Introduction to carbon neutral crude oil



As the world continues to progress to a net-zero future, crude oil producers are beginning to shift towards carbon neutral crude. Carbon neutral crude is broadly defined as crude oil that produces no net greenhouse gases during the production process. How carbon neutrality is measured remains varied as there is a lack of regulation surrounding what counts as ‘carbon neutral’. Therefore producers are at liberty to consider which part of the production to count towards emission criteria. Whilst some producers may consider the whole supply chain, others may consider certain segments such as well-to-tank (emissions during production to storage tank) or tank-to-wheel (emissions during storage tank to end use).


The question therefore remains: How exactly are crude oil producers able to achieve carbon neutral status? They can take two approaches: the attribute approach or the offset approach. The attribute approach aims at reducing carbon emissions during the initial stages of the production process. For example producers may try to decrease flaring (the burning of natural gases when extracting oil). The offset approach is simply to buy carbon offsets to account for emissions from the production process. Despite the offset approach being the more problematic of the two, it is currently the favoured approach. A key problem with this approach is that it assumes that the trees planted will survive the years needed to offset emissions. Natural events such as droughts and wildfires can prevent offsetting and in the worst case scenario can contribute to greenhouse gas emissions itself. Furthermore even if they are effective there simply are not enough carbon offsets for this method to be sustainable.


Overall it is more beneficial for the environment if the attribute approach is used. However producers are unlikely to consider this method until there is sufficient regulation defining the specifics of what counts as carbon neutral crude. Therefore as more governments around the world pledge to reach net zero it is likely that a lack of regulation is only a short term issue and we will likely see greater advancements in the attribute approach

As the world continues to progress to a net-zero future, crude oil producers are beginning to shift towards carbon neutral crude. Carbon neutral crude is broadly defined as crude oil that produces no net greenhouse gases during the production process. How carbon neutrality is measured remains varied as there is a lack of regulation surrounding what counts as ‘carbon neutral’. Therefore producers are at liberty to consider which part of the production to count towards emission criteria. Whilst some producers may consider the whole supply chain, others may consider certain segments such as well-to-tank (emissions during production to storage tank) or tank-to-wheel (emissions during storage tank to end use).


The question therefore remains: How exactly are crude oil producers able to achieve carbon neutral status? They can take two approaches: the attribute approach or the offset approach. The attribute approach aims at reducing carbon emissions during the initial stages of the production process. For example producers may try to decrease flaring (the burning of natural gases when extracting oil). The offset approach is simply to buy carbon offsets to account for emissions from the production process. Despite the offset approach being the more problematic of the two, it is currently the favoured approach. A key problem with this approach is that it assumes that the trees planted will survive the years needed to offset emissions. Natural events such as droughts and wildfires can prevent offsetting and in the worst case scenario can contribute to greenhouse gas emissions itself. Furthermore even if they are effective there simply are not enough carbon offsets for this method to be sustainable.


Overall it is more beneficial for the environment if the attribute approach is used. However producers are unlikely to consider this method until there is sufficient regulation defining the specifics of what counts as carbon neutral crude. Therefore as more governments around the world pledge to reach net zero it is likely that a lack of regulation is only a short term issue and we will likely see greater advancements in the attribute approach

Karthik Govindarajan


References

Lowry, P. (2008). Oil Pump Jack. https://www.flickr.com/photos/paul_lowry/2770193028

VanLaningham, P. (2021, October 8). S&P Global Platts. S&P Global Platts. https://www.spglobal.com/platts/en/market-insights/blogs/oil/100821-carbon-intensity-crude-oil

Yadav, V. G., Yadav, G. D., & Patankar, S. C. (2020). The production of fuels and chemicals in the new world: Critical analysis of the choice between crude oil and biomass vis-à-vis sustainability and the environment. Clean Technologies and Environmental Policy, 22(9), 1757–1774. https://doi.org/10.1007/s10098-020-01945-5



References

Lowry, P. (2008). Oil Pump Jack. https://www.flickr.com/photos/paul_lowry/2770193028

VanLaningham, P. (2021, October 8). S&P Global Platts. S&P Global Platts. https://www.spglobal.com/platts/en/market-insights/blogs/oil/100821-carbon-intensity-crude-oil

Yadav, V. G., Yadav, G. D., & Patankar, S. C. (2020). The production of fuels and chemicals in the new world: Critical analysis of the choice between crude oil and biomass vis-à-vis sustainability and the environment. Clean Technologies and Environmental Policy, 22(9), 1757–1774. https://doi.org/10.1007/s10098-020-01945-5


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