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Making sense of an oil giant's net-zero carbon pledge

Illustration: Rebecca Zisser/Axios
Illustration: Rebecca Zisser/Axios

Oil-and-gas giant Repsol yesterday pledged to achieve net-zero carbon emissions by 2050 — becoming the first oil major to make a specific net-zero commitment (albeit a non-binding one).

Why it matters: Bloomberg notes that it's the "most ambitious attempt yet by an oil major to align itself with the Paris climate goals."

The big question: Will they be a trendsetter or outlier?

Driving the news: The company outlined plans that include adopting interim targets to reduce carbon intensity, moving more deeply into renewable power, and utilizing methods such as carbon capture tech, forest offsets, and EV charging at service stations.

  • One key thing, noted by both Bloomberg and the Financial Times, is that the emissions targets include not just Repsol's direct operations, but the larger CO2 levels produced from use of its products in the economy.
  • That's important because pledging this type of "scope 3" emission cuts is relatively uncommon for oil majors.

The intrigue: Repsol said it's taking a $5.3 billion "impairment charge" to the value of its assets. That reflects the lower value of fossil fuel holdings in a business model consistent with the Paris Agreement's goals.

What we're watching: Whether any other oil majors, including the ones that have recently increased their climate pledges, will match the step.

  • Repsol is much smaller than giants like ExxonMobil, Chevron and Shell.
  • Its project portfolio is also heavily tilted toward natural gas, so it's got something of a head start.

What they're saying: Andrew Logan of the sustainable investment group Ceres called it a "gauntlet thrown." Logan, who carefully tracks Big Oil's climate moves, told Axios:

"One aspect of the Repsol commitment that I think hasn't gotten enough attention is the ~$5B write-down on its existing oil and gas assets."
"This has implications across the sector, and will raise questions among investors about whether other companies should be writing down the value of their assets as well."

The bottom line: This "could be the beginning of a major realignment in the sector," Logan said.

Go deeper: Big names begin bipartisan push to build support for carbon cuts

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