HEAT

Jeroen Van Der Veer

van der veer

He's CEO of Royal Dutch Shell, the world's second-largest oil company. He is also chairman of the European Round Table of Industrialists' energy and climate change working group. This is the edited transcript of an interview conducted on Nov. 12, 2007.

“You need governments who set frameworks, industries who work within that framework and consumer behavior that realizes, 'Hang on, something is going on.'”

Let's just begin by talking about what targets you accept as legitimate in terms of reducing CO2 emissions. What do you see as what the world needs to accomplish?

What we did at Shell in '98, we had a whole discussion that we should apply Kyoto targets for the company. [It] was a strange [choice], because Kyoto is something between governments. ... On the other hand, as a business, we know that if you measure something that helps you to achieve it, what gets measured gets done. ... Let's try to set a Kyoto target for the year 2010 [and] compare it with 1990 for our own operations.

And what percentage reduction was that?

... This was 5 percent CO2 emissions less in 2010 compared to 1990. That is in line with [what the Kyoto Protocol] countries signed. ... It forced us to be careful, to measure all our operations. It forces the people in the company to think if you do, for instance, an acquisition, how do you work that under that ceiling? … So what it did for us is raised the profile [of] how important CO2 and CO2 management is for our own operations.

Now, the long-term targets that the U.N. is setting are for 80 percent reductions by 2050. Is that, in your view, something that Shell could achieve?

We think that, based on our own long-term energy scenarios, this is very, very ambitious. ... If there is a huge problem in the world like CO2 -- and I think that's quite clear now -- then if you go back in history, when people see a huge problem, usually it takes a bit of time. But then you get unexpected technology breakthroughs. So it could well be that between now and the year 2050 we can find solutions for CO2 -- to bind it to something so that it doesn't [go] in the atmosphere -- which has the ability to have a rapid rollout, because in this case, it is not only to find the technology breakthrough for CO2, but it should be applied on a very large scale around the world. Otherwise it doesn't make a huge impact, and then you don't get a reduction in the CO2 concentration in the atmosphere. ...

But those would be huge technology breakthroughs, because you're facing an enormous increase in energy demand.

Yeah. And you have to define this 80 percent -- of what? If it is 80 percent reduction of 1990, I think that is probably naive, because between 1990 and 2050, we expect that we [will] have many more people. And secondly, the people are climbing the energy ladder because they like to drive on their scooter or in a car.

They're moving from poverty into the middle class.

And that takes more energy. So this 80 percent, I think that even if you correct for all those factors, is still very, very ambitious.

Well, it may be naive; it may be overly ambitious. The question is really whether it's necessary.

In Shell we don't have [among] our specialists [the] best climate experts. So we leave this question about the science -- that so much CO2 leads to so [much] raise in sea levels or so much climate change -- we leave that to [the climate change specialists].

We think, as a company, all our focus is, what can we do about it in our operations? Or how far can we cut? What can we do more? What can we do for our customers? And, of course, we do research to see whether we can develop products or services with a relative lower CO2 content. So we bring it simply back to business. And that's what we should do. That's our role.

You were quoted in the Guardian as saying it was not up to Shell to solve the world's CO2 problem. If you don't solve it, who will?

I think that it's not up to Shell to solve the world's CO2 problems. On the other hand, I think the CO2 problem in the world cannot be solved without active cooperation from energy industries like Shell. So it is not that we don't have to play a role, but we should limit the role to our cooperation. ...

... How can you, in good conscience, say you are doing everything you can to reduce CO2 emissions worldwide and within your operations when, at the same time, you're going after hard-to-get oil -- synthetic, unconventional oil -- that's very high in CO2 emissions? How do you square the two?

Yeah. That's a very good question, and I think the best [answer] is to take the example of oil sands. ... That feels strange, because Shell is moving into oil sands, while that is more CO2-intensive than, for instance, natural gas. ... And at the same time, we say we are a pretty green company. How do we square that?

Well, it goes as follows. An energy mix -- that is, the mix between use of gas, coal, oil sands or nuclear -- is basically set by a government. So a government -- in this case, if I take the example of Canada -- they open up for oil sands. Now, if oil sands are open to our people overseas, our company is going to do that. Now, why --

Well, you don't have to.

