Week of 11 May 2020
Oil and gas companies have made more ambitious goals for decarbonisation recently, but none of them align with a 2°C scenario; now is the time for investors to establish a net zero standard for the oil and gas sector (according to asset-owner led Transition Pathway Initiative)
Transition Pathway Initiative (TPI), a global initiative launched by the UK’s Environment Agency and the Church of England National Investing Bodies in 2017 and led by asset owners, released its latest briefing paper: Carbon Performance of European Integrated Oil and Gas Companies.
Key findings from the briefing paper are:
- Since a critical mass of European companies have evolved their position, now is the time for investors to establish a net zero standard for the oil and gas sector. Less than three years ago, no company had set targets to reduce the carbon intensity of the energy it supplied. Today, all six companies assessed by TPI (BP, Eni, OMV, Repsol, Shell and Total) have set such targets, all of which (except for OMV) have recently updated their long- term climate ambitions
- “Ambitions have risen markedly in the last six months”: BP and Eni include Scope 3 emissions in their ambitions, Repsol and Total have extended their targets to 2050, and Shell now plans to cut its emissions intensity by 65% by 2050
- “However, these new targets are not all equal”: Shell’s new target is the most ambitious and is close to alignment with a 2°C scenario. The second most ambitious is Eni, which commits to reduce intensity by 55% and absolute emissions by 80%. Eni’s plan also includes disclosure on the expected contribution of offsets and represents a comprehensive strategic response. The third most ambitious is Total, with its 2050 ambition to reduce emissions by over 60%
- “Companies need to go further”: Within the European companies, the claims of ‘net zero’ or 1.5°C alignment that have been made are not substantiated by TPI’s analysis. None of them align with a 2°C scenario, using TPI’s intensity metric. In addition, non-European oil and gas companies are lagging far behind their European peers
- Oil and gas companies will need to support the decarbonisation of other sectors if they are to transition to net zero by 2050. Both Shell and Total recognise this in their recent announcements. For instance, Shell is aiming to reduce the carbon footprint of its products by 65%, and will play a role in identifying and enabling decarbonisation pathways for the sectors it sells to to address the remaining 35%
The paper provides a number of recommendations for investors, including through initiative such as CA100+. These include requesting oil and gas companies for (1) standardised and comparable disclosures, (2) stronger emissions reduction commitments, (3) a broader scope of commitments, (4) greater clarity on how carbon capture and storage (CCS) and/or offsets contribute to overall corporate goals, (5) both intensity and absolute targets, (6) better disclosure of the contribution low-carbon energy sources will make to overall corporate goals, (7) alignment of short-term targets and executive remuneration with long-term climate commitments, (8) how they will support sectoral decarbonisation plans (in particular in aviation and heavy- duty freight transport), (9) Scope 3 emissions targets and (10) stronger governance and management of climate change.