Net Carbon Footprint

In 2017, Shell announced a long-term ambition to reduce the Net Carbon Footprint of the energy products we sell - a carbon intensity measure that takes into account their full life-cycle emissions including customers’ emissions when they use these products - in step with society’s drive to meet the goal of the Paris Agreement on climate change. In December 2018, we also announced our intention to set short-term Net Carbon Footprint targets. In early 2019, we decided to set a Net Carbon Footprint target for 2021 of 2-3% lower than our 2016 Net Carbon Footprint of 79 grams of carbon-dioxide (CO₂) equivalent per megajoule. We have linked nearer-term Net Carbon Footprint targets to executive remuneration.

Shell supports the goal of the Paris Agreement of limiting the rise in global average temperature this century to well below two degrees Celsius above pre-industrial levels. In pursuit of this goal, we also support the vision of a transition towards a net-zero emissions energy system. But society faces a dual challenge: how to make the transition to a low-carbon energy future to manage the risks of climate change, while also extending the economic and social benefits of energy to everyone.

Meeting this ambition requires changes in the way energy is produced, used and made accessible to more people while drastically cutting emissions.

We believe that the need to reduce greenhouse gas (GHG) emissions, which are largely caused by burning fossil fuels, will transform the energy system in this century. This transformation will generate both challenges and opportunities for our existing and future portfolio.

By 2050, our ambition is to align Shell’s Net Carbon Footprint with the footprint of the energy mix in the global energy system. We aim to reduce the Net Carbon Footprint of the energy products we sell – expressed in grams of CO₂ equivalent per megajoule consumed - by around 50% by 2050. As an interim step, by 2035, and predicated on societal progress, we aim for a reduction of around 20% compared with our 2016 level.

We need to go faster than society to achieve this ambition. Our starting point is higher than society’s because our portfolio has a different energy mix compared to the overall energy system. We do not have the large quantities of nuclear power, hydro power, wind, solar and large-scale primary biomass that the global energy system has.

Our approach to calculating the Net Carbon Footprint covers:

• emissions directly from Shell operations (including from the extraction, transportation and processing of raw materials, and transportation of products);
• emissions generated by third parties who supply energy to us for production; and
• our customers' emissions from their use of our energy products.

Also included are emissions from elements of this life cycle not owned by Shell, such as oil and gas processed by Shell but not produced by Shell, or from oil products and electricity marketed by Shell that have not been processed or generated at a Shell facility. The calculation also includes biofuels, as well as emissions that we offset by using carbon capture and storage or natural carbon sinks, such as forests and wetlands.

Chemicals and lubricants products, which are not used to produce energy, are excluded from the scope of this ambition.

Lowering our Net Carbon Footprint

To meet the decarbonisation goals of the Paris Agreement, society needs an increasing supply of energy products that produce lower or zero greenhouse gas emissions over their full life cycle, to use those products more efficiently and to store emissions that cannot be avoided in sinks. Within this framework, our strategy is to keep increasing the share of low-carbon energy products in our portfolio, such as natural gas, biofuels, electricity and hydrogen. We will also develop carbon sinks. By broadening our focus to the full life-cycle emissions from the energy products that we sell to our customers, instead of solely on our operational emissions, we believe we will be better aligned with societal need and growing customer demand for more energy with lower life-cycle greenhouse gas emissions.

For more information on these areas, see Managing greenhouse gas emissions, Lower carbon options and Developing technology.

Shell’s Net Carbon Footprint value is determined by first estimating the emissions intensity for each of the energy product supply chains in Shell’s portfolio. The individual intensities are then combined into a single value, with the weighting for each product determined by its sales volume. Emissions captured in sinks are deducted to give the final net value. Sales volumes are determined on an energy basis. Electricity is represented as fossil equivalents.

Shell’s Net Carbon Footprint values for 2016, 2017 and 2018 are shown in the table below. We express our Net Carbon Footprint in grams of CO₂ equivalent per megajoule (gCO₂e/MJ) produced for each unit of energy delivered to, and used by, a consumer.

The initial communication of Shell’s Net Carbon Footprint ambition in 2017 was based on the 2016 Net Carbon Footprint value and therefore 2016 is taken as the baseline year for future comparisons. Any previously published Net Carbon Footprint values were preliminary estimates. The values published in this report are the assured values and replace any previously communicated values.

Lloyd’s Register Quality Assurance Ltd has provided limited assurance for our Net Carbon Footprint assertion for 2016, 2017 and 2018. Limited assurance means nothing has come to the auditor’s attention that would indicate that the Net Carbon Footprint data and information as presented in the Net Carbon Footprint Assertions were not materially correct.

Shell’s Net Carbon Footprint remained unchanged between 2016 and 2018 at 79 gCO₂e/MJ. This was due to our higher oil product sales (primarily from gasoline sales in the USA) being balanced by growth in liquefied natural gas (LNG) and electricity sales. Oil products have a higher carbon intensity compared to the LNG and electricity sales.

Read more about our Net Carbon Footprint at www.shell.com/ncf.

Data sources for Net Carbon Footprint

The Net Carbon Footprint calculation uses production and product sales data taken from the Annual Report and Form 20-F. Any other product sales data used for the Net Carbon Footprint calculation but not disclosed in the Annual Report are disclosed in the Sustainability Report. This includes the gas and power data given below.

Sales of gas and power produced by third parties

Gas and power produced or generated by third parties but sold by Shell are included in the Net Carbon Footprint Calculation. The figures in the table below show the global volumes of third-party gas and power sold by Shell between 2016 and 2018.