Meeting

Confronting Climate Change: Methane Emissions and the Environment

Thursday, October 1, 2020
Mike Blake/REUTERS
Speakers

David M. Rubenstein Senior Fellow for Energy and the Environment, Council on Foreign Relations; @Alice_C_Hill

President, Environmental Defense Fund

President, Shell Oil Company

Presider

Founder and Chief Executive Officer, MAC Energy Advisors LLC; CFR Member

The Environmental Protection Agency recently announced it would rescind some methane reporting regulations, a decision now being debated in federal court. Speakers discuss the environmental risks of methane and its effect on climate change, difficulties in detecting emissions, and current efforts in the private sector to curb methane leaks.

MCKIBBEN: Great, thank you and good morning, indeed. Welcome to the Council on Foreign Relations virtual meeting on Confronting Climate Change: Methane Emissions and the Environment. As was announced, we’ll have thirty minutes of me engaging our wonderful panel this morning and then thirty minutes of questions and answers afterwards. Our panel this morning is with Alice Hill. She has been a senior official in the Obama administration, as well as a number of roles in academia. She's currently leading the energy and environment engagement at the Council on Foreign Relations. We also have Fred Krupp, who's had three decades of leadership at the Environmental Defense Fund, making it a leader in advocacy for environment, energy, and sustainability in the U.S. as well as worldwide. In addition, we have Gretchen Watkins with, I think, almost two years of leading the strategic operations of Shell's U.S. businesses—I think where she went from a country with ambitious climate laws to a city economically dependent on the proliferation of fossil fuels.

So, we've got a very timely conversation I think at this time, and I think the timing is interesting not only because we have burning forests in the West, we have flooding in the coastlines, as well as melting ice in the Arctic, and a small thing, like the elections coming up next month here in the U.S. So a couple of headlines to help us sort of frame the discussion today that I want to share with you. One being, you know, greenhouse gas emissions are set to drop by the most in modern history this year as a result of economic slowdown from the pandemic. Not cutting emissions fast enough to slow global warming, the world is on track for the second hottest, if not hottest, year ever. Nine of the ten most sweltering years on record have happened during the twenty-first century. We've had the highest temperature ever recorded likely this summer in Death Valley. The Arctic summer ice is in danger of disappearing in just fifteen years from the first time since primitive humans left Africa, moving up the ice-free timeframe that we've all been discussing thus far. The amount of ice floating atop the Arctic Ocean at summer’s end has fallen about 13 percent per decade since 1979. And finally, but not least, the Trump administration has rolled back climate regulation, eliminating federal requirements for oil and gas companies to monitor and repair methane emissions from pipelines, storage facilities, and wells. So that tees up the conversation of why we're talking about methane emissions today, and so what I'd like to do is have the panelists target a couple of key questions. I'd like to start with Alice Hill. I'm sorry, I'd like to start with Gretchen, I think more appropriately, to sort of lay the understanding of what methane is and why we're talking about methane and how it's different from the other gases. And then we'll have, hopefully Alice can help us put together the regulatory framework that we're dealing with, and that we're looking at this from her experience in the Obama administration to where we are currently with regard to regulations. And then finally, with Fred helping us understand why we're focusing on methane relative to other gases, as most people think about carbon emissions and what's the urgency around that. So, if that's okay with my panel, Gretchen, if you'll help us define what methane is based off your experience as an executive at an oil and gas company.

WATKINS: Great. Thanks, Tracy. Can you hear me, okay?

MCKIBBEN: Yes.

WATKINS: Okay, great. So, first of all thank you very much for inviting me to be part of this panel, I'm really excited to be here and pleased to be engaged in this topic, because it is an important topic and one that I personally and that Shell, as a company, spends quite a bit of time on from an advocating standpoint, but also just from sort of a self-regulation standpoint. So, just to tee up methane on what is it, it's the primary component of natural gas, and natural gas, as we all know, is a fossil fuel. It is the cleanest burning fossil fuel. And we very much feel like it plays a role both today but also in the future for a couple of reasons that I'll come back to. But it's important to know that when companies go out to drill a well, natural gas and methane will always be part of that, so there aren't wells that are drilled that don't have any gas or methane in them. And so that's basically the first thing that’s good to know, I think. I think the second thing that's good to know is that if you drill a well in a place where there aren't existing pipelines or existing infrastructure, it's very difficult to capture the gas and do something with it. Now, a lot of companies do that. And in fact, one of the things Shell has done is we now have a very different way of when we drill a well and bring it on stream of capturing that gas than we did, you know, 10-15 years ago, and we can talk some more about some of the technology advances that we've had. But oftentimes there isn't infrastructure in place, and so then what happens is that the methane is either vented to the air, or preferably, it's flared. And I say preferably, because when you flare methane, you actually burn it. It still creates a greenhouse gas, so it's not a good thing. But nothing is actually thirty-four times the global warming potential of CO2. And so the venting is actually where, you know, the biggest issue really is. Flaring is also an issue, and I'm sure we'll talk about that. So those are, I think, just some important things to note. The last thing I would say is that it's very difficult to measure methane. And we have spent quite a bit of time even in collaboration with the Environmental Defense Fund, with Fred, testing new technologies on how to measure it—and so why is it so difficult? Well, because of course we can eliminate flares, and at Shell we’re actually on a mission to eliminate routine flaring, we've signed on to a number of different initiatives that will eliminate that completely. And in most cases today, we have already eliminated it. But when we do have small leaks of methane, either from an emergency valve where you need to have some way to relieve pressure, there are very limited technologies to measure that. And so one thing we do is we fly drones over to measure. Unfortunately, what drones do is they take a photograph, they take a picture, it's a point in time, it's not, it's worth something, but it doesn't actually give you the amount of data that we'd like to have in terms of collecting methane data. So lots in there, we can talk more about, you know, technology about regulation. I know Alice is going to talk about that, but I think I’ll just end with saying that natural gas, we believe, does have a real role to play, probably reduced over time, but right now it really helps particularly with some of the renewables that aren't able to be consistent—solar, wind, et cetera—it provides a reliable source of energy. So I'll pause there, Tracy.

