Shell’s recent U-turn on green commitments, with plans for steady oil production until 2030, has brought the company under scrutiny for its commitment to the Paris Agreement. Supporters were blindsided when CEO Wael Sawan prioritised shareholder returns, planning to invest $40 billion in oil and gas production as compared to $10-15 billion in low-carbon products. Critics have lashed out at Shell, highlighting that its continued focus on fossil fuels hampers the necessary energy transition.
- Despite public outcry, Shell plans to continue steady oil production until 2030.
- Shell has been legally mandated to reduce its CO2 emissions by 45% by 2030.
- Shell’s campaign promoting CO2-neutral driving was deemed deceptive
Legal challenges and climate activism
Shell, ranking amongst the world’s top 10 most polluting companies, contributing to 1% of global emissions, recently faced a significant legal setback when a Dutch court decreed a substantial reduction of 45% in its CO2 emissions by 2030. With the landmark case instigated by Milieudefensie and backed by 17,379 co-plaintiffs and 6 organisations, Shell finds itself compelled to answer for its substantial contribution to climate change and instigate substantial preventative measures.
The court dictated that Shell must reduce its Scope 1, 2, and 3 emissions across its entire energy portfolio by 45% by 2030, on a contrasting base of its 2019 emission levels. The court handed Shell the flexibility to strategize the allocation of these reductions amongst these scopes. This mandate, however, comes with the obligatory caveat of ensuring an aggregate reduction of 45%.
Throwing light on the court’s verdict, it stated, “With respect to the business relations of the Shell group, including the end-users, this constitutes a significant best-efforts obligation, in which context Shell may be expected to take the necessary steps to remove or prevent the serious risks ensuing from the CO2 emissions generated by them, and to use its influence to limit any lasting consequences as much as possible.” The implications suggest Shell may have to reconsider new investments in the extraction of fossil fuels and limit its production of fossil resources to comply with the mandate.
The court repudiated Shell’s argument that the EU Emissions Trading System (ETS) preempted additional emissions reduction, counterarguing that ETS applies only to some of Shell’s emissions within Europe and doesn’t cover emissions outside the EU. Hence, the standard of care necessitates Shell to reduce global emissions that potentially harm Dutch citizens. Furthermore, the court dismissed Shell’s claim that a reduction obligation would be futile as such emissions would be supplanted by other companies, implying Shell’s unique responsibility for its emissions.
In light of Shell’s changing strategy, which prioritizes profits over environmental conservation, the company’s compliance with the court’s decision remains uncertain. The public view of Shell has been largely unfavorable, as environmental activists continue to protest against its potentially harmful fossil fuel drilling plans. The spotlight is firmly on Shell as it navigates its path between record annual profits of £32 billion and the contentious role it plays in catalysing climate change and its global repercussions.
Misleading advertising and false commitment
The Advertising Standards Authority (ASA) in the United Kingdom declared that a Shell advertising campaign promoting its green initiatives was misleading and subsequently banned it. The ASA argued that Shell had failed to disclose in its ads that the majority of its business revolves around environmentally damaging fossil fuels, such as petrol.
Shell has established itself as an ambitious participant in the race towards sustainable energy, pledging to achieve net zero carbon emissions by 2050. At the same time, the company plans to expand its gas business by one-fifth. Its banned ad campaign, which was disseminated via TV, poster and YouTube channels, was aimed at promoting renewable electricity sources, wind energy, and car charging initiatives. Shell’s climate-focused ads stated, “From electric vehicle charging to renewable electricity for your home, Shell is giving customers more low carbon choices and helping drive the UK’s energy transition.”
The ASA’s verdict followed a complaint lodged by Adfree Cities, a campaigning group, and it was not the first of its kind in the United Kingdom. Previously, the ASA banned “green” ads run by Spanish company Repsol and Malaysia’s Petronas, judging that they did not fully disclose their operations and carbon-reduction strategies.
Reacting to the ad ban, Shell defended the campaign, stating it aimed to highlight its range of lower emission energy products. They opined that mentioning their traditionally high-carbon operations would counteract the ads’ positive environmental message. Shell criticised the ASA’s decision, labeling it “shortsighted” and suggesting it could stifle the UK’s momentum in transitioning towards renewable energy.