No, you don't have to. But we think that we have technology and operation practices that if we operate oil sands, we do it in a very good way. Or we try to do it relatively better than the competition next door.

And at the same time, the government may say, "If you operate in oil sands, then you should take the following into account regarding energy conservation," or all kind of requirements. So the governments have to set the frameworks, as we say, for CO2 in the world. And in the frameworks, companies like Shell, they try to compete to do relatively the best job. But as long as oil sands will be operated and the world thinks that's acceptable -- and the government is the judge there -- ... we will try to make good business out of that.

So you're going to try to make the best of what is a bad situation?

Yeah. Now, that is a rhetorical way of saying that I think in [the end], the world needs energy. Every form of energy has pros and cons. There's nothing ideal. ... Maybe by starting oil sands today, you can find processes to capture the CO2 and to store it. So then you have made of the oil sands a relatively clean fuel if you are successful in that. So do you look at the situation today, or do you look to a past or the future?

... Every form of energy has a different mix of pros and cons. And there is not one ideal solution. Otherwise we would have taken all that form of energy.

But getting gasoline out of oil sands is a pretty dirty way to go, agreed?

... From well to wheel it is probably not as bad as you think. But here, again, suppose that we find in five or 10 years a way to store the CO2 that we use during the manufacturing, so to say, of the oil sands. Or we can do something else with CO2. Then you have a pretty good way to go. Then there are huge reserves. It is close to the American market -- certainly all good news. So in the end of the day, it is how you can cooperate between governments who set the energy mix -- they decide to open the oil sand licenses -- and ourselves, what we can do.

You say that governments set the energy mix. Governments set down the rules, but multinational corporations like Shell, ExxonMobil are extraordinarily powerful forces, and in many countries they dictate the rules. In places like Gabon, Nigeria, Angola, even Canada -- I mean, the [Canadian] environmental minister is heavily critical of what you're doing, but he's powerless to really affect what the central government is deciding.

Well, in my life, I don't experience that we are very powerful. ... We are extremely polite. And if we don't do that, we don't get access to anything in the first place. Secondly, only when I have access to a government or to ministers, ... then we can explain which technologies we have, how serious we are about biodiversity, how serious we are about CO2, how serious we are about indigenous people who may live close to our operations. And then we bring the best of our practices.

So we can only explain that we take a holistic view, how we try to operate. And of course, we have still to make sure that we can make some money. And then it is the governments who grant the concessions. That's how the world works. So I'm not so convinced about our huge power.

Are you saying that if governments say, "You can come in here and extract oil," that you'll do whatever you can as long as it's legal?

No, I think if we don't do a responsible job -- suppose we don't take biodiversity into account or not CO2 or not the interest of indigenous people, and we just stick to the law in the most narrow definition as possible. That would be, over time, to the disadvantage of Shell, because first of all, I assume that people in that particular country would protest that.

Secondly, I don't get my next entrance ticket for the next [opportunity]. They say: "No, no. Those people, they have a very narrow framework, don't like to work with them." So it is in our own interest to work in a very responsible way.

And of course, if the law would give you the possibilities not to take all those additional aspects into account, then of course we can raise our voice, and we say: "Hang on. We think it is perfectly logical that [there] are certain requirements how you work with the interest of those other stakeholders." I can say that to a government.

Did you ever consider, in the Alberta case with the [oil] sands, just not going in there because the oil there is too dirty, too hard to get at, creates [more] dirty emissions?

No, because our attitude is that if somebody operates the oil sands, we have to do [a] very good job. And it's not only CO2 -- that is, with the indigenous people; that is, regarding biodiversity, how you restore the land. And then we think that is the duty of a company. It is not to second-guess a government whether they should open up licenses. It is only to demonstrate, giving us a license to operate, how we can do it.

But here's the problem as people are seeing it and feeling it, and that is that if we're going to make 80 percent reductions by 2050 from 1990 levels, or even from today's levels, that's a really ambitious and perhaps naive targets, to use your word. But certainly, if oil companies, as the price of oil goes up, are encouraged to go after harder-to-get oil that has big carbon dioxide emissions, then we're never going to meet these targets. So how, in that context, do you define corporate responsibility?

In the long-term case, we can indicate as a company, if we produce oil sands for heavy oil, what is the CO2 per unit from well to wheels, and then ... how we may improve that, and can we improve it further if there are certain physical frameworks to store the CO2 in the ground. That is the kind of roles you may expect.