MCKIBBEN: Great, thank you, Gretchen. And you're right, we were going to talk about a number of the issues you've raised, including the technology and measuring methane. And so Alice, if you could just walk us through sort of the regulatory framework from your experience and, you know, working on this in the Obama administration, and also tying in recent announcements last month from the current administration about reducing those regulations. And why they—

HILL: Thank you, Tracy. And it's delightful to be on this panel with Fred and Gretchen and talk about this very important issue that might seem minor to folks, but it's really very significant in terms of the amount of heating that we can expect as you've alluded to, Tracy. So, for the Obama administration, it was really in the second term of President Obama, you might recall seeing him on the steps of Founders Hall in Georgetown University, sweating profusely on a very hot day as he announced his Climate Action Plan. And that was, in fact, the first Climate Action Plan the United States had ever launched. It had three pillars: the first pillar was to cut emissions, to reduce heating; the second was to prepare for the impacts; and the third was to lead internationally. Within that first pillar, there was a focus on methane. It called for the United States to create a methane strategy with the EPA, it also called on the Bureau of Land Management to look at methane emissions on public lands. And eventually, it evolved that EPA-issued regulations regarding oil and gas operations to reduce methane emissions to detect the leaks from those operations in late 2016. So there was actual rulemaking done, and there was also separate rule-making, or regulations, for the Bureau of Land Management (BLM). In 2017, we have a change of administration at just about the same time that the regulations go into place for methane emissions on oil and gas operations and to prevent leakage, and President Trump has since embarked on a path to revoke those emissions, and that occurred earlier this year. So that rule is no longer in place. And the BLM rule is similarly tied up in litigation, right now, to determine its fate going forward. Meanwhile, we have had record-breaking methane emissions, so there is a question going forward how we can better stop this greenhouse gas. It should be pointed out that oil and gas are not the sole source of methane. It's naturally occurring, as Gretchen has alluded to, but in oil and gas production we do see a significant amount of methane leakage that could, if contained, help us reduce these challenges going forward.

MCKIBBEN: Thank you, Alice. Fred, if you can talk to us about why there's such an urgency in focusing on methane right now? As most people think about emissions, they think about carbon emissions and we hear that the number is down, partly as a result of reduction in activity from the pandemic. So can you help us understand why we should be focusing continually on methane emissions?

KRUPP: Sure. Tracy, the quick answer is because the most cost-effective thing we can do to bring down temperatures, in the near term, is to focus on methane. We've got to focus on CO2 simultaneously, so I don't want to distract from that. But just methane is a very cost-effective thing to deal with because it's so powerful. Gretchen quite accurately has always mentioned that methane is thirty-four times more potent than carbon dioxide over a hundred years. It turns out methane doesn't last a hundred years, it only lasts much shorter than that, less than twenty years. And over that first twenty years, it's eighty-six times more powerful than carbon dioxide. And so when you reduce methane emissions, you can have an outsized effect on reducing the temperatures we're going to see over the next twenty years. So as has been said before, it's about 25-30 percent methane, human-caused methane emissions, about 25-30 percent of all the warming we're experiencing right now. Now, a big source is agriculture. In fact, agriculture in total is bigger than the oil and gas industry. But the oil and gas industry is almost as large and actually bigger, than coal mines or landfills, the next two big sources. Here's the thing about the oil and gas industry, we know it can be fixed very cost-effectively, not the Environmental Defense Fund, but the International Energy Agency tells us we can reduce 75 percent of the methane emissions cost-effectively, two-thirds of that at no net cost. It hasn't happened because, you know, companies can get a higher ROI [return on investment] by putting money that they could recover, you get a higher return on investment by putting it into drilling another well. But increasingly, companies like Shell and BP have stepped up and, you know, made very significant commitments to substantially reduce their methane emissions. And, you know, that is a big step forward.

