Can Shell burst its carbon bubble?

| 28th November 2019
XR protest shell
Samuel Hayward
Shell’s climate pledges are not enough to prevent climate breakdown, a recent debate concluded.

You need to do this to make sure that our children and grandchildren live in a decent world, and that investors still have money.

Are Shell’s carbon reduction plans sufficient to reduce their emissions in keeping with the global target to aim to limit temperature rise to 1.5°C?

This was the key question discussed at a recent seminar in London, attended by Tjerk Huysinga, executive vice president of investors relations at Shell, Mark van Baal, founder of activist shareholder group Follow This, Andrew Grant senior analyst at financial think tank the Carbon Tracker Initiative and various investors in Shell.

Shell says that it has an ambition to reduce the carbon footprint of its energy products by around 20 percent by 2035, and by 50 percent by 2050. It is also investing in renewable energy; alternative fuels such as hydrogen and aviation fuels made from waste. It has also linked remuneration of its executives to reducing carbon emissions.

Joint responsibility

When asked why Shell’s carbon reduction strategy was described as an “ambition” rather than a hard target, Huysinga said that the company did not set targets for anything far into the future. “We can’t do that just for CO2, no matter how much people want it.”

Only 15 percent of Shell’s emissions are directly caused by its operations, with the rest emitted by customers using its products. Huysinga said it was important that responsibility for emissions to be taken by everyone, including customers.

He gave the example of aviation, alongside the need for lower emission fuels, he said that people needed to fly less to reduce demand, while airplane manufacturers needed to supply more efficient engines. Shell was already working on this through development of biofuels and synthetic fuels for aviation, he said. Other parts of the economy such as the steel and car industries would also have to change, he said.

He said: “It's really important that we move this away from being just a supply issue to being a demand issue, because if the demand changes in all of these industries, but also from the general public, then this whole thing is going to roll much faster."

Shell’s ambition was not set in stone, and as the world moved on, the company would also move on, he added.

Risky strategy

However, although van Baal acknowledged that Shell was taking more action than other major oil and gas companies, he said it was still not enough. Population growth meant that energy demand would rise by 40 percent, meaning that the world effectively needed to reduce total emissions by 70-100 percent.

You need to do this to make sure that our children and grandchildren live in a decent world, and that investors still have money.

He called Shell’s “Sky” emission reduction scenario, which envisions global CO2 emissions reaching net-zero by 2070, “very risky”, as it meant removing ten gigatons of CO2 per year from the atmosphere.

He said: “That’s the equivalent of three times what the EU is emitting today. That’s what our grandchildren will have to do, year after year, to compensate for the overshoot we are causing today."

Grant said that Shell should not be asking itself whether its investors would mind receiving reduced dividends from taking action on climate change, because there were enormous economic opportunities from the low carbon transition, while fossil fuel extraction was becoming only more costly.

Shell is currently investing US$1-2 billion a year in renewable energy and low carbon fuels, which will rise to US$2-3 billion between 2020-2025, according to its latest strategy, published in June. However, the document reveals that this is a tiny part of its total annual investments of US$25-30 billion.

Shell should instead be using its might to influence governments and customers, van Baal said. It was “one of the most powerful companies in the world”, and therefore should not wait for the rest of the world to take action, he said.

He concluded: “You can do this. But more importantly, you need to do this to make sure that our children and grandchildren live in a decent world, and that investors still have money."

This Author

Catherine Early is a freelance environmental journalist and chief reporter for The Ecologist. She can be found tweeting at @Cat_Early76.

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