Now, we can do that for oil and for gas, maybe even for certain coal technologies. ... Other companies can indicate what does it mean to make nuclear or what does it mean, on very large scale, wind [energy]. And then in the end, that's how the world works. Then the government has to choose between all those pros and cons and to figure out, can they achieve the 80 percent or not?

But it is not Shell's responsibility to achieve the 80 percent reduction. We can only say: "This is our area of expertise. This is what we can do to give the best insight." And of course we try to do that. And then the government has to look at the total energy mix.

So your job is to deliver energy? But what percentage of your overall investments [is] invested in renewable energy?

Now, this you have to differentiate. We are normal businessmen, so we like to build a strong company in the year 2050 as well. And what is a strong company? A company which still does a lot of business. Now, we are not blind nor deaf, so we see all the concerns about CO2. We see the concerns about how you work in sensitive environments like the Arctic. So what can you do?

You can do basically two things. You can make sure that in those difficult environments or complex environments, you not only do the best job, but you're all the time ahead of the game to do even a better job. Or secondly, can we move to forms of energy that don't have those particular disadvantages. ... But the problem of renewable [energy sources] as of today, they are, for consumers, still much too expensive. So a solar panel on your roof, that makes electricity look very nice. I have one, but I do know that the payout of such a panel to make electricity compared to the normal way, to take it off the grid, it will take many, many years.

But that's because we haven't put a price on the social cost and the environment cost of carbon dioxide emissions. If those were priced into coal, other fossil fuels, then there would be more parity, would there not?

Yeah, exactly. So if CO2 is a huge problem -- and it is; I think that by and large the world is now convinced of that -- then it is a very logical approach that, initiated by governments, that industry can help. You price CO2 because that will enhance energy savings. ... It may give more space for non-CO2 energy forms to make more rapid market penetration.

And that is not only what we say to the world; we do the deeds as well. Shell was very closely involved in setting up the European trading scheme where, basically, you price CO2. There are still all kinds of ... problems. But over time, we will get it right. And in general, we are even publicly advocating ... CO2 trading systems, so pricing CO2 is very beneficial because of the high CO2 concerns.

But there's something to my mind that's wrong here, in that if you a see a future in which a price is put on carbon, why are you investing so little in renewables relative [to] oil or gas?

Well, if you look at renewables, then there is no point to invest a lot of money in an existing technology which is too expensive and expected to continue to be too expensive for consumers. So the whole emphasis for technology is, how can you lower the costs so that it can compete without subsidies. ...

But that takes R&D.

Everybody knows, in research, if you put twice as [much money] in the research, it doesn't go twice as fast, so you have to go through all the steps. So we aim our research to try to find those processes that make the products cheaper for the consumers. And if we are not successful, then the consumers don't have those products. ... Only if you have found cheaper renewables for the consumers, then we can put big money behind it. And then we will do that, of course.

Do you see a future where Shell gets out of the oil business?

Well, I think we started in oil. We built a gas business. And then we even built in from the normal pipe gas, we built [a] liquefied natural gas business. I think it is always a natural process. You don't go suddenly out of the oil [business]. ... But we think it is a very natural development if we would have a kind of [a] third leg to stand on besides the oil and the gas business. And that's what we aim for.

But right now you're investing 1 to 5 percent of your total investments in renewable energy? It seems like a very small percentage.

For me, this is apples and oranges. This is nonsense. In an existing oil field, you have a technology; you have to invest in it. Otherwise, you don't get the oil out of the ground. And then you have to compare that with the money you invest into research to find renewables. ... And if I look at what we [have] in our research budget -- how to cope with CO2, how to develop renewables, how to develop more energy-efficient ways of operating -- then it is very sizable. But I keep those figures confidential. ...

Why are those figures confidential?

We don't like to give it. The world is about competition, and we are determined to do a better CO2 job than the competition. But let them [keep] guessing why we hope to be successful.

You've said that renewables don't have a chance of meeting the excess demand that's coming in now from developing countries like India and China.

