The oil-and-gas giant says this “Sky” pathway would involve “re-wiring the whole global economy in just the next 50 years”. Global oil demand would peak in 2025 and gas in the 2030s. It says this is technologically and economically feasible – though it stops short of saying it is politically or socially possible.
Shell’s head of scenarios tells Carbon Brief this would be “very challenging” for the firm, but that the company could still “thrive”. Others have criticised the work, arguing that it maintains fossil fuel use at today’s levels, for decades to come, thereby failing to genuinely test Shell’s existing business model.
In fact, Carbon Brief analysis shows that Shell’s scenario is broadly consistent with other well-below 2C pathways drawn from the academic literature. Almost all of these alternative futures share a heavy reliance on using unproven negative emissions technologies to suck excess CO2 from the atmosphere.
Shell has a long history of using scenario analysis to test and direct company strategy. The idea is not to predict what will happen, but to explore a range of plausible futures.
“These scenarios are a part of an ongoing process used in Shell for over 40 years to challenge executives’ perspectives on the future business environment. They are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes.”
For many years, however, Shell effectively dismissed the idea that the world would make serious efforts on climate change, consistent with avoiding dangerous warming. Indeed, the 2013 scenarios both involved warming far in excess of the internationally agreed limit of 2C.
In a 2015 Carbon Brief interview, Jeremy Bentham, Shell’s vice president of global business environment and head of scenarios, said 2C pathways had become “less plausible”, from a political and social perspective. He said that Shell had developed scenarios, for internal use, where the 2C limit was respected, but that it might not be “helpful” to publish them.
Then, later that year, governments signed the Paris Agreement on climate change, committing to hold temperatures to “well-below 2C” and to strive to limit warming to 1.5C. A few months later in 2016, Shell sketched the outlines of a “below 2C” scenario. However, it presented this pathway as unlikely, relying on a “goldilocks” combination of all the most optimistic outcomes.
This week’s publication develops that 2016 outline into a detailed and – according to Shell – ”plausible” route to meeting the “well-below 2C” goal of Paris. It even explores ways to push further, towards the 1.5C Paris aspiration.
So, what does Shell’s new well-below 2C scenario involve? First and foremost, it means global CO2 emissions reach “net-zero” by 2070, in little more than 50 years.
Bentham tells Carbon Brief:
“A big message [from this new scenario] is Paris is possible. That involves an eye-watering re-wiring of the global economy, in 50 years, but it is technologically, industrially and economically possible, if we, as global society, choose to make it happen…Nearly everything in this is either eye-watering or awe-inspiring.”
Note, however, the careful wording around what, in Shell’s view, “possible” actually means. Here, Bentham says a Paris-compatible future is “technologically, industrially and economically possible”. In contrast, previous comments described the 2.5-3C futures in “Mountains” and “Oceans” as “socially, politically and technically feasible”. Arguably then, Shell continues to harbour doubts over the political and social feasibility of the Paris goals.
Turning to the Sky scenario itself, some of the key features include global coal use having already peaked, oil demand peaking by 2025 and gas following in the 2030s, as the chart below shows. Nevertheless, oil demand remains at or above today’s levels until 2040, while gas demand only dips below current levels by 2050.
Other notable features of Sky include a massive, rapidly accelerating scale-up of solar power, which becomes the world’s largest energy source before 2060 and supplies more than twice the energy of any other fuel by 2100. There are also large increases for bioenergy, wind and nuclear.
The amount of electricity generated around the world would rise five-fold by 2070, with expanding access to power, while transport and heat are increasingly electrified. By 2030, half of new cars around the world would be electric vehicles.
Widespread adoption of a price on CO2 emissions would help drive these changes, Shell suggests. The global average price would exceed $40 per tonne by 2030 and around $80 by 2040.
Meanwhile, most EU nations would reach net-zero emissions by 2060. On a global basis, net-zero CO2 follows just 10 years later, in 2070, before turning net-negative as excess CO2 is sucked out of the atmosphere. Negative CO2 emissions balance residual methane and nitrous oxide, which continue to be emitted even after the aggressive mitigation efforts assumed by Shell.