MCKIBBEN: Thank you, Fred, I'd like to stay with you for just a second, because one of the points that I think Gretchen made in her introductory comments was around, you know, sort of measuring these emissions. And I know that the Environmental Defense Fund has been very engaged in this. So you know, one of the questions that we always have is, how are we all operating on consistent data points and the same data points? And so one of the challenges wrapped around emissions, you probably will admit, is around understanding, you know, how do you measure this? And in order to manage it, you've got to measure it. Can you talk to us a little bit about some of the work that you're doing to bring sort of the preciseness of understanding what's being emitted and how much is being emitted?

KRUPP: Sure, we've worked with, you know, companies like Shell, BP, Exxon, Chevron, many companies and scientists, more than 150 of the leading scientists around the world to get some really good data. Ten years ago, when we started recognizing that methane was potentially a big problem in the oil and gas industry, neither we nor anyone else knew if it really was. So today, as a result of those collaborations, we have published in conjunction with scientists from around the world, more than sixty peer-reviewed papers in the literature documenting how significant a problem this is. So we know in the U.S. oil and gas fields, emissions average, you know, 2 percent of what's coming out of the ground in terms of natural gas is going into the air. And in the Permian, one of the biggest oil fields now globally, we have learned very recently that emissions are three to five times higher than what's being reported and in fact 3.7 percent. So Tracy let me just take one more second to explain the significance—what's 2 percent? What's 3.7 percent? In the near term, where we have to be concerned about, are we passing tipping points, how much is this warming happening? How ferocious are storms going to be? For near-term global warming what’s the effect of methane emissions over the next twenty years? When we have 2 percent leak rate on average in the United States, burning natural gas is only slightly better than coal. At 3.7 percent for the gas that's being produced out of America's major field, now the Permian, burning natural gas is substantially worse than burning coal. So we can reduce it by 75 percent, and if we do, then natural gas is much cleaner than burning coal, and it's a valid transition fuel. We've been told for ten years it's theoretically possible to reduce it. We know in reality it's possible to reduce it. But without the regulations, we don't see all companies doing what Shell and a few others have done. And that's why I just want to take a moment to thank Gretchen and Shell. Gretchen Watkins was the first executive of any oil company to say that the Trump administration should not roll back those rules put in place by the Obama administration. That was leadership and one of several things Shell has done that makes me very proud to be on this panel with Gretchen.

MCKIBBEN: Thank you, Fred. So Gretchen, I'll turn back to you then. A couple of questions for you, you know, as Fred has laid out, and I think you also mentioned it, so you know we're going to see this sort of transition. And you know, a lot of the answers for many countries, India being an example, the move from coal to natural gas is part of this transition. Yet, you know, Shell, you've laid out a very, you've articulated a strategy around this sort of transition. You were one of the first majors, I think, to outline emissions-cutting targets, which included spending on sort of low-carbon, maybe even zero-carbon, technologies. Can you walk us through some of the things that you're doing at Shell that have made you want to remain committed to those sort of articulated goals and objectives, even in spite of reduced regulations that might allow you to sort of have, you know, be a little slower in moving the direction of your company?

WATKINS: Yes, thanks Tracy. And thanks, Fred, for your comments—appreciate that very much. I think I'll start just by saying, you mentioned when you introduced me that I joined Shell two years ago, and I did after I've been thirty years this year in this industry. And one of the reasons why I chose to join Shell, which is a, you know, pretty big company, I've been in the previous decade with smaller companies, is really because I felt and feel very much so now that Shell is right on the front of creating the future of energy, and I wanted to be a part of that after thirty years in this business. I really want to be part of creating the future of energy. And so we're a company and, of course, our strategy is to have a world-class investment case, to have a strong societal license to operate, but then the thing that really hooked me was to thrive through the energy transition. And so this is both about doing the right thing for the planet, but it's also a commercial thing, right? I mean, we do not want to be the Kodak of the oil industry, we actually want to be leading. As consumers demand new energies, low-carbon, no-carbon alternatives, we want to be there to supply them. And in fact, we are there. I mean, that's one of the things that we've committed to doing is really, actually double our investment in new energies, you know, in the coming five years versus the previous five years, where we were already at $1-2 billion. So quite a bit of investment going into that. And at this point, not a huge return, but we feel like that investment is prudent given the direction that we feel the energy transition is heading right now. The other thing we've done is very much held ourselves accountable, both in the short, medium, and long term. So you've heard some companies, Shell included, coming out with 2050 targets, net-zero emissions—very important, and we've committed to that—but we also feel, and I very much feel that, you know, 2050 I'm not going to probably be at Shell anymore, so what are what are you doing for me today. And we're actually doing quite a bit in that. My pay is actually tied to meeting targets this year, next year, the following year. One of those targets actually happens to be a methane intensity target of 0.2 percent, very much lined up with the numbers that Fred was just talking about, and I'm pleased to say in the Permian, we're right about there already, Shell's operations in the Permian. But then we also, of course, as a company have that target globally, and then in the medium term, we've committed to, by 2035, having a 30 percent reduction in the carbon footprint of the products that we sell. So we're not just looking at the emissions that we create as we produce oil and gas or through our refineries and chemical plants, but we actually include the products we sell to consumers, because we very much feel like we need to hold ourselves accountable for that, and then by 2050, a 65 percent reduction in the carbon footprint of the products. And so you will note that we still believe hydrocarbons will have some role to play in 2050, but offsets will be important there, and offsets can look like carbon capture or nature-based solutions. So in a nutshell, this is very much focused on providing our customers with low- and no-carbon alternatives at the pace that they demand, but increasingly, we're working collaboratively to increase that demand, and also making sure that we're doing the right thing for the planet.