The problem where we are today is quite easy to explain. Either we pay for much too expensive renewables -- and that is a huge disadvantage, and I fail to see why relatively poor people living for $1 or $2 per day, how they can afford that type of energy -- ... or you get additional oil and gas. But that creates additional CO2 in the atmosphere. ... So this is the problem of the world: how to find the pass through those two aspects of the problem.

You put a true cost on the use of fossil fuels. Isn't that an answer?

Yeah. ... Price CO2, because that favors the other path. And at the same time, because you have priced CO2, there's an additional incentive, for instance, to figure out how you can do carbon storage. ...

... What would be the true cost of a barrel of oil in a world that really prices carbon dioxide emissions?

Life is a bit more complicated. When we [are doing] this interview, the price of a barrel of oil is close to $100. Having said that, the price of oil, if you look at the investments costs -- so to do the exploration, to find it, to predict your production installation, to make a pipeline to a harbor, to the coast, and to pay for the ships, etc. -- that is not $100 per barrel of oil at all. That may be, for new large-scale projects, one may say, $35 or $40; if you do it in Saudi Arabia, even a lot less. So what is the difference? That has to do a lot with royalties, taxation, duties, etc.

OK. But that's all part of the cost.

But it's not necessarily profit for the oil companies. ... But to say it differently, all the projects we do in Shell, they achieved a break-even point at much lower costs than $100 per barrel of oil. So it says at the same time, if the world is prepared as they are today to pay close to $100 per barrel, we may have some space between the true costs of the oil -- to produce it, to get it out of the ground -- to work on the CO2 problem as well, because we have to realize that CO2 solutions are possible, but they don't come for free. So it will be priced in, in the costs. And if you do that, that means that at the same time they have to realize that governments will have less royalties or less taxation income at a certain level. There, again, you see a very good example. This is not Shell that can dictate that. This needs good cooperation in giving insights to governments.

But let's say governments continue to ask for the same royalties, that the costs of running the infrastructure to deliver the oil to you, all of those costs remain the same. What would be the incremental cost, on top of the $100 a barrel that we're at as we do this interview, when we price CO2 emissions?

In our calculations in Shell, when we look at the project, we ensure a certain price as a penalty for CO2. Now, whether we are too low or too high, we will see that in the future. I think in the end, the only way that we will know a true cost of that is doing large-scale demonstration projects to store CO2 or to use the CO2 for additional ... oil recovery. So these are all guesses. Now, most of the guesses, they are, in short, a number of dollars per barrel, but they are not $40 per barrel. You have some low-cost measures and some high-cost measures, and you have the whole range in between.

And the interesting thing is that if you look at today's oil price, say in the $90s, of this moment, to find CO2 solutions is cheaper than the actual cost without taxes and royalties and profit margins. ... So there is space to work on CO2 solutions. That's my point.

Now, you talk about carbon capture and storage. But there's no carbon capture and storage when it comes to selling gasoline. You're delivering carbon to your customer. There's no way to capture that carbon dioxide in a car and store it.

... Now, if CO2 is the big problem in the world, then I think we should start where you have the lowest cost for society to reduce the CO2. And generally you will see that is power generation. And it sounds strange that gasoline in the car, to reduce the CO2 there [you are probably starting] at the most expensive end. So we choose, then, the most ineffective way to comb out the climate change problem.

Here's the problem as I see it. If we capture and store all the CO2 from all the coal-burning utility plants, we've only saved a small percentage of what the United Nations says we have to achieve. So even there, I don't see how we get to 80 percent reductions, which the scientists say is what we need to achieve, by concentrating on carbon capture and storage. ...

No. We have the World Business Council [for] Sustainable Development [WBCSD], which is seen as a very professional, accountable organization. What they say is, "Yeah, in the power generation, you have to do a lot."

But that won't be enough.

That won't be enough. So ... then they address, basically, buildings. We still can do a lot there: insulation, heating. Do we feel comfortable at 70 [degrees] if you talk in the States, or can you live with 80 [degrees]? ... Then, of course, the industries, they can still do a lot of energy conservation. And thirdly, transport. And then not only fuel efficiency of cars, [but also the] role of public transport. And [do you] have to fly for everything, [every] meeting, or can we use more electronics?

[Through] this combination of power generation, buildings, industries and transport, you can achieve what most people see as acceptable CO2 levels. I have to say, for this, power generation is, of course, very important. And will it be nuclear? Will it be carbon sequestration? How do you do that? And there you have, still, a big question mark. And even if we know how to do that, before we can make a big dent into the problem, it takes years ... because there are so many places of power generation in the world. ...

