The future according to Shell

On 19^th May 2020 Shell will host its Annual General Meeting (AGM) at its headquarters in The Hague. The AGM will not be the most glamorous of its history, restricted to a bare legal minimum of two shareholders physically attending. Also, for the first time since the Second World War, Shell has cut its dividends (by two-thirds), as the pandemic has sent oil companies into crisis mode, with plummeting demand, unprecedented price crashes and a gloomy uncertainty over their future. This comes in addition to the growing tarnishing of Shell’s social license to operate, as mounting pressure on the streets demands strong action on the climate emergency, and several court cases challenge the company’s track record.

Shell is thus once again selling its supposed vision of a sustainable future, hoping to distract from the reality that the company bears a significant share of the responsibility for climate change and has a troubled human rights record.

As far back as 1984, Shell’s own research showed that it was responsible for 4 per cent of the world’s carbon dioxide emissions, and that it knew even then that these were causing climate change. Yet the company doubled down on oil and gas investment, and joined other oil companies in the Global Climate Coalition and American Petroleum Institute, two powerful lobby groups that spent millions promoting climate denialism. Dutch investigative journalists unveiled earlier this year that Shell had even paid a Dutch climate denier to mount a campaign against climate science. The company’s long record of human rights abuses and environmental destruction – especially in the Niger Delta – is also well documented.

By contrast, the future is a clean slate, free of reminders of the company’s unethical record. Shell increasingly talks of low-carbon scenarios, and last month it promised to become a net-zero emissions company by 2050. It sponsors an “eco-marathon” competition to develop the world’s most efficient car. It makes videos full of trees, electric vehicle charging points, and even glamourous social media influencers (#makethefuture). It promises support for “nature-based solutions”, and even says, loudly and repeatedly, that it “welcomes and supports the Paris Agreement and the ambition to limit the global rise in temperatures to well below two degrees Celsius.”

Shell has extremely deep pockets to bring that message not only to the public, but also to policy-makers. It spent over €4.5 million in 2019 alone on EU lobbying. And, along with the other lobby groups it is a member of, it has spent over €215 million  SidenoteSee methodology box since 2010 on buying influence at the heart of the EU.

This is a textbook case of hypocrisy: Shell plans (or at least it did before being hit by the coronavirus crisis) to develop more than 35 new oil and gas projects by 2025, even though there is no plausible scenario for addressing climate change that allows for fossil fuel expansion on this scale.

But that is not it. When Shell talks about an “energy transition” and promises to be a “net-zero” company, this reflects not just greenwashing, but also the company’s attempts to mould the future in its own image. Shell’s envisioned future is one in which gas plays a significant, long-term role, and the lifespan of oil wells is extended through unfeasible and eye-wateringly expensive “carbon capture and storage” technology. Public policy should avoid regulation beyond setting a price on carbon, while international negotiations should ensure that remaining greenhouse gas emissions disappear through “net zero” accounting. Making the impossible possible, indeed.

Shell’s climate priorities: gas, carbon capture and carbon markets

Shell does not hide the fact that its “climate-related” priorities include burning gas for decades to come, backed up by a massive roll-out of costly and unproven “carbon capture” technology, and a system of carbon pricing that shifts the burden of reducing greenhouse gas emissions away from companies like itself. These three elements, backed up by the promise of “nature-based solutions”, form the vision of the rose-tinted future that Shell claims to dream of.

Gas, gas and more gas

Above all, Shell’s “climate” vision is one in which gas continues to play a central role in the energy system. It promotes gas as a “bridge” fuel that can help to reduce reliance on coal and achieve immediate cuts to greenhouse gas emissions.

Shell has also encouraged the EU to see gas as the bridge away from coal and towards a “low carbon” energy system, rather than renewables: as the company wrote to former Commission President Barroso in 2014: “Gas is good for Europe, and Europe is good at gas”. Since then Shell has redoubled its lobbying efforts to put gas at the heart of EU energy policy, and promotes its continued use in the many important policies currently being drafted, including the European Green Deal, the upcoming gas market regulation and the TransEuropean Networks for Energy (TEN-E).

