Shell Inches Forward on Climate Action

April 17, 2020 | 7:00 am
Creative Commons by 2.0/Daniella Beccaria
Kathy Mulvey
Accountability Campaign Director, Climate & Energy Program

Royal Dutch Shell yesterday announced an update to its climate “ambitions,” stating that the company aims to be a net-zero emissions energy business by 2050, if not sooner. While Shell explicitly seeks to bring net global warming emissions from its operations to zero by mid-century, the company’s pathway for reaching net zero emissions from the use of its products is less clear.

Shell also released an update to its 2019 Industry Associations Climate Review, adding information about company payments to trade groups but doubling down on its commitment to the American Petroleum Institute (API), which has been at the forefront of lobbying for industry bailouts and dangerous regulatory rollbacks in response to the COVID-19 pandemic.

The announcement comes ahead of Earth Day 2020 next week and Shell’s annual general meeting in May, where shareholders will vote on a resolution supporting the company to bring its emissions reduction targets in line with the goal of the Paris Climate Agreement. It comes two months after competitor BP set its own “net zero by 2050” ambition and released its first trade association review, quitting three groups on the basis of their misalignment with BP’s climate positions.

Here’s my initial review of Shell’s latest pledges and disclosures—scoring three pluses, three minuses. Like BP, Shell raised questions it didn’t answer. Unlike BP, Shell hasn’t told us when it will answer those questions.

(+) Scaling up renewable energy

Shell acknowledges that to achieve its ambition, it will need to sell more products with lower carbon intensity, such as renewable power, biofuels, and hydrogen.

(+) Setting mid-term ambitions

As an interim step toward reducing the net carbon footprint of the products it sells by around 65 percent by 2050, Shell seeks to cut the carbon intensity of its sold products by around 30 percent by 2035. (However, the concerns my colleague Jeremy Martin raised about Shell’s unorthodox and highly aggregated emissions metric remain relevant). BP has not yet disclosed its mid-term targets (it plans to reveal its strategy and near-term plans in September).

(+) Disclosing trade association payments

Shell discloses its payments to trade associations in broad bands, with API at the top in the $12.5 million-$15 million per year range and Business Europe and the Australian Industry Greenhouse Network at the bottom (less than $50,000 annually). In response to shareholder pressure, Chevron and ConocoPhillips have begun to disclose trade association dues over $100,000 and $50,000, respectively.

(-) Co-opting net zero

The biggest problem with Shell’s ambition is that the company seems to have redefined the term “net zero” to its own advantage. It’s hard to see how Shell’s math adds up to what science tells us is necessary: namely, net-zero absolute emissions from company operations and the use of company products by mid-century.

(-) Shifting responsibility onto consumers

Shell’s ambition to reduce the emissions intensity of the products it sells by 65 percent by 2050, even when coupled with net-zero operational emissions, leaves the company short of net-zero emissions. This is where Shell sees its customers stepping in—calling on them to reduce emissions in order to help Shell reduce emissions. Which is a bit backwards, as Shell knew decades ago about the risks of burning fossil fuels and not only kept digging them up and selling them, but also took part in campaigns to deceive the public and block climate action.

(-) Sticking with API

Among trade associations included in the review, API is by far the largest recipient of Shell’s largesse. Yet just as it did in 2019, the company has decided to “continue [its] engagement with the association in areas where we have different views.” Which begs the question: where does Shell draw the line? Is there anything API could do on climate change that would force Shell to leave?

The Final Tally?

Shell’s updated climate ambition adds to the narrative that European oil and gas majors are outpacing their US-based counterparts on climate action. So far BP, Shell, Repsol, and Equinor have set emissions reduction targets that encompass the end-use of their products. While it’s popular to give companies all the credit, they are taking action in response to new European Union climate goals. In the US, ExxonMobil and Chevron continue to refuse to take responsibility for reducing emissions from the burning of their products.

Overall, Shell isn’t providing anyone with enough information on its strategy to reach these new ambitions. Unlike BP, the company has made no promise of further details in September. While Shell’s updated ambitions move the ball forward, we’re left waiting to see whether the company is actually planning to go the distance to avoid the worst effects of climate change.