Inside Out
The Shell Sky Scenario – what
needs to be done to address the threats
posed by global warming?
IN NOVEMBER 2017 INSIDE OUT FEATURED SHELL’S APPROACH TO A METHODOLOGY USED IN ITS LONG TERM PLANNING,
AND HOW IT LOOKED INTO THE FAR FUTURE UTILISING A CONCEPT KNOWN AS ‘SCENARIO PLANNING.’ THIS APPROACH WAS
INITIALLY ADOPTED BACK IN THE EARLY 1970S IN RESPONSE TO GEOPOLITICAL DEVELOPMENTS IN THE MIDDLE EAST AND
THE INCREASINGLY UNCERTAIN FUTURE ENVIRONMENT IN WHICH THE OIL & GAS INDUSTRY FOUND ITSELF OPERATING
Against a background of investor pressure to adopt more ambitious
goals to address the threats posed by global warming, in March this year
Shell released its Sky Scenario. This is a vision for a pathway – described
as being technically possible but challenging – in order to acheive the
goals of the 2015 Paris Agreement.
This committed the signatories to containing the increase in the
global average temperature since the pre-industrial age to well below 2
Degree C, and to pursuing efforts and initiatives to limit the rise to 1.5
Degree C.
TO ACHIEVE THIS PATHWAY, SHELL HAS
IDENTIFIED SEVEN MEASURES WHICH
NEED TO BE ADOPTED AND IN PLACE
BETWEEN NOW AND 2070
3
3
3
3
3
3
3
A change in consumer mindset means that people
preferentially choose low-carbon, high-efficiency options
to meet their energy service needs
A step-change in the efficiency of energy use leads to
gains above historical trends
Carbon-pricing mechanisms are adopted by governments
globally over the 2020s, leading to a meaningful cost of
CO2 embedded within consumer goods and services
The rate of electrification of final energy more than
triples, with global electricity generation reaching a level
nearly five times today’s level
New energy sources grow up to fifty-fold, with primary
energy from renewables eclipsing fossil fuels in the 2050s
Some 10,000 large carbon capture and storage facilities
are built, compared to fewer than 50 in operation in 2020
Net-zero deforestation is achieved. In addition, an area
the size of Brazil being reforested offers the possibility of
limiting warming to 1.5°C, the ultimate ambition of the
Paris Agreement
“THE SCENARIO RELIES ON A
COMPLEX COMBINATION OF MUTUALLY
REINFORCING DRIVERS BEING
RAPIDLY ACCELERATED BY SOCIETY,
MARKETS, INDUSTRY/COMMERCE AND
GOVERNMENTS”
Implicit in the Sky Scenario is recognition that a simple extension
of current efforts – whether efficiency mandates, modest carbon taxes,
or renewable energy supports – is insufficient for the scale of change
required.
The relevant transformations in the energy and natural systems
require concurrent climate policy action and the deployment of
disruptive new technologies at mass scale. All this being within
government policy environments that strongly incentivise both
investment and innovation.
No single factor will suffice to achieve the necessary transition.
Instead, the scenario relies on a complex combination of mutually
reinforcing drivers being rapidly accelerated by society, markets,
industry/commerce and governments.
A radically different fuel mix
The 2015 Paris Agreement makes long-term energy and climate
projections particularly important because it calls for a goal that likely
requires an energy system that is based on a radically different fuel mix
than currently in use. This presents a challenge for energy companies,
in particular, as they try to anticipate the types of energy and fuels
that will be required to stay competitive while meeting environmental
requirements. In order to achieve the low-carbon energy mix, the
energy companies will need to reduce GHG emissions not only in their
operations, but also in their products.
A number of bodies, such as the IEA in 2017, and studies by
the leading energy companies (BP, 2018; ExxonMobil, 2018) have
developed energy scenarios aimed toward decarbonisation of the
energy system. The Sky Scenario, developed by the Shell scenarios
team, is the first Shell scenario that has a net-zero energy-related CO2
emissions in the 21st century, specifically by 2070.
Formidable challenges and adjustments
No one has ever doubted that reaching the goals set out in the
2015 Paris Agreement would not present formidable challenges and
adjustments. The withdrawal of the US, the world’s second largest
emitter of GHG emissions, from the Agreement introduces a worrying
development – in particular the threatened replacement of the Obama
administration’s Clean Power Plan by the far less stringent – in terms of
GHG reduction targets – Affordable Clean Energy rule proposed by the
Trump administration.
The above notwithstanding, the Sky Scenario makes a key
contribution to enhancing understanding of what needs to be done to
address the threats of global warming, by describing a pathway to be
followed to achieve the goals set out in the Paris Agreement.
We have been alerted!
Fuel Oil News | October 2018 25