Photo credit: Equinor

As with the old adage : “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change”, and in light of the massive digital transformations that are well underway, workers and businesses these days better heed to Charles Darwin’s proven observations.

It is not only digital transformations, but climate change too. Climate change is a major movement these last few years culminating in the 2015 Paris Agreement, which pegged almost every single country to commit to reduction in carbons emissions.

Signing the agreement means countries are committing, and by committing, it means they are expected to take actions in order to comply. Although it may be a bit vague as to what constitute the tiny little details about the emission reductions and net zero emissions, it is suffice to say that businesses and workers would be affected, as the Paris Agreement would alter the current status quo.

The Paris Agreement would impose Cost on businesses and individuals whom in the course of their undertaking, generated Carbons (or Carbon Dioxide in this case which is a Green House Gas emission). The logic is that businesses and individuals would be motivated to take actions in order to address these Cost, either by reducing to a net zero or by way of Offsetting.

Now this is where it gets interesting. It is foreseen that not all industries or companies would be able to get away from Carbons, and as such would comply by way Offsetting. This would include industries such as Airlines, which would still be years away from having batteries-operated planes. Such companies would then be buying Carbon Credits, supposedly from a Carbon Credits Exchange market, in order to comply.

Massive Oil and Gas industry and process companies would be the other example. There are only two ways to comply; either by exiting the industry altogether and emerge as a new rebranded Green Energy company (such as Renewables and Solars), or to retain current business model, but to include in the new Green Energy segment and technologies.

Out of the two, the latter seems to hold more values. By having the new Green Energy segment and technologies, companies are essentially developing new revenue sources, which although contradict with their other business segments, hold as a hedge against their traditional oil and gas business models. Example would be to include in offshore winds, and solars as one of their business models. This would also make great business sense as it would allow the traditional oil and gas companies to tap into the forecasted growing energy (electricity segment) demand, in light of the growing digital economies.

Secondly, they would allow these companies to Offset their own carbon emission or footprints. By investing in these Green Energy, they would be able to generate an amount of Carbon Credits, which would be used to offset their own operation, and with the excess be tradable for others to purchase, to offset their own carbon footprints.

It is foreseen that Carbon Credits would only rise in value going forward, especially now with the strong ‘left’ current, and this would represent an opportunity too big to miss. Such initiatives are doing the Oil and Gas companies a favor actually, as they would have the scale, technical and financial prowess to invest in ‘risky’ and novel Green technologies such as offshore winds, solars, Carbons Capture and Storage (CCS) and many more.

Another example would be Tesla, an automotive player although touted by its founder, Elon Musk as a technological company. It made headline news recently as the company has turned into profits for the first time. Now, it is worth noting that Tesla’s profits are attributed mostly by selling their Carbon Credits to other companies, and not their baseline business. Investors did take note and Tesla valuation skyrocketed, could be because of this Carbon Credits that they have in place.

The danger here going forward is that businesses and eventually people would end up paying the ‘Cost’ neglecting climate change, be it the real climate change in terms of rising sea water level and climate, or the monetary cost associated with signing the 2015 Paris Agreement.

Recent initiatives by Governments everywhere to address these issues should be applauded, for example, the Singapore Government recent Budget 2021 announcements on taking on more new ‘Green’ initiatives going forward, could be that they are anticipating paying the ‘rising’ cost of Carbons.

escveritasEnergyLatest ThinkingOil & GasPowerPhoto credit: Equinor As with the old adage : 'It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change', and in light of the massive digital transformations that are well underway, workers and businesses these days better heed to...