Shell waters down 2030 carbon emissions target in latest fossil fuel industry backslide

Shell waters down 2030 carbon emissions target in latest fossil fuel industry backslide - Business and Finance - News

Shell Revamps Carbon Reduction Targets Amidst Focus on Higher-Margin Projects and Gas Production

Shell, a leading energy company, has recently revised its carbon reduction targets in response to changing market conditions and growing demand for natural gas. The company’s CEO, Wael Sawan, has initiated a strategy shift towards higher-margin projects, steady oil output, and increased production of natural gas. This move marks the latest instance of a fossil fuel major adjusting its climate pledges in response to investor pressure and shifting market dynamics.

Backtracking on Previous Climate Commitments

Shell’s alterations to its carbon reduction targets are the most recent manifestation of a fossil fuel company retreating from previous climate promises. Fossil fuels constitute the primary cause of human-induced climate change, and science underscores the urgent need for substantial emissions reductions this decade. Preceding Shell, rival BP took a similar step last year by scaling back on oil production and emission reduction targets.

New Target: 15-20% Reduction in Net Carbon Intensity by 2030

In its annual update on energy transition strategy, Shell disclosed that it intends to achieve a 15-20% reduction in the net carbon intensity of its energy products by 2030 compared to 2016 baseline levels. Previously, the company aimed for a more ambitious 20% cut in carbon intensity.

Gas as a Transition Fuel and Power Sales

Shell maintains that gas, particularly liquefied natural gas (LNG), will be instrumental in the energy transition by replacing more polluting carbon sources in power generation. Simultaneously, it anticipates lower-than-previously-forecasted power sales, which encompasses renewable energy and biofuels, due to its value-driven approach.

Retiring a 45% Emissions Reduction Target by 2035

Shell has abandoned its earlier target of reducing carbon intensity by 45% by 2035. Instead, it will concentrate on specific markets and customer segments, such as selling more power to commercial clients and less to retail customers. As a result of this focus on value, Shell anticipates lower overall growth in power sales to 2030, which necessitated an update to its net carbon intensity target.

New Ambition: Cut Emissions from Oil Products by 15-20% by 2030

Shell introduced a new objective of reducing overall emissions from oil products, including gasoline and jet fuel, sold to customers by 15-20% by 2030 compared with 2021 levels. The company has also kept its commitment of halving emissions from its own operations, known as Scope 1 and 2 emissions, by 2030.

Mark van Baal’s Response

Mark van Baal, founder of activist shareholder group Follow This, which co-filed a climate resolution at Shell’s upcoming annual general meeting, expressed his dissatisfaction with the company’s backtracking. He stated that “with this backtrack, Shell bets on the failure of the Paris Climate Agreement which requires almost halving emissions this decade.”

Legal Challenges and Cost-Saving Measures

Shell faces legal challenges regarding its climate strategy, including a landmark Dutch court ruling mandating faster emission reductions. The company has initiated company-wide staff reductions, including in its low-carbon solutions division, to save up to $3 billion. It has also divested itself of various assets, such as contact power trading businesses and US solar assets, and announced plans to shut down a refinery in Germany and exit Nigeria’s troubled onshore oil operations.

Financial Performance

Despite facing significant challenges, Shell reported a net profit of $28 billion in 2023 on the strength of liquefied natural gas and oil sales, which were still down 30% from the previous year’s record earnings.