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Royal Dutch Shell PLC said Thursday that it aims to become a net-zero-emissions energy business by 2050 at the latest, joining BP and other mostly European oil giants who have made similar pledges in recent months.
Shell RDS.A, -4.51% RDS.B, -3.99% said it plans to fully cut emissions from product manufacturing and to reduce the carbon footprint of sold products by 30% by 2035 and 65% by 2050. It will pivot toward serving businesses and sectors that also aim to reach net-zero emissions by 2050, the company said.
Considering that Anglo-Dutch Shell had just last year questioned the feasibility of achieving the 1.5 degree reduced in warming envisioned by the Paris Climate Agreement, the company’s new aim to align its business with a 1.5-degree trajectory by 2050 or sooner is a sign that business and investing pressure on the oil giants is finding some traction, analysts said.
“At a time when many U.S. oil companies are using the COVID-19 crisis to push for environmental rollbacks, it is encouraging to see the U.K. oil giant Shell significantly raise its ambitions to align its business with the low-carbon transition,” said Andrew Logan, senior director of oil and gas at sustainable-investing advocate Ceres.
The Trump administration has eased environmental regulatory restrictions on the energy industry, citing the added cost of compliance for businesses afflicted by the economic slowdown tied to the coronavirus. Reports say more government aid for the industry, especially U.S. shale, may be on the way.
With the pandemic-linked demand collapse and a supply tussle between major producers hitting prices, U.S.-traded West Texas Intermediate CL00, -0.10% traded below $20 a barrel to its lowest finish since 2002 on Wednesday before a Thursday rebound.
Shell had already announced plans spend $300 million over the next three years on planting more than 5 million trees in the Netherlands and Spain, supporting forest regeneration in Australia and potentially engaging in conservation in Malaysia. The company will invest in electric vehicle battery-charging stations and a fuel program to help drivers offset carbon pollution.
It is also expanding its business. The company last year invited President Donald Trump to its chemical processing plant under construction on a big bend of the Ohio River in western Pennsylvania, reportedly one of the largest and most expensive projects ever to be built in the former steel stronghold.
Earlier this year, Shell rival BP BP, -3.39% set an ambitious plan to eliminate or offset all carbon emissions from the oil and gas it produces by 2050.
BP said then it would reorganize operations to make sure the company is focused on achieving its carbon-cutting goals while also ensuring it continues to meet shareholder demands, including its role as a dividend stock.
But some climate groups remain skeptical that emissions actions are enough when drilling continues.
“BP is one of the companies most responsible for the climate emergency. They say they want their business model to align with the Paris Agreement, but simply put, it is not possible to keep to a 2 degree warming limit — let alone 1.5 degrees — while continuing to dig up and burn fossil fuels,” said Ellen Gibson, the U.K. organizer for global environment nonprofit 350.org, earlier this year.
Analysts noted the continued divide between European oil interests and those operating primarily in the U.S.
“This increased ambition [from Shell], coupled with recent commitments from other oil companies including BP, Equinor, Repsol and Eni will place intense pressure on Shell’s U.S. competitors including ExxonMobil XOM, -3.33% and Chevron CVX, -2.69% to follow suit,” said Logan of Ceres. “With stock prices in the sector near record lows, investors are quickly running out of patience with any company that continues to pursue business as usual.”
Exxon’s stock is down over 51% over the past year. Chevron trades down 34% over that stretch. London-traded shares of Shell are down 47% since this time last year, with BP sliding 48%.
