Q. What is Chevron's view on climate change?
A. At Chevron, we recognize and share the concerns of governments and the public about climate change. The use of fossil fuels to meet the world's energy needs is a contributor to an increase in greenhouse gases (GHGs)—mainly carbon dioxide (CO2) and methane—in the Earth's atmosphere. There is a widespread view that this increase is leading to climate change, with adverse effects on the environment.
GHGs come from a variety of sources: power generation, transportation, agriculture and land use, manufacturing and other activities. Fossil fuels—coal, oil and natural gas—release carbon dioxide during production and consumption. Fossil fuels are also the primary source of energy for the global economy, which is in the midst of a prolonged expansion that is contributing to a rising quality of life in many parts of the world, particularly in developing countries. According to the International Energy Agency's World Energy Outlook, global energy demand will be at least 22 percent and as much as 47 percent higher in 2035 than it was in 2008, depending on future government policies. The majority of that energy will be provided by fossil fuels, even as lower-carbon alternatives continue to emerge.
As we work to reduce GHGs, our collective challenge is to create solutions that protect the environment without undermining the growth of the global economy.
Q. What is Chevron's strategy for addressing climate change?
A. Our strategic focus on climate change is based on the core principles of the company's Operational Excellence Management System. Across its global operations, Chevron has integrated a corporate climate change strategy. Our multifaceted response to climate change involves seeking ways to reduce greenhouse gases from the use of fossil fuels, expanding the use of alternative fuels and renewables and improving energy efficiency. Our Action Plan on Climate Change continues to guide our activities, including emissions reduction, efficiency improvements, research investments, business opportunities and advocacy positions.
Q. What is Chevron doing to reduce greenhouse gas (GHG) emissions?
A. Chevron is taking actions to reduce GHG emissions from our operations. The two primary sources of Chevron's GHG emissions are combustion, which occurs during operations, and flaring and venting of natural gas, a byproduct of crude oil production. Examples of recent emissions reduction programs include:
- Managing the routine flaring and venting of "associated" gas, the natural gas extracted with crude oil during production, is an ongoing challenge for Chevron and other operators in countries having limited infrastructure for delivering natural gas where it can be put to beneficial use. For the past eight years, we have been a partner in the World Bank-led Global Gas Flaring Reduction initiative to facilitate flaring reduction. Through the execution of a series of commercial projects to capture and use the gas, and with the cooperation of industry and government partners, we have reduced GHG emissions from flaring and venting by 12 percent since 2007. We identified additional activities that, if successful, will eliminate 80 percent of our pre-existing flares and will create facilities to enable other operators to reduce their flaring and control future levels.
- Chevron's Gorgon Project will include the world's largest commercial-scale GHG storage site. The Gorgon Project will position Australia as a leader in the application of GHG storage, with as much as 3.4 million metric tons a year of CO2 being injected and stored underground. Over the life of the project, it is anticipated that approximately 120 million metric tons of GHG emissions will have been avoided because of the Gorgon CO2 injection project. The Gorgon Project is the first project to be regulated under legislation dedicated to GHG storage and is the world's first large-scale storage project to have been subject to an exhaustive, publicly available environmental impact assessment. Project construction has begun, and injection operations are anticipated to begin in 2014.
- Chevron uses an energy index to measure energy efficiency improvements across our global operations. The Chevron Energy Index is an approximate measure of the energy intensity of our operations, based on the estimated improvement of energy technologies and operational performance. As of 2011, that index has shown a 34 percent improvement since 1992. The total energy consumption of our operated assets in 2011 was 720 trillion Btu, at an approximate cost of $7 billion.
Q. How does Chevron address GHGs in capital projects?
A. Consistent with our Action Plan on Climate Change, we seek to reduce GHG emissions by incorporating climate considerations into business decision making.
For development and approval of major capital projects, we estimate a project's incremental emissions profile, assess the potential financial impact of GHG regulations, and describe the emissions reduction options considered and implemented. We developed tools to identify, assess and rank emissions reduction methods; conduct economic analysis; and integrate GHG factors into decision making and overall project development and management.
Q. What are the biggest challenges to reducing GHGs globally?
A. There are several challenges, including the fact that:
- Current estimates from the International Energy Agency indicate that hydrocarbons will account for 75 percent of global energy consumption by 2035.
- There is no single replacement for hydrocarbons—either for power or for transportation—at the scale needed to serve the world's energy demands.
- There is no "silver bullet." In other words, we need to rely on technology advancements across a wide spectrum of technologies for meaningful emission reductions; these advancements will take time (decades in some cases). The U.S. Energy Information Administration's 2010 projections indicate that the total world consumption of energy will increase by 49 percent between 2007 and 2035. Further, the projections indicate that the use of all energy sources will increase during this timeline.
