Taking into account the full lifecycle emissions of their products, the key findings are:
The assessment of the ten largest publicly listed oil and gas companies has found that only two are ambitious enough in their planning to align with the emissions pledges made by governments in 2015 as part of the UN Paris Agreement on climate change. Five of the ten fail to set any quantitative emissions reduction targets at all.
The findings are based on the
Carbon Performance assessment in oil and gas discussion paper, which includes an explicit focus on the industry's 'Scope 3' emissions, i.e. the emissions that come from burning a company's products in buildings, electricity generation, industry and transport. These emissions make up by far the largest share of these companies' lifecycle emissions, accounting for more than three-quarters of a company's carbon footprint.
The findings show some positive progress in the sector, with Shell and Total recently setting out ambitions to reduce not only their operational emissions, but also the emissions from their value chains. This brings their ambitions in line with the Nationally Determined Contribution (NDC) pledges made by governments under the 2015 Paris Agreement, though it is still not enough to align with what scientists say is required to limit global warming to 2°C or below by 2050.
Of the other eight companies, five (
Chevron,
EOG Resources,
ExxonMobil,
Occidental and
Reliance) do not have any quantitative emissions reduction targets. The remaining three (
BP,
ConocoPhillips and
Eni) only have targets covering operational emissions (Scope 1 and 2), which would leave their future carbon intensity significantly above that required to meet the Paris pledges.
No company has proposed to reduce its carbon intensity enough to align with a 2 Degrees or Below 2 Degrees benchmark, or to achieve net zero emissions, by 2050.
Professor Simon Dietz, who leads TPI's research at the Grantham Research Institute, London School of Economics, said:
"The most significant finding is the emerging status of companies' future ambitions. It is encouraging to see two major oil and gas companies, Shell and Total, setting out long-term ambitions to reduce carbon emissions intensity in a way that is compatible with the government pledges made at the Paris climate agreement. However, there is a long way to go. None of the ten largest global oil & gas firms currently set a path that would align them with limiting global warming to 2°C or below before 2050. To reduce the carbon footprint of the sector these companies need to set more stretching low carbon targets."
Dr Rory Sullivan, Chief Adviser to TPI and one of the paper's co-authors, said:
"In this paper, we have set out a series of expectations that should inform investors and others engaging with these companies. Setting clear targets covering all the company's emissions from the production and use of their products is vital if investors are to meaningfully assess the risk they carry in their portfolios. Judging carbon performance just on emissions from direct operations only tells part of the story. The current emissions intensities of most oil & gas majors are similar, but by shining a light on the companies' future ambitions and looking holistically at the full lifecycle of products, investors can begin to see clear leaders and laggards in the sector."
Adam Matthews, Co-Chair of the Transition Pathway Initiative and Director of Ethics & Engagement at the Church of England Pensions Board, said:
"Forward looking lifecycle emission targets that take account of all the impact of a company's carbon footprint are essential if we, as investors, are going to have confidence in the strategy of companies we invest in. We want to see evidence of a company's commitment to the transition to a low carbon economy, and this latest research from TPI is not comfortable reading. We welcome Shell and Total's leadership in setting out their ambitions. We note that while they are moving in the right direction, and are ahead of their peers, this study suggests they are not yet ambitious enough to align with a pathway to below 2 degrees of warming by 2050. Targets that cover all of a company's emissions, from production to use of their sold products, provide a transparent basis for asset owners to engage with oil and gas companies on their strategies to transition."
Euan Stirling, Global Head of Stewardship and ESG Investing at Aberdeen Standard Investments, said:
"Updating the Transition Pathway Initiative methodology to include Scope 3 emissions is tremendously useful as it represents the most significant element of these companies' carbon emissions intensity. The fact that this has taken so much effort and that the companies' targets still lag what is necessary underscores the importance of the work of the TPI for us as investors."
Emma Howard Boyd, Chair of the Environment Agency and Chair of the Environment Agency Pension Fund Investment Committee, said:
"The UK Government has asked the Committee on Climate Change to review whether legally binding carbon targets are compatible with limiting temperature increases to 1.5°C above pre-industrial levels. The IPCC report shows even if we manage that we still face an exponential rise in physical impacts, like flood, drought, and the spread of disease. Corporate Boards, especially those in the oil and gas sector, need to get ahead of this or they are taking an unrecoverable risk with their companies' future."
Notes: The ten oil and gas companies reviewed are the largest globally by market capitalisation: BP, Chevron, ConocoPhillips, Eni, EOG Resources, ExxonMobil, Occidental, Reliance, Shell and Total. Reliance could not be benchmarked because it does not currently disclose its operational CO2 emissions. The methodology in the discussion paper seeks to make the best of the current state of disclosure, but at present the leading players do not provide consistent, consolidated disclosures of emissions and energy production that cover all key sources.
