Terry Slavin says the latest climate plans from the two oil and gas majors look miles apart, with Shell detailing its plans for net-zero and ExxonMobil taking its first green steps, but underlying both is a strong commitment to fossil fuels
Royal Dutch Shell recently coloured in its net-zero plans for investors, announcing that it was cutting back oil production by 1-2% a year and speeding up its timeline to reduce the net carbon intensity of each unit of energy it produces. By 2035 this will be 45% less than 2016, compared with 30% targeted previously, and 100% by mid-century, from 65%.
The oil major said it will increase investment in renewables, including biofuels and hydrogen, and build out its EV charging services network.
With its net carbon intensity metric, Shell is taking responsibility for all its emissions, including those of its customers, which account for a whopping 85% of its total carbon footprint, by 2050. This is more ambitious than BP, whose target is a 50% cut in carbon intensity of its products by 2050.
BP's pledge also excludes more than 40% of its oil production and 15% of its gas from its stake in Russian energy giant Rosneft (see January's Brand Watch column).
A careful reading of the Shell announcement reveals that a significant amount will be down to offsetting
But it is notable that Shell’s renewable energy production targets are far less ambitious than those of BP and Total, which earlier this month announced plans to rebrand itself as TotalEnergies as it transforms into a broad energy company over the next decade. Total allocates more than 10% of its capex to low-carbon electricity, which it says is the highest level among the majors, and is planning to double that by 2030. BP, meanwhile, plans to increase its renewable output 20-fold by 2030, while slashing both oil and gas output by 40% – a far more decisive shift than Shell’s 1-2% decline in oil production per year coupled with Shell's plans to grow its gas business by 20%. (See Shell wants to be at leading edge, not bleeding edge with climate plan).
So how, exactly, is the Anglo-Dutch company planning to reach net-zero? Efficiency measures and clamping down on methane emissions will play a big part. But a careful reading of the Shell announcement also reveals that a significant amount will be down to offsetting, with a target to offset 120m tonnes of emissions from its products annually by 2030.
By comparison, this is more than the entire voluntary carbon offset market in 2019, which reached 104 million tonnes, according to Ecosystem Marketplace figures. (For details see also How Shell’s offsetting move could help unlock flood of finance for forests)
The company is also looking to boost carbon capture and storage capacity to store an additional 25m tonnes a year by 2035, compared with 4.5m today – another big bet on a nascent and unproven technology, given that figures from the Global CCS Institute show that global operational CCS capacity stood at around 40 million tonnes in 2020.
Plans for offsetting and storing emissions are certainly not unique to Shell, as the Transition Pathways Initiative made clear in an assessment of the industry's net-zero plans last year. As reported in Brand Watch this month, BP recently bought a majority stake in forest offset developer Finite Carbon.
The industry's focus on hydrogen as a low-carbon solution is controversial, but is still highly suspect to some analysts. In a recent blog for Green Alliance, David Cebon, professor of mechanical engineering at Cambridge University, argues that hydrogen processes are too expensive to compete with electric solutions in all but specific solutions like aviation and the manufacture of ammonia, which is being proposed as a liquid fuel for shipping.
He says fossil fuel companies are promoting hydrogen in a bid to delay their own demise, “pursuing a ‘bait and switch’ strategy in which they promise a green hydrogen future, but then fall back to an interim ‘blue’ hydrogen position”, where steam methane is used to reform natural gas, with the resulting CO2 by-product captured and stored in depleted oil wells. Cebon adds that this is a dangerous distraction at a time when CO2 emissions need to come down rapidly, since CCS itself will take decades to deploy. In the meantime unabated, also known as “grey”, hydrogen will generate more CO2 than the status quo, Cebon says.
As late as October, ExxonMobil’s CEO Darren Woods reassured staff there would be ‘an ongoing need for the products we produce’
Seen in that light, one has to ask whether Shell’s commitment to addressing climate risk is much more evolved than that of ExxonMobil, the erstwhile bête noire of the green movement, which also recently announced plans to spend $3bn in the next five years on a new low-carbon business unit.
This comes after a flurry of announcements signalling that America’s biggest fossil fuel producer may have finally accepted that it may need to change course in the face of climate change.
Before Christmas, the Irving-based Texas oil major announced a five-year programme committing to cut the intensity of CO2 emissions from its upstream production by 15-20% by 2025, increase investment in green hydrogen and advanced biofuels, and decrease emissions intensity of methane, a far more potent greenhouse gas, by 40-50% – though this is far lower than the 65% cut in methane emissions by 2025 being proposed by the Clean Air Task Force and under consideration by the Biden administration.
On the face of it, heightened investor pressure from activist investor Engine No. 1, backed by heavyweight institutions such as the Church Commissioners for England and U.S. hedge fund DE Shaw, have forced Exxon to move into line with U.S. number two producer Chevron.
Like Chevron, Exxon’s new targets apply only to Exxon’s scope 1 and 2 emissions, from its own operations, though it also announced that it would report on its scope 3 emissions.
It remains to be seen whether such moves will be enough to silence Exxon’s legion of critics, including the Attorney General of Connecticut, who in September filed the latest
of a wave of law suits from U.S. states and cities accusing ExxonMobil of “an ongoing, systematic campaign of lies and deception” to discredit the climate change science, despite knowing since the 1970s that fossil fuel production caused global warming.
It's worth remembering that as late as October, its CEO Darren Woods dismissed the suggestion that climate change concerns posed long-term risk to his industry, reassuring staff that there would be “an ongoing need for the products we produce”.
This article appeared in the February 2021 issue of the Sustainable Business Review. See also:
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Royal Dutch Shell ExxonMobil BP Total renewable energy fossil fuels oil and gas Carbon offsetting blue hydrogenn Chevron