Our Climate Target: Frequently Asked Questions
Shell’s target is to become a net-zero emissions energy business by 2050, in step with society's progress in achieving the goal of the UN Paris Agreement on climate change.
Here you can find answer to frequently asked questions on our approach.
What is a net-zero emissions energy business?
A net-zero emissions energy business is one that does not add to the total stock of greenhouse gases in the atmosphere.
This means net-zero carbon emissions from our operations – our Scope 1 and 2 emissions – and also net zero from the end use of all the energy products we sell – our Scope 3 emissions.
Our target includes Scope 3 emissions, which account for over 90% of our total emissions.
Our target includes the emissions not only from the energy we produce and process ourselves but also from all the energy products that others produce and we sell to our customers. Altogether, we sell around three times more energy than the oil and gas we extract ourselves. So, to account for Shell's full effect, we have to include all the energy we sell in our targets, not just the energy we produce ourselves.
What are Shell’s latest targets and how will these achieve net-zero emissions?
Our climate target is to be a net-zero emissions energy business by 2050, in step with society. We also have interim targets along the way.
We have introduced a new target, to reduce our carbon intensity by 20% by 2030. This will help to ensure that we are on the right track to achieve our updated 2035 and 2050 targets.
We now aim to reduce our carbon intensity by 45% by 2035, and by 100% by 2050. The updated 2035 and 2050 targets reflect the fact that we will start to include all actions taken to reduce emissions when we calculate our carbon intensity. This includes the actions we take ourselves as well as actions taken by the users of the energy products we sell.
The carbon intensity targets are aligned with our overall target of becoming a net-zero emissions energy business by 2050, in step with society.
What is meant by the carbon intensity of Shell’s business?
Shell’s carbon intensity is the average intensity, weighted by sales volume, of the energy products sold by Shell.
In other words, it’s the average amount of greenhouse gas emissions which are produced for each unit of energy that we sell, and which is used by our customers.
It includes the emissions associated with the production, processing, transport and end-use of the energy products.
We measure and report Shell’s carbon intensity using our Net Carbon Footprint metric, which we have published every year since 2019.
Does Shell have short-term carbon intensity targets?
We have set specific carbon intensity targets each year for the following three-year period.
Beginning in 2019, we set an unconditional three-year target to reduce our carbon intensity by 2-3% by the end of 2021, compared to a 2016 baseline.
Then, in 2020, we announced a target of a 3-4% reduction by the end of 2022 and, in 2021, we announced a target of a 6-8% reduction by 2023.
We use 2016 as the baseline for our targets as this was the first year we reported the carbon intensity of our business.
What is Shell already doing to achieve its targets?
We are already taking steps to cut emissions from our existing oil and gas operations, and to avoid generating more in the future.
We are increasing the proportion of lower-carbon products such as natural gas, biofuels, electricity and hydrogen in the mix of products we sell. We are working with our customers to help them address the GHG emissions they produce when they use products sold by us.
To reduce carbon emissions across sectors, we are partnering with our customers and others, including support for government policies.
How is Shell ensuring that employees across the company support this target?
Our targets are being tied to our staff incentive structure. We are doubling the weighting of the Energy Transition condition in our long-term incentive share awards, affecting more than 16,500 employees. For the most senior leaders, this means an increase in weighting from 10% to 20%.
We are also developing carbon budgets for our businesses, motivating our employees to substitute high-carbon income for low-carbon alternatives.
What emissions are included in Shell’s carbon intensity target?
The scope of our carbon intensity target includes:
Shell’s Scope 1 and 2 emissions, these are the direct and indirect emissions from our own operations associated with the production and processing of energy products.
Shell’s Scope 3 emissions, these include the emissions from the use of the energy products we sell, regardless of whether they are produced by Shell or a third party. Also included are the emissions associated with the manufacturing of the energy products that we purchase from third parties for resale.
Mitigation of emissions using carbon sinks, such as reforestation or carbon capture and storage.
