How Can Energy Law Help Preserve our Environment?
Over your years of practice, petroleum products and gas demands change over the years. Much of the oil and gas industry has survived an especially tough few years with weak demand and low prices.
Sami Charles, CEO of ANOG says: “It has been difficult to make strategic decisions and plan for the future, although, prices appear to be recovering.
“In the near future, the recent oil price gains — which are due to a rebalancing of supply and demand fundamentals, partly accelerated by OPEC’s recent decision to cut production — are expected to remain in place. That expectation is behind a number of positive industry forecasts.”
Below, he expands more on energy law in relation to environmental concerns.
What do you think is the best option for trades to meet international energy demands, while still preserving the environment?
In my opinion, cap-and-trade programme is ideal. This approach is “quantity-based.” Instead of setting a price on each unit of pollution, the regulatory authority determines a total quantity of pollution (a “cap”) that will be allowed. Companies buy and sell emission allowances (tradable certificates that allow a certain amount of emissions) based on their needs. The limited number of these allowances creates scarcity. The requirement that regulated businesses hold enough allowances to cover their emissions ensures the cap is met and creates demand for the allowances.1 If it is less costly for a company to reduce emissions than to buy allowances, the company will reduce its own emissions. Similarly, if a company can reduce emissions below its requirements, so it has excess allowances, those allowances can then be banked for future use or sold in an open market to a firm that finds it more difficult (costly) to reduce emissions.
Moreover, what complications can arise for your clients, and how do you help them avoid such challenges?
The oil price collapse triggered a wave of cost reduction among upstream businesses. Most of my clients who are global oil and gas companies slashed capital expenditures by about 40% between 2014 and 2016. As part of this cost-cutting campaign, my clients had to let go thousands of workers and major projects that did not meet profitability criteria were either cancelled or deferred.
To avoid such challenges, firstly, I advised my clients that they will need to ensure that their business models are prepared to manage and benefit from this volatility.
Furthermore, as oil prices recover, I advised them to hold on to the benefits of cost reduction though recognising the fact that some cost escalation is inevitable.
As an expert in international trade in the energy sector, which jurisdictions do you think are addressing environmental concerns the best? What can other countries do to follow suit?
There is no single way to address an environmental problem; multiple approaches are required.
This situation is caused by the parlous state of global environmental governance, wherein current global environmental governance is unable to address environmental issues due to many factors. These include: fragmented governance within the United Nations; lack of involvement from financial institutions, and proliferation of environmental agreements often in conflict with trade measures. All these various problems disturb the proper functioning of global environmental governance. Moreover, divisions among northern countries and the persistent gap between developed and developing countries also have to be taken into account to comprehend the institutional failures of the current global environmental governance.
With environmental concerns affecting everybody, how do you expect international trade in the next three decades to progress?
Protection of the environment and economic growth are often seen as competing aims. Proponents of tighter environmental regulation challenge this view. They highlight the financial benefits of increased eco-efficiency and the emergence of a European eco industry with millions of jobs together with the need to improve how we protect public health and manage natural resources.
European industry and business, meanwhile, often claim that tightened European environmental regulation is hampering their growth, undermining their international competitiveness, and destroying jobs, and will force them to eventually relocate their activities to emerging market
economies outside the EU.
The controversy surrounding environmental policy has, perhaps surprisingly, arisen not so much from the issue of conserving non-renewable commodities such as fossil fuels or industrial metals, but from the increasing scarcity or overuse of renewable natural resources, causing problems such as water and air pollution, or damage to global commons such as the atmosphere or the ozone layer.
While demand for environmental protection is growing, it comes at a cost. The costs and benefits of taking action or not must therefore be estimated when environmental legislation is being drafted.
I think the gradual but credible long-term tightening of environmental standards and ambitions helps to establish new markets for environmental technologies.
Hon. Sami Charles
CEO/ Chairman
ANOG Petroleum
www.anoggroup.com
ANOG Petroleum Ltd. is a major trading company in crude oil (REBCO), D2 Gasoil, reinforced concrete iron, steel billets, bitumen and gas. We source from around the world, but our major supplying and manufacturing refineries are in Russia, Western Europe and Middle East. We also have supplying outlet in Africa.