The ASA, however, stated that consumers, familiar with Shell’s fossil fuel-based operations, would likely be unaware of the specific details pertaining to each company’s approach to emission reduction. The advertising watchdog argued that ads would mislead consumers if they misrepresented the role low-carbon initiatives play in a company’s overall strategy, both currently and in the foreseeable future.
This ruling reinforces prior influences from the Reclame Code Commissie (RCC) in the Netherlands, where Shell’s CO2-neutral driving campaign was also found to be deceptive. The campaign there promised to allow customers at Shell petrol stations to pay an extra cent per litre of fuel to support tree planting and forest conservation, while its validity in fully compensating for CO2 emissions remains unproven.
The rulings against Shell have sparked political and societal reactions urging for a ban on fossil fuel advertising, likening it to the ban on tobacco advertising. This has led to questions raised in the Dutch parliament by the political parties GroenLinks, PvdA, and Partij voor de Dieren. Advocacy groups, such as Reclame Fossielvrij, Greenpeace, WWF, and ActionAid, have also expressed their support for such a ban in the Netherlands and across the EU.
Carbon Capture and Storage: A genuine solution or merely a fossil fuel facade?
As per Shell’s carbon capture proposal, the company has avowed its strategy to reach net-zero emissions by 2050. However, skeptics are quick to note the glaring inadequacy of this plan. To elucidate, the Shell-owned Quest Carbon Capture and Storage (CCS) project in Alberta, Canada, regarded as a “thriving example” of CCS, has demonstrated less than satisfactory results in the carbon emissions arena. According to an examination by the international watchdog, Global Witness, the plant has released a staggering 7.5 million metric tons of greenhouse gases since 2015 while only managing to capture 5 million tons of CO2.
This unfortunate result signifies that the Quest plant has captured under half (48%) of its carbon emissions, a stark comparison to the oil industry’s promised 90% carbon capture rate for similar projects. Gauge this with the carbon footprint of 1.2 million gasoline vehicles per annum, and doubts about the effectiveness of this technology in reducing carbon emissions begin to mount.
In reaction to this, Shell representatives disputed Global Witness’s findings and insisted that the facility was designed to capture approximately a third of CO2 emissions. It accelerates raising queries on Shell’s promise of technologies such as CCS and blue hydrogen – fossil or hydrogen empowered methods to minimise carbon emissions – to tackle the globe’s energy and climate goals. However, the discrepancy in the figures shrouds Shell’s pledge in uncertainty.
Adding a further twist, Shell recently pulled out of the Northern Endurance Partnership’s (NEP) East Coast Cluster carbon capture and storage project in northern England. As per a statement to Reuters, following a review of its portfolio, Shell revealed shifting its focus to the Acorn CCS project in Scotland, where it would take up the role of technical developer. An obvious question then emerges, was Shell’s retreat from the NEP project an embodiment of its commitment to fossil fuel and not to invest in any green initiatives.
Is this a good strategy for Shell and its shareholders?
Shell’s decision to prioritize short-term profits over long-term sustainability is not a good strategy for the company or its shareholders. While focusing on shareholder returns may seem like a sound business approach, it fails to acknowledge the changing global energy landscape. The world is transitioning towards renewable energy, and the demand for fossil fuels is expected to decline. By continuing to invest heavily in oil and gas production, Shell is putting itself at risk of becoming obsolete in the future.
Enron, another energy company that prioritized shareholder value above all else, serves as a cautionary tale. The company’s unethical practices and focus on short-term gains eventually led to its downfall. Similarly, Shell’s reluctance to prioritize the necessary energy transition could have negative consequences for the company.
The world is changing, and green energy is not only better for the environment but also becoming more cost-effective. The declining cost of solar panels and battery storage presents an opportunity for companies to embrace renewable energy and capitalize on its potential. Businesses that fail to adapt may find themselves left behind, just as Kodak did with the rise of digital photography. Kodak went from record profits in 1996 to no profits in 2004. When there is a technology shift the results for companies left behind can be brutal and fast.
Shell’s decision to prioritise profits over environment preservation is alarming and raises serious questions about the company’s dedication to combat climate change. As one of the world’s top polluters, Shell’s actions hold significant implications for sustainable living and the urgent need for climate solutions. The company should prioritize investments in low-carbon products and technologies that align with the global push for sustainability. By embracing green energy and driving the energy transition. This strategy would work long term for all stakeholders.