Carbon intensity in 2021 was 2-3% lower than in 2016. [image credit: Shell]

By Callum Cyrus

Shell said March 10 that its carbon intensity reduction target for 2021, cutting it by at least 2-3% versus the 2016 level, which was 83 g of CO2 equivalent/MJ. This intensity relates not only to Scope 1 and 2 but also Scope 3 emissions from the combustion of products it produces and sells by consumers.

In its annual operations update for 2021, Shell also confirmed its earlier pledge to reduce its carbon intensity by 3-4% this year versus the 2016 level and by 6-8% by 2023.

The target is part of Shell's overriding energy transition policy, and the company concedes there is medium and long-term risk to operations should the move to low-carbon economies lead to significantly lower oil and gas demand, and changes in investor appetite to shift away from fossil fuels.

Most of Shell's emissions fall under the Scope 3 bracket. They relate to products such as oil and gas, and petroleum products, that either it produces itself and sells or buys from third parties and resells.

"If we fail to stay in step with the pace and extent of change [in customer and other stakeholders' demand for low-carbon products, this could adversely affect our reputation and future earnings," Shell said in the report, "If we move much faster than society, we risk investing in technologies, markets or low-carbon products that are successful, therefore we cannot transition too quickly or we will be trying to sell products that customers do not want."

With 90% of the global economy signed up to net-zero commitments as of January, according to the UK Energy and Climate Intelligence Unit, Shell is aware of the risk of future regulatory frameworks set out by governments could further restrict upstream programmes and consumption of end products.

But the energy transition offers opportunities as well as commitments. Shell views replacing coal and oil with natural gas as key to the net-zero emissions. The UK-based major aims to reach net-zero emissions by 2050, in line with the US and EU policy objectives.

Renewables, new energy solutions and biofuels, the latter through Shell's 44% stake in the Raizen joint venture, will also play a key role. The company believes total CO2 emissions, from energy actually sold onto the market, peaked in 2018 and expects them to trend below 1.7 gigatons/yr. Leadership accountability has been woven into its reporting framework with a 15% weighting attributed to climate performance. 

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