The most common climate-related question facing investors is “how can we tell if a company is aligned with Paris”? Carbon Tracker’s framework for addressing this challenge in the oil and gas sector is based solely on the economics of potential project portfolios.
The report looks at alignment in terms of short term actions: which individual projects are non-Paris compliant and shouldn’t go ahead in an economically rational Paris-aligned world, yet nonetheless either a) were sanctioned last year; or b) are targeting sanction this year.
Key findings include:
- The shift to a Paris-compliant world will require a dramatic change in behaviour from the ingrained growth model.
- Last year, all of the major oil companies sanctioned projects that fall outside a “well below 2 degrees” budget on cost grounds.
- This includes the large European companies that are doing the most to reassure investors that they are responsive to climate concerns – BP, Shell, Total and Equinor.
- The majors also hold a number of projects targeting approval this year which don’t fit in a Paris-compliant world.
- No new oil sands projects fit within a Paris-compliant world.
- Several US shale specialists have portfolios that are entirely out of the budget.
- The oil and gas in projects that have already been sanctioned will take the world past 1.5ºC, assuming carbon capture and storage remains sub-scale.