By Laura Hurst and James Herron
The energy giant is following in the footsteps of its peers BP Plc and Repsol SA, which have already set similar targets. Shell’s move indicates that, despite the turmoil caused in the industry by the coronavirus, major oil and gas companies aren’t abandoning the transition to cleaner energy.
“Society’s expectations have shifted quickly in the debate around climate change. Shell now needs to go further with our own ambitions,” Chief Executive Officer Ben van Beurden said in a statement on Thursday. “Even at this time of immediate challenge, we must also maintain the focus on the long term.”
Shell aims to have net-zero emissions from its own operations, a category known as scope one and two, by 2050. It also intends to reduce the carbon footprint of the energy products it sells to customers, so-called scope three emissions, by around 30% by 2035 and 65% by 2050. To achieve this, the company will sell products with lower carbon intensity, such as renewable power, biofuels and hydrogen.
While Big Oil has always been a target for environmental and activist groups, the sector is increasingly being pressured to tackle its emissions by its own investors. On Wednesday, a group of 11 asset managers asked France’s Total SA to discuss adopting tougher climate goals in its shareholder meeting.
“Investors will now look to other energy companies to match, and build on, the welcome ambition Shell is showing,” Stephanie Pfeifer, a steering committee member of the Climate Action 100+ investor group.
The move comes even as the International Energy Agency said on Wednesday that the current pandemic and the resultant oil price crash was threatening to derail major companies’ energy transition plans. But some including BP CEO Bernard Looney have vowed to press ahead.
Shell’s measures in the midst of the virus crisis “signal both their continued focus on the other systemic challenge we face of climate as well as a welcome indication of their confidence beyond the current crisis,” Adam Matthews, director of ethics and engagement at the Church of England Pensions Board, said in an email.
Shell has taken a step in the right direction, but it falls short of aligning with the Paris climate agreement’s goals, Dutch investor group Follow This said. Shell’s target of reducing scope 3 carbon intensity by 65% by 2050 equates to an absolute cut in emissions of 50%, the group said.
Follow This earlier filed a shareholder resolution asking the company to set concrete targets. But Shell advised its shareholders to vote against the plan, saying that it is “unnecessary” and “counterproductive”.
Greenpeace also said the net-zero plan is vague. Shell will provide details in a strategy update in the third quarter of this year where it will outline some of the first steps, a Shell spokesperson said.
The ambition is big and the path won’t be smooth. When he set up BP’s bold emissions reduction plan in February, Looney admitted the nuts-and-bolts details of how it would get there were yet to be worked out. These companies are still oil and gas producers at their core and need dramatic changes to make their net-zero plan work.
Shell’s greenhouse gas emissions edged lower last year only because it sold assets, the company said this month. Flaring of gas rose in 2019, but it reduced leaks of methane, a more potent greenhouse gas than carbon dioxide.
As European oil majors have increasingly chased more ambitious emissions targets, pledges from their American peers remain modest. Exxon Mobil Corp. and Chevron Corp.’s plans are mostly limited to reducing flaring and methane leaks. Exxon does not report scope 3 emissions, saying that these are a function of demand and out of its control.