resilience
April 24, 2023
By
Josh Gabbatiss
Shell admits 1.5C climate goal means immediate end to
fossil fuel growth - resilience
![](images/images_07_19_2023/11-09-fotofluege-cux-allg-25a.jpg)
Growth in oil and gas production ends immediately
in Shell’s latest pathway for staying below 1.5C, new Carbon Brief
analysis reveals.
The admission that continued growth in fossil
fuel output is incompatible with 1.5C is significant, because it comes
from one of the world’s biggest public oil and gas companies.
Shell had previously
claimed that oil and gas production could rise for another decade,
even as warming was limited to 1.5C.
The dramatic shift in its new “Energy
Security Scenarios” is not explicitly acknowledged, but, as Carbon
Brief’s analysis shows, is hidden in plain sight.
Key to the faster fall in fossil fuel use in the
new pathway is much slower growth in global energy demand, which Shell
had previously insisted was all-but unchangeable.
While Shell’s new scenarios are more closely
aligned with the conclusions of independent research,
its 1.5C pathway still contains relatively high levels of ongoing
fossil fuel use.
If the world followed Shell’s pathway, it would
“overshoot” the 1.5C limit for decades, before returning below that
level by using largely
unproven, energy-intensive machines
to suck large volumes of carbon dioxide (CO2) out of the atmosphere
towards the end of the century
The fossil fuel giant stresses that its scenarios
are not intended as forecasts, projections or indeed business plans.
Despite being a major oil-and-gas producer, it also states that
meeting global climate targets is “not within Shell’s control”.
At the same time, Shell’s new chief executive,
Wael Sawan, has recently stated that
“cutting oil and gas production is not healthy”. He also announced that
the firm is reappraising its plans to scale back oil extraction.
New Sky
Shell recently released two new energy scenarios
in response to the challenges facing the world, including the global
energy crisis and rising geopolitical tensions.
The company says its “Archipelagos” and “Sky
2050” pathways ask if a world “desperate for immediate security” can
also tackle climate change. Archipelagos involves global sentiment
shifting “away from managing emissions towards energy security”.
Sky 2050, on the other hand, is the latest in the
company’s “Sky” series that has set out pathways for cutting global
emissions in line with the Paris
Agreement warming target.
The first Sky scenario was launched in
2018 and only included a pathway for the less ambitious “well-below
2C” Paris limit.
The firm’s “radical” Sky scenario maintained
significant fossil-fuel use even out to 2100, equivalent to a quarter
of current global energy demand.
This was followed in
2021 by Sky 1.5, an “ambitious” update showing how warming in 2100
could be limited to 1.5C. It maintained exactly the same long-term
fossil-fuel use and energy demand as the previous version, but with
much more tree planting.
The latest Sky 2050 scenario is explained by Laszlo
Varro, Shell’s vice president of global business environment and
former chief economist at the International
Energy Agency (IEA), in a LinkedIn
post:
“In the comprehensively remodelled Sky
scenario, the fossil-fuel dominated system itself is seen as a
security risk and society leans forward for an accelerated
transition. In Sky, clean-tech becomes like space technology during
the cold war, [with] fantastic technological achievements driven not
by cooperation but competition.”
Shell emphasises that it sees this new pathway as
pushing the upper limits of feasibility. It describes the assumptions
behind the scenario as “what we believe as technically possible as of
today and not necessarily plausible”.
Shell gave very
similar warnings about its less-ambitious “well-below 2C” pathway
in 2018. At the time, it said this was a “radical” path that was
“technologically, industrially and economically possible” – but it
stopped short of saying the scenario was plausible.
In the intervening period, Shell appears to have
recalibrated its assumptions.
Whereas previous Shell
pathways had taken rapidly rising global energy demand as,
effectively, an unstoppable force of nature, the new scenario includes
much slower demand growth. This enables a much faster phasedown of
fossil fuels.
At the same time, Shell’s new pathway includes
more realistic – though still very challenging – assumptions around
the role of afforestation and bioenergy. Instead, it includes rapid
growth in direct
air capture (DAC) machines to remove CO2 from the atmosphere.
Peak fossil fuels
The new Sky 2050 update involves fossil fuel
production and use dropping much sooner and faster. Shell says
“oil-and-gas supply peaks during the second half of the 2020s”.
In the spreadsheet published alongside
its new scenarios, the company only provides data for oil-and-gas
production in five-year increments.
