I was essentially expelled from the American Petroleum Institute.
So, attitudes have changed quite a lot. What I think we're trying to do is not just adjust the energy inputs, but we're trying to decarbonize everything and to become more efficient in that process. So, more energy efficient and so conserve resources. We're also trying to abate and eliminate emissions while measuring all the above. If you describe it like that, it is an industrial revolution.
I'm not an economic historian but I do recall it took time even when coal was introduced. And even when gasoline was introduced, as a motor spirit, it was trying to compete with electricity. The first cars were electric. Gasoline was sold on the basis that it was rather more macho than a silent electric car. So, it took time for all of these to take off.
Everything we do will have to be changed in one way or other. Whether it's flying, shipping, or being in your house using a boiler or heat pump, you name it, it's got to change.
ML: The question of acceleration is interesting. Do you think certain policies can make things move more quickly?
JB: A set of incentives or penalties, like carbon prices, carbon taxes, and capital incentive programs, so not taxing everything up front but taxing at the back end, accelerates plenty of things. A lot of these tools and techniques have been used on the oil and gas industry over many years and they can be applied to many capital-intensive activities, which is a lot of what the industrial revolution will involve.
You can make choices now and every choice you make has a consequence, it changes the total cost of an input or an output. You've got to think carefully about whether it’s a regressive tax or not. And is it acceptable politically? Is it a sin tax or not a sin tax? What is it? There are plenty of decisions to be made.
You can accelerate a bit more than we may think. Clearly, we are not going to eliminate coal and gas at the flick of a switch. We have a choice, either we let them produce the carbon dioxide and methane, which we would have to offset somewhere else. Or else we try and capture it all, bury the carbon dioxide, and forbid people from emitting methane, even inadvertently, from any source. We probably must do both. And we should get on and do it.
ML: Is it realistic to think that the planet and the global economy can get to net zero? Considering carbon capture, reforestation, but also dramatic reductions in emissions. If you were a betting man, what year would you think we could get there by?
JB: I think we could get there sometime around 2050. But the conditions to get that are rather significant. First, we must get on now. Absolutely now. Second, I don't believe in global government, it doesn't work, but we need some form of regional approach to disincentives and incentives.
Beyond that, it's going to be a lot of activity which needs to be done locally, and that means local policy, but it does need global deployment of technology. Interestingly, somewhere between 60% and 80% of the technologies we need to get to net zero probably exists today, although it’s difficult to measure the number. They're just not deployed at scale, which means that they are too expensive.
ML: BP, the company that you grew, is probably the most progressive or one the most progressive energy companies in the world. If it's not leading the net zero charge, it's certainly up there in the leading group. The forecasts that they published last year said the base demand for oil will never go above 100 million barrels a day and will then to start to decline. Other studies are even more aggressive falls in oil. What do you think? I mean, if I can ask, how do you feel when you see that as the person most closely associated with having built BP?
JB: I'm not surprised. When I was running BP, we never subscribed to the demand for oil going much above 100 million barrels a day. But with one thing and another, we just reminded ourselves that the oil intensity to unit of GDP keeps dropping by about 1.5% a year. There's no reason why that shouldn't accelerate with the changes in the digital revolution which wasn’t even on the cards when I was in charge. Add a bit of climate change and conservation then you're going to be below 100 million. So, under all cases, oil is ex-growth. Gas is probably ex-growth later, but it's ex-growth. So, the question is how, how ex growth is it?
ML: In business it's now clear that there's been an old school way of doing things which no longer works. That's clear. But there are other sectors where LBGT employees cannot come out in public. I'm thinking of sports, for example, I don't think there's one out gay professional footballer in the Euros this year.
JB: Strangely, the correlation is the players only become gay when they retire. We've come a long way in business, but not the whole way. People understand the meaning of equality and inclusion leading to diversity, and there's been a lot of pressure. People have figured out that if you include everybody your chances are you get better performance because you get team bonding. To include you must include everybody, and you're always tested on your weakest link. So, if people see you exclude in one thing, they think you're not involved in teams. Now that happens for a lot of the world in business. Diversity doesn't happen where people are worried about the customers, they worry that anything which isn't down the line, exactly the way it's always used to be, gets in the way.