Thirteen of the biggest 15 publicly traded oil-and-gas companies have revised climate targets since May 2021, and together they reveal an industry utterly without standardized policies shaped by climate science, according to a new analysis by the UK research nonprofit Carbon Tracker Initiative.
Carbon Tracker’s approach has practical value beyond the specific conclusions they reached about fossil-fuel leaders and laggards. The questions that shape the report seek to clarify the sector’s—and by extension much of the world’s— rhetorical dash toward net-zero emissions commitments. These three questions, which make up their basic framework, are widely applicable:
The “Absolute Impact” report, which first launched in 2020, is a snapshot of an industry under climate pressure like few others, since its fundamental product is a major cause of the global problem.
“Take a car manufacturer. We need to change how cars are powered. But ultimately, we’re still going to use cars,” said Mike Coffin, head of oil, gas and mining at Carbon Tracker. “With the oil and gas industry, as the entire energy mix changes, the whole industry is going to fundamentally shrink.”
Changing patterns of investment and use around oil and gas is difficult enough for institutions outside the sector. Even some forward-looking pension investors are finding it difficult to change, according to an analysis this week by Fossil Free California that charges funds with inflating the cost of divesting from fossil fuels. The Science Based Targets initiative, a group that validates corporate climate goals that are in line with scientific guidance, is still developing a policy for fossil-fuel companies and for the time being isn’t currently accepting commitments for the sector, according to its website .
Scope 3 emissions are particularly important for oil-and-gas companies, because 85% of their emissions come from end-users. In a Black Rock Inc. commentary this week on climate-related shareholder proposals, analysts noted that “To effect change in Scope 3 GHG emissions in a fair and balanced way, policy action by governments will be necessary. Companies cannot solve Scope 3 on their own.”
That makes analyzes like Carbon Tracker’s useful for documenting the best—and worst—kinds of climate policies among traditional energy companies. The new report further identifies several credibility criteria to help separate aggressive from weak goals.
“Look, if you set targets, make sure they’re appropriate,” Coffin said. “For those companies that are setting targets—and we have seen a significant progress over the past three years on this—companies are improving.”
Eni took the top spot for best climate policies for the third straight year in the Carbon Tracker ranking. The Italian energy giant has pledged to cut its absolute level of emissions 35% by 2030, which is more ambitious than its previously stated goal of 25%, and it’s also investing in carbon-capture facilities. Only four of the companies on the list say they are pursuing absolute cuts. All of the North American companies are trailing their European counterparts. An Eni spokesperson said the ranking “confirms the completeness of our decarbonization strategy” that focuses on new technologies and business models.
The group highlights three practices that investors might consider as red flags:
- Companies shouldn’t sell off polluting assets just to “create space” for new fossil-fuel investment. The report points to the International Energy Agency’s mid-century net-zero scenario, which calls for an end to new oil and gas fields as of 2021, no new fossil-fuel boilers by 2025 and an end to new internal-combustion car sales by 2035.
- They should “not rely unduly” on what Carbon Tracker calls emissions mitigation technologies, a broad category they created to include all kinds of carbon-capture, direct air capture, forestry and oceans.
- Fast-moving offsets markets are attracting scrutiny and shouldn’t be over-used.
Carbon Tracker’s emphasis on what’s covered in companies’ net-zero pledges and the details of pathways to achieve them is supported by the UN Intergovernmental Panel on Climate Change’s recent report on preventing dangerous warming.
The rate at which emissions fall is an extremely influential factor in determining how hot the Earth will become. The report concluded that the lower Paris Agreement goal of limiting warming to 1.5°C was all but out-of-reach, unless the world accelerates cuts to emissions—which are still rising—so they peak “at the latest before 2025.”