Shell revises climate targets as it plans to keep gas business growing

Shell has weakened some of its climate targets to accommodate plans to keep growing its giant gas business, ditching a 2035 greenhouse gas emissions reduction target even as it maintained a net zero goal by 2050.

In the revision of its three-year-old energy transition strategy, Shell said the net carbon intensity of its products would fall more slowly by 2030 than previously planned.

The changes reflect chief executive Wael Sawan’s plans to keep oil production flat and expand sales of liquefied natural gas while being more selective about the types of low-carbon energy products it sells.

Sawan said the changes made it “more, not less, likely” that Shell would achieve its targets. However, the revisions provoked sharp criticism from green groups and those that already believe the company is not doing enough to reduce its environmental impact.

Mark van Baal, founder of activist group Follow This, which has filed regular shareholder motions at Shell calling on the company to cut emissions faster, immediately criticised the changes.

“This backtracking removes any doubt about Shell’s intentions: the company wants to stay in fossil fuels as long as possible,” he said, urging investors to back the climate resolution it co-filed with 27 institutional investors at the upcoming annual meeting in May.

Shell had previously said the net carbon intensity of its energy products would fall 20 per cent from 2016 levels by 2030, 45 per cent by 2035 and to net zero by 2050.

Rather than a commitment to cut the absolute emissions generated by burning fossil fuels, carbon intensity is an accounting treatment that allows Shell to offset the carbon produced by its oil and gas business against its growing sales of lower-carbon products.

The company is now targeting a 15-20 per cent drop by 2030, partly because the amount of power it sells is likely to increase more slowly owing to a decision to focus on lower-volume, higher-value sales to commercial rather than residential customers, Shell said on Thursday.

The group also dropped its 2035 target. The uncertainty over the pace and evolution of the transition means such long-dated interim targets were not useful, Sawan said, adding that Shell could introduce new targets for the 2030s later on.

“It is not about trying to change a trajectory, we are committed to that trajectory,” Sawan told the Financial Times. He added that over the past three years, the company has learned that “the shape of the energy transition and the pace of the evolution in different countries is just uncertain”.

The company’s 2021 commitment to reduce absolute emissions from its operations by 50 per cent by 2030 remained unchanged, he said, adding that those operational emissions had already fallen by 31 per cent.

“The discussion has to be around . . . what are people doing rather than the promises that are being made,” Sawan said.

Varying methodologies and starting points make it difficult to compare decarbonisation goals across companies.

BP has pledged to cut operational emissions by 50 per cent by 2030 but that is compared with 2019 levels, rather than Shell’s 2016.

BP is similarly targeting a 15-20 per cent drop in the carbon intensity of all the products it sells by 2030, but it has also committed to cut the absolute emissions from the oil and gas it produces — excluding traded volumes — by 20-30 per cent by 2030.

Shell on Thursday introduced a new ambition to cut the absolute emissions from the oil products it sells by 15-20 per cent from 2021 levels by 2030, but it intentionally excluded gas as a “critical fuel in the energy transition”.

Even before the changes, a Dutch court had ruled that Shell’s original targets were not ambitious enough, instructing the company to cut all of its emissions by 45 per cent, on an absolute basis, by 2030. Shell has appealed against the ruling and that appeal is scheduled to be heard next month.

Shell’s total emissions last year were 1.1bn tonnes of CO2e down from 1.3mn tonnes in 2021. Sawan said he hoped the court would take note of the progress Shell had already made, but reiterated the company’s view that it could not reduce its emissions faster than society.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here