Emitting half of the greenhouse gases in industrialised countries, the oil and gas sector plays a central role in global GHG emissions. Environmental regulations such as the EU ETS emerged to fight climate change by reducing GHG emissions. Although those regulations increasingly affect oil and gas companies, specific implications of the EU ETS on business strategies are widely unknown. Therefore, this dissertation explores strategic responses to the EU ETS and analyses the impact of the regulation on the oil and gas sector.
A strategic response framework, derived from the literature review, provides the basis for the analysis and is consequently adapted to the research findings. Empirical case studies of BP and Shell, combine secondary data and expert interviews to identify and further outline specific responses to the EU ETS.
The research findings indicate that the EU ETS significantly impacts business strategies of oil and gas firms. The resulting strategic responses are mainly influenced by regulatory pressure, economic factors and competitive implications. Responses in various corporate, managerial and operational areas could be identified. From a corporate perspective, oil and gas companies support the EU ETS, as a trading scheme for carbon is preferred to other options, such as carbon taxes. Managerial responses comprise the introduction of environmental risk management systems, incorporating a carbon price into investment decisions, and the establishment of carbon trading teams, mitigating the costs of the EU ETS. Operationally, oil and gas firms responded directly by engaging in carbon trading and investing in Carbon Capture and Storage technologies. While, process improvements and lower emission generating products such as natural gases and biofuels are responses triggered by the EU ETS, investments in renewables are not affected. Additional findings of the research are the high probability that carbon and investment leakage will take place as well as the significant impact, the EU ETS might has on M&A and outsourcing decisions, depending on the carbon price.
Table of Contents
1. General Introduction
1.1 Purpose of the research
1.2 Research interest
1.3 Research question
1.4 Research objectives
1.5 Dissertation structure
2. Background on Climate Change Regulations and the EU ETS
2.1 Why Climate Change is addressed by companies
2.2 Climate Change regulations
2.2.1 The Kyoto Protocol
2.2.2 The European Emission Trading Scheme
2.3 Chapter conclusion
3. Literature Review
3.1 Conceptual studies
3.1.1 Dunn (2000)
3.1.2 Hoffman (2002)
3.1.3 Schaltegger, Burrit and Petersen (2003)
3.1.4 Boiral (2006)
3.2 Empirical studies
3.2.1 Levy and Kolk (2002)
3.2.2 Skjaerseth and Skodvin (2003)
3.2.3 Pacala and Socolow (2004)
3.2.4 Pinske and Kolk (2007)
3.2.5 Hoffmann (2007)
3.2.6 Jeswani, Wehrmeyer and Mulugetta (2008)
3.2.7 Kim (2008)
3.2.8 Lacombe (2008)
3.2.9 Pinske and Kolk (2009)
3.2.10 Rogge, Schneider and Hoffmann (2010)
3.2.11 Okereke and Russel (2010)
3.3 Analysis of the Literature Review
3.3.1 Strategic responses to Climate Change, GHG and EU ETS
3.3.1.1 Influencing Factors
3.3.1.2 Strategic Responses
3.3.2 Literature Gap
3.4 Chapter conclusion
4. Empirical Approach
4.1 Research setting
4.1.1 Industry selection
4.1.2 The Oil and Gas sector
4.2 Research approach
4.3 Research design
4.3.1 Data sampling
4.3.2 Data collection
4.3.3 Data analysis
4.4 Quality of Research: Validity, Reliability and Limitations
4.5 Chapter conclusion
5. Results
5.1 Carbon Emissions of Case Companies
5.2 Influencing Factors
5.3 Strategic Responses
5.3.1 Corporate Responses
5.3.2 Managerial Responses
5.3.3 Operational Responses
5.3.3.1 Compensation
5.3.3.1 Innovation
5.4 Additional Case Study Findings
5.5 Future Implications and Challenges
5.6 Chapter conclusion
6. General Conclusion
6.1 Dissertation Purpose and Research Question
6.2 Key Findings
6.3 Theory Contributions
6.4 Managerial Contributions
6.5 Limitations
6.6 Further Areas of Research
6.7 Critical Appraisal
Research Objectives & Topics
This dissertation aims to explore how multinational oil and gas companies respond strategically to the European Union Emission Trading Scheme (EU ETS). It seeks to bridge the existing knowledge gap by analyzing the impact of these regulations on company strategy and identifying the range of organizational, managerial, and operational responses adopted by major industry players.
