Our Climate Target: Frequently Asked Questions

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.

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. In 2022, we announced a target of a 9-12% reduction by 2024.

We use 2016 as the baseline for our targets as this was the first year we reported the carbon intensity of our business.

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.

Explore our climate 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.

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.

View illustration of the Scope of 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.

Sales from retail stations that use the Shell brand but are not operated or supplied by Shell are excluded from our target.

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.

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.

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.

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.

Our strategy aims to support the ambitious goal of the Paris Agreement. Tackling climate change is an urgent challenge. It requires a fundamental transformation of the global economy and the energy system so that society stops adding to the total amount of greenhouse gases in the atmosphere, achieving what is known as net-zero emissions. That is why Shell has set a target to become a net-zero emissions energy business by 2050, in step with society’s progress in achieving the goal of the Paris Agreement on climate change.

There is no established standard for aligning an energy supplier’s decarbonisation targets with the temperature limit goal of the Paris Agreement. In the absence of a broadly accepted standard, we developed our own approach to demonstrate Paris alignment by setting carbon intensity targets using a pathway derived from the Intergovernmental Panel on Climate Change (IPCC) scenarios aligned with the Paris Agreement’s goal. We believe our NCI and absolute emissions targets support the more ambitious goal of the Paris Agreement: to limit the increase in the average global temperature to 1.5 degrees Celsius above pre-industrial levels. It is aligned with the findings of the IPCC which concluded that the world must reach net-zero carbon emissions by around 2050 to limit global warming to 1.5 degrees Celsius and avoid the worst effects of climate change.

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.

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.

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.

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.

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.

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.

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;

Sales from retail stations that use the Shell brand but are not operated or supplied by Shell are excluded from our target.

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.

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.