Ben Van Beurden calls for industries to urgently step up collaborative efforts to support the Paris Agreement and overcome systemic barriers to faster decarbonisation
The chief executive of oil giant Shell has issued a direct call for businesses around the world to collaborate in support of the Paris Agreement, warning that the net zero transition is now non-negotiable and that the public will simply "not stand for" current emissions trajectories and the resulting warming.
Speaking at the company's annual Energy Summit in Weybridge yesterday, Ben van Beurden offered a sweeping overview of the challenges and opportunities presented by the net zero transition, for the economy as a whole and high carbon businesses in particular.
He repeatedly stressed that a rapid net zero transition would be hugely difficult to engineer, but was now all but inevitable. "Even for a country with the resources, the talents, and the capacity to innovate of the UK, reaching net zero by 2050 is going to be a challenge," he said. "But it is a challenge that is also entirely consistent with the Paris Agreement goal of restricting the temperature rise to less than two degrees, and I think significantly less. Lowering emissions to the point that the world is no longer adding to the stock of greenhouse gases and the atmosphere is the only way to go."
He also added that the net zero transition would extend far beyond the UK. "The whole world has to get to that point," he said. "Now some people say the whole world needs to get there by 2070, and some people say 'no, you have to get there by 2050'. But whatever timeframe you pick, getting to net zero will require an absolutely unprecedented level of coordinated action. And I believe governments will need to do a lot and will need a lot of help as well."
Challenged by Environmental Defense Fund CEO Fred Krupp to support a target of net zero emissions by 2050 in every industrialised country, Van Beurden said Shell would back such goals. "If we could get to a point, which I think we are very close to in Europe, where the EU would support net zero by 2050 we would be wholeheartedly, vocally supporting it," he said.
Van Beurden argued there was a compelling case for bolder climate policies across the board, reiterating his previous calls for more ambitious carbon pricing mechanisms and for the UK government to bring forward its target date to end the sale of internal combustion engine vehicles by 2040. "The UK will have to move a whole lot more quickly on vehicles to meet the commitments that the government made [on net zero]," he said.
However, he also stressed that significant systemic and structural barriers continued to hamper investment in the net zero transition.
Challenged repeatedly by event host, ITV's Allegra Stratton, on the contrast between Shell's $3bn of capital investment in renewables and its $25bn investment in the rest of its primarily oil and gas focused business, Van Beurden argued that if a rapid increase in renewables investment failed to deliver financial returns shareholders might push back against the entire strategy of building a Paris Agreement compatible business.
"You know, my biggest concern about our investment levels, is that we get ahead of ourselves, and at some point in time we have to say, 'whoops, you have to write off a few billion dollars because we got a few things wrong'," he admitted. "And a very significant set of stakeholders in our company will say, 'well, that's enough. Yeah, you guys just stick to your knitting - you do oil and gas because at least you know how to do that'."
Krupp countered that there was a compelling case for Shell to be investing more now in renewables, carbon capture, and other forms of clean technology. "I'd like to see every dollar of capital that is expended by the company be expended in a way that aligns with this goal of net zero," he added. "And I'd like to see the company be able to justify how that alignment is taking shape to both its investors and the general public. After all energy infrastructure lasts for a long time, and 2050 is just around the corner. So the dollars being spent by Shell today are really shaping what's going to happen in 2050."
Van Beurden insisted the company was looking to step up investment in clean energy infrastructure, having already established itself as a major player in the market. He argued the company was working hard to convince shareholders and other stakeholders of the investment case. "What we have to do is to tell people, 'there is value in this, you know, the energy transition is a huge value opportunity, a huge investment opportunity'," he said. "And as a matter of fact, we do believe we have very relevant competencies that will allow us to be winners in that new energy world. So, trust us a little bit to demonstrate that we can make good business out of the energy transition."
He added that as such he was hopeful Shell could increase its investment in renewables to around $5bn a year by 2025, assuming the financial case can be made. "We need to step up [renewables investment] ideally already before 2025, because we expect to have a business model that can create eight to 12 per cent return," he said. "And we have to show the pathway to getting there. At the moment there aren't too many companies in that sector that make that kind of return. And that's why it sounds a little bit too ambitious. But I think if you can get that in the lead up to 2025 then we will be stepping up our investment levels."