MCKIBBEN: Thank you, Gretchen. Alice, I'd like to turn to you. So we've talked about the status of the current administration's position on regulations around methane. You were in the Obama administration, can you talk a little bit about what you would expect to see if Biden were elected and what you anticipate would be done with regard to addressing methane or even more broadly around climate change considering, out of the recent debate, there was a short discussion around climate change. Can you just offer some thoughts that you think, you know, might be the direction that a Biden administration would go?

HILL: Yes, this is a stark contrast between positions. In fact, it's pretty much, I think, that there will be little that the Trump administration will do to address climate change, other than perhaps on the preparedness side where we have seen more activity, although they don't refer to it as climate change. But on the cutting emissions, I think that would fall to the Biden administration, if it should be elected, that you would see significant movement in that area. Of course, Vice President Biden was part of the Obama Climate Action Plan, very familiar with that. And he has proposed an aggressive plan that would carry a cost of about $1.7 trillion. It would address, obviously, emissions—there's a goal for being net carbon neutral in 2050. And then there's separate calls out for greater regulation, again, of the oil and gas industry on this issue of existing operations leaking, the need to detect and repair those leaks. I think you'll also see increased focus on agriculture, because if cows were a country, they would be among the major emitters for methane, so methane digesters do help with agricultural emissions as we go forward. And another issue is methane in the Arctic, which we have not talked about yet, but because of higher temperatures in the Arctic, we are seeing the melting of tundra. And as that permafrost, that always permanently frozen land, melts, we're seeing increased methane emissions. There is a feedback loop here that we are experiencing as we have more methane in the Arctic, we have more heating in the Arctic, we have more land cover, it's a darker color than the snow would be so the heat isn't reflected. And as you pointed out, in the Arctic Ocean opening up, that black area is absorbing more heat as well. So, Vice President Biden, in his plan, has proposed working with the Arctic Council to address the carbon sediment or emissions that are falling on the white snow in the Arctic as well as the methane emissions to get at black carbon, as it's called, and methane to try to address what could be a very damaging situation developing very rapidly in the Arctic, because it's warming at least twice as fast as the rest of the globe. And so that was a special call-out, and taking further what President Obama had started, but taking it to a further spot.

MCKIBBEN: Thank you. I'm going to go back to Gretchen, but if I could just remind our members that if you could just submit your questions that you have for our panelists because we'll shortly be going to the Q&A session and we'd love to hear what you would like to ask our panelists. Gretchen, one of the things that Alice mentioned in terms of regulations, and you also alluded to it, you know, you've been in this industry for a long time and there was clearly a different response or receptiveness to the reduction in regulations by the current administration from the large majors as opposed to smaller oil and gas companies. Can you give us some thoughts on, you know, how you think, what you think can best help the sort of smaller oil and gas companies appreciate the need for the transition to, you know, a lower-carbon, a lower-emissions future, and what is driving that sort of consciousness or cost concern that they're experiencing? Any thoughts that you can share with us on that, considering you've worked at some of the smaller companies as well as some of the majors?

WATKINS: Yes, I think a couple things. First of all, the cost burden is felt more significantly by smaller companies, because they just tend to not have the same scale as the bigger companies. And so when you invest in technology, particularly the technology that's available today such as flying drones over or putting special meters on sites, or even, you know, just to give an example, one of the ways we've dramatically reduced, like 80 percent in the last couple of years in the Permian, dramatically reduced our methane emissions, is because we now no longer build single well pads with all of the equipment needed on that site. We actually will drill wells, and then hook it up to a what we call a central processing facility, so we've got thirty wells, basically going to one place versus thirty individual wells that all need their own flares and their own vents and their own—so we've eliminated flares, for we now have maybe one flare for thirty wells versus one flare per well. And that's, frankly, that's a more expensive way to do it because you have to build a fairly big central processing facility, it means you have to actually plan out, you know, thirty wells at a time. Smaller companies don't tend to necessarily have the ability to do that kind of scale. So that's one reason why. I do think that there is an industry solution here too that needs to not be missed. And, you know, one of the reasons that we advocate quite a bit inside of organizations like API, American Petroleum Institute, or the Texas Oil and Gas—TXOGA—it's called, is you know, we've been part of setting up basically self-regulation programs. The API has something called the environmental initiative, and we're actively working at getting some of the smaller companies that are members of API on board, you know, able to leverage technology and research that other companies have done with the smaller company. So I think there's an industry collaboration piece there, too, that we shouldn't lose sight of.

