Our work to address climate change
There are clear, practical steps that could help tackle climate change while continuing to provide energy to meet the world’s present and future needs.
We welcomed the United Nations Paris Agreement on climate change and its entering into force on November 4, 2016. The agreement seeks to limit global warming to well below 2 °C by managing climate and environmental pressures while ensuring economic development.
It highlights the urgent need for policies that can help build a low-carbon future. In particular, Article 6 of the Paris Agreement introduces the necessary foundation to support the development of a global carbon emissions market. However, as noted by the International Energy Agency (IEA), implementing the current Nationally Determined Contributions (NDCs) will not limit global warming to well below 2 °C.
Shell is looking at cost-effective ways to manage greenhouse gas (GHG) emissions and the commercial opportunities these solutions will bring. Our four main contributions to reducing global GHG emissions are: supplying more natural gas to replace coal for power generation; progressing carbon capture and storage (CCS) technologies; developing alternative energies; and implementing energy-efficiency measures in our operations. To support this, we continue to advocate the introduction of effective government-led carbon pricing mechanisms.
We work with governments and industry representatives to help society transition to a low-carbon energy future. We have invested in cleaner-burning natural gas and low-carbon biofuels and are also working on new fuels for transport. Shell shapes its portfolio and strategy to take into account the shift to lower-carbon energy, ensuring our company’s resilience for the future.
A greater role for natural gas
Natural gas, the cleanest-burning hydrocarbon, produces around half the carbon dioxide (CO2) and just one-tenth of the air pollutants compared to coal when used for power generation. We convert natural gas into products, such as liquid fuels, hydraulic fluids and lubricants, and are always working to make them as efficient and reliable as possible. Natural gas can also act as a partner for intermittent renewable energy, such as solar and wind, to maintain a steady supply of electricity, because gas-fired plants can start and stop relatively quickly. The IEA estimates that global demand for gas will grow by 1.5% every year in the period to 2040.
Shell is one of the world's leading suppliers of natural gas and liquefied natural gas (LNG), through our operated and non-operated joint ventures, and is safely tapping into resources of natural gas known as shale gas.
Government-led carbon pricing mechanisms
Shell has long called for governments to create carbon-pricing mechanisms that place a meaningful cost on CO2 emissions.
These mechanisms offer an effective way to stimulate the development of low-carbon technologies, generate revenue for governments and, ultimately, give consumers new energy choices. They could encourage the deployment of renewable energy and CCS.
Carbon capture and storage
According to the IEA, CCS remains the only technology capable of delivering significant reductions in emissions from the use of hydrocarbons.
CCS will be essential for meeting the goal of limiting global warming to well below 2°C. According to the IEA, reaching this goal will require 6,000 million tonnes of CO2 to be stored by 2050, equivalent to about 100 times the global CCS capacity expected by the end of 2017. The IEA also estimates that without CCS, the transformation to a low-carbon power sector will cost at least $3.5 trillion more.
Shell is playing a leading role in the demonstration of CCS technology at the Quest CCS project in Canada. We are working on CCS research programmes with partners around the world, and sharing knowledge with working groups and coalitions.
Low-carbon energy and biofuels
Low-carbon biofuels are one of the most viable ways to reduce CO2 from transport fuels in the coming years.
Our Raízen joint venture (Shell interest 50%) in Brazil produces low-carbon biofuel from sugar cane. We are also investing in research to help develop and commercialise advanced biofuels.
In 2016, we created a New Energies business to continue to explore investment opportunities in areas including biofuels, hydrogen and renewable energy. This business will also look for opportunities in energy solutions that combine wind and solar power with gas, for example, and new ways to connect customers to energy.
We continually assess Shell’s portfolio and strategy against a wide range of outlooks, taking into account the long timescales in our industry and the potential for shifts in the economic landscape. This is how we identify new business opportunities and possible divestments, and ensure the resilience of the company in the future. Our refreshed company strategy reflects our recognition that we are in an era of transition and volatility for the energy industry. The Energy Transitions and Portfolio Resilience report explains how Shell is investing in low-carbon energy, and creating a strategy to succeed through changing times.
Shell has a rigorous approach to understanding, managing and mitigating climate risks in our facilities. We reflect future regulatory costs by typically applying a common $40 per tonne project screening value (PSV) to the CO2 emissions associated with investments. 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 apply several other forms of GHG management including GHG design standards and stress testing.
The screening value can affect our project design in several 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. We also maintain energy management plans for all assets and projects to identify opportunities to reduce GHG emissions and consider the potential for CCS in the design of our new projects.
We also evaluate options to integrate readiness for CCS into the design of our new projects.
The 2017 Executive scorecard focuses on GHG emissions in three specific business areas: refining, chemical plants and flaring in upstream assets. This goes beyond carbon dioxide and specifically includes methane, which is also a GHG.
The effects of climate change mean that governments, businesses and local communities are adapting their infrastructure to the changing environment. At Shell, we are taking steps at our facilities around the world to ensure that they are resilient to climate change. This reduces the vulnerability of our facilities and infrastructure to potential extreme variability in weather conditions.
We take different approaches to adaptation for existing facilities 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 appropriate action.