Despite talks that the two energy giants, Shell and Total, are shifting towards renewable energy technologies, around 90 per cent of their capital continues to be spent on fossil fuels, as revealed by the Institute for Energy Economics and Financial Analysis (IEEFA) in its report.
However, in order to reach their own stated targets, the two super majors need to shift at least USD 10 billion per annum each (or 50 per cent of total capital expenditure) from oil and gas exploration and invest into accelerating their renewable strategies, suggested the report.
Clark Butler, who is the author of the report, highlighted that the two giants are well short of their publicised sustainable energy targets without a major shift of investment from fossil fuel assets to renewable energy.
According to Butler “Total is unlikely to meet its 2025 goal of 25 GW of installed renewable energy on its current trajectory. And Shell’s immediate plan to spend USD 6 billion on renewable energy generation by the end of 2020 will also fail.”
Significantly, Total has pledged to be net-zero in Europe (only) by 2050, and to reduce its carbon emissions intensity by 60 per cent or more by 2050. Similarly, Shell plans to reduce its net carbon footprint by 65 per cent by 2050.
The author further expressed his concern by saying that “it is difficult to see how either company will achieve the massive transformation in carbon intensity they aim for without a fundamental shift away from oil and gas investment.”
“Shell and Total together are responsible for more carbon emissions than Germany, the world’s sixth largest emitter. It is impossible for them to be net zero unless they invest more in zero emissions energy and less in fossil fuels,” he suggested.
“At the very least Total and Shell need to direct more than half of their capital investment each year to zero carbon investment if they are to reduce their carbon intensity in line with their own stated targets.
“This will at least tip the balance of investment in favour of renewables over fossil fuels and will scale them up towards renewable competitors like NextEra and Iberdrola.”
“No other major oil company is growing renewables this fast,” says Butler. “But Total’s announcement last week of USD 15 billion of debt financing dwarves its investment this year in zero carbon energy.”
He further said that “Shell is in an even worse position. It will need to increase its current level of activity by orders of magnitude to meet its renewables capital investment target of USD 2-3 bn per year from 2021.”
Butler further expressed concern that “investors may avoid the supermajors altogether unless they demonstrate serious progress towards their stated goals.”
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