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Carbon pricing, fiscal terms and upstream asset values

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04 March 2021

Carbon pricing, fiscal terms and upstream asset values

Report summary

CO2 emitted during the extraction of oil and gas accounts for less than 4% of total emissions associated with fossil fuels; nearly 90% of emissions occur in their final combustion. And very few countries currently require producers to either pay a carbon tax or participate in an emissions trading scheme. But prudent upstream companies are assuming that carbon charges are a question of when, not if, and including these variables in their asset valuation models. This analysis addresses the following questions: Where do upstream carbon charges currently exist, and how do they interact with other fiscal terms? What are the differences between carbon charges introduced in royalty/tax and production sharing contract (PSC) fiscal systems? What is the potential impact of carbon charges on upstream asset values?

Table of contents

  • Executive summary
    • Carbon tax
    • Emissions trading schemes (ETS)
    • Carbon charges and upstream asset valuations
    • Carbon charges and royalty / tax fiscal systems
    • Carbon charges and PSC fiscal systems
    • There may be trouble ahead...

Tables and charts

This report includes 10 images and tables including:

  • Carbon tax rates for oil and gas producers
  • Norwegian field CO2 emissions and ETS free credits
  • EU ETS average trading price (US$/tonne, nominal)
  • Current carbon prices in tax or ETS systems
  • Reduction in asset values because of carbon charges
  • Impact of new carbon charge under different royalty/tax systems
  • Gross and net carbon charges (US$/tonne, nominal)
  • Norway’s tax revenue from upstream operations 2017-2021
  • Late-life production vs carbon intensity
  • GPS under different methods

What's included

This report contains:

  • Document

    Carbon pricing, fiscal terms and upstream asset values

    PDF 1.15 MB