In the meantime, using energy more efficiently (e.g. insulation improvements, vehicle fuel efficiency improvements, lighting and HVAC systems) is critical to achieving meaningful reductions in greenhouse gas emissions.
Q. Why should climate policy recognize the role of fossil fuels in addition to renewable and alternative energy sources?
A. Energy is needed to drive economic growth and to improve our quality of life. Today's energy requirements are expected to grow substantially larger as the world's population grows and economies develop further.
The role of renewable and alternative energy will continue to help meet the rising demand; however, there is no single replacement for hydrocarbons—either for power or for transportation—at the scale needed. Therefore, climate change policies must enable available energy sources to operate in an energy-growth and carbon-constrained world. Policies that severely restrict the use of fossil fuels would be disruptive to global economic growth.
In 2007, Chevron executives and employees participated in the U.S. National Petroleum Council's study of global energy prospects and markets. The report, Facing the Hard Truths About Energy, included input by more than 1,000 contributors from academia, government, nongovernmental organizations and the private sector. The report detailed several "hard truths," including the following: Coal, oil and natural gas will remain indispensable to meeting the projected global demand through 2030. The world is not running out of energy resources, but there are accumulating risks to continuing expansion of oil and natural gas production from historically conventional sources. To mitigate these risks, all economic energy resources—coal, nuclear, renewables and unconventional oil and gas—are needed.
More recently, the International Energy Agency published data in 2010 indicating that 81 percent of today's energy requirements are supplied by fossil fuels and that hydrocarbons will continue to supply 75 percent of the world's energy requirements in 2035.
Q. Chevron's 7 Principles for Addressing Climate Change calls for government support and partnerships with private sector on research and development in carbon mitigation and clean energy technologies. What are the most promising technologies?
A. Principle Six calls for support and partnership in the research and development of new technology. There are three primary technological areas that should be addressed to tackle this issue now, given what we know of mitigation costs. In order of priority, they are:
- Energy Efficiency and Conservation
Much can be achieved by addressing demand. Technologies that deliver improved waste heat recovery, insulation, lighting and heating systems are ready to be deployed now.
- Greenhouse Gas Storage
The practice of capturing CO2 from stationary sources such as power plants and storing it in existing geological formations such as depleted oil and gas reservoirs, may turn out to be promising technology. However, it will be a massive undertaking to tackle this on a globally commercial scale. Understanding more about its feasibility and its risks are critical before we can rely on widespread use. In Australia, as part of our Gorgon Project (44 KB), we plan to inject as much as 3.4 million tons of CO2 per year, making it one of the world's largest potential greenhouse gas storage projects.
- Lower Carbon Fuels
Cellulosic biofuels will have a role in the future transportation fuel mix, and Chevron has created a number of research partnerships with academic and government institutions to further scientific understanding in this area. We also created Catchlight Energy LLC, a joint venture with forestry products company Weyerhaeuser, to jointly assess the feasibility of commercializing the production of biofuels from cellulose-based sources.
Q. The last of the 7 Principles for Addressing Climate Change calls for transparency of climate policies. What do we mean by this and who is responsible?
A. Lowering emissions will have economic costs; most studies predict an increase in energy costs and a lowering of gross domestic product as a result of climate policy. Individuals will inevitably have to bear these costs, and this must be openly communicated to the public. The goal of Principle Seven is to communicate that as policy is developed, we all need to be informed about the costs and the trade-offs, the risks and the benefits. Truly informed decision-making requires an open discussion of the cost and consequences of possible actions.
Both public officials and the private sector have responsibility. We need reliable information openly communicated between policymakers and the public on costs, impacts and trade-offs during the legislative/regulatory process. After legislation and regulations are created, we also need reliable information communicated on the progress of other top emitters, so that "equitable sharing" can be assessed; on the advancements being made in science and technology; and on the outcomes of the interim assessments of results.
Q. What is Chevron doing in the areas of renewables and alternatives?
A. Conventional fossil fuels will continue to provide the majority of our energy needs; however renewable energy will play an important role in augmenting energy supply. Chevron is pursuing business and technology opportunities in innovative energy technologies. Chevron spent $4.4 billion on renewables and efficiency from 2002 to 2010. We expect to spend $2.2 billion on renewable energy and efficiency between 2011 and 2013. These efforts aim to augment our energy portfolio over the long term.
Chevron is the largest private producer of geothermal power in the world. Our Darajat III geothermal power plant, which began generating power in 2007, will avoid an estimated 650,000 tons of CO2 equivalent per year by providing clean, renewable power in Indonesia. The project has been granted approval from the United Nations Clean Development Mechanism to qualify for Certified Emissions Reductions.
