Is Shell's Net Carbon Footprint Ambition in line with the emissions reduction needed by the Paris Agreement?
Shell's Net Carbon Footprint ambition is explicitly designed to be consistent with the emission reductions needed to meet the Paris Agreement.
Because it is designed to ensure Shell is consistent, the Net Carbon Footprint metric itself specifically concerns all the areas of emissions influenced by energy suppliers like ourselves.
Our ambition has been calibrated using data from scenarios which are in line with the Paris Agreement. These scenarios are the International Energy Agency's (IEA) Energy Technology Perspectives (ETP) 2°C scenario and Shell's Sky scenario.
Our ambition depends on society making progress to meet the Paris Agreement. If society changes its energy demands more quickly, we intend to aid that acceleration.
If it changes more slowly, we will not be able to move as quickly as we would like. Both energy demand and energy supply must evolve together. This is because no business can survive unless it sells things that people need and buy.
The goal of the Paris Agreement is to keep the increase in global average temperature to well-below 2°C compared to pre-industrial levels. To achieve this will require a dramatic reduction in greenhouse gas emissions, reaching a point of net zero global emissions within the second half of this century.
In Chart 1 above we show that to reach net zero emissions, actions will be needed in three areas: 1) improving energy productivity, 2) changing the mix of energy products; and 3) storing remaining emissions in carbon sinks.
Of these three areas, Shell's Net Carbon Footprint ambition focuses on the second, namely changing the mix of energy products. This is because it is the area we can influence.
It is our ambition to reduce the Net Carbon Footprint of the energy products we sell in step with society's progress towards meeting the Paris Agreement. By 2050 we intend to reduce our Net Carbon Footprint by around 50%. We plan to reduce our Net Carbon Footprint by around 20% by 2035 as an interim measure.
Credible scenarios agree that governments, regulators, businesses and consumers all have a major role to play if the world is to meet the goal of the Paris Agreement.
The world must change the way it uses energy and the types of energy it demands. And if Shell is to meet our ambition we will have to be a part of this effort by changing what we sell in step with the evolving demand of our customers.
Today Shell supplies around 3% of the energy the world uses and over time, the energy products that our customers want will change as they look to reduce emissions.
They will want a mix of energy products with an ever-lower carbon intensity. As an energy provider, Shell will act to support this shift. Shell only directly controls its own emissions from operations but by changing the mix of energy products we supply, we aim to help others to lower their emissions.
We will use the Shell Net Carbon Footprint metric to track and target our progress in this regard.
In calculating our Net Carbon Footprint, we aimed to encompass the full picture of the impact of Shell energy products and activities.
When we looked at Shell's portfolio in 2016 using this approach we found the measure of the overall Shell Net Carbon Footprint was 79 grams of CO2 equivalent per megajoule consumed (CO2e/MJ).
We understand all the different products and activities in our portfolio associated with this figure, and we can use the metric to guide our choices to mitigate emissions.
The Net Carbon Footprint metric associated with Shell is calculated in a straightforward and transparent way, as has been substantiated in consultation with independent external analysts.
It is not quite as straightforward, however, as simply taking one number - for the greenhouse gases that will be emitted when the products we sell are used - and dividing that by another number - for the energy content of those products.
This is because we have also made sure the full life-cycle emissions from our products are taken into account by the calculation, and some of those emissions are generated in making and transporting the products.
A further aspect we have included in the calculation is the fact that Shell sells products whose raw or refined materials have been sourced from other companies. We take the emissions associated with those activities into account as well.
Finally, in the coming years, we want to reduce the impact associated with our products and activities by applying carbon dioxide capture and storage on some of our operations and also through activities like supporting verified reforestation.
Yet while we take such activities by Shell into account in our calculation, it would not be appropriate to take credit for any similar activities undertaken independently by our customers or others, so these are excluded from the calculation.
In taking this approach we aim to show the full picture of the impact of Shell products and activities. It is by showing the full picture we can use this metric effectively to guide all our choices.
To benchmark our progress, we used an equivalent Net Carbon Footprint measure for the global supply of energy to society. We can use that figure to track the overall global progress towards achieving the Paris Agreement.
To calculate this benchmark figure, we take the global energy and emissions figures and make the same adjustments noted above to show the full picture of the total contribution from the products and activities of all energy suppliers like Shell.
In this way we created data points that are directly comparable: to directly compare Shell's progress with that made in the global energy system.
Once the global energy system's Net Carbon Footprint was calculated in this manner the emissions intensity was found to be around 75 gCO2e/MJ.
This is lower than the current number for Shell - 79 gCO2e/MJ - for the reasons outlined in the response to the above question: How does Shell's Net Carbon Footprint relate to the broader energy system?
Having established the Net Carbon Footprints of both Shell and the mix of energy products in the global energy system using a comparable measure, we could then compare how both Shell and the global energy product-mix might need to change to meet the goal of the Paris Agreement.
We did this by using figures for 2050 from the IEA and Shell Sky scenarios, which are both consistent with a Paris outcome.
This calculation revealed that by 2050, the Carbon Footprint of the energy-mix in the global system in a world on track to meet Paris would be around 40gCO2e/MJ (see Chart 3 below).
Shell's ambition is to bring our Net Carbon Footprint from where it is today at 79gCO2e/MJ to where the world needs to be by 2050 to be on target for Paris at 40gCO2e/MJ: a drop of around 50%.
Using this approach, the global energy system needs to fall by 46% from 75gCO2e/MJ to 40gCO2e/MJ.
It has been noted that the raw global scenario data, which have not been adjusted to be directly comparable to Shell's Carbon Footprint calculation scope, indicate that the global energy system's carbon intensity needs to reduce by about 60-65% by 2050.
This is consistent with the fall outlined within Shell's Net Carbon Footprint, but the different ways the two percentages are calculated means that the two data points are not comparable.
The emissions intensity of the overall energy system needs to fall by more (60-65%) than the Carbon Footprint (46%) because it includes the impact of all societal actions taken to reduce emissions described above, such as improving energy productivity and carbon capture and storage.
The Carbon Footprint, however, focuses only on the contributions to this from changing the mix of energy products. This is the appropriate focus for an energy supplier like Shell.