Climate change and energy transition

As the global population grows and living standards rise, society will need to meet increasing energy demand with a lower carbon footprint. To play our part in a cleaner energy future, we will offer customers more low-carbon products and services, including lower-carbon fuels for drivers, and solutions such as forests and wetlands to act as natural carbon sinks.

Shell is determined to help provide more and cleaner energy solutions. We fully support the Paris Agreement and we are driving our business strategy in the context of the energy transition and climate-related risks and opportunities.

Thriving through the energy transition requires working with society, including helping to advance the sustainable development goals. To help achieve the energy transition and ensure opportunities to achieve better living standards for all, the world needs to transform the way it produces and uses energy.

We believe more renewable energy like solar and wind is critical for a cleaner energy future, and that increasingly how people live, work and play is going to need to be powered by lower-carbon electricity. But we also recognise that not everything can be easily, swiftly or cost-effectively electrified.

We see continuing, changing roles for oil and gas alongside new energies and new technologies, in co-ordination with complementary approaches like carbon capture and storage and nature-based solutions to manage the difficult-to-avoid emissions that will remain in the system for years to come.

City at dusk. (photo)

Making cities sustainable is one of the world's biggest challenges (see UN sustainable development goals).

Climate change

Governments took a great stride forward in 2015, when they reached agreement in Paris to tackle climate change by limiting the rise in global average temperatures this century to well below two degrees Celsius above pre-industrial levels. We fully support this goal.

But there are tough challenges ahead that society will need to address because the transition to a lower-carbon energy system will require enormous levels of investment, and profound changes in consumer behaviour. For Shell, it could mean significant changes in the long term. We will learn, and adapt our approach over time.

In 2018, we published our second Shell Energy Transition Report, which sets out how our strategy should allow us to thrive in this energy transition. It also provided information about our medium-term resilience and examples of how we are already active in many of the growth areas that will drive our continued success.

Working with others

To advance solutions to the energy and climate challenge, we continue to work with others (see Collaborations), including the Oil and Gas Climate Initiative (OGCI), a voluntary -led group taking practical actions on climate change. The OGCI’s billion-dollar plus investment arm, OGCI Climate Investments, aims to combine the expertise and reach of 13 oil and gas majors with the potential of groundbreaking start-ups (see Methane emissions). We also work with the Energy Transitions Commission (ETC), whose report Mission Possible: Reaching net-zero carbon emissions from harder-to-abate sectors by mid-century, was published in November 2018.

Portfolio resilience

At Shell, we are confident that our strategy, portfolio and strong financial framework give us the sources of resilience to potential changes in the energy system to 2030, and the flexibility to adapt as the energy system changes over the long term. We are reshaping our portfolio to provide the energy, and related products and services, that consumers will need through the transition.

We have set a long-term ambition to reduce the Net Carbon Footprint of our energy products, measured in grams of carbon-dioxide equivalent per megajoule consumed, by around 20% by 2035 and by around 50% by 2050, in pace with society.

The key will be to adapt to develop new opportunities in areas that will be essential in the energy transition, and where we see growth in demand over the coming decades. We seek to build a diverse portfolio – both geographically and across different parts of the energy industry.

Shell Scenarios

We have been developing energy-focused scenarios for almost 50 years, helping generations of Shell leaders, academics, governments and business leaders to consider possible pathways when making decisions. They stretch our thinking and help us to make crucial choices in times of uncertainty and transitions as we grapple with tough energy and environmental challenges.

In 2018, we published our Sky scenario, which illustrates a technically possible, but challenging pathway for society to achieve the goals of the Paris Agreement. Sky builds on previous Shell Scenarios publications, Mountains and Oceans, and is our most optimistic scenario in terms of climate outcomes.

Executive sharing perspectives as part of a panel. (photo)

Shell's Sky scenario, published in early 2018, is part of an ongoing process used in Shell for over 40 years to challenge executives’ perspectives on the future business environment.