Q. How is Chevron improving efficiency?
A. Chevron has made a long-term commitment to improve the energy efficiency of our operations. In 1992, the company began tracking the efficiency of its energy use with the Chevron Energy Index. The index is an approximate measure of the energy intensity of our operations, based on the estimated improvement of energy technologies and operational performance. As of 2011, the Chevron Energy Index has shown a 34 percent improvement since 1992. The total energy consumption of our operated assets in 2011 was 720 trillion Btu, at an approximate cost of $7.0 billion. Some specific areas of efficiency include:
- Chevron committed to a $2.5 million endowment for a permanent chair in Energy Efficiency to direct the world's first university center of excellence in energy efficiency at the University of California-Davis. The center is focused on developing and commercializing advanced technologies to enable energy efficiency in buildings, agriculture and transportation.
- Chevron completed construction and began operation of a new solar plant near our Coalinga, California, oil field to demonstrate the ability to commercially produce steam and inject it to extract oil. This solar thermal plant reflects sunlight from thousands of mirrors at a 323-foot (98 m) tower to produce the steam, replacing units now fired by natural gas.
We also deliver energy efficiency and renewable energy solutions to customers through our subsidiary Chevron Energy Solutions (CES). CES completed a 3.4 megawatt solar photovoltaic system for the Milpitas Unified School District in California. The solar power and energy efficiency program reduces the district's energy costs by more than 22 percent, which translates to an estimated $12 million in savings to the general fund over the life of the project.
Q. What should government do to promote energy efficiency and conservation?
A. Efficiency and conservation should be the highest priority and first order of business in any climate policy. Government can play a valuable role on a multitude of levels. They can:
- Remove barriers and/or provide financial incentives to improve energy efficiency in residences, commercial buildings, transportation systems and government offices.
- Provide continued support for existing national energy efficiency programs.
- Strengthen energy efficiency standards for appliances and commercial building sectors over time.
- Educate the public and introduce practices of energy efficiency and conservation into school curricula.
In addition, business should continue its own efforts to become more efficient.
As an example, the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy provides incentives—grants, incentives, tax credits—for energy efficiency projects and energy efficient appliances.
Q. What is Chevron's view on carbon credits?
A. Chevron views the use of credits as essential to addressing cost control within cap and trade schemes. We believe that carbon credits generated from offset projects must be additional, quantifiable and verifiable. Recognition of such credits in regulatory programs will help assure that emission reductions are achieved as cost-effectively as possible.
Additionally, Chevron's 110 megawatt Darajat III geothermal power plant in Indonesia is generating Certified Emission Reductions (CERs or carbon credits) issued through the United Nations. The first of these CERs (approximately 89,000) were commercialized in 2009.
Q. What is Chevron's view on global climate negotiations such as the Kyoto Protocol and Copenhagen Accord?
A. We support the intentions of governments to reduce greenhouse gases and we believe this is a global challenge that requires global participation. Chevron respects the decisions of governments on climate change policies and will continue to evaluate such policies based on our 7 Principles for Addressing Climate Change.
Q. Does the company support nationally mandated legislation or regulation around greenhouse gas reductions?
A. Chevron supports a national climate change program that is in alignment with our 7 Principles for Addressing Climate Change—is transparent, promotes energy efficiency and conservation measures, treats all participants fairly and protects our economy and energy security. Whatever the framework, realistic objectives must be set based on the best available data. It is vitally important to understand and fully communicate the economic and social costs, as well as the environmental benefits, of all proposed legislation and regulatory plans.
Q. What is Chevron's experience with the European Union's Emissions Trading Scheme?
A. The European Union's Emissions Trading Scheme (EU ETS), which sets limits on the greenhouse gas emissions from major stationary sources such as refineries and power stations, is the first large-scale carbon market of its kind. Chevron complies with all applicable regulations wherever we operates and our carbon markets team participates in the EU ETS to manage the compliance of our refining and exploration and production assets in the region.
Q. Does the company support measures such as California's Global Warming Solutions Act?
A. In 2006, California Governor Arnold Schwarzenegger signed AB 32, the Global Warming Solutions Act. The legislation seeks to cap California's greenhouse gas (GHG) emissions at 1990 levels by 2020.
We support the intentions of the state in reducing GHG emissions and have worked closely with the California Air Resources Board to design a workable program. But we believe that effective mitigation of GHG emissions can only occur at a global level, given that climate change is a global issue. This requires coordinated national frameworks, and fragmented actions by individual states have the potential for undue economic costs without effectively mitigating the climate change risk.
We have experience with state-by-state and region-by-region regulatory approaches, and these have not been favorable to consumers.
Q. How will Chevron help meet California's goals to reduce GHG emissions?
A. We will continue to play a constructive role in the implementation of California's Global Warming Solutions Act (AB32) and will focus on all options available to achieve the goals that are set.
Updated: March 2012