But conservation efficiency seems not to get us there because carbon dioxide in the atmosphere is cumulative. And as long as you're putting more CO2 out there, you're increasing the parts per million that are in the atmosphere. You've got to get to zero carbon dioxide emissions if you're going to begin to see a lessening of the burden on the planet.

Yeah. Well, the attitude that I come back to is that this is a huge scientific debate: How much can the atmosphere bear? ... I think as an industry, as Shell Company, we should give high clarity [to] what we can do, what we can't do, or what can we not do today, but can probably do tomorrow. Of course, we have to make our choices which new forms of energy we develop and how efficient we can make our own operations. I mean, that's our role.

But let me be clear.

You don't speak here to the best climate expert, that's not my role. For us, our role is what we can do.

If the best climate experts tell you that the world has to get 80 percent reductions of CO2 by 2050, what do you say to them?

I say, I don't know at all whether that's possible or much too ambitious or even naive. I say to them, I can tell you that based on population, based on climbing the welfare ladder, this is the amount of energy the world will look for. This is what we can do. We can produce gas. We can produce oil or heavy oil, and you need that. This is what we can do, maybe not today, with the CO2. And, of course, we try to develop our renewables. ...

What if they say that's not acceptable; you've got to get into renewables and out of the oil business?

Then they have to set regulations. But if they set the regulation today, "One should not use oil," then you have a huge problem, because people like to drive; or, "One should not use electricity today," then you have a huge problem. ... The frameworks in the world and the energy mixes are set by governments, not by companies.

But what people are beginning to say is that you've got to take your $26 billion in profits, Exxon's got to take its $39 billion in profits last year, and redirect much, much more of that to cleaner energy sources; that you have the resources to make this happen, and if you don't do it, no one else will.

... If we made in a year $25 billion of profits, then you will see that this is the same order of magnitude -- this $25 billion -- as our investments. So we are huge investors. And what do we invest? Partly only to keep the same stream of oil and gas running. ... And if the whole industry wouldn't do that, oil prices would even go higher.

Then your question is, why don't you put more of that money not in oil and gas, [but] in renewables? Because that is a false comparison in renewables. Then we [would be] starting to build more capacity in something which is, in the eyes of consumers, too expensive. The only thing that we can do for renewables is doing research, to make it lower cost for the consumers. And only if we have achieved that -- so, if we have something that is in the eyes of consumers competitive with oil and gas -- then we will put billions into it.

I have to ask you about some of your ad campaigns. You had an ad campaign in which you had a flower growing out of the top of a power plant or an oil refinery, and you got heavily criticized for it.

... We have [something like] this up and running. This is a water dam refinery called Pernis. It's in the Netherlands. They catch part of the CO2, and they run it via pipeline to greenhouses, because if you increase the CO2 in greenhouses a bit, the tomatoes and the tulips, whatever, grows better.

But the criticism was that this was negligible.

... I think everybody who sees the advert -- the bosses, at least, in my view -- [there's] a touch of humor in it. I think it is quite clear that not all CO2 was going to the greenhouses.

We are very practical. We pulled the advert. ... It's over. And I think people make a big deal out of nothing.

Well, what people are criticizing is whether or not oil companies like yourself and British Petroleum, with their "Beyond Petroleum" campaign, aren't basically pretending and greenwashing the situation. I mean, this was a small stream of CO2 that you diverted to greenhouses to grow bigger tomatoes. It was not a significant thing, but you used it to try to promote the image that Shell was a very green company. And the environmentalists said, "That's unfair."

Now, first of all, I think "greenwashing" is a negative term. If I look in our operations, how seriously we take CO2, if I see how we try to help our customers -- we advocate European trading systems, we see how much research we have already [done] at [our] own expense to get at least one renewable off the ground -- then I take issue at that. I think that all energy issues and CO2 issues and environmental issues with indigenous people as well, if I see how our company works, I take issue at people who criticize that easily. And then I say: "Look at our operation. See what we do. Try, then, really to look into the facts."

But weren't some of those demonstrators that stood outside here of your headquarters and protested your gas flaring, for instance, in Nigeria -- weren't they responsible for putting pressure on the company to actually clean up its act?