MCKIBBEN: Thank you. I do think we have some questions in the queue. So we're going to quickly turn to allow members to ask a couple of questions, and we'll come back if there aren't anymore—if we have some time afterwards. So we'll take the first question.

STAFF: (Gives queuing instructions.) We'll take the first question from Franklin Moore.

Q: Thank you very much. And thank Allison, Fred, and Gretchen for the presentations. Both Fred mentioned and Alice went into a little detail on methane and its relationship to land use change and particularly agriculture and sustainable agriculture. And looking at ruminant livestock like cows and the production of rice, the ag sector is responsible for producing a lot of methane. My question is, are there things that we are learning about measuring and monitoring methane and the gas and oil industry that is applicable to agriculture? Thank you.

MCKIBBEN: Very good question. And I think if we could go to Fred first, if you want to answer that question since you've been doing some interesting work around the measurement questions.

KRUPP: Yes. Thanks, Franklin. Great question. Definitely, we are learning a lot and we don't need to single out the oil and gas industry, we have to get all the controllable sources. The oil and gas industry happens to be the most tractable, the most cost-effective. But on measuring feedlots and dairy farms, you know, we now have the technology to do that both out on the ground and in the air with the drones that Gretchen mentioned with airplanes, even with satellites. The Environmental Defense Fund has a wholly owned subsidiary called "Methane Sachs," that we're planning to launch in 2022. It's about a $100-million project, and while its mission is to look at the oil and gas industry, and it will be able to look at 80 percent all the major oil and gas facilities around the globe, and with precision, figure out what the emissions are. That same tool will be able to look at agricultural sources as well. And New Zealand, the country of New Zealand, has been very generously supporting over twenty million New Zealand dollars to develop the science of looking at not only feedlots, but other agricultural sources. On the hopeful side, I just want to say, Franklin, one last thing to you is that several companies, including DSM, have come up with supplements for the feed of dairy cows or even beef cows, and have been able in pilot studies to reduce submissions from cows by, I am told by the CEO of DSM, as much as 60 percent. So if we can scale those solutions, there's quite a bit of hope for that major source as well.

MCKIBBEN: Great, it's funny, when I was telling my husband that I was going to be presenting this panel, he did ask me, he was like, when I was saying we were focusing on methane he was like, from the oil and gas industry or from the cows? So very good question, Franklin. Alice, I don't know if you had anything you—

HILL: No, no.

MCKIBBEN: —okay, great. So we'll go to the next question.

STAFF: We'll take the next question from Corbin Hiar.

Q: Hi, I'm wondering why Shell and EDF are focused on making natural gas a cleaner transition fuel instead of just moving directly to promoting battery storage or other emissions-free energy technologies to backstop the variable renewables we're talking about?

MCKIBBEN: Gretchen?

WATKINS: Yes, I'm happy to start. I think it is both that are needed. At the moment, natural gas provides, like I said earlier, a real source of reliable energy, it is something that you can turn on and the lights don't go out when the wind stops or when the sun goes down. Absolutely, battery technology is critical, and so is, you know, continuing to advance other sources of energy, whether it's hydrogen, or biofuels, and we're active in all of those spaces. And so I think it's not an either or, Corbin, but we very much feel that natural gas has a role to play right now and will in some ways for the next couple of decades.

KRUPP: Yes, if I can just add we absolutely have to transition away from society's dependence on fossil fuels, and the sooner we do that, the better. At the same time natural gas today, I don't know if it's thirty trillion cubic feet we take out of the ground in the United States each year, but a third is used to generate electricity, but remember, a third is used for industrial processes, a third is used for heating and cooling. So we're going to be using that as a reality. If we're not in denial, we are going to be using natural gas for a while even if we go as fast as we can to promote renewables and construction of new renewables for electricity—natural gas is just about 40 percent of America's production electricity. So while we are using this fuel, there is just no excuse to have its production and use be as bad or worse than coal. We need to make this fuel as good for the climate as it can be, and we know from IAEA, it can be 75 percent better, and it's not that expensive. So we need to get on with that. So I agree with your question in the sense, and what Gretchen has said, we need to do both clean up natural gas, even as we transition away from both coal, oil and natural gas.

 

WATKINS: I think Fred brought up a good point there that I'll just give a couple of examples for folks. You know, Fred said that natural gas is used in industrial processes, and what that means is it's actually used to make things like hand sanitizer, for example, which we went into overdrive on earlier this year, actually retooling some of our chemical plants to make more batches of hand sanitizer that we donated, you know, around the country, and frankly, around the world. And so, you know, in addition to that, you know, you might think about plastics—plastics are often given a kind of a bad name, but in fact, used for a lot of medical devices. Frankly, they'll be used, you know, in a huge way to combat this whole Coronavirus and COVID-19 that we have in terms of getting, you know, vaccines out and our medicine transport. So those are just some examples of the industrial uses that Fred mentioned.

