To mark the publication of Total’s Climate Report, Patrick Pouyanné, the CEO of Total, highlighted the actions and investments needed to secure the company’s future and proposed reviewing indicators currently used to track performance.
The Time for Action Is Now
This is Total’s second report on what we are doing to tackle climate challenges as an integral part of our corporate strategy. This publication has three major objectives. First, to share our ambition for Total in 2035, as we reshape the company using the International Energy Agency’s (IEA) 2°C scenario as a baseline.
Second, to describe how we are addressing the impact of that scenario on our decision-making. It has prompted us to acknowledge that oil is a mature market facing long-term decline. Thus, our policy of selective investment is an increasingly important contributor to sustainable performance and warrants further clarification. And third, this report is an opportunity to take stock of the actions we have already implemented, the initiatives we are currently undertaking, our investments to secure the future and the indicators we use to track our performance.
Our policy has evolved out of a desire for transparency and dialogue with our stakeholders, to ensure they fully understand the challenges and opportunities that climate change presents for Total.
This year’s report comes at a time of major developments. The COP21 Paris Climate Conference in 2015 generated renewed awareness, formally outlined in goals and voluntary commitments by numerous stakeholders. Those goals and commitments remain valid today. The 2016 ratification of the Paris Agreement by 94 parties was a further milestone. So 2017 represents a time for action by governments and the private sector alike. The business world has mobilized to an impressive degree and here at Total, we are actively backing international initiatives that will compel industry action.
The Oil & Gas Climate Initiative’s launch of Climate Investments (OGCI CI), including its pledge of no less than $1 billion for projects and technology that could significantly reduce emissions, is the best example of this. The initial focus areas will be developing carbon capture, utilization and storage, reducing methane emissions and improving energy efficiency. The multiplier effect of all of these companies investing together serves as an engine to attract other funding.
Total’s strategy — to become the responsible energy major, providing affordable, reliable and clean energy to as many people as possible — is consistent with this proactive commitment. At Total, today’s climate concerns are integral to our strategic decisions. With that in mind, we have taken the critical step of creating a combined Strategy & Climate Division and a new business segments, Gas, Renewables & Power (GRP), which is spearheading Total’s ambitions in the field of low-carbon energy.
Significant Ongoing Investment in R&D
As the IEA’s 2°C scenario indicates, changes in the energy mix play an instrumental role in any effort to limit climate change.
Demand for energy remains intense and will only grow more so in the coming years. There are now 7 billion people in the world, of whom 1.3 billion lack access to energy. By 2040, the world’s population is likely to top 9 billion, including 2 billion people in Africa. Global demographic growth will require energy that is not only affordable, to support the planet’s economic and social development, but friendlier to the environment as well. That calls for significant progress, and while some avenues of opportunity are at hand, others must be improved or even built from scratch. That is why Total’s R&D budget, which already exceeded $1 billion in 2016, will continue to rise. That campaign for innovation — marked by determination, commitment but also pragmatism, and in many cases involving partner organizations — is already leading us toward a lowercarbon energy mix.
In particular, we intend to earmark 10% of our R&D budget (excluding specialty chemicals R&D) for carbon capture, utilization and storage technologies. Reaching carbon neutrality during the latter half of the century is a climate imperative. But oil and gas will still dominate the energy mix at that time. Those two factors can only be reconciled if carbon storage and utilization technology is in place and operational.
More Natural Gas to Meet Demand for Electricity
Oil and natural gas are not going away. They are essential to continued growth, and will continue to play an important role in the decades to come: under the IEA’s 2°C scenario, they will still comprise more than 40% of the primary energy mix in 2035. So we must not embrace the unrealistic idea of an abrupt transition; instead, we need to look at these energies from a fresh perspective.