Now, this gas flaring is a very good example. We don't like to flare. The policies for not flaring, we basically, in the '90s, we initiated it ourselves. And we said to government, "You can't continue with that," etc., etc. ... But if you say today, "You cannot flare gas in Nigeria," then you have to stop the oil production as well, because we don't [purposely] flare the gas, ... but it is a byproduct during oil production. And no gas flaring means no oil production. And if there's no oil production, the Nigerian government may have something to say there, because it's income for the country. And the only thing [t]hat we can do is, we have to put billions of dollars of investment into place to avoid that gas flaring. That is exactly what we tried to do.

But those investments have to be funded. The government is a shareholder; they have to play their part. And those people, those protesters, they ignore all those minor details, and they think you turn off the flares today, and the world is happy. No, the world is not happy at all, because Nigerian oil production is so big, if Nigeria stops producing today, I'm convinced that oil price will react. And so you have to take some realities of the world into account.

I guess what I hear on all of this is that to make oil cleaner, to reduce CO2 emissions has a cost. But the question is whether or not we shouldn't already be paying this cost, whether oil shouldn't be more expensive.

... You can only do that by making fiscal frameworks and setting rules with governments, because it has to continue [on] a level playing field.

But if oil was more expensive, then you could invest more than 500 megawatts in wind or 20 megawatts in solar, as you are. Why not get out in front of the game here? People want leadership. Why not build more megawatts of solar, more megawatts of wind -- because you know that the price of oil is going to continue to rise?

... We built one of the largest offshore wind parks [off] the Dutch coast here in the North Sea. From a money point of view, you must have a lot of guts to do that. And why is that? Because the technology is still too expensive.

Relative to oil and coal?

Relative to oil and gas. And the only way we do it [is to build off of] learning experiences so that the next project, you get a bit cheaper or lower costs, and again and again. So here, you see, you try to find a path that it becomes competitive.

But the world is not served by building things which can't compete. And then we don't solve the CO2 problem. The money has to come from somewhere. ...

You've said that there are three hard truths that we need to face about the oil business. What are they?

First of all, the world continues to increase in amount, population growth, welfare growth. So we are very sure that the world will demand more energy.

Secondly, so far, renewables are too expensive for the consumer. They are still way out, even if I compare to oil and gas prices today. And then realize that because the demand will go [to] what is lowest cost, that is oil and gas and coal, and that leads to the CO2 problem. And that's a very serious problem, as we just discussed.

And the third one, even if you would correct the CO2 problem, we have to realize that the access and opportunities for easy oil, easy gas ... -- as you have in the States, in Pennsylvania, as we have now in Saudi Arabia -- you'll run out of those opportunities. So that means that a lot of the additional oil and gas has to come out of sensitive areas -- think about the Arctic -- and that creates all kinds of new concerns in the world. ...

I also just want to go back to this cost thing, because you keep saying that renewables are too expensive. But if oil was at $130 or $140 a barrel --

Well, it has to go to $300 or $400 before it --

Well, I don't know the math. But renewables, when you say they're too expensive, they're saving the planet. If renewables are not emitting CO2, then aren't we getting a tremendous benefit?

Yeah. But the oil-plus-CO2 solution is cheaper than renewables.

Do you know that? That's a guess?

We don't know. ... We bet on two horses. One is oil or gas or heavy oil-plus-CO2 solution costs a certain price per unit. And the other one is renewables -- winds, biofuels. Yeah, we bet on [that horse] as well.

And the jury is out. In the year 2050, are both horses still running? ... Or has one basically lost [the] game and the other one has won? That's too early to say.

... You're betting on both horses, and some people criticize you for not betting enough on renewables. ... But you reject that.

Yeah. We think very carefully to put stakes on the horses. And we feel good how we do it.

But there's also the possibility that we're still going to be burning a lot of dirty coal and a lot of dirty oil. I mean, we're going to be emitting a lot of CO2.

[Shell is] not in coal, [but there are] clean coal technologies which can capture the CO2. But then the whole problem is not to capture the CO2, but what to do with it and [that has liabilities] So that is the risk of that horse. Is that a winning horse? Or is it renewables? ... But that's not free of disadvantages nor costs. ... And that's why we keep the two horses in the race.

