Scope 3 and net carbon intensity

NCI performance

In 2023, Shell's NCI was 74 grams of carbon dioxide equivalent per megajoule of energy (gCO₂e/MJ), a 2.6% decrease from the previous year and a 6.3% reduction compared with the 2016 baseline. The decrease in Shell's NCI in 2023 was mainly achieved through a reduction in the average intensity of power sold and the use of carbon credits. The power intensity reduction was driven mainly by progress in grid decarbonisation in key markets such as the USA and Europe and partly by increased sales of renewable power including the retirement of Renewable Energy Certificates.

As part of our Powering Progress strategy, we aim to increase the share of low-carbon products in our energy product sales, which is the biggest driver for reducing our NCI.

Our ability to change the emissions intensity of each energy product varies depending on the product type:

• Hydrocarbon fuels – emissions from end-use by customers are by far the biggest contributors to the carbon intensity of the product. As a result, the emissions intensity of hydrocarbon fuels is expected to stay relatively unchanged over time. This is why we are focused on helping our customers decarbonise.
• Biofuels – can vary significantly in intensity depending on the feedstock and production process used.
• Power – the emissions intensity of power can be highly variable depending on how it has been generated. The proportion of our renewable power sales and the generation mix in countries where we sell power to the market both affect Shell's overall power mix and its resulting emissions intensity.

In 2023, Shell's NCI accounted for 20.0 million carbon credits, of which 4.0 million were linked to the sale of energy products. Of the carbon credit retirements included in Shell's NCI metric for 2023, 85% were certified by Verra, 9% by the American Carbon registry, 6% by Gold Standard, and less than 1% via Australian Carbon Credit Units.

Drivers of absolute Scope 3 emissions change in 2023

We sell more energy products than the energy products we produce ourselves, therefore, when we calculate our emissions, we include emissions from energy products that we produce ourselves as well as from the products that we purchase from others for resale. This is reflected in the scope for calculation of our emissions shown in the chart showing the Scope of NCI. Our strategy is based on working with our customers to address the emissions from the use of our products and to help them find ways to reduce their emissions to net zero by 2050.

The reported Scope 3 emissions within the NCI boundary have reduced from 2022. The decrease is largely due to a reduction in sales of gas and refined oil products. Furthermore, Scope 3 emissions for our sales of power were comparable year on year as we sold more power but at a lower average intensity in 2023 compared with 2022.

We undertake external verification of our GHG emissions annually. Our Scope 1 and 2 GHG emissions from assets and activities under our operational control and emissions associated with the use of our energy products (Scope 3) included in our NCI have been verified to a level of limited assurance by LRQA Group Limited.