‘Net Zero’ Oil and Gas Club Is Not All It’s Cracked Up to Be

In early May, French company Total, became the latest investor-owned oil and gas company to come out with an ambitious-sounding climate announcement. Total stated its support for the “goals of the Paris Agreement” and an intent “to be consistent with these goals . . . with a view for Total to get to net zero by 2050.” 

This commitment puts Total in what has been called “Big Oil’s ‘Net Zero’ Club,” joining other European oil and gas companies Shell, BP, and Repsol. Even state-held PetroChina became the first Asian national oil company to signal its recognition of the energy transition by pledging to cut emissions to “near zero” by 2050. While any commitments to ratchet up emissions reductions are to be celebrated, it is problematic that such companies, some of the largest single sources of greenhouse gas (GHG) emissions in the world, are claiming the distinction of “net zero.” 

According to the Grantham Research Institute on Climate Change, net zero means “achieving an overall balance between emissions produced and emissions taken out of the atmosphere.” This means reducing total emissions to as close to zero as possible and then using various strategies to remove any residual emissions. Of the recently announced GHG emissions targets by these oil and gas companies, do any of their plans meet this definition? 

The Spanish oil and gas company Repsol has committed to a net-zero goal by 2050 that covers its “production and products,” understood as Scope 1 through 3 emissions. This commitment does not cover oil and gas products purchased from other companies. UK supermajor BP committed to reduce to net zero the Scope 3 emissions associated with oil and gas production that the company extracts itself. However, its CEO clarified that this excludes the larger Scope 3 emissions associated with refinery outputs for crude purchased from external producers and additional energy products that it markets. Notably, BP has more recently committed to declining production, but even this announcement excludes its equity in Russian gas giant Rosneft.

The claim of net zero gets even more opaque in the case of Total and Shell. Total states in its net-zero announcement that it will achieve net zero “across all its production and energy products used by its customers in Europe by 2050.” For the rest of its global emissions, however, it will achieve a “60 percent or more” reduction in the average carbon intensity of its energy products by 2050, apparently excluding product use emissions for all other global customers. In the case of Shell, the company claims a net-zero target, but defines this as a commitment to reduce its operational (Scope 1-2) emissions to net zero and to reduce the carbon intensity of its energy products sold (Scope 3) by 65 percent by 2050 through production and sale of cleaner products. Beyond that, Shell underlines that it will rely on the actions of its customers to “help Shell become a net-zero business.”

While making commitments toward net-zero goals is a strikingly positive development, these announcements should not be mistaken for actual net-zero commitments across the full scope of a company’s emissions. Marketing such reductions as net zero may give a false sense of progress in the race to achieve global climate reduction goals that truly align with the Paris Agreement. 

As explained by Carbon Tracker, a leading UK climate and financial think tank, carbon-intensity targets allow companies to potentially grow their absolute, or overall, production and associated emissions while lowering the companies’ carbon-intensity (defined as emissions per unit of energy produced) through efficiency or by purchasing clean energy infrastructure. 

When it comes to climate stabilization the only thing that matters is that absolute emissions are falling at the necessary rate and scope. While carbon intensity lowers the emissions per unit of energy produced, if this masks the fact that even more oil and gas is being produced overall, the world’s carbon goals may not be timely met. Currently, science indicates that total production of oil and gas must decline to meet net-zero goals. Carbon intensity goals are appropriate when a company is part of an industry-wide scheme to account for, and reduce, total sectoral emissions or when a company is otherwise also measuring and reducing its total emissions in line with the net-zero goal. 

A recent report from Transition Pathway Initiative also highlights gaps and distinctions between announced company targets, highlighting the lack of standardization in defining the emissions for which oil and gas companies are responsible. Transition Pathway Initiative points to differences of “boundaries,” in other words, which emissions are considered by each company and which are not. Discrepancies between organizational boundaries (whether only operated asset emissions are covered versus equity asset emissions) or emissions boundaries (whether a company includes all CO2e versus just CO2 and which categories of Scope 3 emissions are included) can greatly affect how meaningful a company’s target truly is.

The Science-Based Targets Initiative (SBTi) has become known as the gold standard for setting Paris-aligned targets. While setting a science-based target through the initiative’s sector-based approach is not yet an available option for oil and gas companies (that approach is still under development by SBTi), companies can commit to set an SBT. Thus far, no oil and gas major has done so. 

Despite the need for more clarity on when an oil and gas company can rightfully claim it is headed toward the critical goal of net-zero emissions, these handful of oil and gas companies described above are taking important leadership positions on greenhouse gas emission reductions. Companies that set broader and more ambitious climate targets should be lauded when compared to peers such as Chevron and Exxon that have set abysmally low GHG reduction targets and demonstrated hostility toward investor engagement on this important topic. 

Ultimately, oil and gas companies should offer much more transparency on the full scope of emissions that are attributable to them and be clear on what portion of these emissions are covered in their announced GHG reduction targets. It is only when all emissions are accounted for and covered by a target aligned with science, that the company can truly claim it is aiming for net zero and aligning with safe climate stabilization.