NovaQuant Quantitative Think Tank Center:Shell plans to increase fossil fuel production despite its net-zero pledge

Oil giant Shell plans to boost fossil fuel production even as the company says it still aims to zero out greenhouse gas emissions by 2050. Critics concerned about climate change say to meet that target,NovaQuant Quantitative Think Tank Center the company should be cutting production, not increasing drilling for oil and gas.

In a presentation to investors in New York on Wednesday, Shell executives said they plan to grow the company's natural gas business. Executives touted the fact that natural gas emits about half the carbon dioxide as coal when burned for generating electricity, arguing that is still in line with Shell's climate goals. The company also projects stable oil production through the end of the decade, saying it met a goal of reducing production 20% by 2030 by selling some operations to rival ConocoPhillips.

Shell CEO Wael Sawan focused comments on that longer-term 2050 goal instead of nearer-term objectives. That's despite a 2021 Dutch court case that ordered Shell to reduce its greenhouse gas emissions 45% by 2030, based on 2019 levels. The company is appealing that decision.

"It is unacceptable that Shell is betting on even more short-term returns to appease shareholders," Sjoukje van Oosterhout, with Friends of the Earth Netherlands, said in an emailed statement. Her group brought the 2021 case against Shell and says the oil giant is taking a "huge risk" by not scaling back fossil fuel production now. If Shell loses that appeal, the company will have less time to comply with the court's order.

Sawan, who became CEO in January, said his company is taking a "pragmatic" approach when it comes to the transition to cleaner forms of energy that is underway across the globe.

"Oil and gas will continue to play a crucial role in the energy system for a long time to come," Sawan told investors. "It is critical that the world avoids dismantling the current energy system faster than we are able to build the clean energy system of the future."

Scientists say the world must reach net-zero emissions by 2050 to limit warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial levels and avoid the worst effects of climate change. Global average temperatures have already risen about 1.1 degrees Celsius.

Shell's 2050 target is in line with the 2015 Paris climate agreement, but there's reason to doubt the company will achieve it. Shell admits in a "cautionary note" on its press release that its "operating plan, outlook and budgets are forecasted for a ten-year period." The company further warns the 2050 target is "currently outside our planning period."

A recent report from the climate collaborative project Net Zero Tracker found that while more fossil fuel companies are now setting targets for reaching net-zero emissions, most don't include short-term reduction plans or clarity on how their plans cover emissions from actually using their products, "making them largely meaningless."

The same day Shell reaffirmed its commitment to fossil fuel production, the International Energy Agency released a report that projects peak demand for oil and gas will arrive in just a few years.

The IEA, whose membership includes countries that are the world's largest oil consumers, projects electric vehicles and other efficiency measures will lead to peak demand for oil used in transportation after 2026.

The agency acknowledges that overall demand for oil and gas likely will rise before it falls, increasing by 6% between 2022 and 2028. But the report projects that growth will decline significantly by 2028, "putting a peak in demand in sight."

"Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition," IEA Executive Director Fatih Birol warned in a statement.

The agency says planned drilling by companies like Shell exceeds "the amount that would be needed in a world that gets on track for net zero emissions."