But burning more gas would take the world far beyond safe climate limits, and lock in a reliance on expensive fossil fuel infrastructure for decades to come.

Carbon Capture and Storage/Utilization

In reality, Shell’s plans are as fanciful as they are dangerous. Its global vision is outlined in the ethereally named “Sky” scenario. “In 2070, Sky achieves net-zero emissions in the energy system, but the use of fossil fuels is far from over”, explains Shell’s Chief Climate Change Advisor David Hone. The circle in this vision is magically squared by assuming that 10,000 CCS facilities will be in operation by 2070. Shell has already used this scenario to lobby the European Commission to promote the “large scale deployment of CCS projects”, as a means to reach “Net Zero Emissions”.

At present, despite considerable hype and government subsidies, there are just 51 CCS plants globally, many of which are small-scale. The biggest impediment to CCS is that it is “wildly expensive” while, at the same time, renewable energy is rapidly falling in cost. As a result, CCS either relies on state subsidies, or on companies finding environmentally harmful ways to “utilize” the CO2.

Shell’s own investments in CCS follow this pattern, as the company unwittingly admits. The Quest project in Alberta, Canada, is the company’s flagship CCS project, but it “has benefited from significant government funding”, notes Shell Canada President Michael Crothers. He further states that industry is looking to a “self-funded” future in which it can generate revenues from CO2.

Carbon capture is also a byword for postponing emissions reductions, as was seen with the Gorgon gas project in Australia - a Chevron CCS project in which Shell holds a 25 per cent stake. The state-funded project was subject to long delays, with local groups claiming it was “deliberately mismanaged” to help the companies to avoid meeting environmental regulations. Gorgon plans to capture just 40 per cent of the emissions from the massive Western Australia gas plant, which only originally won approval on the grounds that it would “sequester” emissions.

Carbon Markets

Shell has consistently supported carbon emissions trading and, in certain jurisdictions, carbon taxes (see “glossary”). Although the company trumpets this support as evidence of its commitment to climate action, the main reason for this enthusiasm is that carbon pricing benefits the company’s core gas business. Firstly by helping gas to out-compete coal (in the electricity generation sector), and secondly by undermining the case for other regulations, targets or renewable energy subsidies.

Shell’s support for carbon pricing should not be confused with climate ambition. Even in cases where it argued for a higher price in the EU Emissions Trading System (EU ETS), its goal was for gas to out-compete coal, and to avoid renewable energy becoming the norm. Indeed, when the EU threatened to make Shell pay for pollution permits in 2008, the company threatened to quit Europe altogether. Shell was also one of the lead actors which successfully undermined the EU 2030 renewable energy targets in 2014, when the EU decided that the 27% target for renewables in the energy mix would not be binding on individual member states.

To this day, Shell continues to argue that the impacts of carbon pricing should be tempered by rebates for industry. Outside the EU, Shell has lobbied against efforts to introduce more ambitious targets in California’s cap and trade scheme, and opposed a Washington state carbon tax proposal.

Another reason that Shell supported carbon pricing relates to its support for CCS, which it argues should receive subsidies paid for by the auction of pollution permits. Even Cefic (the EU chemicals industry lobby, of which Shell is a member), admits that the company has a “vested interest” here, because “they have invested a lot of money into CCS.”

Nature-based solutions

Shell’s latest climate concept involves promoting “nature-based solutions”, focusing on the “protection and restoration of natural ecosystems such as forests, grasslands and wetlands.” This is a textbook act of “greenwashing” – producing videos, brochures and other PR materials that feature thriving woodlands in order to mask the dirty reality of Shell’s core activity.

“Nature-based solutions” is a new name for an old idea: promoting forestry (and other land use) projects as an “offset” for continued fossil fuel use. The carbon absorbed by forests is counted and “credits” are then issued for supposed “emissions savings”, which can then be used by Shell to justify its continued extraction, refining and sale of oil and gas. The company promised to set aside US$100 million a year to invest in natural ecosystem projects by 2021, a significant sum in the context of a forest carbon market that has failed to take off, but a drop in the ocean compared to the overall size of Shell’s business. Moreover it is also a very risky business for the many local communities that can find themselves displaced as a result of land grabs for such lucrative offsetting projects.