However, Carbon Brief has extracted the data from
graphics provided in its report, revealing that the peak for both oil
and gas production has, in fact, already passed.
Put another way, there is an immediate end to
growth in the production of oil, gas and coal – individually and
collectively – in Shell’s pathway for staying below 1.5C.
In Shell’s older Sky scenarios, oil production
had peaked between 2025 and 2030, as shown in the figure below (dashed
line). In the new 1.5C scenario, oil production is never higher than
it was in 2022 (solid line).
Output dips and flatlines until 2028 when it
starts to drop rapidly – particularly for the European and North
American companies operating in non-Organization
of the Petroleum Exporting Countries (OPEC) nations.
![](images/images_07_19_2023/chart1.jpg)
Global oil production, exajoules (EJ) per year, in Shell’s new Sky
2050 scenario (solid line), compared to its previous Sky 1.5 scenario
(dashed line). Shell only provides data for five-year intervals, so
Carbon Brief obtained annual data for the Sky 2050 scenario from a
chart provided in the company’s full
report using WebPlotDigitizer.
Source: Shell’s
Sky 2050 scenario and Shell’s
Sky 1.5 scenario. Chart by Carbon Brief using Highcharts.
In Sky 2050, OPEC oil producers use revenues from
high fossil fuel prices to finance a shift away from oil-and-gas
reliance.
Meanwhile, non-state backed, independent oil
companies, such as Shell, take “a cautious approach” and “prefer to
generate cash for their investors rather than invest in additional
production capacity”. As a result, OPEC takes a larger share of
production.
As for gas, Shell states: “A key characteristic
of the Sky 2050 scenario is that the ‘golden age of gas’ comes to an
end.” The current trend of increasing demand for liquified natural gas
(LNG) is “short-lived” and global demand for gas peaks “by the middle
of the 2020s”.
(In its latest World
Energy Outlook, the IEA said the “golden age” of gas had come to
an end, regardless of whether or not countries scaled up climate
ambition to stay below 1.5C. Shell is pointing to an immediate end to
global gas demand growth only within its 1.5C pathway.)
Carbon Brief’s data extraction reveals that in
the new 1.5C pathway growth in gas production peaks just before the
Covid-19 pandemic in 2019. This is far earlier than in the previous
Sky scenario, where gas extraction continues to expand until around
2035, as shown below.
![](images/images_07_19_2023/chart2.jpg)
Global gas
production, EJ per year, in Shell’s new Sky 2050 scenario (solid
line), compared to its previous Sky 1.5 scenario (dashed line). Shell
only provides data for five-year intervals, so Carbon Brief obtained
annual data for the Sky 2050 scenario from a chart provided in the
company’s full
report using WebPlotDigitizer.
Source: Shell’s
Sky 2050 scenario and Shell’s
Sky 1.5 scenario. Chart by Carbon Brief using Highcharts.
In the long term, the new scenario sees
oil-and-gas use dropping around two-thirds lower than in the previous
Sky 1.5C pathway. However, Shell still sees a significant role for
both fossil fuels even in 2100.
Coal production also peaks in 2022 in the Sky
2050 pathway.
Shell’s older 1.5C pathway involved considerable
coal use out to the end of the century, as shown in the figure below
(dashed line). In contrast, the new 1.5C pathway sees demand for the
fuel dropping fast and approaching zero by 2100 (solid line).
![](images/images_07_19_2023/chart3.jpg)
Global primary energy from coal, EJ per year, in Shell’s new Sky 2050
scenario, compared to its previous Sky 1.5 scenario. Shell only
provides data for five-year intervals and the older Sky 2050 scenario,
unlike Sky 1.5, does not include data for the years 2019-2025, which
covers the drop in demand due to the Covid-19 pandemic. Source: Shell’s
Sky 2050 scenario and Shell’s
Sky 1.5 scenario. Chart by Carbon Brief using Highcharts.
More production?
The immediate end to fossil fuel growth in
Shell’s new 1.5C scenario marks a dramatic shift from its earlier
work, which had squared the circle between limiting warming to 1.5C
and continuing to expand oil and gas production by invoking
implausibly-large forest expansion.
On the other hand, this shift also brings Shell
into agreement with the findings of multiple other 1.5C pathways.
In the influential 1.5C-compatible
pathway developed by the IEA, for example, there are “no new oil
and gas fields” and “no new coal mines”.
