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4 degrees of separation: Santos proves gas not climate solution

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“The pathway that we adopt is the 4 degree pathway”.

That was Peter Coates, the chairman of one of Australia’s largest and most controversial oil and gas companies, Santos, at the company’s Annual General Meeting in Adelaide on Thursday.

This startling revelation came in response to a question about what scenario analysis the company had conducted, and whether the results of such analysis would be disclosed to shareholders.

Source: The Australian

Source: The Australian

If we can put aside the catastrophic impacts 4°C of warming would have for human civilization, let alone Santos’ share price, the statement reveals much about the company.

Despite its lofty commitment to “align its business strategy with the Paris Climate Change Agreement”, the company clearly has no understanding of what that actually means.

Coates attempted to justify this position due to the lack of Nationally Determined Commitments (NDCs), consistent with 2°C. This may be true, but the investment community has been demanding companies plan for a 2°C pathway.

The reality is that there are valid policy pathways, but they’re simply not consistent with Santos’ business strategy.

In fact, just last week, a report from the Energy Transitions Commission – whose board includes representatives from Royal Dutch Shell and BHP Billiton – concluded that gas production can grow by just 2% to 2040, in order to limit warming to 2°C. And that is predicated on drastically reducing methane leakages.

Coates’ admission contradicts his entire industry’s sales pitch that gas is part of the solution to climate change. If gas really is the transition fuel to a low carbon economy, and the “perfect partner for renewables”, then why on earth does Santos not make the case for a 2°C pathway? Well, I think we know the answer.

Coates may have stolen the headlines, but those who lost the most credibility yesterday were institutional investors. The stewards of our retirement have long argued that engagement was the most effective tool with which to achieve change, as opposed to redirecting capital elsewhere, that is. And engage they did, compelling Santos to issue a ‘Statement on climate change disclosure’ less than a fortnight out from their AGM.

Santos committed to ‘review’ the recommendations of the Task Force on Climate-related Financial Disclosures, not implement them; and, issue a climate change report. About which, the company provided no parameters, no timeframes and no promise of any new information.

At Thursday’s meeting, neither the chairman nor the CEO Kevin Gallagher made a single mention of climate change, emissions or the disruption in the energy sector. Until, that is, they were forced to respond to questions from shareholders.

This is a company comfortable admitting that it hasn’t considered the risks a 2°C pathway poses to their business. This is a company that “doesn’t know or care” about the developments in battery technology and the impact it may have on gas demand. Institutional investors were sold, it seems, a lie.

Investors yesterday had the opportunity to send Santos a clear message that disclosure of climate risk matters, but they bottled it. Instead, they largely voted with a board that quite clearly is removed from the reality of climate change.

The question now is what they will do about it, because carrying down the path of failed polite engagement cannot continue to be an option.

Dan Gocher is an analyst and campaigner with Market Forces.  

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  • Darren

    something something market forces. Something something death spiral.

  • Marcus Gibson

    This also demonstrates a poor understanding of basic chemistry and engineering. CO2 ties up oxygen while increasing temp which in turn depletes phytoplankton (70% of our O2 comes from phytoplankton.) Under a 4 degree scenario we’ll have Everest-level O2 concentrations at ground level, and stratospheric O2 depletion at aircraft altitudes (meaning even jets will have trouble running.) Piston engines currently have an effective ceiling of around 15,000 ft due to lack of oxygen at altitude. So basically, most Santos customers will be unable to burn gas due to process inefficiency and anemic burn. Oh… And we’ll be dead.http://link.springer.com/chapter/10.1007%2F978-94-010-1729-9_4

  • Goldie444

    I did disconnect from the gas grid 2 weeks ago. But if FF guys like Peter Coates can say they can “adopt the 4 degree pathway” in regards to Climate Change and human civilization – why bother. Sigh

    • Chris Fraser

      Stay true to the cause. Not everyone thinks like them.

      • MaxG

        But unfortunately those with influence do.

        • Alastair Leith

          When the tide turns they all run. A former AGL(IIRC) exec is director of a company building a massive solar farm in QLD today. They’ll follow the money…

          • solarguy

            I agree. But it’s disgusting, maddening to think though, that if it wasn’t for the money, they wouldn’t give a damn about the planet. The greedy arseholes.

          • Alastair Leith

            you noticed, right?

  • MaxG

    Why I am saying “vulture capitalism” … it will self destruct eventually.

  • Alastair Leith

    That could come back to bite him if it ever goes to court. Company directors are on notice now that they can be held accountable for not taking climate change into account.

    • Darren

      exactly. We need this same threat to be available to pollies as well.
      If you had to bet your assets against your opinion, would you?