Royal Dutch Shell has urged investors to vote for its strategy to shift the business towards cleaner energy sources, despite warnings that the plan does not go far enough to meet the Paris climate agreement goals.
The oil company set out its energy transition plan before its annual shareholder meeting in May, when investors will be able to take part in an advisory vote on Shell’s climate plans for the first time. The vote will not be binding.
Shell’s strategy includes plans to reduce the carbon intensity of the energy it produces by 20% before the end of the decade, by producing less oil and more renewable energy, and further steps to become a carbon neutral company by 2050.
Ben van Beurden, Shell’s chief executive, said the company was asking shareholders to vote for an energy transition strategy “designed to bring our energy products, our services, and our investments in line with the temperature goal of the Paris agreement and the global drive to combat the climate crisis.
“It is a strategy that we believe creates value for our shareholders, our customers and wider society,” he said.
However, Follow This, the shareholder activist group, said the plan’s focus on carbon intensity (the average carbon footprint of all Shell’s products), rather than the total emissions produced, would put it at odds with the Paris climate agreement in the medium term. The Paris accord is considered crucial to avoid an irreversible climate crisis.
Follow This will put a rival climate proposal to shareholders at the AGM. Its plan outlines tougher measures to bring Shell in line with the Paris goals, which require absolute emissions to fall by between 25% and 45% by the end of the decade.
Shell has called on its investors to vote against the Follow This resolution in favour of its own proposal. The company said the rival plan was “redundant” given its own “more comprehensive strategy”.
Mark van Baal, who leads Follow This, said: “If Shell’s targets were Paris-consistent, we would only need one resolution. In that case we would withdraw our resolution and support Shell’s.
“Shell’s medium-term target of a 20% reduction in carbon intensity, will not deliver enough absolute emission reductions to achieve the Paris goals. Moreover, Shell doesn’t plan to shift investments substantially away from fossil fuels to renewables, and plans to increase natural gas production.”
The company’s climate strategy, which was first set out in February, includes a modest fall in oil production, by selling oilfields or through the natural decline of their reserves, and an increase in gas production and gas exports to the global market.
While Shell’s gas production is expected to decline by 1 to 2% a year, the company plans to increase its ability to export 33.3m tonnes of liquefied natural gas (LNG) a year, to another 7m tonnes a year by the middle of the decade. In theory, Shell could produce more carbon dioxide emissions a year while still decreasing the carbon intensity of its energy products by producing less oil and more gas.
“Investors want to see absolute emission reductions,” Van Baal said. “Shell only talks about relative emission reductions – intensity targets – that fail to reduce absolute emissions this decade by 25-45%, which is needed to achieve the Paris goal.”