These conclusions have since been bolstered by
an analysis of
nearly 100 scenarios conducted by the International
Institute for Sustainable Development (IISD). It found a “large
consensus” that new oil and gas is “incompatible” with the 1.5C
target.
However, Sky 2050 is still less ambitious than
these other scenarios, due to its longer plateau and slower decline in
fossil fuels.
It involves a drop in oil-and-gas production of
just 2% and 6%, respectively, by 2030.
The consequence of slower cuts in fossil fuel use
is that warming would “overshoot” the 1.5C limit for much of the
second half of this century. This would raise
the risk of widespread environmental and economic damage.
By contrast, the IEA 1.5C pathway and those
assessed by the Intergovernmental
Panel on Climate Change, which involve “no or low-overshoot” of
the 1.5C limit, would see declines in fossil fuel use of 15-30% by
2030, according to Olivier
Bois von Kursk, who led the IISD analysis.
He adds that such a slow decline means new fossil
fuel production could, in fact, go ahead in Shell’s scenario:
“Meeting these production levels would
imply continued development of new oil and gas fields to compensate
for the natural decline rates of existing assets, a finding that
would support Shell’s interests in oil and gas production.”
David Hone, Shell’s chief climate advisor, tells Carbon Brief that
the company’s Sky 2050 1.5C scenario represents a balance:
“In the case of Sky 2050 and 1.5C,
this represents the fastest route we could see for achieving
reductions this decade and, therefore, limiting the overshoot in
temperature between 2035 and 2050.”
Shell says this is an outcome that “some will
consider unacceptable”, but emphasises that any more ambitious action
“may not be technically feasible”.
Hone says that, in fact, a 1.5C scenario with
even more fossil-fuel use would still be possible, but would result in
a greater overshoot:
“Clearly, with an outcome of 1.2C in
2100 you could imagine a scenario with further fossil fuel-use than
Sky 2050, then the same removals strategy, but a temperature between
1.2 and 1.5 in 2100.”
Moreover, Shell distances itself from the
scenarios’ key messages and says they are “not intended to be
predictions of likely future events or outcomes and investors should
not rely on them when making an investment decision with regard to
Shell Plc securities”.
Ultimately, it says “only governments can create
the framework necessary for society to meet the Paris Agreement’s
goals”.
Indeed, despite spending millions
on advertising, Shell has long insisted that it has limited power
to affect demand for its products.
In a 2016 interview
with Carbon Brief, Shell’s then-energy scenarios lead Jeremy
Bentham described the firm as “one of the bigger hairs on the tail” of
the “dog” of global energy demand, saying “we can’t wag the tail or
wag the dog completely at all”.
Since then, Shell has made much of becoming “a
net-zero emissions energy business”, with a pledge to
reduce oil production by “around 1-2% each year” following a peak in
2019. (It had no such pledge for reducing gas production.)
However, under Sawan, the company is considering
weakening its climate actions. The chief executive told the Times in
March:
“I am of a firm view that the world
will need oil and gas for a long time to come. As such, cutting oil
and gas production is not healthy.”
If Shell decides to maintain or increase
production, it would join other oil majors that are rolling back
climate pledges, even as they made record
profits during the energy crisis. BP recently watered
down its plan to cut oil-and-gas output by the end of the decade.
Low energy
In the past, Shell’s Sky scenarios have involved
both fossil fuel use and global energy use at the very upper
end of 1.5C pathways that other researchers have devised.
A crucial factor that enables fossil-fuel use to
fall faster in the Sky 2050 scenario is its “much-reduced” energy
demand. It involves global demand reaching just 641EJ in 2050, some
23% lower than the 828EJ in Sky 1.5.
In the new 1.5C scenario, the lower energy
demand, shown in the chart below, is largely driven by more
electrification and the assumption that buildings are made more energy
efficient faster. Shell’s Varro cites “renewable-based
electrification and efficiency improvements” as key priorities
following the global energy crisis.
![](images/images_07_19_2023/chart4.jpg)
Global primary
energy demand, EJ per year, in Shell’s new Sky 2050 scenario (solid
line), compared to its previous Sky 1.5 scenario (dashed line). Shell
only provides data for five-year intervals, and the Sky 2050 scenario,
unlike Sky 1.5, does not include data for the years 2019-2025, which
covers the drop in demand due to the Covid-19 pandemic. Source: Shell’s
Sky 2050 scenario and Shell’s
Sky 1.5 scenario. Chart by Carbon Brief using Highcharts.
