The key role of No-Carbon State-Owned Enterprises in Global Climate Action: Leveraging the G20 forum to accelerate the energy transition
The energy sector is the single largest source of carbon emissions, for which actions oriented to reduce its carbon intensity are critical to effectively tackle climate change. A great and yet largely untapped potential to reduce its emissions lies in oil and gas companies. Cognizant of this potential, in recent years several International Oil Companies (IOCs), publicly traded organizations with large capital access and wide geographical reach, have looked forward to effectively reduce their carbon intensity by shifting their operations to non-core low-carbon energy development.
The IOCs have embraced this transition to leverage the business opportunities presented by political and social environments progressively more accountable of the energy sector’s contributions to climate change. Owing to the potential of this transition to produce positive climate outcomes, it has sparked great interest in an increasing number of stakeholders; nevertheless, National Oil Companies (NOCs) and other state-owned enterprises (SOEs) in the energy sector are still notoriously absent.
SOEs not only dominate the global oil and gas industry over IOCs, but they typically enjoy more favorable industry conditions, as they benefit from improved capital access and governmental support, as their overall value proposition, business strategies and budgets are interlinked with, or heavily influenced by governmental policies.
Under a mutable business environment which favors the development of energy resources with low or zero carbon content, it is reasonable to anticipate that national governments will become more determined to join the energy transition through their SOEs based on two main reasons: meeting their national targets under global emissions reductions commitments while sustaining shareholder value. Given the complex efforts and resources in carrying out the energy transition at a pace and scale that effectively helps mitigate climate change, such initiative will set us in a deep decarbonization pathway if fully embraced by the world’s largest economies and their SOEs.
The implementation of this initiative would allow NOCs and SOEs in these countries to transform themselves into No-Carbon State-Owned Enterprises that would strive for socially accountable sustainable growth, higher economic value and effective contributions in the global fight against climate change. This paper analyzes these issues and advances a proposal for the Group of the world’s 20 major economies (G20).
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