MCKIBBEN: Yes, I appreciate that Gretchen. Fred, I did want to stay with you for just a second on that last question because you talked about, and it's true, we get these emissions from various different processes, right, and so different inputs. Can you talk about, I know today we're focusing on sort of the oil and gas industry, because we've got Gretchen here, but if you could talk about how you're collaborating, because what you've done at EDF is, you know, go from just being, you know, sort of you're known for the litigation part of your business, but collaborating with companies to address these important issues. Can you talk about how you're working with some of the other companies that you know, whether it's in, you know, sort of transportation or what have you, where you're seeing these other causes to the emissions? Can you talk a little bit about what EDF is doing to work with those kinds of companies?

KRUPP: Thanks for those kind words, as well. We're working around the world with people who not only are responsible for some of the emissions but also people who have the ability to solve the problems. In agriculture we're working with big producers of corn to figure out how they can farm corn to reduce the emissions of nitrous oxides into the atmosphere, to keep more carbon sequestered in the soil. We're doing that in India. We're working in China, as well, with farmers. We're working with, you know, the hog farmers on, you know, their production as well. So, you know, we found that the spirit of working together, you can solve a lot of problems. You know, in the automotive industry, we've had good working relationships with several of the biggest auto manufacturers, including Ford Motor that's now investing more in electric vehicles and which aligned, for good policy, in the state of California as California has set precedents for cleaner and cleaner cars, and also trucks, which is a big part of this. So we find that many companies are realizing it's in their long-term self-interest to do things that's going to allow the whole planet to thrive and their businesses to thrive. Tracy might take one second to come back to the oil and gas industry, though, you know in Texas, there's very important rules under consideration right now to reduce flaring. We've flown over these flares, and a lot of companies, well in the Permian, we found 10 percent of the flares aren't lit. So the gas is still going through many of them. Some of them have automatic shut offs, but not all, and they're not even lit. Texas Railroad Commission is now considering ending routine flaring, and again Shell and BP have been leaders in supporting that sort of action. In the European Union, the European Union is now thinking of considering putting in place standards to affect not only leaks of natural gas in the European Union, but in the products that are sold into the European Union. And again, Shell has been supporting that regulation to create an even playing field for all the producers. So cooperating with companies, in my view, turns out to be a pretty good way to change the world.

MCKIBBEN: Even though interests don't naturally seem aligned, you've done a very good job. Thanks, Fred. So we've got another question in the queue. We'll take that question.

STAFF: We'll take the next question from Caroline Vance.

 

Q: Hi, thank you all so much to CFR and all the panelists. My question is for Gretchen—I know there's been recently a lot of activity in the institutional investor world around pushing for more transparency and reporting by corporations, particularly on extra financial information like carbon intensity, and this has been picked up by regulators in Europe. And I'm curious to what extent these investor trends have been a factor and in encouraging Shell to move toward renewable and alternative energy and lower carbon intensity? Or do you see this as something that's more of a trailing trend? And do you think that these efforts could be having an effect on your peers at all? Thank you.

WATKINS: Thanks, Caroline. I actually think that the ESG [environmental, social and corporate governance] investment community is, you know, is engaging with industry in a different way than they were five years ago. And I do believe that, you know, that this increased transparency is something that, frankly, you know, we welcome in most cases, and we'll continue to look for ways that we can basically be more transparent as a company that then helps our investors. And so I do think that it's, you know, that it has some influence. I do believe also though that, you know, from an industry perspective, you know, we as Shell view that we've got a role to play in terms of being a positive force, or maybe a loud voice at tables, you know, like the API or like TXOGA. And speaking out as we have, both at the federal level around methane regulations and our very clear view that we need to have these regulations in place around methane. But also, as Fred just indicated, here in Texas, really urging the states to look at eliminating routine flaring over time. We've signed up for it as part of a World Bank initiative, so why wouldn't we want to see that happen everywhere?

MCKIBBEN: Great. Thanks, Gretchen. I will say that the ESG discussion, while it's become the effort to standardize, you know, sort of what that means and what companies should be disclosing is more recent, but certainly it seems to me that the commitments that Shell had made around, you know, both being responsible to their shareholder interest as well as to the environment is something that happened even before we've had this, you know, coalescing around the need or investors focused on ESG. Though I do believe ESG in various different stages and parts has been around for a long time, but certainly, Shell's broader announced commitments have has predated some of this more recent discussion around where ESG investors are so, great. So, we've got what we've got another question in the queue. We'll take the next question.

STAFF: We'll take the next question from Peter Georgescu.

We'll move on to Kimball Chen.

