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  • Writer's pictureThe Opportuneo Team

A not so quiet revolution

Major international energy companies have been in the headlines over the last few weeks. BP, Shell, and TotalEnergies have come under pressure at their AGMs to set binding carbon emissions reduction targets for 2030 in line with the limits set in the Paris Climate Convention. ExxonMobil, Chevron, and ConocoPhillips have also seen shareholder action, demanding the first to set out a meaningful low-carbon strategy, and the latter two to set out carbon emissions reduction targets, including emissions from products they sell. This is a major development, and it is worth exploring where this might lead for climate change action in the period to 2030 and beyond.

Shell, perhaps anticipating what was coming from shareholders, published its Shell Energy Transition Strategyreport ahead of its AGM detailing what action it was taking to reach net-zero emissions in the period to 2050. To its credit Shell was arguably the first major energy company to publicly recognise that climate change was a serious environmental issue, and it did this in the 1990s. It also adopted best practice by reporting both direct and indirect emissions, as defined in in the Greenhouse Gas Protocol: Scope 1, direct emissions, Scope 2, indirect emissions as a result of its operations, and most recently Scope 3, indirect emissions associated with its products. Unfortunately, it did not protect them from a Dutch court ruling in May which ordered the company to reduce their greenhouse gas emissions 45% by 2030 compared with 2019 levels; instead of 20% compared with 2016 levels.

The Shell Energy Transition Strategy report is an impressive document but some simple observations about the strategy and the figures presented perhaps explains why shareholders, and the District Court in The Hague, demanded the company be much more ambitious in reducing greenhouse gas emissions.

For example, Shell reports that its emissions peaked at 1.7 Gigatonnes CO2e (GtCO2e) in 2018 ; yet this suggests that its emissions continued to rise for about 25 years after it had publicly recognised the climate change issue in its long-term energy scenarios. Also, to put this number into context, it is about the same as the total reported carbon dioxide emissions by Germany, UK, Italy, and France combined in 2018. This confirms what is already well known: that energy companies have a crucial to play in emissions reduction in the period to 2050.

Another observation is that the strategy focuses on reducing the net carbon intensity of the energy used in its operations and by its customers, from 79 gmCO2e/MJ in 2016 to 0 in 2050. The profile presented suggests a steady reduction in the projected carbon intensity of just under 3% per annum over the next 30 years; this does not suggest the disruptive intervention needed.

TotalEnergies has stated that it wishes to reach Net Zero emissions across all worldwide operations by 2050 or sooner (Scope 1+2). It has also stated that it wishes to reach Net Zero across all its production and energy products used by its customers in Europe by 2050 or sooner (Scope 1+2+3), and 60% or more reduction in the average carbon intensity of its energy products used worldwide by 2050, with intermediate steps of 15% by 2030 and 35% by 2040 (Scope 1+2+3). BP has also set out what it hopes to do to mitigate its greenhouse gas emissions over the next three decades. It has published 20 ‘Aims’ covering a range of activities including, like Shell and TotalEnergies, actions to reduce their Scope 1 to 3 emissions.

So, what might at first glance suggest real progress by all three companies is undermined by the fact that their activities will continue to load emissions into the atmosphere in the coming decades at a significant rate. For example, assuming the steady decline in emissions from Shell’s peak emissions of 1.7 GtCO2e in 2018 to net zero in 2050 leads to a total loading into the atmosphere of about 26 GtCO2e; this is comparable to the global emissions of 34 GtCO2 in 2018. The proposals by the other major energy companies will have similar outcomes. Focusing on the absolute emissions is important because carbon dioxide has a very long atmospheric lifetime, and this means its concentration will continue to rise over the next three decades, at a time when significant emissions reduction is needed to minimise the damage to our environment by climate change.

It is important not to double count emissions since an organisation’s reported emissions are also captured in those reported in government ledgers. Nonetheless, the UK, for example, has legally binding emissions targets whereas Shell, BP, TotalEnergies and the other energy companies do not. The latter must comply with the law regarding emissions, and it is incumbent on governments to set ambitious national reduction targets, underpinned by policies and regulations, to ensure the major energy companies make the contribution that is needed. This has not been the case across multiple jurisdictions, and it has been left to Shareholders to take up the banner in their stead.

The difficulties facing the world’s major energy companies that dominated the world energy scene in the 20thcentury, and all the stakeholders that rely on them, including governments, are formidable. Electricity is arguably the most important energy carrier today and will dominate energy consumption in the future; this raises important questions for the large energy companies. All are making investments in renewables and electric vehicle infrastructure but aim to maintain their traditional fossil businesses from which they draw the bulk of their cash-flow. Their efforts look like business-as-usual, particularly in the crucial decade to 2030.

History suggests it is difficult for companies to transition away from activities that made them successful; rather, new organisations with disruptive technologies emerge to transform markets. Major renewable companies are now part of mainstream electricity markets, and their contribution will continue to grow as electricity demand rises; and specialist manufacturers like Tesla are setting the benchmark for electric vehicle performance in the closely allied car industry.

This is the time for the major energy companies to be more ambitious going forward. Public opinion, and the legal system, will play a decisive role in their future strategy. The management of these organisations should embrace the leadership shown by their shareholders, to break with their fossil fuel history and invest in low carbon technologies. That will safeguard their futures and the environment.

At Opportuneo, we would be delighted to discuss the challenges for the energy sector with you. Please contact us at

Chris Anastasi, June 2021

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