Using prices for emitting CO2 in our business decisions

We were the first energy company to factor the future costs of emitting CO2 into the designs and decisions about major new projects. We believe this will reduce the risks to our projects and provide us with a competitive edge.

Nations will choose different mixes of policy options with the aim of achieving whatever national or international targets they take on. These actions will result in costs being applied to the emission of CO2, either through CO2 taxes or through the value of permits in a trading system.

We incorporate our expectation of the future level of CO2 costs into project designs and investment decisions about new projects, adjusting cost levels and our approach as the future regulatory environment has become clearer.

Using future CO2 costs to influence decision-making on new projects now is critical for making sure those projects can remain profitable throughout their long operating lives. Shell has been incorporating CO2 costs in all its major projects since 2000. Today, most new investment projects, irrespective of size, must be designed to optimize profitability in a fast-approaching world in which emitting CO2 carries a cost penalty.

We are often asked what the business logic for this is. The reasons we do this are that:

• It is a powerful way to raise awareness and signal our seriousness about the need to adapt to a world with stringent restrictions on emitting CO2. 
  
• It avoids expensive retrofits later
  
• It reduces the risk of future liabilities for emitting CO2
  
• It gives us a management tool for steering the Group's portfolio and designs.

This approach has also provided another stimulus for increasing energy efficiency in our projects.

Back to managing our emissions.