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Royal Dutch Shell, BP plc Seek UN Support Over Carbon Pricing

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By: MICHEAL KAUFMAN: Published: Jun 1, 2015

Major oil exploration and production companies in Europe are coming together to seek the United Nations’ support for the first time, in putting forward a plan that will apply brakes to global warming.

As pressure mounts on oil companies over concerns of climate change, company executives have moved to hold direct talks with government officials ahead of a UN meeting, scheduled to take place in December this year in Paris, the Financial Times (FT) reported on Sunday.

According to FT, executives from two of the biggest European oil companies, Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and BP plc (ADR) (NYSE:BP), are seeking talks with UN to introduce a carbon-pricing system on a global scale, which economists believe will be effective in reducing emissions. The companies are looking for a “direct dialogue with the UN and willing governments” to structure a global carbon-pricing scheme.

Under a carbon-pricing system, carbon dioxide emissions are charged. Companies that emit carbons must pay an amount for each ton of carbon dioxide emitted; called the carbon price.

“We owe it to future generations to seek realistic, workable solutions to the challenge of providing more energy while tackling climate change,” company executives told FT in a letter on Sunday.

“We have important areas of interest in and contributions to make to creating and implementing a workable approach to carbon pricing,” the executives further said in the letter. Executives from Total SA (ADR) (NYSE:TOT), Statoil ASA (ADR) (NYSE:STO), Eni SpA (ADR) (NYSE:E), and BG Group Plc (ADR) (OTCMKTS:BRGYY) pitched in on the letter, along with executives from Shell and BP.

The letter comes as more than 196 countries are expected to attend the Paris Summit this year, in an attempt to reach an agreement on global warming. Delegates from the countries who are participating in the negotiation process previously met in Geneva in February this year. Some countries have gone as far to ask for a complete phase-out of fossil fuels by 2050, to stop carbon emissions from causing further global warming. A total phase-out is unlikely to materialize; support from executives of major oil companies to limit carbon emissions is indicative of the severity of the threat posed to the environment.

The group of European companies believes in using natural gas to generate electricity, as opposed to the use of coal, which can cut carbon emissions, FT has reported. While European oil majors have encouraged moves to address climate change, US oil majors hold a contrasting view. US-based Exxon Mobil Corp (NYSE:XOM), the world’s largest energy company in terms of market capitalization, held its annual shareholders meeting last week.

Exxon’s Board had opposed a resolution put forth by Michael Crosby and Pat Daly, calling for the company to appoint a climate-change expert on its Board. Only 21% of Exxon’s shareholders supported the resolution. Speaking at meeting on climate change, Exxon chairman and CEO Rex Tillerson, said: “We’re not going to be disingenuous about it. We’re not going to fake it.” “We’re going to express solutions and policy ideas that we think have merit,” added Mr. Tillerson.

As European oil companies are pondering a shift towards renewable sources of energy, Mr. Tillerson remains focused on fossil fuel. Informing investors why Exxon has not made considerable investments in renewables, Mr. Tillerson said: “We choose not to lose money on purpose.”

Mr. Tillerson believes that technological advances over time can help mankind cope with climate change. “Mankind has this enormous capacity to deal with adversity,” he said.

Chevron Corp (NYSE:CVX) chairman and CEO John Watson shares Mr. Tillerson’s views. “We think we can make our statements, and our statements speak for themselves,” said Mr. Watson, at the annual shareholder meeting on Wednesday.

Lack of support to address climate change concerns is not a priority for the shareholders of the two companies as well. A resolution to introduce company-wide targets for greenhouse-gas emission received only 9% and 10% support at the meetings of Chevron and Exxon.

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