Amid accusations that the Anglo-Dutch oil major is trying to extend an unsustainable business model with its embrace of nature-based climate solutions and increased investment in gas, Terry Slavin interviews Shell New Energies' Mark Gainsborough about Shell's Net Zero Carbon Footprint plan
Shell’s investment in nature-based solutions is controversial for environmental groups, who were not falling over themselves to congratulate the oil major.
As Doug Parr, Greenpeace UK’s chief scientist tweeted after the oil major’s announcement: “Natural climate solutions are great, but best used for the last few percent of CO2 emissions, which are really hard to deal with. They should not be used as a prop to continue with business that is fundamentally unsustainable.”
This was supported by this week's report from the Carbon Tracker Initiative, which said all of the major oil companies last year sanctioned new projects that fall outside a "well below 2 degrees" global carbon budget, and highlighted Shell's $13bn liquified natural gas project in Canada as one of the largest of these new investments.
This month directors of the European Investment Bank are discussing whether to sign off on draft new lending policies that would exclude "upstream oil or gas production, coal mining, infrastructure dedicated to coal, oil and natural gas, and power generation or heat production from fossil fuel sources” by 2020.
In an interview with Ethical Corporation in June, Mark Gainsborough, the head of Shell’s New Energies business, defended Shell's shift from a 50:50 split between oil and gas to greater reliance on lower-carbon gas as part of Shell's Net Zero Carbon plan to half its energy intensity by 2050. And he said carbon offsetting is in addition to measures the company is taking to cut its own emissions. Although a fraction of the $25bn Shell spends on investment in hydrocarbons, he said the company is investing $1bn-$2bn a year in fossil-fuel-free transport solutions such as electric vehicle charging, battery storage and hydrogen infrastructure as well as carbon capture and storage.
We want to sell our customers lower carbon solutions, but it’s not something that we can do overnight
He also spoke about a pilot project Shell is doing shipping liquid hydrogen into Japan, a solution that would use Shell’s existing value chain for liquified natural gas and allow renewable energy generated in one location to be converted into hydrogen for storage and shipping to other parts of the world. He said this potentially transformative solution could become financially viable to roll out at scale within 10 years.
“We want to sell our customers lower carbon solutions, but it’s not something that we can do overnight,” Gainsborough said.
And with the cost of electric vehicles still prohibitively high for most consumers “we are giving people a choice that will get them on the journey to a lower-carbon solution.”
But if Shell is serious about making a dent in its scope 3 emissions, which account for 85% of its footprint, should the company not internalise the one euro cent cost of offsetting the emissions of all its customers, as it does for its premium customers in the Netherlands? (See How Shell’s offsetting move could unlock flood of finance for forests)
Gainsborough said: “When you multiply one cent across billions of litres of fuel it adds up to a lot of money. For us to supply all our customers on a carbon-neutral basis would be a very significant portion of our retail margin on fuel.”
A Shell spokesperson clarified that the company's Net Carbon Footprint plan does not depend on customers offsetting their own emissions. If there is not enough take-up of offsets by retail customers, Shell will use other low-carbon levers to plug the gap.
A bigger criticism is that Shell’s Net Carbon Footprint ambition, to cut its energy intensity in half by 2050, is also far from the net zero CO2 by 2050, which the UNFCCC has said is necessary to be compliant with the Paris Agreement. Shell’s own Sky scenario says the company could be net zero by 2070 and remain in step with keeping warming to "well below" 2C.
And while Shell's shift from oil to gas contributes to the company's calculation of its Net Carbon Footprint, the plan excludes the environmental impact of non-energy businesses, such as Shell's growing business using gas for polyethylene production for plastics, which is also under fire from green groups.
If we can find ways to move faster commercially we can do it, but it’s hard to move too far ahead of the curve
Gainsborough made it clear that the company's investors, most of them now US-based, will only permit it to go so far on climate leadership.
“We think it’s very hard to get to net zero by 2050 but let’s see: if the world can move faster, Shell is prepared to move faster as well …. If we can find ways to move faster commercially we can do it, but it’s hard to move too far ahead of the curve. Our goal to finding good solutions for our customers is we want to be at the leading edge, not the bleeding edge.”
Asked about the importance of a global carbon price on carbon in speeding the energy transition, Gainsborough pointed to the effectiveness of the UK’s carbon floor price of £40 per ton in pushing out coal-power in favour of renewable energy.
“One of the big struggles with changing consumer and producer behaviour around CO2 is you don’t have good market signals around the price of carbon. Because of that there is a patchwork of mandates and incentives to try and get around that problem. … If you put a price on carbon you’d see that natural carbon solutions are very cost-effective.”
Main picture credit: Semmick Photo/Shutterstock
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