What is not included in Shell’s carbon intensity target?
Our carbon intensity target includes the emissions associated with the energy products sold by Shell.
Non-energy products such as chemicals, lubricants and bitumen are not included. This is because their end-use is not combustion, and so they are not consumed as energy in the way that fuels like liquefied natural gas (LNG), petrol or diesel are consumed.
Our trading activities are included, where we buy products from others to resell them, for example, but trading activity that does not result in a physical product sale is excluded.
We include the emissions from the production, processing and transport of energy products as well as their use by the end-users. However, we do not include the emissions associated with the construction or decommissioning of the assets involved in producing the products, for example refineries.
We do not currently account for actions taken to reduce emissions by end-users of the energy products we sell. However, in the future, as the necessary reporting protocols are developed, we will start to account for all mitigation actions when we calculate our carbon intensity. This includes the actions we take ourselves as well as actions taken by the users of the energy products we sell.
Why doesn’t Shell start accounting for all actions to mitigate emissions straight away?
Today, the existing protocols comprehensively cover emissions reporting by both suppliers and users of energy.
Specifically, energy suppliers report the Scope 3 emissions from the use of their products, which are equivalent to the Scope 1 emissions reported by the users of those products.
However, there is no such equivalence in the reporting of mitigations. That means the reduction (by storage or compensation) of Scope 1 emissions by an energy user is not reflected as a corresponding reduction in the Scope 3 emissions of the energy supplier.
Shell, working with standard-setting bodies, intends to help develop the necessary protocols and frameworks which will allow us to account for the removal of emissions by both the suppliers and users of energy.
Because of this, we anticipate that it will be 3-5 years before we are able to start accounting for all carbon removals, in the same way that we currently account for all of the emissions associated with the energy products that we sell.
How is the carbon intensity of the energy products sold by Shell calculated?
Lifecycle analysis can be used to assess the overall greenhouse gas (GHG) impacts of a fuel, including each stage of its production and use.
As an example, the carbon intensity of gasoline would include the emissions associated with: a) the production, transport and refining of crude oil; b) the transport of the fuel to a service station, and; c) the final combustion of the fuel in a vehicle.
Shell uses this approach to measure the carbon intensity of each of the different energy products we sell. Specifically, we calculate the intensity (gCO2e/MJ) in terms of the grams of carbon dioxide equivalent (gCO2e) per unit of energy (MJ) sold.
Once we’ve calculated the carbon intensity for each of the individual energy products, we then calculate the overall carbon intensity by taking a weighted average of the individual product intensities, with the weighting based on their sales volumes.
Finally, we deduct, or "net off", any emissions that are stored in sinks. For example, we subtract emissions that are stored using carbon capture and storage in our own operations. We also subtract any carbon dioxide emissions that are removed from the atmosphere and stored using natural carbon sinks created using nature-based solutions, such as reforestation.
This approach enables like-for-like comparisons across a range of energy products, and allows us to establish the average carbon intensity for all the energy products we sell. Lower heating values are used for the energy content of the different products and a fossil-equivalence approach is used to account for electrical energy, so that it is assessed on the same basis as our other energy products.
Shell’s carbon intensity is measured using our Net Carbon Footprint methodology, a detailed description of the methodology is available on our website.
Why has Shell chosen to report progress using an intensity measure rather than on an absolute basis?
Shell’s target is to become a net-zero emissions energy business by 2050, in step with society.
Reducing the carbon intensity of the energy products we sell to net zero is equivalent to reducing our absolute emissions to net zero.
We already report our absolute emissions on an annual basis and, since 2019, we have also published our Net Carbon Footprint which measures the carbon intensity of the energy products we sell.
These measures complement each other and allow Shell’s progress towards our net-zero target to be tracked.
Is Shell's climate target in line with the emissions reduction needed by the Paris Agreement?
Shell's climate target is designed to be consistent with the Paris Agreement goal of limiting the increase in global average temperature to well below 2°C and the more ambitious goal to limit it to 1.5°C compared to pre-industrial levels.
