The World Benchmarking Alliance's ranking of the fossil fuel industry's progress in the energy transition is the first to measure companies against the IEA's 1.5C roadmap. Its findings are stark, reports Terry Slavin
Italy’s Eni and BP have been ranked among the top five oil and gas producers in the world for their performance on climate change in the first benchmark to judge the industry’s performance against a 1.5C scenario.
Finland’s Neste, a producer of renewable road transport and sustainable aviation fuel, French natural gas producer Engie, and Spanish gas company Naturgy Energy took the top three positions, respectively, in the ranking of 100 companies by the World Benchmarking Alliance, in partnership with CDP and the French environment agency Ademe.
The benchmark is the first to use the International Energy Agency’s (IEA) Net Zero Emissions by 2050 Scenario, which aligns with a 50% chance of limiting long-term temperature rise to 1.5C, and WBA said the results painted a “worrying picture of a sector at odds with the low carbon transition”.
It’s important that companies also recognise how crucial efficient disclosure on climate targets is
Its top-line finding was that, without a drastic change of course, the sector will burn through its carbon budget for meeting the Paris Agreement’s 1.5C goal by 2037, with the combined emissions of 100 oil and gas companies together accounting for nearly 80% of the total global carbon budget.
Nicolette Bartlett, executive director of CDP, said: “The progress of the oil and gas industry worldwide is woefully inadequate if we’re going to limit global warming to 1.5C by 2050. If we want to meet the IEA’s 1.5C scenario, that means total transition away from oil and gas production as a society and the inherent transformation of fossil fuel-based business models."
She added: “It’s important that companies also recognise how crucial efficient disclosure on climate targets is, if they are to be held accountable on their own climate commitments and if we are to see the climate ambitions of the international community fulfilled.”
The research, which used data reported in 2020, highlighted the pivotal role of state-owned companies, which accounted for 41 of 100 companies but 56% of the total scope 1, 2 and 3 emissions. Only four – Equinor, Pertamina, Petrobras and PTT – set climate targets that were rigorous enough to be assessed, while only Norway’s Equinor was assessed to be 1.5C aligned, and that only for its scope 1 and 2 emissions.
Equinor ranked eighth on the benchmark, behind Total (6) and Repsol (7), and ahead of Portugal’s Galp Energia (9) and Royal Dutch Shell (10). U.S. oil majors were much lower down in the rankings, with ConocoPhillips at 35, Chevron at 45, and ExxonMobil at 50.
Despite the IEA’s recent Net Zero by 2050 roadmap saying unequivocally that no new oil and gas fields can be developed if the 1.5C goal is to be met, only BP has pledged to undertake “no new oil and gas exploration in new countries”, a goal that allows it to continue to explore in existing fields.
The most stark finding was the ‘shockingly low’ levels of investment in a low carbon future across the 100 companies
And while companies like Shell and Total Energies are expecting to see their oil production decline, “this is undermined by plans to increase gas production”, the report said, describing this as one of the “smoke and mirrors tactics” used by the industry to deflect attention from its lack of commitment to the energy transition.
Another is the claim that action on climate change is managed by boards, when the study finds that only five out of 67 companies with board-level oversight have the expertise needed. Interestingly, the boards of the three US oil majors – ConocoPhillips, Chevron and Exxon Mobil – have significant climate change expertise, but none offers a high level of climate change performance incentives. Eni, alone among the majors, has significant board-level climate expertise, rewarded through a significant incentive package.
WBA drew attention to the lack of comprehensive and comparable climate reporting. Crucial gaps include emissions data, with most companies sharing only partial data across scope 1 and 2, while only a third of the companies, including Galp, Repsol and Equinor, disclose information on scope 3 emissions, although they account for some 80% of the industry’s total carbon footprint.
More readily available is information on emissions intensity, the amount of greenhouse gas emissions generated per each unit of product. But looking at progress on that metric, over 2014-2019, the researchers found that on average, the 100 companies had only reduced emissions intensity 10% compared with the IEA’s 1.5C pathway; half had either increased or failed to decrease emissions intensity, while only two companies, Ohio-based Marathon Petroleum (13) and Australia’s Origin Energy (12), had reduced emissions in line with the IEA’s 1.5C pathway.
But the most stark finding was the “shockingly low” levels of investment in a low carbon future across the 100 companies. Only 30 of them reported how much they spent in 2019, and among them only four invested more than 10% of capex in low carbon and mitigation technologies.
Plans for future investment also feel far short: among the seven oil majors, Eni is expected to spend 20% Total 17.5%, BP 16%, Shell 8.3% and Exxon 3.3%.
In a webinar ahead of the full benchmark’s release last week, Bartlett of CDP said the finding demonstrated the vast gulf between stated ambition and tangible action. “There is lots of talk around what technologies are needed, the role they can play, their net zero targets …. But what we can see clearly from our analysis is that the details of [energy transition plans] are not there. The IEA is clear that by 2030 we need to see 77% of investment aligned globally with new types of technology. Yet a very small number of companies even disclose what their capex plans are, and of those that do, no company is at the right level – not even close.”
Oil and gas companies have less than 4,000 days to completely reverse the trend, with many barriers ahead
Baptiste Perrissin Fabert, executive director of expertise and programmes at Ademe, which developed the Assessing Low-Carbon Transition (ACT) methodology used in the benchmark, said it is a robust accountability framework designed to debunk greenwashing, and guide companies on how to credibly transform from contributors to climate change to providers of solutions. This guidance has been widely shared with companies, he said in the webinar.
“And actually, most of them have started to implement some solutions, but given the urgency of the climate threat, the challenge for them is to deliver the solutions at the right scale and the right speed. Oil and gas companies have less than 4,000 days to completely reverse the trend, with many barriers ahead.”
Both Bartlett and Fabert emphasised the need for governments to step in with regulation in order to accelerate action. “This new benchmark from WBA, CDP and Ademe shows that the industry simply is not doing enough to make [the energy transition] happen,” Bartlett said.
Neste BP oil and gas sector CDP ADEME WBA energy transition emissions disclosure IEA