Shell has introduced a “Scope 3” emission target in a first review of its energy transition strategy since 2021, but the UK supermajor softened its "carbon intensity" climate targets, angering climate campaigners and activist shareholders.
Until now, Shell has been reluctant to take responsibility for targeting emissions from the end use of fossil fuel production. It said the new target of cutting Scope 3 emissions by 15-20%, against a 2021 benchmark, would represent a 40% reduction if compared with 2016, when customer emissions were 819 million tonnes CO₂ equivalent.
But Shell took a more conservative stance on its targets for the net carbon intensity of its energy production.
The company’s previous plan stated that the carbon intensity measure would fall 20% from 2016 levels by 2030, and 45% by 2035.
Target dropped
In a first three-year review of its transition strategy unveiled today (Thursday), the 2030 target was eased to 15-20% and the interim 2035 target was dropped entirely.
The change is the latest example of CEO Wael Sawan’s determination to align strategy more closely with shareholder value, focusing on the oil and gas production with the highest returns and what Shell states to offer lower carbon intensity.
“Our ability to raise and invest capital depends on delivering strong returns to shareholders, shaping the role that Shell can play on the journey to net zero. We believe this focus makes it more, not less, likely that we will achieve our climate targets and ambitions,” Sawan said.
As part of this strategy, Shell indicated that it will invest to keep oil production steady this decade, but will invest in higher production of liquefied natural gas and lower-carbon energy products.
Shell reiterated today that it expects an internal returns on investment of at least 15% from oil and gas but added that it “does not anticipate” entering into any new frontier exploration entries after 2025.
Shell and French peer TotalEnergies have just made massive natural gas discoveries in a new exploration "frontier" off Namibia.
'Backtracking'
Mark van Baal, founder of activist shareholder group Follow This, was quick to jump on the shifting targets as an example of climate “backtracking”.
“With this backtrack, Shell bets on the failure of the Paris Climate Agreement which requires almost halving emissions this decade,” he stated.
Shell maintained its target of halving emissions from its own operations (Scope 1 and 2) by 2030, compared with 2016, on a net basis.
The company also maintained it overall target of reaching net zero operations by 2050.
Carbon intensity is a measure of emissions that measure emissions from different products and forms of production and can takes into account practices such as carbon capture and storage.
Shell’s shareholders will have an opportunity to cast an “advisory” vote on the company’s energy transition strategy at the next annual general meeting.
Van Baal argued that the strategic review showed the company wants to stay in fossil fuels as long as possible.
“The board not only endangers the global economy by exacerbating the climate crisis, but also puts the company’s future at risk through policy interventions, disruptive innovation, stranded assets, and accountability for the costs of climate change,” he stated
“Short-term shareholders might reward Shell with an increase in share price today, but long-term responsible shareholders want Shell to change. They will vote for change at Shell’s next shareholders’ meeting, because they foresee both their assets and the company are in danger in a global economy devastated by climate change.”