He offered a similar analysis of the prospects for carbon capture and storage (CCS) technologies, arguing that Shell was investing in the nascent sector and was keen to do more to help bring down costs and develop new business models, but was still hamstrung by the fact that without stronger policy interventions there was currently "no business case" for capturing emissions.
Speaking on the same day as rival oil giant BP admitted that a combination of economic and climate-related pressure from investors meant some of its higher cost and higher carbon resources "won't see the light of day", Van Beurden revealed there were encouraging signs that some investors wanted Shell to actively accelerate its clean energy transition.
"We now talk to some shareholders who ask questions where they say, 'it may well be that in 10 years' time, we're not allowed to invest in you guys anymore, which is a real problem for me as a shareholder because the dividends you pay are pretty good. What are you going to do to make sure I can continue to invest in you?'," Van Beurden revealed. "That is a helpful sign. But in the end, we're not going to get there just relying on altruism of shareholders. We have to get there by demonstrating that investing in the energy transition is good business, not just for us to be able to do the right thing, but also for society to be able to get there."
Throughout the event Shell executives argued all businesses had a responsibility to help make the case for the net zero transition. Van Beurden issued a direct call for whole sectors to work together to deliver deep decarbonisation at the requisite pace and scale. Warning that both the supply and demand of fossil fuels had to be addressed if a net zero emission economy was to be achieved, he argued businesses, governments, and even individuals had a role to play shifting demand away from carbon intensive resources.
"Shell wants to establish a coalition of businesses which work together within sectors to enable the decarbonisation of those sectors," he said. "Shell is already working together with many businesses, of course, but I'm talking about an entirely different level of ambition, a form of action that all business sectors can take in different that we in this room can make… I believe it is by cooperating through transformative collaboration, by bringing together the supply side with the demand side that we can help to bring the low carbon advances that the world needs as quickly and as cheaply as possible."
Referencing the Paris Agreement's national climate action plans, known as Nationally Determined Contributions, Van Beurden said there was an urgent need for a "coalition of Industry Determined Contributions". He added that these groups should focus on hard to decarbonise sectors, such as aviation, shipping, and heavy industry, and should look to deliver detailed, specific policy proposals that extend beyond overarching calls for more carbon pricing measures.
Van Beurden's call for greater co-operation to bring businesses into line with the Paris Agreement was broadly welcomed, but Shell also faced fierce criticism from some of the speakers on the day over its continued investment in fossil fuel exploration.
Krupp said the company's emissions goals could be "stronger", while later in the day Professor Kevin Anderson from the University of Manchester received applause from the audience for his stark warning that oil majors are helping to perpetuate climate inequality, with the world's poorest and most vulnerable already suffering the worst climate impacts.
"Whilst we carry on in a modern building with the air conditioning running because they are so badly built and designed, and with gas, nuclear and renewables keeping the lights on while it's sunny outside… people elsewhere in the world, typically low-emitting, poor, in climate vulnerable zones, typically non-white, typically women and children, they are today suffering the implications of our choice to fail," he said. "[This is] an indirect repercussion of our choice to explicitly fail for 30 years on climate change. And the [pace of transition] that Ben and Fred outlined before, I still see that as ongoing failure for another 20 or 30 years."
His analysis was echoed by leading environmental analyst, Mike Berners-Lee, who argued Van Beurden was "glossing over" some of the "basic realities" dictated by tightening global carbon budgets. "I thought there was some dissonance in the room," he said of the Shell CEO's opening address. "I thought there was some glossing over of the basic realities about energy growth, and some glossing over the need to leave the fuel in the ground. We can have all the renewables we like, but if we don't leave the fuel in the ground it won't help us."
Asked by BusinessGreen if sceptical shareholders fully consider the long-term commercial implications of more 3C or more of warming, Van Beurden said he was "not trying to hide behind shareholders" and that the barriers to investment extended beyond investor short termism to take in market design and customer demand as well.
But he quickly added that "I'm totally with you; we can't deliver a world of 3C". "As a matter of fact, I'm not quite a techno optimist, I'm more of a socio-realist," he explained. "I do think the world would not go for it, would not stand for it… We may not be on track to get there at this point in time. But I do believe, whether it is through activism or through general mobilization of voters or society, the world will insist that governments and companies will take action to get us below 2C, and significantly below it."
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