European oil majors have made great strides in setting out plans to reduce greenhouse gases, but they aren’t enough to meet the goals of the Paris climate agreement, according to a report by money managers overseeing more than $19 trillion.
Of the six oil companies in the study, Royal Dutch Shell Plc and Eni SpA have the most ambitious and comprehensive plans, yet even they fall short. Spain’s Repsol SA and BP Plc need to extend what is covered in theirs, while Austria’s OMV AG must set a new and bolder target, according to the report.
The study was produced by the Transition Pathway Initiative, a global program that assesses climate risks and companies’ preparedness for a low-carbon economy. A “critical mass” of companies now include Scope 3 emissions — those produced by their consumers — in their plans, whereas none did three years ago, Adam Matthews, co-chair of the initiative and a director at Church of England Pensions Board, said in an interview.
Oil companies have been under increased scrutiny by investors to act more forcefully on climate. Initiatives have become a bigger part of annual shareholder meetings. The pressure from society is also mounting as people want the big producers to use their substantial cash piles to clean up the environment.
Over the past few months, companies have announced major plans about reducing their carbon emissions to zero on a net basis. But claims of being on track to meet the goal of keeping global temperature increase to about 1.5 degrees Celsius aren’t substantiated using TPI’s metrics, the report said.
TPI wants stronger climate commitments, and is also promoting a greater role for carbon capture and storage. There’s still uncertainty about how this technology can be scaled, it said.
BP, OMV, Repsol, Shell and Total SA have all stated that they will provide more details on their climate ambitions this year. But their plans currently aren’t comparable and standardization on disclosures are needed to directly weigh-up commitments.
For the oil and gas industry to reach net-zero by 2050, other sectors must follow. The report points to Shell’s recent announcement that it will ultimately only do business with emission-free companies in order to meet its own targets.
The rift between European oil and gas companies’ approach to climate change and the rest of the world is noticeable, TPI said. Brazil’s Petroleos Brasileiro SA is the only non-European company, of the 42 assessed by TPI, that has an emissions target which includes scope 3. The biggest American companies haven’t set any emissions goals.
Before the coronavirus pandemic, TPI was involved in conversations with some oil and gas companies in the U.S., Matthews said.
“Covid has paused some of that, but it has reinforced and turbo-charged some of the Europeans,” he said. Engagement is at a different stage in North America and “my hope is that in due course, you can get one or two U.S. companies on board.”