Sky results in a balance of net-zero global emissions by 2070 and meets the goal of the Paris Agreement, to hold the increase in the global average temperature this century to well below two degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels. If very large-scale reforestation of an area the size of Brazil is added to the scenario storyline, it would result in limiting warming to 1.5 degrees Celsius. By adopting a modelling approach that is grounded in the current reality of the energy system and combined with a specific long-term goal, Sky is intended to be both an ambitious scenario and a realistic tool to inform dialogue.

In October, the Intergovernmental Panel on Climate Change (IPCC) released its report on the impact of 1.5 degrees Celsius warming and referenced Sky. The report finds that limiting global warming to 1.5 degrees Celsius would require “rapid and far-reaching” transitions in land use, energy, industry, buildings, transport and cities.

Today’s energy needs

The world gets most of its energy from coal, oil and gas, with around a fifth of all energy used to generate electricity. Energy sources differ across industry, transport and domestic use, which all need to transition to low-carbon options.


Current global energy demand

There are currently no easy replacements to fuel heavy industries, where extremely high process temperatures are required. Petrochemicals are the building blocks of thousands of products that people use daily.

Enlarge image Current global energy demand: 32% Oil; 22% Coal; 27% Natural gas; 9% Biomass; 5% Nuclear; 5% Renewables (pie chart)

Domestic and commercial demand

The buildings sector is responsible for nearly one-third of global final energy consumption and is also the source of a large proportion of electricity demand and therefore emissions in the power sector. The primary use of energy in buildings is for heating or cooling, lighting and cooking.

Enlarge image Domestic and commercial energy demand: 31% Electricity; 28% Natural gas; 26% Biomass; 6% Heat; 5% Liquid fuels; 4% Coal (pie chart)

Industry demand

There are currently no easy replacements for hydrocarbons in energy intensive industries, such as in petrochemicals or in iron and steel manufacturing where extremely high temperatures need carbon-intensive processes.

Enlarge image Industry energy demand: 23% Natural gas; 28% Electricity; 26% Coal; 11% Liquid fuels; 7% Biomass; 5% Heat (pie chart)

Transport demand

Oil currently powers more than 90% of transport, with aircraft, motor vehicles and ships in use for between 15 and 25 years.

Enlarge image Transport energy demand: 96.5% Liquid fuels; 2.5% Natural gas; 1% Electricity (pie chart)

Electricity generation

The power sector transforms primary energy into the electricity used in other end-use sectors. Because electricity is emission-free at its point of use, the decarbonisation of the power sector can enable decarbonisation elsewhere.

Enlarge image Electricity generation: 39% Coal; 23% Natural gas; 22% Renewables; 10% Nuclear; 4% Oil; 2% Biomass; 19% of total final energy consumption is electricity (pie chart)
Liquid fuels
Natural gas

Source: Shell Scenarios Team Extended Policies and Technologies 2018 (EPTS18) scenario and the International Energy Agency


Jules Kortenhorst, Chief Executive Officer at Rocky Mountain Institute. (photo)

Jules Kortenhorst

Chief Executive Officer, Rocky Mountain Institute

The Rocky Mountain Institute seeks to transform global energy use to create a clean, prosperous and secure low-carbon future.

“Shell’s 2018 Energy Transition Report outlines the company's ambition to reduce the full scope of its Net Carbon Footprint by 50% in 2050, in line with society's drive to meet the Paris Agreement. This is a bold promise as it looks not just at emissions from Shell’s own operations, but also at the resultant emissions from use of the products the company produces and sells. However, current commitments to the Paris Agreement are inadequate to meet a 2°C future, and mounting evidence makes clear the need to move even faster toward a net-zero energy future. As one of the leading energy multinationals in the world, Shell will also need to increase its ambitions, seizing the opportunity to lead the way in the energy transition and helping shape global decarbonisation ambitions.”

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Intergovernmental Panel on Climate Change
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