Q: Can you hear me? Okay, thank you. My name is Kimball Chen. I've been involved in the natural gas industry and LNG and LPG, it's lot of natural gas experience globally, especially with developing countries, that's in my private sector life. In my public sector life, I've worked very closely with the UN and international agencies to create a role of LPG and natural gas as a transition solution for energy access on clean cooking. So the I've noticed this discussion focuses on what the developed world and developed world large companies in their activities in a subset of developing world settings, principally oil and gas production can do to limit methane emissions, but as Fred and others have pointed out, oil and gas is only, whatever, roughly half of the methane emission problem—the other half is anthropogenic agriculture activity and also municipal solid waste. Now, the problem if the developing world is going to modernize and get access to energy and has population growth, who is going to provide the money for them to start to bend the curve of their emissions of methane as part of the significant contribution or reduction of mitigation of methane as part of anthropogenic contribution to climate change? It seems to me that there's very little money, as we know, going from the developed world and from large scale international business and capital markets into developing country energy development, and the UN has commented about that. So, I'd like to hear it since this is Council on Foreign Relations, I'd like to hear more about what our goals should be in the international community, especially in the developing world, to help them contribute to our shared need to reduce methane emissions. Thank you.

MCKIBBEN: Great, thanks. I think if we could—Fred if you want to take that on, I think each of the panelists is probably equipped to discuss that, and then Alice if you want to add something, considering, you know, you worked on the National Security Council, so you looked at it from a foreign policy perspective. But, Fred, you've worked around the world on these kinds of issues, if you want to start?

KRUPP: Great question, let me give you one example from India, where IndiGo Airlines every time someone takes a flight, they have the opportunity to contribute to offset the emissions from that airline flight. And millions of dollars have gone to, not to EDF, but to something called the Fair Climate Network in India, which has paid rural farmers to reduce their emissions, including of methane. So farmers have sold basically carbon credits that IndiGo Airlines and put in methane digesters taking animal dung, getting the methane out, burning it, so these remote poor villages have a source of light or cooking heat, doing something good for methane that would otherwise be venting and causing global warming, all funded by customers neutralizing their carbon footprint. That's an example of a market mechanism that India is in the process of expanding, but we could see that scale up in other places in the developing world as well.

MCKIBBEN: Alice, do you want to add some thoughts?

HILL: Yes, thank you. I think this is a very important point. And of course, it's not just in reducing methane emissions, but we're also going to need to make major investments to help less developed countries deal with the impacts of climate change, because in many instances, they are on the front lines of the sea level rise—the really extreme heat events will occur in countries that are less developed. So the question, of course, is who is going to pay for all of this under the Paris Climate? There is the Green Climate Fund, which is inadequately funded at the moment. But going forward, certainly my hope is that the United States, and I think we see this in the European Union, will recognize that it's in all of each of our self-interest to make sure that the other countries are put on a better path going forward as well, including as they develop their economies and build out. You know, most of the infrastructure that we will see built will probably occur in Asia, we will see many more cities developing. I think Bill Gates has said it's about a city the size of New York every month, and there are lots of opportunities to reduce emissions and build resilience going forward. But it will take huge contributions from the developed world. The reason why it's in our self-interest, I think, Jim Mattis put it well, when the former secretary of defense, when he testified before Congress, that if we don't invest in countries overseas and help them in their path of development and addressing these issues, essentially, he would have to buy more bullets. And that's what will happen is we see a greater focus internally and attempts to protect ourselves. But if you want to take the COVID as an example of what happens then, we have seen greater recruitment by organized crime, the mafia, and the cartels in Mexico during this COVID pandemic as countries have struggled in their recovery, as well as greater growth in terrorist groups recruiting as countries have been inadequate in their efforts to help their populations through this crisis. Climate change is a continuing crisis. So we will see more of that as we go forward, and to deflect that we need to help the government's be stronger in their own efforts, including and reducing methane, but also building resilience to the impacts.

MCKIBBEN: Great, thank you, Alice, I think we'll turn to the next question. We've got a couple in the queue.

STAFF: We'll take the next question from Harold Schmitz.

Q: Hi, yes, Harold Schmitz with the venture firm, The March Fund, and also UC Davis. And just a turn, I guess, then this might be most appropriate for Gretchen, but it seems like we're in a little bit of a situation. I live in California now, so definitely acutely aware of current effects of his topic. And it sort of reminds me of the Cold War-Sputnik analogy and the formation of DARPA, and you know advanced innovation capability. And of course, there's ARPA-E, which has been a representation of sort of trying to get arms around that. But my experience, I've spent twenty-five years with Mars as the CFO, and so seeing the corporate side of things there's a real, real need here for corporate innovation, and I think Gretchen, you definitely seem to be heading in the right direction on that, and I'm sure with the resources are [inaudible] all over that. But I'd really appreciate if you can say a little bit more about, you know, from a corporate innovation perspective, how are you guys or how is the sector thinking about, you know, really taking a DARPA-esque when DARPA works well, not always works well, but taking a DARPA-esque, when it works well, approach to tackling these, you know, really, really urgent problems right now.

