Collaboration, portfolio and adaptation

Collaboration and public policy

Governments play a key role in their energy transitions: their policy choices can drive innovation in low-carbon technologies, and encourage investment in low-carbon energy and infrastructure. Policies and frameworks need to be developed to support businesses and consumers to make choices that reduce emissions. This could bring about fundamental change. Innovation can be driven by a global carbon emissions market – an approach that is suggested in the Paris Agreement.

Shell has a long history of collaborating to build international policy and market frameworks. For example, we were a founding member of the International Emissions Trading Association (IETA), which today is a leading business association focused on carbon pricing and the development of emissions markets. We continue to work with IETA and a number of other organisations on climate change issues. (See Collaborations).

Portfolio resilience

Shell has long taken into account the potential risks and threats to the viability and profitability of major projects to ensure the robustness of our portfolio. Our investment horizons can be decades ahead.

At Shell, we assess the greenhouse gas (GHG) risks on all our planned ventures. We generally apply a GHG project screening value (PSV) for all new projects, and have done so since 2000. Since 2008, our GHG PSV has been $40 per tonne. This means that new projects are assessed for the financial impact if a government imposed price or levy of $40 per tonne for GHG emissions is implemented. For projects with a high exposure to government imposed carbon pricing or legislation, we consider the impact of higher GHG prices.

The screening value can affect our project design in a number of ways. Some projects may be stopped at an early stage if the GHG footprint is too high or a design may be altered to reduce GHG emissions at start-up. For example, we have stopped some projects at an early stage, due to high levels of CO₂ in the hydrocarbon reservoir. Alternatively, a project may be designed to enable CO₂ reduction at a later date if there is an increase in the local government imposed carbon price – for example, by adding CCS.

We strengthen the resilience of our portfolio with internal targets on energy efficiency and emission reductions at our assets. We use targets that are based on the local context and which cannot meaningfully be converted into company-wide goals. Our Carbon Disclosure Project submission provides more information about how we apply our targets.

Adaptation

The effects of climate change will require governments, businesses and local communities to adapt their infrastructure to the changing environment. Across Shell, we take steps at our facilities around the world to ensure that they are resilient to climate change. This reduces the vulnerability of our assets and infrastructure to potential extreme variability in weather conditions linked to climate change.

We take different approaches to adaptation for existing operating assets and new projects. We progressively adjust our design standards for new projects while, for existing assets, we identify those that are most vulnerable to climate change and take appropriately timed action – for example, by upgrading refinery drainage systems.