The political context of oil companies

Shell, BP and ExxonMobil operate all over the world, but they are still firmly tied to Europe and the US, respectively. Shell International is located in the UK, but the company has its backbone in the Netherlands (the Shell Group is 60 per cent Dutch-owned) and has been influenced by Dutch culture, society and policy. BP has its backbone in the UK, while ExxonMobil has deep roots in the US, which can be traced back to Rockefeller's foundation of Standard Oil in 1882. Exxon's cultural heritage has been seen as generally important for the company's choice of environmental strategy (Estrada et al, 1997). This also implies that Shell and BP are much more closely linked to the climate policy of the EU than ExxonMobil.

In relative terms, the US and the EU have experienced different levels of social demand. First, a number of studies have shown that Europeans have been much more receptive to proactive measures on climate change than the US (see, e.g., Skolnikoff, 1997; Rowlands, 2000). The Netherlands is widely perceived to be among the greenest countries in the world in terms of public values and attitudes towards environmental problems.31 Shell, for example, has exploited this situation by using the Netherlands as a testing ground for the society's willingness to pay for environmental protection in general, and clean energy in particular.32 High social demand for clean energy will make Shell's investments in renewable energy more profitable. In contrast, the US public expresses significant concern for the environment, but climate change is given little public attention compared to domestic environmental problems (OECD, 1996; Saad and Dunlap, 2000). Public opinion polls have also indicated that the US population is not willing to accept significant costs or a large share of the international burden to reduce the problem (Gallup and Saad, 1997). While Shell perceives consumers' willingness to pay for clean energy as a business opportunity, fossil fuel interests in the US have launched PR campaigns to highlight the high economic costs of reducing GHG emissions. For example, Exxon Education Foundation's Exxon Energy Cube, with videos, books, games and posters, 'implies that fossil fuels in general pose few environmental problems and that alternative energy is unattainable and costly' (Levy and Egan, 1998, p344).

Second, oil companies operating in Europe have been repeatedly exposed to campaigns and boycotts initiated by the green movement. For example, following boycotts of Shell's petrol stations after the Brent Spar incident, it emerged that losses from the boycott could be more costly than the plan to dump the platform at sea (Estrada et al, 1997). It is quite illustrative that the ongoing 'Stop Esso' campaign specifically related to Exxon's climate policy was initiated in Europe and not in the US. Greenpeace-US finds it difficult to raise funding on climate change owing to low public concern. Even though the US ratification of the Kyoto Protocol would have been the key to a viable climate regime, Greenpeace-US restricted its efforts in lobbying for US ratification even before George Bush Jr was elected in the fall of 2000.33

Social demand is also important for understanding differences in climate policy. US climate policy is strong on scientific research and weak on action. As noted, the Clinton-Gore administration struggled to develop a viable climate policy in the US, owing to resistance from Congress and the fossil fuel lobby. In April 1993, Clinton announced that the US had committed itself to reducing emissions of GHGs to their 1990 levels by the year 2000. However, after the defeat of the BTU tax, which was seen as the core policy instrument, the fossil fuel industry did not take the stabilization target seriously. The Clinton-Gore administration was forced to shift its focus from taxes to voluntary public programmes. The core of US climate policy over the last decade has comprised a number of genuinely public voluntary programmes aimed at creating markets for energy effective technologies. These programmes do not deal with the oil industry, but are rather general cross-sectoral programmes. ExxonMobil has shown little interest in the 40 different programmes, arguing that none of them have led the company to take action different from what it would have done in their absence.34

Compared to the US, the Netherlands, the UK and the EU have set ambitious goals and adopted a wide range of policy instruments; the Netherlands in particular has focused actively on renewable energy. As noted above, the UK and the EU have launched ambitious climate change programmes in which the oil industry participates. In March 2002, EU Member States agreed to be legally bound by the Kyoto Protocol, and the EU ratified the Protocol in May the same year.

For Shell, the Netherlands does not only constitute a 'test country' for pressures and opportunities offered by the public at large. It also represents a test case for what the oil industry can expect from a relatively viable climate policy. The Netherlands has aimed at a 3 per cent reduction in CO2 emissions by 2000 against its 1990 levels. In 2002, the Netherlands was the first of the EU Member States to ratify the Kyoto Protocol. The Dutch use of policy instruments has also been gradually stepped up and comprises taxes, legal regulation and negotiated agreements. A long-term agreement was concluded between the Dutch authorities and the oil industry in 1996. In 1995, the Dutch government decided to increase its share of renewable energy to 10 per cent of total energy consumption by 2020. In 1996, the EU followed up with its intention to double its share of renewable sources of energy by 2010. Combined with regulatory pressure, these initiatives influenced Shell's decision to establish Shell International Renewables in 1997.35

The differences between political institutions regulating state-company relationships in the US and most European countries are well documented. These differences are also to some extent reproduced and reinforced by the multi-stakeholder approach of the EU. In the mid-1980s, Vogel (1986) described the US style as the most rigid and rule-oriented to be found in industrial society. Ten years later, Wallace (1995) still held that the US was based on an adversarial, legalistic approach to environmental issues, an approach which has produced an inflexible, fragmented and confused regulatory system. This description of the US approach is shared by the API.36 The image of the US regulatory system is now changing, but the backbone of US regulatory and compliance models remain essentially intact (Dannenmaier and Cohen, 2000). As a consequence, industry prefers opposing environmental goals to seeking creative solutions. In climate policy, corporate opposition has proved successful and has to a large extent determined the regulatory framework.

The Dutch and UK approaches have been described as almost the opposite. In comparison with the US, Vogel (1986) describes the UK approach as a model where policy makers work closely with the industries. They rely on expert advice from industry and seek industry consent before changing policy, as well as in the implementation phase. This can be illustrated by the appointment of Shell's Chris Fay as a leader for the UK emissions trading scheme. The Netherlands has gone a step further. Partnership with industry based on long-term agreements has been an integrated part of Dutch environmental policy since the first National Environmental Policy Plan (NEPP) in 1989. Shell has a very good relationship with Dutch authorities on environmental matters (Skjsrseth and Skodvin, 2001).

In sum, ExxonMobil has operated within a political context that has generated scant new market opportunities for renewables, has exerted little regulatory or societal pressure, and is marked by a lack of cooperation between the state and industry. Of particular importance for the climate strategy of ExxonMobil is the weakness of the state in climate policy and the power of the fossil fuel lobby. ExxonMobil has been convinced that US climate policy would remain weak and that the Kyoto Protocol would never be ratified by the US. According to the company, it has never developed a Plan B in case of US ratification of the Kyoto Protocol.37 Conversely, Shell and BP have faced a significantly different political context pulling in the opposite direction. The combination of regulatory pressure and market opportunities has led these companies to choose a different climate strategy. These companies have not been able to control the political processes and have thus chosen to exploit new opportunities. In the case of Shell in particular, there is a direct link between public programmes on renewables and the establishment of a fifth core business area on renewables.

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