Diversifying the Business of Oil and Gas Companies in the Context of Global Climate Policy

Abstract

In 2019, Russia, being a climate-conscious country, ratified the Kyoto Protocol to the UN Framework Convention on Climate Change caused by anthropogenic emissions of greenhouse gases. The increase in the emissions is primarily driven by the advancements in energy production. The existing level of technology for processing and using raw materials in many energy industries leads to dangerous environmental pollution and causes an increase in environmental problems. Many companies have adopted their carbon neutrality strategies to use “green energy” based on ESG criteria, which allows them to increase their competitive advantages. Achieving carbon neutrality involves minimizing direct emissions during production processes or shifting to renewable energy sources. The paper examines the transformation of the oil and gas companies towards cutting greenhouse gas emissions and analyzes the mechanisms for achieving decarbonization. To assess the effectiveness of investment projects in the field of low-carbon energy, the paper analyzes an approach and proposes a dynamic simulation model based on a modification of the discounted cash flow method. The model is tested under the assumption that carbon regulation is carried out through the introduction of a carbon border tax.