Sky 2050 also involves a faster near-term
acceleration of wind and solar power.
However, as the chart below shows, the shift in
Shell’s pathways for these technologies is not as dramatic as for
fossil fuels. (Shell’s previous 1.5C scenario already
included solar power construction at the very maximum end of
pathways available at the time.)
![](images/images_07_19_2023/chart5.jpg)
Left-hand chart
shows global primary energy, EJ) per year, provided by wind (blue) and
solar (red) in Shell’s new Sky 2050 scenario (solid lines), compared
to its previous Sky 1.5 scenario (dashed lines). Right-hand chart
shows the same but for bioenergy (blue) and nuclear power (red). Shell
only provides data for five-year intervals, and the Sky 2050 scenario,
unlike Sky 1.5, does not include data for the years 2019-2025, which
covers the drop in demand due to the Covid-19 pandemic. Source: Shell’s
Sky 2050 scenario and Shell’s
Sky 1.5 scenario. Chart by Carbon Brief using Highcharts.
The new scenario also significantly scales down
its assumptions for the growth of nuclear power and bioenergy, as
shown in the figure below. For bioenergy, it cites “rising concerns
about the availability of a large sustainable resource base”.
By 2100, Shell’s new 1.5C scenario involves just
84EJ of bioenergy and energy from waste, a reduction of 54% compared
with 183EJ in its previous pathway. Similarly, nuclear in 2100 is 29%
lower.
CO2 removals
These concerns over sustainability are echoed in
Shell’s decision to scale back the use of tree planting and bioenergy
with carbon capture and storage (BECCS) in its new pathway.
Shell’s older 1.5C scenario involved “extensive
scale-up of nature-based solutions”, including planting trees over an
“area approaching that of Brazil”.
The new scenario accepts that this is an
unrealistic outcome. A table from Shell’s report (below) shows that
its previous Sky 1.5C reforestation target of 678m hectares exceeded
the “technical maximum” global tree planting potential of 673m
hectares.
![](images/images_07_19_2023/table.jpg)
Global area
covered by different nature-based solutions (NBS), millions of
hectares, in the three Shell scenarios, Sky 1.5, Sky 2050 and
Archipelagos. “Technical maximum” refers to the global area models
suggest could technically sustain such NBS. Source: Shell’s
Sky 2050 scenario.
Shell takes a “cautious view” in its new scenario
and undertakes “a full overhaul of the assessment of land-use change”.
The “Brazil-sized” forest is replaced with a three-times smaller
“Mexico-sized” forest, covering 202m hectares.
The company also emphasises the role of voluntary
carbon markets in promoting nature-based solutions. It says that by
2030, an area of 20m hectares, the “size of Cambodia”, would be
generating carbon credits in the Sky 2050 scenario.
Despite the lower levels of BECCS for capturing
and storing CO2 from the atmosphere, CO2 removals are higher in Sky
2050 than previous versions of Sky.
This is because the new scenario relies for the
first time on a substantial scale up of DAC machines for sucking
carbon dioxide (CO2) out of the atmosphere. Shell says this reflects
“rising hopes for engineered emissions removals” and notes:
“The CCS challenge is well suited to
the exploration and production arm of the oil and gas industry,
which has a unique skillset in engineering and geology.”
DAC and other technologies for removing CO2 from
the atmosphere are controversial as
a long-term climate solution, in part because they are popular within
the fossil-fuel industry, despite remaining largely untested on a
large scale.
In addition to concerns over
deliverability, DAC could also have very large energy
requirements. Indeed, in Sky 2050 DAC ends up consuming 13% of the
world’s energy supplies in 2100.
As the chart below shows, this is more than the
energy used to power every road passenger vehicle, every passenger
plane or every home in the world.
![](images/images_07_19_2023/chart6.jpg)
Energy use by different sectors, EJ per year in 2025, 2050, 2075 and
2100 under Shell’s new Sky 2050 scenario. Source: Shell’s
Sky 2050 scenario. Chart by Carbon Brief using Highcharts.
Teaser photo credit: An oil platform in Mittelplate, Wadden
Sea. By Ralf Roletschek – Own work, CC BY-SA 3.0 de, https://commons.wikimedia.org/w/index.php?curid=16338452
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