The chief executive of oil and gas giant Repsol reveals why the company's first-of-its-kind commitment to net-zero emissions is smart for business
- The Spanish oil and gas giant Repsol announced last month that it will become a net-zero carbon emissions company by 2050. It was the first oil and gas company in the world to make such a commitment.
- The company's chief executive, Josu Jon Imaz, says the target isn't just about combatting climate change, in an exclusive interview with Business Insider. "We are doing that because we want to make money," he said.
- Imaz says that even for a hydrocarbon company, lowering emissions significantly reduces risk to shareholders and protects investments. "We don't want to have stranded assets," he said.
- This story is part of Business Insider's reporting on the energy transition. Please share any feedback and tips with us at bjones@businessinsider.com.
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It sounds like an oxymoron: An oil and gas company committing to net-zero carbon emissions.
But that's exactly what Spanish energy giant Repsol did last month. By 2050, the amount of carbon dioxide (CO2) the company emits will equal the amount it captures from the air, Repsol says. Remarkably, that commitment includes so-called Scope 3 emissions - CO2 released by automobiles and powerplants that use Repsol products.
While Repsol is the world's first oil and gas company to make such a commitment, it's one of a trove of energy behemoths including Shell, Total, and Chevron that have recently set climate targets.
The flurry of commitments, though visibly admirable, has raised questions among environmentalists who worry these targets are a form of greenwashing: the practice of obscuring environmental degradation by focusing public attention on sustainability efforts. There's also concern that the commitments are nonbinding.
"I respect these kinds of views," Josu Jon Imaz, Repsol's CEO, told Business Insider in an exclusive interview.
Repsol's chief executive is the first to say that concerns about greenwashing could be right - that is, if his company, based in Madrid, only advertised its 2050 target.
"The easiest part of this narrative is that we're going to be [carbon] neutral by 2050," he said. "Because they could be right if we were only talking about 2050."
Imaz points to the company's history and short-term commitments. Repsol was the first oil and gas giant to support the Kyoto Protocol, an international treaty that mandated country-by-country emissions reductions, he says. It also has an interim plan for slashing emissions leading up to the 2050 commitment - a 10% cut by 2025, a 20% cut by 2030, and a 40% cut by 2040.
"We are reducing CO2 year after year," he said. "That is not greenwashing."
The company announced that its new carbon-reduction strategy would mark down the value of its oil and gas reserves by $5.3 billion. Nonetheless, Imaz says these emissions reductions are good for business - at least in the longterm.
"We are not doing that because we are an NGO [non-governmental organization], and we only want to contribute in a generous way to climate change," he said. "We are doing that because we want to make money. What we're doing has to fully support returns. That is, of course, a minimum condition."
Imaz says Repsol's work to reduce CO2 has resulted in new margins, lower risk to investors, and a competitive edge for the company, without a significant shift in what it offers its customers.
Consider Repsol's industrial business, which operates refineries. About 60% of a refinery's variable costs are tied to energy consumption, the company website states; making operations more efficient lowers costs while cutting emissions.
The same strategy applies to methane flaring or venting.
"Actions to reduce emissions from the routine burning of hydrocarbons in flares are especially important as they allow us to reduce GHG emissions and minimize the loss of products or fuel," the company website says.
Repsol also plans to bolster its production of natural gas, fuels made from recycling waste, and plastics and polymers, Imaz says. These industries are lower emissions, he says, yet still provide customers with the products they expect.
Setting carbon-reduction targets also reduces the risk to the company's shareholders, a large portion of which support sustainability efforts, Imaz says.
"We need to protect our future assets from climate risks," he said.
Those risks could include a drop in the profitability of hydrocarbon assets, for example, if the price of oil falls.
"We have to anticipate this future," he said. "We have to act and to move ourself [sic] in that direction. Not only to save for the planet but to save the interest and the risk of our shareholders. "
But even if reducing emissions is good business, it won't be easy for Repsol to meet its 2050 commitment.
Near-term goals are one thing; the company can likely reach its early reduction targets by investing in low-emissions fuels and products. But by 2040, Repsol will almost certainly have to turn to carbon capture technologies, or natural sinks like forests, to reach net-zero.
Experts say these approaches are expensive. And even Imaz doesn't see them as a formidable solution, at least for the short-term.
"The main driver we have to consider is going to be the return on the profitability of the CO2 we are getting rid of," he said.
In Imaz's mind, the technology that underpins renewable energy, biofuels, and the use of waste to produce diesel or green hydrogen could lead to higher returns than other alternatives.
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