- Strategic response frameworks within the oil and gas sector
- Impact of regulatory pressure and economic factors on corporate strategy
- Managerial adaptations to carbon pricing and environmental risk management
- Operational innovations, including CC&S and biofuels
- Strategic implications of potential carbon and investment leakage
Excerpt from the Book
3.1.2 HOFFMAN (2002)
In the paper “Examining the Rhetoric: The Strategic Implications of Climate Change Policy”, Hoffman outlines factors influencing strategic responses to climate change regulations and identifies four key influencing variables.
The first variable is capital asset management. Given the huge investments into plants, equipment and technology, new environmental regulations will add some extra costs to those investments. As a response, affected companies try to influence policies and regulations. Dependent on the volume of those investments, firms “pushed for flexible time tables for climate controls to be mandated, allowing users and developers of technology extended time horizon to plan for, develop and perfect substitutes” (Hoffman, 2002, p. 331).
Summary of Chapters
1. General Introduction: Introduces the research purpose, interest, and the exploratory approach taken to study strategic responses in the oil and gas industry.
2. Background on Climate Change Regulations and the EU ETS: Provides an overview of global climate policies, specifically the Kyoto Protocol and the mechanisms of the EU ETS.
3. Literature Review: Synthesizes existing academic conceptual and empirical research to establish a framework for understanding corporate strategic responses.
4. Empirical Approach: Describes the methodology, focusing on a multiple case study approach involving BP and Shell to gather empirical evidence.
5. Results: Details the findings regarding the carbon emissions of case companies and analyzes their corporate, managerial, and operational strategic responses.
6. General Conclusion: Summarizes the key research findings, theoretical and managerial contributions, and suggests potential areas for future research.
Keywords
EU ETS, Oil and Gas Industry, Climate Change, Carbon Trading, Strategic Response, Greenhouse Gas Emissions, Corporate Strategy, Managerial Responses, Operational Responses, Carbon Leakage, Investment Leakage, Innovation, Compensation, Environmental Management, Sustainability.
Frequently Asked Questions
What is the core subject of this dissertation?
The thesis investigates how large multinational oil and gas companies develop and implement strategic responses to comply with the European Union Emission Trading Scheme (EU ETS).
What are the primary themes discussed?
The research explores the influence of regulatory pressure, competitive dynamics, and economic factors on corporate behavior regarding climate change, specifically focusing on corporate, managerial, and operational responses.
What is the main research question?
The dissertation is guided by the question: "How do multinational oil and gas companies strategically respond to the EU ETS?"
Which methodology is applied?
The study utilizes a qualitative, exploratory multiple case study approach, conducting expert interviews at BP and Shell and utilizing data from the Carbon Disclosure Project.
What is covered in the main body of the work?
The main sections cover a literature review of climate change strategies, an empirical analysis of specific corporate, managerial, and operational responses, and an examination of future implications like carbon leakage.
Which keywords summarize this research?
Key terms include EU ETS, Oil and Gas industry, carbon trading, carbon leakage, strategic response, and corporate environmental management.
How do oil and gas companies typically manage carbon risk?
Companies integrate environmental risk management systems and internalize projected carbon costs into their financial planning and investment appraisal processes to maintain competitiveness.
What is the significance of the findings regarding carbon leakage?
The study identifies "investment leakage"—where new investments are redirected to non-EU regions due to regulatory uncertainty—as a more probable strategic outcome than the immediate relocation of existing production facilities.
- Quote paper
- Simon Hecker (Author), Marc Noy (Author), 2011, Strategic Responses to the EU Emission Trading Scheme, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/180583