You say that the world needs to adopt a different mind-set. It seems to me that Shell Oil going into the Athabasca [oil sands] fields in Canada is not adopting a new mind-set. How do you explain?

What I mean by the different mind-set is, first of all, in everything we do, whether you live in the U.S. or somewhere else, you have to take CO2 into account, because you cannot say it is a problem of the guy next door. The problem is too big. And I think there are enough scientific evidences that it needs real action.

And the second advice is mind-sets are important, because Shell cannot solve the CO2 problem nor [can] the American government solve the CO2 problem. But you need, basically, ... a triangle of governments who set frameworks, industries, like Shell, who work within that framework and consumer behavior that realizes, "Hang on, something is going on." And there's not one player saying, "I don't like to play this game."

This is the reality. And that is the change in mind-set, that all three have to make changes and to cooperate. And if we don't do that, then the CO2 emissions will simply only increase, etc.

So how is it cooperating for Canada to sign onto the Kyoto treaty, and then totally miss its targets, because soon after signing onto the Kyoto treaty, it opened Alberta to this very high-CO2-emitting oil extraction process?

I'm not the Canadian government. I can only say we have technology to produce oil sands. Our aim is to produce oil sands with lower CO2 [emissions] than the competition, so to do the best job. But we need frameworks or government regulations. ... So the answer is not oil sands are bad; don't do it. No, you have to set regulations around oil sands, how to produce it.

That may be a bad idea.

No. Hang on. And then the Canadian government has to balance that with what they do with wind or nuclear, etc. So they have to look at the total energy mix.

Isn't it possible that taking oil out of those oil sands just has too big of a carbon price?

Suppose that the penalties on CO2 would become much higher than we expect now. ... We have certain assumptions of what it will cost to store CO2 over time. That's still all to happen. But suppose that all our estimates would be wrong, and if the price of CO2 goes then a lot higher, then automatically that favors wind energy, second-generation biofuels, solar electricity. So then the penetration of that goes faster. And so in the end, this is a relative game. And if the one thing gets too expensive, that opens the opportunities for the renewable forms in which the key [dis]advantage was that it is too expensive now. ...

But it's not just a game. It's not just about markets. It's about CO2 levels in the atmosphere threatening the health of the planet. I mean, these are cumulative levels. We can't go back and get that CO2 -- not easily anyway, not with known technology -- get it back out of the atmosphere.

Yeah. Yeah. But I think different people have to play different roles. The scientific world has to think about climate changes. Governments have to set the regulations, what you are allowed to do. Are you allowed to exploit oil sands or coal mines? And if you do that, what about the CO2 sequestration? What about energy conversion? What about nuclear? That is the role of governments.

And industry has to say: "OK, if we produce today, these are our costs. If we have to do more on CO2 sequestration, that will be about the costs." ... So we have to give transparency and opportunities about energy forums and to give insight about the different pros and cons. That is how it should play.

So your definition, if I understand you right, of corporate responsibility is to play by the rules?

No. The corporate social responsibility has two aspects. First of all, you have always to play within the rules; otherwise you don't have accountability as a company. ... But secondly, of course, take the example of oil sands: [There] are certain rules that all the players comply with that. But then if you have good technology or good working practices or something else, then you can play it even better than ... the competition. So we play better, then build up. ...

So what you're saying is that Shell goes into the situation and looks to do a relatively cleaner job in a very dirty business.

Yeah, I disagree that it is a dirty business. [That depends] what you compare it with. ...

But oil from tar sands is a very high-CO2-emitting business proposition.

You have to look at it in an energy mix. It may be more CO2 than light oil. It may be less CO2 than coal. ... And one has to say: "How about energy security? How about the possibilities to do something with the CO2 coming out of the oil sands?" You should not only look at the situation today, but what opportunities has this energy form for the future to make it more clean. Let me put it that way, because that sounds a hell of a lot better than less dirty.

More clean is better than less dirty. ... I mean, people don't understand it. They just see you saying that you're going to be more clean in what essentially is a very bad proposition. What people want is for businessmen to take bigger leadership roles because you have the resources, the know-how, the wherewithal to do that, whereas governments in many cases are weak, disorganized. The legislative processes are long and slow. ... So it's up to you guys.

Yeah. But that's naive.

posted october 21, 2008

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