To achieve this, we have calibrated our target using scenarios which have outcomes aligned with the Paris Agreement. These scenarios are taken from a database developed for the IPCC Special Report on Global Warming of 1.5°C (SR 1.5).
Shell's target is to reduce the carbon intensity of the energy products we sell to net zero by 2050, in step with society. This is aligned with the 1.5°C scenarios, the majority of which reach net zero between 2040 and 2060. We aim to reduce our carbon intensity, measured by Net Carbon Footprint, by 45% by 2035. This interim target is within the 2035 intensity range of the 1.5°C scenarios.
Achieving our target 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.
How did Shell select the group of 1.5°C scenarios which were used to calibrate your climate target?
The scenarios prepared for the IPCC Special Report on Global Warming of 1.5°C (SR 1.5) are categorised according to their temperature outcome and degree of overshoot. Overshoot refers to the extent to which a scenario exceeds an emissions budget and subsequently relies on sinks to compensate for the excess emissions.
To calibrate our target, we started with all the 1.5°C scenarios and then selected the scenarios which focused on earlier action and placed less reliance on the use of sinks. Finally, we removed any outlying values at the top and bottom of the range to produce the 1.5°C pathway we have used for target setting.
What actions will reduce the carbon intensity of the energy products sold by Shell?
Our climate target will require Shell to drive down the emissions caused by the production, manufacturing and distribution of the energy products that we sell.
It will also require us to sell more energy products that produce little or no emissions. The emissions generated from processes that bring a product to customers represent around 10% of overall emissions. Customers’ emissions from the use of an energy product generates around 90% of overall emissions.
We have several options to reduce the carbon intensity of the energy products that we sell. These range from improving the efficiency of our own operations and maturing our investments in renewable power generation, to developing carbon sinks.
Is Shell’s data externally verified?
Shell annually submits the Net Carbon Footprint calculations to our environmental auditors for verification. Assurance statements are published on the Shell Sustainability reporting and performance data website.
How will Shell assess and report progress against your climate target?
Progress against Shell's carbon intensity target is reported annually in our Annual Report and Sustainability Report. This is in line with best practice as set by the Task Force on Climate-related Financial Disclosures.
Can Shell provide a more detailed description of the Net Carbon Footprint metric?
The intended use of the metric is to track progress in reducing the overall carbon intensity of the energy products sold by Shell, as described in Shell’s climate target.
The calculation includes greenhouse gas emissions – on an equity basis – from several sources, including emissions directly from Shell operation; those third parties’ emissions caused by supplying energy for that production of the products we sell; and our customers’ emissions from consumption of the products we sell.
Emissions from the extraction, transport and processing of crude oil, gas or other feedstocks, the transport of products to our customers, and our customers’ emissions from the use of products we sell are included.
Also included are emissions from elements of this lifecycle not owned by Shell, such as oil and gas processed by Shell but not produced by Shell; or from oil products and electricity marketed by Shell that have not been processed or generated at a Shell facility.
Emissions compensated through various measures, such as by working with nature to create carbon sinks – including forests and wetlands – or mitigated by using carbon capture and storage technology are also taken into account.
What is included within the scope of the Net Carbon Footprint?
The following supply chains and steps in the product lifecycles are included in the Net Carbon Footprint:
Oil products: (i) crude oil production, (ii) transportation of crude oil (pipeline/shipping), (iii) refining, (iv) distribution of oil products, and (v) end use of oil products;
Pipeline gas: (i) gas production, (ii) transportation of gas via pipeline, and (iii) end use of gas;
Liquefied Natural Gas (LNG): (i) gas production, (ii) transportation of gas via pipeline, (iii) liquefaction, (iv) shipping of LNG products, (iv) regasification of LNG in recipient terminals, (v) local distribution of gas, and (vi) end use of gas;
Gas-to-Liquids (GTL) fuels: (i) gas production, (ii) transportation of gas via pipeline, (iii) gas-to-liquid processing, (iv) shipping of GTL products, (v) local distribution of GTL fuel products, (vi) end use of GTL fuels;
Biofuels: (i) production, (ii) transportation (domestic/shipping), (iii) distribution and (iv) end-use of biofuels;
Electricity from renewable sources, solar and wind, converted to fossil energy equivalent and electricity purchased and re-sold from the national transmission/distribution networks;
CO2 reductions: the impact of CO2 reductions from carbon capture usage and storage (CCUS) projects, nature-based solutions (NBS) and other carbon offsets.
