Downstream Director, Ben van Beurden, 2012
Shell CEO Ben van Beurden

Historic is a word that most of us use too freely, but the announcement of an agreement on climate change between the United States and China looks deserving of the term. The fact that these countries, the world’s largest emitters of carbon dioxide, reached a bilateral agreement last week on curbing those emissions isn’t merely a cause for optimism, it’s a timely development that, I believe, could reinvigorate efforts to tackle a critical and urgent challenge.

Why should we care? Well, if anyone were still complacent about the scale of the problem that climate change poses, then the recent report by the Intergovernmental Panel on Climate Change will have come as a stark wake-up call. As the report points out: “Warming of the climate system is unequivocal and unprecedented, with emissions rising faster than ever before.” 

In the face of that warning, the fact that the US and China are coming together to tackle emissions is important on several levels. In pursuing new targets to reduce carbon emissions by 2025, America is choosing to go farther and faster than ever before – something that could make a material difference to the amount of carbon released into the atmosphere and could act as an important example to others.

Likewise with China, whose undertaking to peak its overall emissions by 2030 is welcome. That both countries’ commitments are grounded in an understanding of the importance of replacing coal as a fuel for power generation, and the potential value of carbon capture and storage technology, is evidence of their ambition and pragmatism.

Significantly, it seems fair to hope that the joint commitment by President Obama and President Xi will inject momentum into a much bigger effort. Arguably, we have already seen evidence of that in deliberations by the G20 countries. On Sunday, they stated their commitment to “strong and effective action” on climate change.

Late next year, governments will gather in Paris to sign what is hoped will be an agreement to address climate change. After the disappointment of the previous attempt to agree a deal, in Copenhagen in 2009, no one is taking anything for granted. However, building on the impetus of the United Nations secretary-general’s climate summit in New York in September, the US-China accord should encourage policymakers to work harder to secure the global agreement that our planet needs.  

There is plenty more to be done. Greater collaboration, for example, is essential. Building a cleaner global energy system that is also capable of meeting growing energy demand is going to involve a lot of effort by a lot of people. We need long-term solutions, yes, but we also need those solutions to be enabled and supported by appropriate policy frameworks, which may look different in different parts of the world.

As chief executive of Shell, I’m determined that my colleagues and I play a constructive role in designing and implementing new models of cross-sector collaboration in which the three key constituencies – government, business and civil society – can participate. All of us have plenty to learn if we are to co-operate on the unprecedented scale required, but the fact that the presidents of the US and China have managed to do exactly that can serve as a powerful inspiration.

It is also vital that we root the debate around energy and climate change in pragmatic, commonsense thinking, rather than in the wishful variety. That means, for example, acknowledging the necessity of access to energy, not only for developed countries, where too often we take it for granted, but also in those parts of the world where it is still lacking.

The World Bank estimates, for example, that the growth of about ten million small and medium-sized businesses in Africa is hampered by the lack of available energy. The fact is that the world will need oil and gas to help to meet rising energy demand well into the second half of this century and beyond.

Being pragmatic also means recognising that economic growth and action to tackle climate change are not mutually exclusive – a point persuasively made in the recent New Climate Economy report produced by Lord Stern and others. And it’s about recognising how effective carbon pricing can help to tackle emissions at the lowest possible cost to consumers and with the lowest impact on economies.

What other steps can we take? I’ve already acknowledged the importance of shifting our power generation systems away from reliance on coal, by far the most polluting fossil fuel. That means, in part, a greater role for cleaner natural gas as well as a steadily growing role for renewables, even if experience shows that growth necessarily will be slow.

As chief executive of a company that believes in the value of innovation, I also know that, collectively, we must give ourselves every chance of allowing technology to help. Innovation is no silver bullet, but, as we navigate what will be a decades-long transition away from a fossil fuels-dependent energy system, new technologies can play a crucial and transformative role.

One example is CCS – capturing carbon dioxide from man-made sources such as power stations and storing it safely deep underground. It’s an approach that Shell is seeking to implement at SSE’s Peterhead gas power station in Aberdeenshire. If it goes ahead as hoped, the UK’s leadership on responding to climate change will be reinforced.

The ability to innovate is also, incidentally, the reason why – along with our global reach, our capacity to invest over the long term and our deep experience of working in partnership with others – companies such as Shell won’t be mere witnesses to the coming energy transition, but essential participants.

In announcing this climate change agreement with China, Mr Obama has rightly acknowledged that the objective is “ambitious but achievable”. Accelerating any kind of planet-wide energy transition, while mitigating something as complex as climate change, will always be ambitious, but, with the right pragmatic approach, the right innovative thinking and the right collaborative action, it is both highly desirable and, now, seemingly more achievable.