INSIGHT by Carbon Tracker
Global policy makers are currently gathered at COP28 in Dubai pursuing a managed phase out of fossil fuel production and use, to prevent global heating reaching catastrophic levels. And yet one of the most important figures we need to achieve this – how much new fossil fuels are being added to the existing global stock – is currently missing from the public domain.
No publicly available figure currently exists for how much oil and gas was added to global reserve stocks last year. To address this problem Carbon Tracker and The Global Registry of Fossil Fuels are proposing a new reporting metric to be known as: New Reserves and Resources (NRR) in order to close this emissions reporting gap.
“The ‘reserves’ classification means the fossil fuel volumes can be recovered economically—today’s reserves are tomorrow’s emissions. The International Energy Agency (IEA) has made clear we don’t need new oil and gas exploration in our climate-constrained world, yet the proving up of new reserves continues across the globe. Remarkably, there is no comprehensive and reliable information on the volumes of previously unreported oil and gas reserves have been ‘found’ year over year. If we don’t measure it, we can’t manage it.”
-Rob Schuwerk, Carbon Tracker’s lead on the Global Registry project
Even though states and governments are the key Parties to the Paris Agreement and climate change policy, they do not, for the most part, originate data on fossil fuel reserves. Instead, they collate it from companies operating in their jurisdiction.
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The traditional way of counting oil and gas reserves is for shareholders to know what assets an oil company retained, able to be produced in the future. But the energy transition introduces a need for a new metric – the volumes of embedded emissions added, relative to the remaining carbon budget.
Large oil and gas companies listed on major financial markets already publish detailed updates to their oil and gas reserves, identifying newly added oil and gas as sub-categories.
But National Oil Companies (NOCs) in major oil producing countries, private companies and governments overwhelmingly do not report this data. They simply state the start and end balance of reserves – how much oil and gas can be produced in the future. The consequence is that we are unable to be more precise about how many emissions were in new oil and gas added to stocks last year than somewhere between 20 and 45 billion tons.
| Government should release submitted data for countries, NOCs and private companies
The current system of reporting reserves is inadequate for the energy transition. Since reserves reporting is focused on future commercial value, companies and governments report only the net balance of reserves still available to produce. But production is continuous from one year to the next. If the reserves balance stays roughly the same, then some new reserves must be found to balance out the in-period production. In terms of a commercial balance sheet, the produced volumes have been converted to revenues. But in planetary terms, those volumes were converted to emissions that have reduced the remaining carbon budget, whilst new permits and related seismic and drilling activity have created new reserves—and future carbon emissions.
“Current net reserves reporting is not fit for our climate-constrained world. At a time when the 1.5C carbon budget is under 300 gigatons, nobody knows how many new emissions were added by oil and gas exploration last year. We need a single global number for new reserves that is reliable and in the public domain. It would take very little lifting by governments to get to this.” said Johnny West, principal of Koinon and the architect of the Global Registry.
Publication of NRR needs to become normalized by countries, so that national totals can be summed to find the global figure for how much new oil and gas is added to global stocks.
National regulators already receive this information from companies. It is simply a question of publishing the full, granular data they receive from companies, and the same principles should be applied to NOCs, countries, and private companies.
It takes only light- and no-burden steps to release the full data needed to quantify new oil and gas discoveries – the first step to managing the overhang of global fossil fuel reserves.
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| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.