Falling and then net-negative CO2 emissions in Shell’s scenario come from a heavy reliance on carbon capture and storage (CCS), increasingly combined with bioenergy (BECCS, which includes biomass power, biofuels and industrial uses).
By 2070, Shell says, there would need to be 10,000 large CCS facilities in operation, or perhaps 3,000 very large sites on the scale of major coal-fired power stations. For comparison, there are fewer than 3,000 coal plants around the world today.
Shell’s route to staying well-below 2C involves continued reliance on fossil fuels for several decades and a massive build-out of largely unproven BECCS technology later this century.
As Shell notes, however, there are, in effect, an infinite number of pathways to stay well-below 2C. So how does Sky compare to alternative pathways?
The scientific community has developed the new Shared Socioeconomic Pathways (SSPs) in preparation for the next Intergovernmental Panel on Climate Change report. These SSPs – which Carbon Brief will explore in more depth in the coming weeks – present five possible future worlds that differ in their population, economic growth, energy demand, equality and other factors.
Carbon Brief has compared Shell’s scenario to a subset of SSPs, that limit warming to similar levels. Whereas Sky offers a 50per cent chance of staying below 1.75C, these RCP2.6 scenarios, drawn from the IIASA SSP database, offer a 50per cent chance of limiting warming to 1.6-1.7C.
To visualise this comparison, Carbon Brief has plotted the primary energy demand, fuel mix, CO2 and negative emissions assumptions in Shell’s outlook against the group of RCP2.6 “well-below 2C” models. In each chart, Shell is shown in red, with the other scenarios shown in grey.
The first thing to notice from this comparison is that Shell assumes large increase in global primary energy demand. In this respect, Shell’s scenario is at the very top end of the range of other well-below 2C scenarios, as the top-left chart below shows.
The primary energy demand in Shell’s scenario is closest to that in the SSP5 “family” of pathways. This family is described as “fossil-fueled development”, a world where: “The push for economic and social development is coupled with the exploitation of abundant fossil fuel resources and the adoption of resource and energy intensive lifestyles around the world.”
Shell says this demand is driven by the energy needs of a growing population, with increasing access to transport, air conditioning and other energy services. It comes despite what Bentham describes as “really aggressive” assumptions on improvements in energy efficiency.
When pressed on the matter, Bentham says Shell stands by this outlook, which he says is more realistic than other views. It is worth noting, then, that, as well as most of the SSP pathways, Statoil and the International Energy Agency (IEA) see demand being much lower, in a below-2C world.
David Hone, Shell’s chief climate change adviser, says demand is suppressed by efficiency gains, but not by “energy austerity”. He tells Carbon Brief in an email:
“Some [scenarios]…suppress energy demand through various approaches, which we do not believe are credible in the world going forward (people want more services, more travel, more devices etc).”
Interestingly, this high-end energy demand is a fixed feature of each of Shell’s published scenarios – demand in Mountains is even higher. This seems to run counter to the stated aim of the scenario exercise, namely to “challenge executives’ perspectives on the future business environment”.
It is notable, then, that Bentham tells Carbon Brief:
“From a company point of view, we can thrive within this [well-below 2C] outlook, because there are many opportunities in a world that has got growing needs for energy services, that we provide.”
He adds that Shell would like to be seen as an “energy services company”, rather than an oil and gas company. Indeed, Shell hopes that by 2030, its activities in the electricity sector will make up as large a share of its business as gas.
Despite its high energy demand, other aspects of Shell’s well-below 2C scenario are broadly consistent with others drawn from the academic literature. Oil demand is close to the average, ranking 10th out of 19 pathways in Carbon Brief’s comparison, shown in the charts, above.
Shell’s gas demand is higher than average for below-2C scenarios until around 2040, when it falls slightly below average. Coal use remains relatively high throughout this century.
