A new report from independent financial think tank Carbon Tracker has concluded that the world’s seven leading oil and gas majors must cut production by an average of 35% by 2040 if global emissions are to be reined in and kept “well below” 2°C, in accordance with the Paris Agreement’s commitment.
The new report, Balancing the Budget: Why deflating the carbon bubble requires oil & gas companies to shrink, analyzes current and future oil and gas projects in an effort to identify those projects that would still be economic in a 1.6˚C world using the International Energy Agency’s Beyond 2 Degrees (B2DS) scenario – in line with the Paris Agreement’s commitment to limit global temperature rise to “well below” 2°C.
Carbon Tracker found that none of the world’s oil and gas majors are on track to be aligned with the Paris Agreements by 2040 — though some were closer to achieving this than others. Shell, for example, only needs to cut production by 10% by 2040 while Texas-headquartered ConocoPhillips has to cut production by a whopping 85%. The remaining five companies include ExxonMobil (55% reduction needed), Eni (40%), Total (35%), Chevron (35%), and BP (25%).
“If companies and governments attempt to develop all their oil and gas reserves, either the world will miss its climate targets or assets will become “stranded” in the energy transition, or both,” said Mike Coffin, Oil & Gas Analyst at Carbon Tracker and report author. “The industry is trying to have its cake and eat it — reassuring shareholders and appearing supportive of Paris, while still producing more fossil fuels. This analysis shows that if companies really want to both mitigate financial risk and be part of the climate solution, they must shrink production.”
Each of these companies has set out various emission reduction targets and ambitions in response to investor pressure but none have committed to an absolute cap on full-life cycle emissions and the production limits that are necessary to align with Paris. Additionally, only three companies have placed targets on their Scope 3 emissions.
“Only Shell, Total, and Repsol have targets which include the ‘Scope 3’ emissions created by burning their products, which account for the vast majority of CO2 related to fossil fuel use,” explained Andrew Grant, Senior Oil and Gas Analyst and co-author of the report. “While an improvement on many peers, they have only pledged to reduce the carbon intensity of the energy they produce, which means they can continue to grow fossil fuel production — increasing CO2 emissions overall and leaving open the risk of stranded assets. Our climate system works on finite limits, so strategies that allow infinite growth are a square peg in a round hole.”
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