Q&A: How Measuring the Differences Between Barrels of Oil Improves Climate Policy

EESI: One incorrect notion you address in your book is the idea that the world will run out of oil and gas sometime in the near future. Why is this thinking wrong and why does it matter?

Gordon: The hydrocarbons that make up oil and gas are physically abundant natural resources. Sufficient supplies exist for centuries into the future, even as they are increasingly difficult to access. We need to acknowledge this reality to address climate change. Acting as if oil and gas will soon run out forces us to focus only on demand-side solutions that improve energy efficiency and consume less. These policies are necessary and vital, but they are not sufficient because oil and gas markets do not respond to demand alone. Given resource abundance, we have to reduce oil and gas supply-side emissions as well. This means the industry has to shrink its own climate footprint. For example, this involves using renewable energy instead of fossil fuels to extract, process, and refine oil and gas, preventing methane leakage throughout the supply chain, shipping petroleum products over shorter distances, and making hydrogen from renewables instead of fossil fuels.
 

EESI: What makes oil and gas emissions different from one another? Is it their location? The type of resource? Their extractive operations? And to what extent do greenhouse gas emissions vary based on production, refining, and end use? 

Gordon: There is no standard oil or gas. Each resource, regardless of its location, is chemically and physically different. Some oils are solid like peanut butter and others easily evaporate like nail polish remover. Gases can be fizzy like soda or dry like air. Resources can be pooled or trapped in rock fissures, shallow or deep, pooled or spread out, and contain different contaminants. Even in a single basin, hydrocarbons can vary markedly. And their makeup can change over time. Oil and gas require different operations to extract and turn them into petroleum products like gasoline, natural gas, waxes, roof tars, medicines, detergents, cosmetics, and plastics made from petrochemicals. These differences result in wide-ranging greenhouse gas (GHG) emission intensities that can vary by an order of magnitude or more. In other words, one barrel of oil or gas can emit ten times more than another barrel. Today’s markets do not distinguish between oil and gas climate footprints. So, consumers cannot tell whether the petroleum products they consume are made from the highest- or lowest-emitting oil and gas.
 

EESI: You started the Oil Climate Index project back in 2015 at the Carnegie Endowment for International Peace think tank. You are now re-releasing it at RMI having analyzed 60 percent of the world’s oil and gas resources. This data will be available for free online. What have you learned and what has been the response to this data over the decade since you started this project? 

Gordon: When I joined Carnegie in 2010 to study energy and climate, inflation-adjusted oil prices were over $100 per barrel. This spurred the development of unconventional oil and gas, including fracking and oil sands. I hypothesized that the differences between resources would result in varying climate footprints. I assembled a research team from Carnegie, Stanford, and the University of Calgary, and together we developed the first-of-its-kind open-source model—the Oil Climate Index (OCI)—to assess the GHGs from equivalent barrels of oil. We initially modeled five percent—and then 25 percent—of global production and consistently found large differences in oil emissions through the entire lifecycle. The only thing stopping us from modeling 100 percent of global production was the lack of data transparency. 

We discovered that model input data was more readily available for oils in Saudi Arabia, Iran, and other Organization of the Petroleum Exporting Countries (OPEC) than in the United States. This situation shocked legislators when I testified before Congress about lifting the U.S. crude oil export ban. To close the oil data gap, Rep. Huffman (D-Calif.) and five cosponsors introduced the Know Your Oil Act (H.R. 3286), pulling directly from the OCI. This legislation was reintroduced in the 115th Congress, but did not advance. In 2020, California followed suit and introduced similar OCI legislation, but it was pulled with all other non-pandemic bills. 

But the OCI has high utility even without this model input data. The International Energy Agency used the OCI models in the 2018 World Energy Outlook in a special chapter on innovation and environmental performance of oil and gas supply. And investors incorporated OCI data into their climate risk analysis. At COP21, Norwegian policymakers cited the OCI results that estimate very low climate intensities for their current production in the North Sea. This example, however, underscores the need for additional OCI+ analysis on Norway’s desire to drill in the Arctic—a much more climate-intensive operation.

At RMI, we are now adding natural gas into the open-source Oil Climate Index Plus Gas (OCI+), which will be publicly released this April at ociplus.rmi.org along with a new report, Know Your Oil and Gas. New GHG satellites and corporate pledges could expand data transparency, making it possible to model 100 percent of the world’s oil and gas resources, routinely update emission intensities, and develop strategies to reduce supply-side oil and gas emissions.

EESI: You talk about the genesis of this work in your new book, No Standard Oil: Managing Abundant Petroleum in a Warming World. What have you learned? What are the advantages of making the Oil Climate Index Plus Gas model and its results available open source?

Gordon: No Standard Oil tells a story, one that I learned first-hand from working on oil, gas, and climate change from every perspective—public, private, and non-profit. The OCI+ was created from this unique perspective, where I’ve uncovered half-truths and gaps in knowledge about oil and gas that are impeding climate progress. By making the OCI+ open source, we can verify self-reported company and country climate pledges. Markets can reflect variable emissions in oil and gas prices. Financial actors can make climate-aligned investments and require greater data transparency. And governments can enact more impactful policies. With the climate intelligence generated by the OCI+, public, private, and non-profit actors can focus on reducing emissions now as we also endeavor over the longer term to transition to clean energy.
 

EESI: How can the private sector incorporate Oil Climate Index Plus Gas data into investment or procurement decisions—have you seen this already happen? 

Gordon: Competition is the key, especially in oil and gas markets. Today, oil and gas compete for resources largely based on economics and geopolitical grounds. The OCI+ factors emissions into private-sector decision-making. There are numerous examples where this is already happening. Last year, a Dutch court ruled that Shell must accelerate its efforts to reduce emissions to tackle climate change. This spurred a company sell-off of its most climate-intensive assets identified by the OCI+, including the Martinez, California, coking refinery and Midway Sunset extra-heavy oil production assets in California’s San Joaquin Valley. Saudi Aramco and its research arm, KAPSARC, are using the underlying models of the OCI+ to analyze oil and gas emissions and publish global results in peer-reviewed journals. The Norwegian oil company, Equinor, shared its offshore platform data with OCI+ researchers to improve emission estimates. And industry consultants, including Rystad and Solomon Associates, are using the OCI+ to advise their corporate, investor, and insurance clients about how to reduce the climate intensities of their holdings. All of these efforts serve to heighten data transparency and climate intelligence, which serves as a virtuous cycle to increase actionable insights in the oil and gas sector.
 

EESI: Are there any other actors who can use this data to reduce climate impacts?

Gordon: I’ve long thought that the single most important actor that can capitalize on the OCI+ data to reduce climate impacts is the investment community. Oil and gas are not only energy commodities. They are money in another form that trades globally with handsome profits. As the global economy wakes up, financial institutions are elevating climate risk in their investment considerations. There are over 2,600 endorsers of the Task Force on Climate-Related Financial Disclosures. If the OCI+ can steer funds away from oil and gas resources and operations with the highest climate intensity, this will begin to turn the Titanic of the century-old oil and gas sector that needs to be decarbonized to safely navigate a warming world.

This interview was edited and condensed for clarity.

Interview by: Amber Todoroff