Global decarbonisation scenarios produced by BP, Royal Dutch Shell and Equinor are incompatible with the climate objectives of the Paris Agreement.
Oil majors will not reach net zero with current decarbonisation pathways and are not using current massive profits to realign trajectories.
Current short term energy security concerns are driving further fossil fuel investment, slowing transition.
As extreme weather forces refocus on system resilience, much of that investment risks becoming stranded assets.
News of the disconnect between goals and pathways comes from a new study led by research organisation Climate Analytics.
It is widely understood that energy system transformation is critical to reaching the Paris Agreement warming limit, and decision makers need sound and transparent scientific assessments. The peer-reviewed paper newly published in Nature Communications adds to that transparency.
This is increasingly important as the energy crisis is having a dramatic impact on the cost of living and global inflation. At the same time, concerns about energy security are seeing states refocus on old energy models based on fossil fuels.
Given that the price of energy is predominantly driven by the gas price at the moment, while the cost of renewables and storage is significantly lower, this seems to be counterintuitive.
Current decarbonisation scenarios mostly miss the net zero mark
Researchers from Climate Analytics analysed six institutional scenarios published between 2020 and mid 2021, including four from the oil majors (two from BP), and two developed by the International Energy Agency IEA. The analysis showed that the majority of scenarios are inconsistent with global targets of net zero emissions by 2050.
“Most of the scenarios we evaluated would be classified as inconsistent with the Paris Agreement as they fail to limit warming to ‘well below 2 ̊C, let alone 1.5 ̊C, and would exceed the 1.5 ̊C warming limit by a significant margin,” said Dr Robert Brecha, co-lead author of the study.
Most of the evaluated scenarios would be classified as “lower 2°C pathways” (i.e., pathways that keep peak warming below 2°C with a 66% chance or more). Equinor’s (NYSE:EQNR) ‘Rebalance’ scenario peaks at a median warming of 1.73°C above pre-industrial levels in 2060, BP’s ‘Rapid’ at 1.73°C in 2058, Shell’s ‘Sky’ at 1.81°C in 2069, and the IEA’s sustainable development scenario (SDS) at 1.78°C in 2056.
Only the IEA Net Zero Scenario is consistent with Paris Agreement
Only the IEA Net Zero 2050 scenario is aligned with the criteria for Paris Agreement consistency that the researchers applied in the study. BP’s Net Zero scenario results in a median peak warming of 1.65°C, too high to be consistent with the Paris Agreement criteria – every fraction of a degree matters.
Bill Hare, CEO and Senior Scientist at Climate Analytics, said: “Fossil fuel companies claim that we can continue to burn oil and gas while keeping to the 1.5°C warming limit, and they cite their own scenarios as justification. But our research shows that their pathways would bust the Paris Agreement. Even temporarily exceeding the 1.5°C warming would lead to catastrophic impacts and severely weaken our ability to adapt to climate change.”
Oil industry trajectories increase risk of stranded assets
It is also important to recognise the implications of such scenarios. Today oil states like Saudi Arabia as well as oil majors such as BP (NYSE:BP) are reporting multiple billions in profits driven by the high price of fossil fuel energy and increasing demand.
There doesn’t appear to be a commensurate increase in investment in renewables and a digitised energy system. Unfortunately, this could be the result of a short-term knee jerk reaction to the current energy environment and could have damaging long term consequences.
Research has already shown that most existing oil reserves cannot be burned if we are to stay within the global carbon budget. That means that every investment made today in the fossil fuel sector is at risk of becoming a stranded asset.
Research provides policymakers with tools to understand risks
The researchers compared the analysed pathways to the Integrated Assessment Model scenarios assessed by the Intergovernmental Panel on Climate Change’s Special Report on 1.5°C and evaluated peak and end-of-century temperatures.
In addition to implied temperatures, the authors assessed underlying energy system features that drive emissions pathways and lead to a given scenario satisfying (or not) the Paris Agreement.
The study makes available the tools for policy makers to assess on an equal footing the Paris Agreement claims made for scenarios published by a number of public, commercial and academic institutions.
“Institutional assessments have historically been opaque on climate outcomes. Our study provides a direct line of sight from pathways to temperature. Governments should use these tools to carry out a robust assessment of the energy-system transformation to meet the Paris Agreement goals,” said Dr Matthew Gidden, co-author of the study.