Royal Dutch Shell (RDSB) has joined BP (BP) in pledging to reach net zero carbon emissions by 2050. The supermajor will balance out emissions from its refineries and oil and gas operations, while it also made clear “the total amount of energy Shell contributes is likely to increase” in the coming decades.
The pledge comes at a difficult time for the industry, with oil under $30 (£24) per barrel (bbl) and demand collapsing because of Covid-19 lockdown measures around the world. Shell has already paused its buyback programme and will cut spending 25 per cent this year. Its major buyback and gearing plans were based around an oil price of $65/bbl, and had already been slowed before Covid-19 hit because of a poor 2019 performance.
The net zero plan includes the company’s scope 1 and 2 emissions, those directly from its operations and the plants used to power them, but it has a different approach for its scope 3 emissions, which are from its products.
BP said it would get to net zero scope 3 emissions from the products it extracts, refines and then sells, excluding third party oil it sells at petrol stations, for example.
Shell has stuck to its carbon intensity goal on scope 3, rather than an absolute cut. It had previously set the goal of reducing the ‘net carbon footprint’, or carbon intensity, by 50 per cent by 2050, and has now increased this to 65 per cent.
The company has not yet changed its spending plans or portfolio to reflect the new goals, but will reveal its first steps before the end of the year. BP will reveal its own changes in the second half of the year.
A chart supplied by the company suggests its Shell Energy retail business and “carbon sinks” would provide the majority of the net emission cuts. Its non-energy products like lubricants are not included in the net carbon footprint.
Shell chief executive Ben van Beurden said that while these were “extraordinary times”, the company would keep its long-term focus.
Panmure Gordon analyst Colin Smith said the new goals - which include a 30 per cent intensity cut by 2035 - had different emphases to BP’s. “Unlike BP, Shell has not made a commitment to cut the scope 3 emissions related to the embodied carbon in the products it produces but has set out much clearer near term emissions reductions goals,” he said.
