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Path to net zero: In taking plunge, US utilities ahead of global oil, mining


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Path to net zero: In taking plunge, US utilities ahead of global oil, mining

Energy and mining companies are grappling with how to respond to growing pressure from investors, local and national governments, and the public to develop decarbonization strategies.

Path to net zero
How some of the biggest companies in energy and metals and mining are moving to decarbonize their footprints. Please click on the story links below to read more of our coverage.

Overview: In taking plunge, US utilities ahead of global oil, mining
Utilities: Cracks appearing in natural gas' role as bridge fuel
Oil and gas: European oil majors outpace US companies on climate goals
Mining: Miners are starting to decarbonize as investor pressure mounts

While some of the biggest corporations in each sector have responded by setting ambitious net-zero emissions targets, not all have made the leap and decarbonization strategies vary greatly. Moreover, each sector, and even each company, faces its own set of challenges in navigating the clean energy transition.

Nevertheless, Josh Price, a senior analyst on energy and utilities at investment research and advisory firm Height Capital Markets, said investors want companies to make aggressive pledges "because if you don't set a target, you can't meet it."

This is the first of four stories examining how the largest 30 companies in each of three sectors — oil and gas, utilities, and metals and mining — are tackling climate change, including the extent to which they are setting aggressive goals to achieve net-zero greenhouse gas emissions by 2050 or earlier.

In response to scientific climate projections, investors, policymakers and portions of the public, particularly teenagers and young adults, have pressured energy and mining companies to develop decarbonization plans that align with the Paris Agreement on climate change.

Specifically, scientists have asserted that to limit global warming to 1.5 degrees Celsius relative to pre-industrial levels, the world will need to achieve net-zero greenhouse gas emissions by around 2050. But to get there, the sectors most responsible for the vast majority of emissions will need to move fast and start lowering global emissions levels by 2030.

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Globally, the power sector in 2019 accounted for 41% of energy-related carbon emissions in 2019, according to the International Energy Agency. And in the U.S., electric generation is the second-biggest producer of greenhouse gas emissions behind the transportation sector.

The oil and gas industry’s operations account for about 9% of global human-caused greenhouse gas emissions and they produce the fuels that create another 33% of global emissions, according to a January article by consulting firm McKinsey & Co. While the mining sector is directly responsible for about 4% to 7% of global greenhouse gas emissions, according to McKinsey, mined materials are also the starting point in the supply chain for much of the global economy.

To find out how major U.S. gas utility DTE Gas Co. is planning to achieve its net-zero target, click here to listen to our exclusive interview with company President and COO Matt Paul on the S&P Global podcast ESG Insider.

Of the three sectors examined in this series of articles, domestic electric and multi-utilities that own both electric generation and natural gas distribution pipelines have made the most net-zero carbon emissions pledges, followed by mining and then oil and gas companies operating on a global scale.

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As of mid-July, 13 of the 30 largest U.S. publicly traded electric and gas utilities had set goals to achieve either zero or net-zero greenhouse gas emissions by at least 2050 or a 100% clean electricity by 2040 goal. Among the 30 largest global metals and mining companies, eight had set net-zero targets, and of the top 30 global oil and gas companies, only five have set net-zero targets.

In 2020 alone, major companies in each of the three sectors announced net-zero or carbon-neutral pledges, including metals and mining company Rio Tinto in February, oil major Royal Dutch Shell PLC in April, and electric utility Southern Co. in May. Each of those companies were under pressure from investors, including the Climate Action 100+ initiative, to reduce their emissions.

The sustainability-focused group Ceres is the organizer behind the Climate Action 100+ initiative pursuant to which investors with over $40 trillion in assets under management are pushing major companies to disclose their climate risks and curb their emissions. Of the 90 companies reviewed in this series of articles, Climate Action 100+ has targeted 19 oil and gas companies, 13 utilities and eight mining companies.

"We've been seeing this trend toward decarbonization take hold" and accelerate, said Dan Bakal, Ceres' senior director of electric power.

Looming large over the utility decarbonization plans is the November presidential election.

Presumed Democratic presidential candidate and former Vice President Joe Biden has pledged to require utilities to decarbonize the grid by 2035 and achieve economy-wide net-zero emissions by 2050. The Democratic National Committee is expected to take up Biden's recommendations, as well as a call for a "carbon adjustment fee" for products from countries that are not pursuing the Paris accord agreements, The Hill reported July 23.

If President Donald Trump is reelected, however, federal action to directly address climate change is expected to be limited or non-existent. But even if that is the case, decarbonization actions by states, pressure from investors, and customer preferences have prompted many major companies to adopt decarbonization goals that they will continue to pursue.