• 98% of oil & gas and electricity companies do not align future capital expenditures with long-term decarbonisation goals
• 96% do not clarify the role played by offsets and negative emissions technologies
• 92% do not quantify the key elements of their emissions reduction strategy
The Transition Pathway Initiative Centre (TPI Centre), based at the London School of Economics and Political Science (LSE), today (Wednesday 13 December 2023) publishes an analysis of how well publicly-listed oil & gas and electricity companies are transitioning to a low-carbon economy.
The TPI Centre’s analysis found that only 2% of oil & gas companies are aligned with the Paris Agreement’s target of limiting warming to 1.5°C across three timeframes (2025, 2035, 2050).
Analysing companies’ emissions reduction targets, the TPI Centre found that only 11% of the 131 energy companies assessed are aligned with the 1.5°C limit across all three timeframes (2025, 2035 and 2050).
When compared to the 11 sectors in total that have been assessed by the TPI Centre, electricity is among the top three which are aligned with the 1.5°C limit (after diversified mining and shipping). By contrast, oil and gas is the second-least-aligned sector (after food).
A larger proportion of companies in the electricity sector are aligned with the target of limiting warming to below ‘below 2°C’ compared with the oil & gas sector, particularly in the long term (2050). However, despite this better ranking, more efforts are still needed because the International Energy Agency has indicated that the electricity sector should reach net zero by 2040 if the world is to limit warming to the Paris Agreement’s temperature goals.
Shell and TotalEnergies are two companies whose alignment against the 1.5°C benchmark scenario has changed. In our 2022 assessment, both companies were judged to be aligned with 1.5°C in the long term (2050), but in our 2023 assessment they are not. This is not due to the companies explicitly setting weaker targets, rather it is due to how the companies' targets treat customer mitigation actions (including customers' use of offsets), and traded products, respectively.
The TPI Centre also analysed the companies’ carbon management and governance performance, including the credibility of their transition plans. They found that 96% of oil & gas and electricity companies do not clarify the role played by offsets and negative emissions technologies, 92% do not quantify the key elements of their emissions reduction strategy, and 98% do not align future capital expenditures with long-term decarbonisation goals. The TPI Centre’s analysis indicates that 93% of companies do not commit to phasing out future investment in carbon-intensive assets or products.
The TPI Centre’s analysis also found that none of the oil & gas companies assessed had explicitly committed to a time-bound phase-out of investments in carbon-intensive assets or products. Only 12% of electricity companies scored positively on this indicator.
The analysis indicated that 65% of oil & gas and electricity companies disclose the actions they are taking to reach their emissions reduction targets, and 73% are already undertaking climate scenario planning.
The analysis launched today is the 2023 Energy scorecard
, the second in the series, following the publication of the Industrials and Materials cluster scorecard in October 2023.
The TPI Centre has introduced yearly ‘scorecards’ that offer a unique understanding of how sectors (and their respective companies) are approaching carbon emission reduction and addressing the challenge of climate change.
Editor's Note: This article has been revised to enhance clarity on the reasons why the alignment for some of the assessed companies against the 1.5°C benchmark scenario changed. The modifications were made on the 19th of January 2024.