Responding to those saying Shell’s scenario is self-serving, maintaining fossil fuel use for decades to come, Bentham tells Carbon Brief:
“It’s actually, in many ways, a very challenging outlook for us…In this outlook, you have coal already peaked/plateauing, oil peaks in the mid-2020s and gas plateaus in the mid-2030s and then falls quite rapidly after that. If you think about the kinds of choices we have to make, a lot of change is happening then, in the time period that is right in our investment horizon [of 10-20 years]…
“We have to continue to serve our customers yet making choices on investments that have to cope with the prospect of even more accelerated change…We have to try to be as attractive and robust as we can against all those outlooks. This is about coping with radical uncertainty.”
It is worth adding a word from Shell’s legal disclaimer, which says: “We have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years.” It goes on to repeat a November 2017 pledge to halve CO2 emissionsfrom Shell’s operations and customers’ use of its products, by 2050, “assuming society aligns itself with the Paris Agreement’s goals”.
On the low-carbon side of the equation, Shell’s scenario includes above-average levels of wind and relatively low levels of nuclear, hydro and bioenergy, though each of these sees dramatic scaling up compared to today.
Most striking is solar, which Shell assumes will grow much more rapidly and to much higher levels than any of the other below-2C scenarios. Bentham quips that, unlike the IEA, some of Shell’s earlier scenarios included the sorts of rapid growth already seen for solar.
By 2070, Bentham says, Shell’s scenario would, globally, cover an area the size of Spain with solar panels and an area four times the size of France with windfarms.
For bioenergy, he says the area required would be the size of Australia – or twice the size of India. This would be equivalent to a significant proportion of the area currently devoted to arable and cropland. Nevertheless, the amount of bioenergy in Shell’s scenario is among the lowest in the ensemble of below-2C pathways.
Added together, Shell’s new scenario leads to net-zero CO2 emissions by 2070. This turns to net-negative emissions for the rest of the century. You can see this in the chart, below, which compares Shell’s energy-related CO2 trajectory to other well-below 2C pathways.
As for the energy-demand trajectories, Shell’s CO2 pathway is broadly consistent with other well-below 2C scenarios. Still, it is fair to say that emissions fall relatively more slowly than compared to most other pathways. Shell has CO2 peaking by 2025 and falling below today’s levels around 2035.
To its critics, this might suggest that Shell is institutionally resistant to change, particularly when it falls within the company’s investment horizon out to the late 2030s. For Shell, this relatively slow bending of the emissions curve reflects the huge inertia in the global energy system. It says:
“From around 2018 to 2030, there is clear recognition that the potential for dramatic short-term change in the energy system is limited, given the installed base of capital across the economy and available technologies, even as aggressive new policies are introduced. But the period is also assumed to include significant capacity-building and technology cost reductions, following two five-year national determined contribution (NDC) cycles of the Paris Agreement, such that after 2030, deployment can proceed at an accelerated pace to ensure a result well-below 2C.”
Shell’s pathway, combined with cutting deforestation and associated CO2 emissions to net-zero by 2070 as well as cutting other greenhouse emissions aggressively, would give a 50per cent chance of limiting warming to 1.75C, according to an assessment from the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change. [Note that Shell commissioned MIT to produce this work.]
MIT also assesses the impact of a massive global effort towards reforestation, covering an area the size Brazil by 2100. If added to the other elements of the Shell scenario, this effort could limit warming to 1.5C, MIT says.
Looking out to 2100, the chart above shows that energy-related CO2 emissions turn net-negative in all except one of the 18 other well-below 2C scenarios in the SSP database. Shell has negative emissions by 2075, while the others range from 2065 through to 2095.
In fact, Shell’s reliance on BECCS and CCS to remove CO2 from the atmosphere is relatively modest, in comparison to most other well-below 2C scenarios, as the chart below shows. (Note that BECCS, the most commonly referred-to option, tends to stand in as a proxy for all negative emissions approaches, in current modelling efforts.)
Even this lower-end deployment of CCS would be a huge challenge: Shell suggests it would need a new industry at least as large as the current global fleet of coal-fired power stations.
As implausible as that sounds, the chart above shows that Shell is far from alone in relying on negative emissions to meet the goals of the Paris Agreement. Indeed, every single well-below 2C pathway in the SSP database uses CCS to some extent, as the chart above shows.
This story was published with permission from Carbon Brief.
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