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The failure of BP and other oil giants to green-up their acts already seems like an epic mistake.

FREDERIC J. BROWN/AFP/Getty Images

BP PLC, Britain’s national oil champion, used to be called British Petroleum. Around the turn of the century, before Greta Thunberg was born, it doused itself in green and invented a cheery new starburst logo adorned with “Beyond Petroleum.” How cool and progressive was that?

Imagine one of the world’s biggest and grubbiest oil players admitting, in effect, that the oil era was coming to an end and that sheer survival, and social and environmental responsibility, meant evolving into a broad-based energy supplier with an ever-larger portfolio of renewable energy projects.

Sadly, “Beyond Petroleum” proved to be far more a marketing ploy than an exercise in strategic enlightenment. Within a few years, the green logo faded away, as did many of the company’s renewable-energy projects, such as the U.S. wind farm. BP wasn’t alone in sticking almost entirely with oil. Shell’s annual report says the company invested US$25-billion in oil and natural gas in 2018. It provides no figure for its spending on low- or zero-carbon projects, suggesting they are minor.

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BP decided it’s a driller first and foremost. It expects oil demand to keep growing for the next 10 years; by 2040, it sees fossil fuels meeting “at least” 50 per cent of the world’s energy needs, with renewables under its conservative “evolving transition” scenario providing only 15 per cent (BP does not consider nuclear and hydro power renewable). So much for the 2015 Paris climate accord goals. They appear doomed.

The failure of BP and other oil giants to green-up their acts already seems like an epic mistake, for three reasons.

The first is the realization that potentially catastrophic climate change is no longer just the plot line of Hollywood horror-thrillers.

Ms. Thunberg, the 16-year-old Swedish environmental activist who had been widely tipped to win the Nobel Peace Prize on Friday (she did not), has electrified millions of students around the world with her climate school-strike movement. The strikes, along with the Extinction Rebellion’s civil disobedience campaign, are aimed at compelling governments and big polluters to take action to prevent ecological collapse, and are doing a credible job in turning the oil companies into pariahs.

Investment funds around the world, from university endowments to church institutions, are responding by ramping up their fossil-fuel divestment policies. Suncor Energy Inc., the biggest operator in the Alberta oil sands, has trouble attracting investors from anywhere in Europe because of the project’s dirty image. At some point, the oil companies’ ability to fund themselves will suffer unless they can produce a credible black-to-green transformation strategy.

The second reason is that radical transformations are not just possible; they can be profitable too.

Take Denmark’s state-controlled Orsted A/S, the former Dong Energy. Dong’s fleet of coal-plants were among the dirtiest producers of electricity in Europe. The company alone was responsible for one-third of Denmark’s carbon dioxide emissions. About a decade ago, after Dong’s executives decided they could no longer tolerate running a company that was warming the planet and blackening lungs, the company launched an overhaul that would see it ditch the coal burners and embrace offshore wind power.

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By last year, Dong, now rebranded as Orsted, was producing 75 per cent of its power from renewable sources and had become the world’s biggest operator of offshore wind farms. The transformation turned Orsted into a profitable stock market star, putting the lie to the theory that fossil fuel companies produce better returns. In the last year alone, the shares are up more than 50 per cent. BP is down 10 per cent, and Suncor down 20 per cent, over the same period. Would oil companies trade at higher values if they had thrown a heap of renewable energy into the mix? Probably.

The third reason is that if Big Oil refuses to change, change will be thrust upon it.

It’s already happening. Carbon taxes have arrived in North America and in Europe, and they are spreading. About 40 countries have already imposed some form of carbon price through taxation of fossil fuels or cap-and-trade programs (British Columbia’s carbon tax, at $30 a tonne, is considered a model). Canada is imposing a $20 a tonne carbon tax on provinces that don’t have their own version of the tax, among them Ontario and Manitoba.

The problem is that the carbon taxes already in place, with few exceptions, are too low to have much effect. The International Monetary Fund this week said that carbon taxes have to be much higher – perhaps more than US$75 a tonne – if countries are to meet their Paris agreement commitments.

The direction of carbon taxes has only one way to go, and that’s up, which is really bad news for Big Oil and Big Coal. Activists like Ms. Thunberg have, in effect, given politicians the green light to make life more difficult for fossil fuel companies. Canada’s next government will find it hard to keep carbon taxes at inconsequential levels. BP had the right vision almost two decades ago with its “Beyond Petroleum” campaign. Too bad it had no stamina to see it through. If it had, it would be praised today. Instead it and its rivals are being demonized.

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