WATKINS: Yeah, thanks for the question, Harold. I think, you know, we very much are looking at advancing innovation and technology both in the areas of controlling our emissions, which is what we've been talking about for the most of the time today, but also in the area of continuing to provide low and no carbon products to our customers. And then the third area being, you know, if you can't sort of eliminate all emissions, how do you offset those and that is things like carbon capture and sequestration or nature-based solutions. So those are kind of the three sort of areas I would say that we're looking at this through. And, and just to give you one thing we haven't talked much about is kind of the low, no carbon fuel offerings. One of the things we're doing a lot more of now than we were even five years ago is very much focusing on that in a sectoral way. And so, you know, I had said earlier as our customers demand, we actually want our customers to demand more of that. And so in doing that we're working very closely with, for example, the airline industry. How do you decarbon the airline industry? Well, it's biofuels, and biofuels right now are, they're just not very plentiful, they're a little bit more expensive. And so we're actually collaborating with the airline industry on how do we make them more available. How do we make it less expensive to produce? How do we make it more accessible by airlines around the world? So those are kind of the three lenses we're looking at this through right now in terms of sort of tackling it and really applying innovation in all three areas.

MCKIBBEN: One question, if I could, because it ties into a number of the questions that's been asked by our members, and I'd like to get each of your thoughts on—I think the approach is clearly going to require a global understanding of, you know, sort of the responsibility around responding to the needs of the climate and the environment. If I could get each of you, Alice and Fred, and then Gretchen, your thoughts quickly on, you know, what do you think should be—how do we go around doing sort of post-Paris, getting reengagement and an understanding globally around what needs to be done? You can just give your quick thoughts around whether Alice if it's from a policy perspective that, you know, governments need to look at, and, you know, Fred, engaging, you know, in collaboration and Gretchen, certainly from a specific industry perspective. Can you just give some short thoughts on what you think should be done as we try to move forward and make continued advancement around dressing this urgent problem?

HILL: Well, thank you. I think that's a very important question. On terms of the two sides as I view climate change, there's the side that we've been talking about, which is cutting emissions, and there is also the side of preparing for the impacts. On the side of cutting emissions, I do think this will have to come primarily from the government level. We've seen much greater ambition as the Trump administration pulled away from the Paris Agreement and really any presence on the issue of climate change. We've seen the EU definitively step into that void, and then just during climate week, President Xi announcing his ambitions for China. So I think the world is working around the U.S.'s position, but without the U.S. present in this, it will be difficult for the world to make progress—we are historically the largest emitter, the second largest emitter now. So having a signal from the major emitter countries around the world is very important for driving further change. And then as we talked, I think that we're going to need to help on the local level, which is really where the adaptation or the preparation decisions are made. Those will be driven primarily by the subnational groups, by those who are affected by whether there's a seawall or you're going to invest in a wetland, or what other choices are made to protect different communities. But those, as we've previously discussed earlier, will need some substantial infusions of cash. Hopefully, we can find ways that we can better partner with the private sector, because it's certainly in their interest as the COVID pandemic has revealed, for there to be functioning communities so that their supply chains are not interrupted, their transportation systems continue to operate, and that there isn't just a cascading breakdown of infrastructure as a result of climate change events. So we'll need to see efforts on both sides. It's actually when you step back and look at the scale and scope of the climate risk, it's an all-in, everyone will need to be participating at various levels to find the right solutions, and it will involve millions of decisions, if not billions. But we need to set the direction from the top that emissions or cutting emissions is core to having the globe thrive in future decades.

MCKIBBEN: Fred, your thoughts?

KRUPP: I would just name one thing that I think is so important, and that is I'd love to see citizens, NGOs, and industries cooperate to put in place market-based policies, which are the most efficient way to deal with this problem. When you have an externality throwing either methane or carbon into the atmosphere that's not priced, no wonder there's not an incentive to do something about it, or an incentive to innovate, as we were talking about earlier. So if we can put a price on carbon, use market-based policies, the models show we’ll get twice as much pollution cleanup for every dollar we spend. We can't afford to waste money on this, so that's the one North Star that the Environmental Defense Fund we think is really important.

MCKIBBEN: Any thoughts, Gretchen?

WATKINS: I pretty agree with Fred there, and he and I worked closely on particularly the carbon price. I would just say, you know, we very much feel that we are part of the solution, and that's why we're doing what we're doing at Shell. So we want to continue to be part of the solution and look for opportunities to collaborate on that, both with governments, with NGOs and with society.

MCKIBBEN: Great. Well, thank you very much to our three wonderful panelists. And thank you to the members for joining us for today's virtual meeting—Alice Hill, Fred Krupp, and Gretchen Watkins. Please note that the audio and transcript of today's discussion will be posted on the CFR's website. Again, thank you everyone, and have a good rest of your day.

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