Investment groups managing more than $2trn have strongly criticised oil & gas companies over failures to align their businesses with the Paris climate agreement in a new report from a low-carbon lobbying group Transition Pathway Initiative (TPI), with just three seen as “getting closer” to having a decarbonisation strategy that would help limit the rise in global temperatures to below 2°C by 2050.
Despite the recent headline-grabbing net zero announcements by a number of European oil & gas majors including Shell, Total, Equinor, Eni and BP, none is fully on a trajectory yet to meet the so-called national ‘Paris pledges’ of emissions reduction, according to TPI.
“For oil & gas companies, the route to Paris alignment is much more of a challenge to their basic reason for being. Some companies have started grappling with this challenge, but none have met it yet,” said report author Simon Dietz.
The TPI report judged five oil & gas operators “on track to align” with the emissions pledges made as part of the 2015 Paris Agreement and three oil and gas companies “getting closer” to a 2°C climate pathway by 2050, though they would “need additional measures to bring them into line with our [corporate climate action] benchmark”.
Companies were measured on “carbon performance”, factoring in the carbon intensity of the products they produce and sell, as well as emissions reduction targets, by TPI, an asset owner-led group that receives financial support from 80 investor groups globally with a combined $20.9bn of assets.
The report also looked at how these companies would perform under different political scenarios, including one in which governments meet existing national emissions pledges, a scenario in which temperatures rise by 2°C, and one where they rise by less than 2°C.
TPI assessed 59 oil & gas companies and mining firms and found that just seven (12%) have set emissions targets in line with the pledges made by national governments in Paris. These included Shell, Repsol, Total, Eni and Equinor, and mining giants Glencore and Anglo American.
However, TPI warned that the emissions reductions targets of these companies are widely regarded as “insufficient to avert dangerous climate change”, leaving the world on track for 3.2°C of warming, based on United Nations Environment Programme calculations.
In addition, only three oil & gas companies — Shell, Total and Eni — are “getting closer” to the 2°C scenario, although their emissions-reduction targets and low-carbon investment plans are fall short of bringing them into line with that benchmark, let alone lower, TPI said.
“Investors have witnessed a flurry of significant climate announcements by fossil fuel majors this year, so it is striking this independent research still shows those commitments do not yet align with limiting climate change to 2°C,” TPI co-chair Adam Matthews said.
“There has been some movement, with seven European companies now aligned with the Paris pledges... but US fossil fuel giants have yet to take meaningful action to reduce their emissions and the gap with their European peers is stark,” he added.
Notably absent from TPI’s ‘on track’ list was supermajor BP, despite its announcement in August of ambitious plans to cut oil and gas production by 40% over the next decade, while expanding its energy transition investments in solar via its Lightsource BP arm and opening the coffers to debut in the international offshore wind sector via a deal with Equinor.
BP, which intends to cut production at a faster rate than its own scenarios suggests is necessary to align with the Paris Agreement, has seen its share price fall by 53% in the last year.
Meanwhile, TPI also assessed 66 electric utility companies, finding that 39 (59%) were aligned with the Paris pledges, while 22 (33%) were aligned with the most ambitious "below 2°C" benchmark.
“The electricity sector is heavily regulated with regards to its emissions in some regions such as the EU and this likely explains some of the results we see,” Dietz said.
“More broadly, the [renewable energy] technologies needed for decarbonising electricity production are already there and often competitive on cost with fossil fuels, so the core business model is not under threat.
“For oil & gas companies, the route to Paris alignment is much more of a challenge to their basic reason for being. Some companies have started grappling with this challenge, but none have met it yet,” he added.