What is excluded from the scope of the Net Carbon Footprint?
The following greenhouse gas emissions are not included in the Net Carbon Footprint calculation:
Emissions from production, processing, use and end-of-life treatment of non-energy products, such as chemicals and lubricants;
Emissions associated with the construction and decommissioning of production and manufacturing facilities;
Emissions associated with the production of fuels purchased to generate energy onsite at a Shell facility;
Other indirect emissions from waste generated in operations, business travel, employee commuting, transmission and distribution losses associated with imported electricity, franchises and investments;
Traded volumes of energy products not destined for use by or marketing to end-customers;
Emissions from third-party processing of sold intermediate products, such as the manufacture of plastics from feedstocks sold by Shell;
Emissions from capital goods and other goods and services not related to purchased energy feedstocks sourced from third parties or energy products manufactured by third parties and sold by Shell.
How is the Net Carbon Footprint calculated?
To calculate the Net Carbon Footprint, it is first necessary to establish the emissions intensity for each of the energy products in Shell’s portfolio. This is done using established lifecycle analysis principles and includes both the emissions associated with bringing products to market and the emissions associated with their use.
The individual intensities are then aggregated into a single value, with the weighting for each product determined by its sales volume. Emissions captured in sinks are deducted to give the final net value.
While the Net Carbon Footprint is an intensity measure and not an inventory of absolute emissions, a notional estimate of the amount of CO2e emissions covered by the scope of the Net Carbon Footprint calculation can be derived from the final Net Carbon Footprint value for any year.
Similarly, a fossil equivalent estimate of the total amount of energy sold included in the calculation can also be determined.
Important notes on the Net Carbon Footprint metric
1. The Net Carbon Footprint is not a mathematical derivation of total emissions divided by total energy, nor is it an inventory of absolute emissions.
2. It is a weighted average of the lifecycle CO2 intensities of different energy products normalising them to the same point relative to their final end-use. The use of a consistent functional unit (gCO2e/MJ) allows like-for-like comparisons and the aggregation of individual lifecycle intensities for a range of energy products including renewables.
3. In order to calculate the energy content of the different products, their lower heating values are used to derive their energy content in megajoules using a fossil-equivalence approach for electricity.
4. Our Net Carbon Footprint is a comprehensive measure of the lifecycle carbon intensity of the energy products we sell. As such the boundary definitions used in calculating the Net Carbon Footprint cover a significantly broader scope than the reporting boundaries for Shell’s annual GHG reporting (Scope 1/2/3) under the Greenhouse Gas Protocol. As a result, the notional CO2e emissions included within the scope of the Net Carbon Footprint calculation will differ from the sum of Shell’s reported Scope 1,2 & 3 emissions.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this content “Shell”, “Shell Group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this content refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.
Also, in this content we may refer to Shell’s “Net Carbon Footprint”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions. The use of the term Shell’s “Net Carbon Footprint” is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. It is important to note that as of February 11, 2021, Shell’s operating plans and budgets do not reflect Shell’s Net-Zero Emissions target. Shell’s aim is that, in the future, its operating plans and budgets will change to reflect this movement towards its new Net-Zero Emissions target. However, these plans and budgets need to be in step with the movement towards a Net Zero Emissions economy within society and among Shell’s customers.
This content contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this content, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this content are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2019 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this content and should be considered by the reader. Each forward-looking statement speaks only as of the date of this content, February 11, 2021. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this content.
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