Shining a Light on Oil's Hidden Pollution

June 28, 2016
Jeremy Martin
Senior Scientist and Director of Fuels Policy

A pair of recent reports highlight the oil industry’s global warming pollution and suggest mechanisms to reduce it. The reports build on themes of our recent work on cleaning up transportation fuels in general (Fueling a Clean Transportation Future), with a specific focus on methane pollution from oil production (The Truth About Tight Oil). It’s great to see specific and concrete solutions to these important problems being proposed.

Oil is the largest source of global warming pollution in the United States, and tailpipe pollution from gasoline-powered cars and diesel trucks is its most concrete manifestation. But even before these fuels are delivered to the gas station, a great deal of damage has already been done.

The carbon dioxide, methane, and other global warming pollution coming from oil wells and refineries in the oil supply chain is larger than the emissions from all the jet fuel used in the United States. Moreover, much of this pollution is unnecessary, and can be readily reduced using existing technology.

This is low hanging fruit compared to replacing all the 737s with planes like the Solar Impulse that just crossed the Atlantic on solar power. But before we can hold the oil industry accountable to cut the hidden pollution on the other side of the gas pump, we need to illuminate the extent of the problem.

Oil companies are major methane polluters

A recent report from the Center for American Progress catalogs The Who’s Who of Methane Pollution in the Onshore Oil and Gas Production Sector. The top 5 are ConocoPhillips, ExxonMobil, Chesapeake Energy, EOG Resources Inc., and BP America.

Some of these names are familiar as major oil companies, and others are better known as gas companies, but these days the separation between oil and gas industries has all but vanished. With the rise of fracking, oil and gas comes from the same companies, and often from the same wells. Indeed, recently the trade associations representing these two companies merged. But regardless of what share of their product mix goes into cars versus power plants, methane pollution is a major climate pollutant, and the oil and gas industry has to be held accountable to curtail its wasteful and polluting practices.

EPA recently finalized regulations for new sources of methane in the oil and gas industry and is beginning to collect information on methane emissions from the existing operations, to develop appropriate regulations for this damaging global warming pollutant. Right now it’s clear we still have a lot to learn about exactly how large these emissions are. The CAP report is based on EPA reporting that captures just about half of the methane pollution from the industry. Improving accountability of polluters to measure and report their pollution is an essential foundation for policies to address climate change.

Oil pollution goes deeper than methane

While cutting methane pollution from oil and gas industry is an essential near term action, it’s only the tip of the iceberg where oil industry pollution is concerned. An important new report “A Smart Tax: Pricing Oil for a Safe Climate” by Deborah Gordon and Jessica Tuchman Mathews at The Carnegie Endowment for International Peace takes a broader view of the complex and challenging oil supply chain.   They explain that different types of oil have dramatically different emissions. Figure 2 provides a useful contrast of some different US sources of crude.

Some oils are extracted without unnecessary pollution and are relatively easy to refine, with the result that more than 90% of their pollution comes from using the final fuels like gasoline and diesel. Other heavier oils are more energy intensive to extract and refine, and can create 75% more pollution per barrel of oil than the lighter crude.

For these more challenging oils, tailpipe pollution accounts for less than 2/3 of the total pollution, so pollution reduction policies that target only emissions from fuel use will fail to account for a lot of the emissions, which is not good policy.

The oil market is complex, with highly variable sources of crude, different extraction and refining techniques, and complex markets for a variety of products. Gordon and Mathews argue that a well-designed “Smart Tax” that is based on a comprehensive lifecycle assessment of the oil supply chain can align the interests of energy producers with the need to cut carbon pollution, stimulating innovation and avoiding perverse incentives. They walk through key implementation details including why refineries are the best point of regulation and the implications for global oil trade. But the first order of business is better information.

It starts with better data

The starting point for smart policies that hold the oil industry to account is better information about pollution from the oil supply chain. Gordon and Mathews lay out a compelling case for a tax policy approach, but regardless of whether the policy instrument is the pollution tax economics textbooks favor, a broad performance standard approach like the California Low Carbon Fuel Standard, or a more narrowly focused performance standard like the methane rules being developed by EPA, good policy must be based on good information. The current information the government collects on pollution from the oil supply chain is scattered and incomplete.

The Energy Information Administration was founded in the 1970s with a charter focused on ensuring reliable access to the energy our economy needed. But where the future of clean transportation is concerned, producing enough gasoline to fuel our cars is no longer the most pressing problem. Instead we need to maintain and improve everyone’s access to mobility while also preserving climate stability. Achieving this goal will require collection, dissemination, and analysis of different information on our fuels by all the stakeholders inside and outside of government.  These two reports point us in that direction.