The credibility of Shell’s investment in ecosystems also seems to be somewhat undermined by the company’s bio-ethanol production operations in Brazil, where it owns a 50 per cent stake in Raízen, a multi-billion dollar company that is one of the largest players in an industry that has driven wide scale deforestation in the Amazon.

These are also the final pieces of the jigsaw, that allow Shell to claim it supports the Paris Agreement. Shell’s investment in offsets allow it to claim that its “net” emissions will reduce to zero, even as it continues to extract oil and gas. The reality is that burning fossil fuels and storing carbon in trees and soil cannot be compared – and that any hope of restricting climate change to 1.5 degrees requires real forest restoration and preservation in addition to rapidly phasing out fossil fuels.

How Shell is trying to make its dystopia come true:

Investing in a fossil fuel future

“Despite what a lot of activists say, it is entirely legitimate to invest in oil and gas because the world demands it” - Ben van Beurden, Shell CEO.

The extent of Shell’s ongoing commitment to exploiting oil and gas tends to be hidden by the company’s PR efforts, but it is crystal clear in its investment portfolio. Shell is Europe’s biggest oil and gas company, and intends to remain so. Before the pandemic exploded, it was planning more than 35 new oil and gas projects by 2025. Shell has plans to diversify its business eventually – most oil companies do – but that future will come more slowly than the company’s shiny “sustainability” brochures imply.

Shell’s “growth priorities” in the coming years are in deep-water oil exploration and the chemicals sector. Half of the 24 “major projects” in its investment profile are deep water oil and gas projects (in the Gulf of Mexico, Brazil, Malaysia, Nigeria and Norway), which it says have “significant growth potential.” The remainder of its major projects under development include conventional (offshore) oil and gas, petrochemicals, gas-to-power and LNG plants.

These investments could hardly be further removed from ongoing efforts to avert climate chaos, and the company admits that it will continue to invest significantly in new oil and gas capacity for at least the next two decades. Shell intends to develop “New Energies” further in the future, but it is dipping its toes into the water rather than diving right in. Before the coronavirus crisis, just US$1bn-$2bn of Shell’s annual $25bn-$30bn capital expenditure was for “low-carbon” projects, and this seems to only go lower now.

Moreover, Shell’s New Energies investments are not guaranteed to be clean. The company is as heavily invested in biofuels and hydrogen-powered cars as it is in wind power and electric vehicle charging. The “Shell Ventures” division, which invests in new technologies, has an equal interest in deepwater oil extraction technologies and in next generation solar panels. Shell also sees “longer term” opportunities from investment in shale gas in North America and Argentina.

Before the yet unknown impact of the coronavirus crisis, Shell was forecast to increase output by 38% by 2030, increasing its crude oil production by more than half and its gas production by over a quarter. If you follow the money rather than the company’s words, it is clear that Shell is aiming to continue profiting from oil and gas production for as long as possible, as well as dedicating significant resources to “extreme” fossil fuels like deep sea oil drilling (Shell operates the deepest offshore oil and gas project in the world) and fracking for gas.

Conclusion: a fossil-free future

Strip away the green brochures, the techno-optimism of carbon plucked directly from the air at a massive scale, and the heartfelt commitment to letting the market resolve a climate crisis that it was key to creating, and Shell’s future vision remains one where oil and gas are burned far beyond planetary boundaries.

Shell’s climate rhetoric is designed to signal that it is the cleanest of the big oil companies. Even if that were true – it is like claiming to make the healthiest cigarettes. In the end, they still kill you.

The tobacco analogy is far from arbitrary. In 2003, the World Health Organization acted to protect policy-making from the influence of the tobacco industry (via article 5.3 of the WHO Framework Convention on Tobacco Control). It is high time for the world to adopt the same approach to the fossil fuel industry. We must kick Shell and other big polluters out of the conference halls where climate policy is negotiated, and out of the EU institutions and national capitals. This would finally clear one major obstacle to taking action commensurate with the scale of the climate crisis. We need Fossil Free Politics before it’s too late!