Shell Refuses To Address Scope 3 Emissions

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Carbon emissions are carbon emissions, except when they are not. In the oil and gas industry, companies conveniently divide them into emissions associated with production and distribution of their products — known as Scope 1 and Scope 2 emissions — and emissions created when their products are consumed — known as Scope 3 emissions. Shell has been under pressure to reduce emissions from its business for years. In fact, a court in the Netherlands ordered the company to reduce its emissions by 45% by 2030. The company has appealed that decision, which means it need not take any action to comply with the court order until the appeal (and any subsequent appeals) is heard and a final ruling issued.

A group of European institutional investors is backing a London lawsuit targeting Shell’s board over alleged climate mismanagement in a case that could have far reaching implications on how companies tackle emissions — when and if it ever reaches a conclusion. According to Reuters, Shell said in a report in response to that lawsuit, “We believe our directors have complied with their legal duties and have, at all times, acted in the best interests of the company.”

That may be so and the court may so rule, but that statement exposes the deeply embedded lie at the heart of all fossil fuel operations. Burning fossil fuels is making the Earth inhospitable to human life. The best interests of Shell, and any company, should include not killing its customers, now or in the future. In order to be in business, one must first have a business and business relies on having customers first and foremost. Apparently such considerations are not taught in B School these days. (Neither are ethics, it would seem.)

Shell 2022 Energy Transition Report

Shell has just released its Energy Transition Progress Report for 2022, in which it speaks in glowing terms of the progress it has made in reducing Scope 1 and Scope 2 emissions. The problem, however, is that its Scope 3 emissions equal 95% of the total emissions attributable to its business, so those reductions don’t amount to a piss hole in the show in the overall scheme of things.

For an extensive explanation of what activities are included in Scope 1, Scope 2, and Scope 3 emissions, please see the explanation provided by Everything you ever wanted to know on this topic is in there and is explained in clear, concise language.

In a press release regarding that report, Shell says it has met its climate targets as part of its energy transition strategy. The report will be put to shareholders for an advisory vote at Shell’s annual general meeting on May 23. The company says it is quite satisfied with how its liquefied natural gas business is lowering emissions — the net carbon intensity of the energy products sold by Shell has fallen by 3.8% compared with 2016. Using data from the International Energy Agency, the net carbon intensity of the global energy system fell by around 2% over that time.

That’s something to be proud of, apparently. At that rate, average global temperatures should be well over 125º F and sea levels about 200 feet higher than they are today by the time Shell and its peers get their emissions to zero.

“In this report, we show the progress we have made towards becoming a net-zero emissions energy business by 2050, as we continue to supply the vital energy the world needs during a time of great volatility,” said Wael Sawan, the new CEO of Shell. “I am especially proud of the progress we have made in reducing carbon emissions from our operations, with a 30% reduction by the end of 2022 compared with 2016 on a net basis.”

Ignore Those Scope 3 Emissions

Some investors are urging Shell to introduce medium term targets to reduce its Scope 3 emissions in absolute terms, but the company wants no part of such nonsense and says it has decided against doing so. “The Board has considered setting a Scope 3 absolute emissions target but has found it would be against the financial interests of our shareholders and would not help to mitigate global warming,” Andrew Mackenzie, chairman of the company’s board of directors, said in the report. Shell said that such Scope 3 targets would force it to reduce sales of oil products and natural gas, “effectively handing over customers to competitors.”

Well, we can’t have that, can we? Clearly market share and profits must come before keeping the Earth habitable for human beings, mustn’t they? A cynical observer might conclude that the business world has created its own form of socialism, one which recognizes only the interests of business entities but takes no account of the interests of people. Some refer to this model as “privatizing the profits but socializing the costs.” That same cynical observer might be so bold as to suggest the outrageous profits realized by the oil and gas companies should be shared with the wider community to offset some of the harm caused by them as they go about their business.

The rejection of the tougher emission reduction targets comes after Shell’s new chief executive, Wael Sawan, suggested this month that the company was reviewing plans for a gradual reduction to oil output. Shareholders will vote on May 23 on a resolution filed by activist group Follow This, which asked Shell to set 2030 emissions reduction goals in line with the 2015 Paris U.N. accord on climate change. Shell’s board has yet to issue a recommendation, but it has previously recommended that similar resolutions be opposed by investors, Reuters reports. Last year’s resolution won the backing of 20% of the votes while Shell’s energy transition strategy received 80% backing.

Shell Intensity Measurement

Shell aims to cut planet-warming gases across its portfolio — based on the emissions intensity of its fuels — by 20% by 2030 and 100% by 2050. From a 2016 base it aims to reduce emissions from its own operations on an absolute basis by 2030 and said it has already reduced them by 30%. That sounds just ducky, but Reuters says measuring emissions by intensity means a company can technically increase its fossil fuel output and overall emissions while using offsets or adding renewable energy or biofuels to its product mix. In other words, the old saying, “Figures lie and liars figure” is appropriate here.

The Takeaway

“Conundrum — a confusing and difficult problem or question.” How to reduce the emissions created by extracting and burning fossil fuels when doing so is the basis for the global economy certainly qualifies as a conundrum, or so it would seem. But it’s really not. The crux of the matter is that we humans have allowed an economic system to rule us that is grossly distorted because it takes no notice of the harm done by the waste products created by the industry. That’s insane. Until we fix that situation, companies like Shell will be able to continue blowing sunshine up our skirts about what a great job they are doing in addressing global overheating.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new."

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