We are moving toward a model in which natural gas — which emits half as much carbon as coal for power generation — increasingly replaces coal in the energy mix. Here too, climate concerns generate opportunities for growth. Demand for electricity will outpace energy demand over the next two decades, and natural gas offers a reliable solution in the face of that reality. Gas will make up the biggest share of our portfolio by 2035.
But in order for natural gas to gradually take the place of coal — an inexpensive, abundant energy source — we must tackle a critical challenge: cost. That’s a priority.
Total has a role to play in meeting that challenge. First, by maintaining a high level of investment, as we have done in recent years and will continue to do, despite the volatility of energy prices. Second, by ensuring that the cost of our gas liquefaction projects is lowered by introducing new technologies.
And third, by encouraging the growth of gas demand, as with our recent regasification terminal projects in Côte d’Ivoire and Pakistan.
Energy efficiency is likewise a key component of our activities, whether at our own facilities, where we aim for a 1% improvement each year, or those of our customers, thanks to products and services that encourage responsible energy use.
Beyond our own initiatives, one crucial factor for success remains the introduction of carbon pricing that aligns energy prices more closely with carbon content, to ensure a more balanced mix that favors sources with lower emissions. Putting a price on carbon is the most efficient financial mechanism to change the rules of the game quickly. The main priority is to reduce the use of coal by switching to natural gas and renewables for power generation. Some countries, such as the United Kingdom, have begun moving in that direction by establishing a price support (£18 per ton) to maintain the E.U.
Emissions Trading System (ETS) market price. This has quickly led to a reduction in carbon emissions without curbing the supply of energy. We support any such initiative that would immediately institute a carbon floor price in the European Union, for example €20/ton, and otherwise allow the market to determine price through schemes such as the ETS.
More Renewables to Meet Demand for Electricity
We are getting ready for the trend toward greater electricity demand by looking outside the company with acquisitions such as Lampiris, a supplier of natural gas and green power to the residential sector; Saft, a battery manufacturer; and PitPoint, a leading European provider of natural gas vehicle fuel.
Like natural gas, renewable energy offers a further resource for meeting rising power demand. Our ambition is to consolidate a market-leading position in solar energy by leveraging SunPower’s cutting-edge technology for distributed generation applications and through the growth of our affiliate Total Solar in utility-scale solar power plant projects. We aim to continue expanding our operations — especially in Africa, which could, in fact, leapfrog to distributed generation based on renewable energies. Already deployed in over 30 countries, our Total Access to Solar program provides us with valuable experience in understanding the challenges ahead.
Our goal is to have low-carbon energy account for close to 20% of our businesses in 2035, while also growing this portfolio profitably.
Tackling the Challenges Raised by Transportation
The face of transportation will be transformed in the coming decades. For instance, electric vehicles will be extensively used in large urban areas within 20 years.
The changes will also impact the trucking sector and maritime transportation. In both cases, natural gas will be called on to play a role, and Total aims to be a front-ranking provider to industry players.
In aviation and road transportation alike, biofuel use will have to expand if climate objectives are to be met. In response, we are investing to cement our position as Europe’s leading biofuel marketer.
An Organization That Reflects Our Strategy
To address this array of challenges, Total’s organization needed to be adapted. So in 2016 we created a new business segment: Gas, Renewables & Power (GRP). The very name reflects our perspective on the market.
GRP has a very clear task: propose a growth strategy with regard to midstream and downstream gas, renewable energies, the electricity value chain and energy efficiency. It is founded on the integrated business model that has served us so well: we explore for, produce, refine, process, market and distribute energy to fulfill our customers’ expectations as closely as possible. Our approach is rooted in a highly disciplined investment policy, with a focus on low-cost energies to meet our customers’ primary requirement: affordable, even cheap, energy. There too, corporate strategy and climate responsibility go hand in hand.
Optimizing the mix of fossil fuels, developing low-carbon businesses, promoting energy efficiency, exploring new options for carbon utilization — Total is building a comprehensive array of diversified, growth-enhancing solutions, commensurate with the scope of the challenges we face.