A Tipping Point for Sustainability?

Big Oil seeks a new income source: carbon storage.

The market to store carbon emissions is there. The technology is there. Now the question becomes, can the very firms that used to just pull carbon from the ground make money storing it?

As more and more companies pledge to become carbon neutral, oil companies are realizing they can make a profit by capturing and storing emissions for other industries like transportation and manufacturing. It’s a tipping point that turns carbon reduction from a sustainability initiative into a business opportunity, and a potentially big one at that; by some estimates, the market could generate $2 trillion in new revenue by 2040.

The problem is, as of right now, there is no global consensus on how to price, tax, or sell storage of greenhouse gases, says Richard Preng, a Korn Ferry senior client partner and the global sector leader of the firm’s Energy practice. Some countries have carbon trading exchanges and taxes, for instance, while others do not. Moreover, says Preng, a company that emits a lot of carbon dioxide may be willing to pay more than a company whose emissions are lower. “What storing carbon is worth is unique to each company,” he says.

But the fact that it is worth something is enough for oil companies—with the aid of governments and private-sector partners—to keep plowing ahead. To be sure, oil companies are under increasing pressure from their boards, employees, consumers, and investors to move faster in reducing carbon emissions. If they can convince other companies under similar pressure to pay them to reduce their carbon emissions, all the better.

Moreover, with the new US administration reengaging on global climate-change efforts, the expectation is that more decarbonization-related regulatory and legislative actions will be on the horizon. “There has been an extreme acceleration in the demand for metrics and transparency around carbon reduction strategies for all companies,” says Shelly Fust, a Korn Ferry senior client partner and leader of the firm’s activities in cleantech, renewable energy, and sustainability.

While carbon capture is not new and there are preexisting reserves that can be repurposed, selling storage as a service isn’t as simple as putting carbon into the ground instead of taking it out. For starters, new pipelines and other infrastructure to transport the carbon will have to be built, requiring vast capital expenditures not just for materials but also for engineering and other talent. Moreover, from a talent perspective, Preng says companies will need to bring in sales, marketing, and other commercial talent capable of structuring and influencing the development of a new market.

At the same time, Big Oil will need to move even faster to retain its engineering and tech talent, who are being lured away by cleantech and renewable energy start-ups that are flush with funding and already committed to sustainability. “They want to incentivize people to stay by accelerating their transformation to clean tech,” Fust says.