Report: Most oil majors’ net-zero strategies are greenwash, with US firms faring the worst

Despite a major trend towards strengthening climate commitments in recent months, oil and gas majors are broadly failing to take responsibility for their entire emissions footprint, with some on track to deliver just a 3% cut in absolute emissions by 2050.

That is the key conclusion of new analysis from think tank Carbon Tracker, which analysed the climate targets of nine large oil and gas firms, in addition to their policies for meeting these goals and metrics for tracking progress.

The analysis found that six of the firms – Shell, Total, Equinor, Chevron, Conoco-Philips and Exxon-Mobil – have designed their climate ambitions in a way that will enable them to shirk responsibility for all or some of their Scope 3 (indirect) emissions, particularly emissions generated by the burning of their products by the end-user. Scope 3 emissions can account for as much as 95% of an oil and gas firm’s overall carbon footprint, with the average among the businesses analysed being 85%.

Moreover, most of the firms analysed wither have plans to increase oil or gas production in the coming decade, or have climate targets which would leave them free to develop or implement such plans. Carbon Tracker has previously undertaken research concluding that the world’s largest oil and gas companies must cut combined production by 35% by 2040 if nations are the meet the collective ambitions of the Paris Agreement. This cut would only be sufficient to cap the temperature increase at 2C, a trajectory which would, according to the IPCC, result in significantly greater nature loss, human health and economic impacts than 1.5C.

Without capping production and shifting to new business models centred around renewable energy, oil and gas majors are not only jeopardising global progress towards key climate targets but risking the financial viability of their own businesses, Carbon Tracker warns. The think tank previously concluded that major companies risk wasting £1.8trn ($2.2trn) on stranded assets by 2030. The only oil and gas major to have shifted the vast majority of its portfolio to renewables to date is Orsted, formerly Danish Oil and Natural Gas (DONG). 

According to the new analysis, the firm best placed to comply with the Paris Agreement is Eni. The Italian firm is striving to reach net-zero emissions from Scope 1 and Scope 2 sources, to cut absolute emissions by 35% by 2030 and reach net-zero across absolute emissions by mid-century.

Repsol and BP round out the top three. BP set a net-zero target in February and initially faced criticism around plans to account for Scope 3 emissions and due to its reliance on offsetting. Since then, it has made preparations to reduce the value of its fossil fuel assets by between $13bn (£10.4bn) and $17.5bn (£14bn).

ExxonMobil, meanwhile, ranked last. Its climate targets only cover Scope 1 and Scope 2 emissions related to oil sands projects. Chevron and ConocoPhillips also fared poorly. Carbon Tracker claims that their cliate targets will only reduce their overall emissions by 3% by 2050, against a 2018 baseline. Overall, the think-tank believes there is a “major” gap between the ambitions and actions of European and US-based firms.

“On their own, net-zero targets are insufficient to link to Paris goals,” report author Mike Coffin concluded.

“To do that, climate targets need to recognise the absolute limits of a global carbon budget and incorporate interim emissions reductions. Policies which fall short will fail to satisfy both environmental and financial concerns from investors, and risk being perceived as greenwashing.”

Sector deal

The publication of Carbon Tracker’s analysis comes shortly after senior civil servants in the UK officially began work to develop a sector deal for the oil and gas sector.

In light of the UK’s 2050 net-zero target, enshrined in law last year, and given the fact that the oil and gas sector is among the hardest-hit by the Covid-19 fallout, the Sector Deal will contain measures to deliver a green recovery for both the sector and the wider economy.

Experts are predicting that it will contain measures around upskilling and reskilling, repurposing infrastructure and investing in emerging technologies such as carbon capture, usage and storage (CCUS) and hydrogen. Green groups would also like to see time-bound, numerical targets for capping production introduced.

 Oil & Gas UK (OGUK) recently published an industry-wide 2030 target to halve operational emissions and a shared roadmap to reach it. The sector does not, however, have a shared target for Scope 3 emissions.

Sarah George