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Tina Casey headshot

Royal Dutch Shell Throws In The Climate Change Towel, Sees Low-Oil Future By 2070

By Tina Casey

It had to happen sooner or later. A legacy oil and gas company -- in this case, Royal Dutch Shell -- finally took a clear-eyed look at climate change and concluded that the age of oil is winding down. Earlier this week the company announced its "Sky" carbon emission scenario for 2070, in which electric vehicles, energy storage and other new technologies combine to cut the global fossil fuel cord.

That doesn't mean oil and gas are completely out of the picture. However, Sky is a giant step forward in terms of coming to grips with reality, and shaping a new role in the transformation of the global economy.

Action on climate change: technically possible, but challenging

Shell's new Sky scenario is outlined on the company website, and there's a lot to chew on even just in the scenario's landing page.

First off, Shell is careful to emphasize that "scenario" is not the same thing as "policy proposal."

Nevertheless, the scenario reads like a manifesto for action on climate change, and a prescription for meeting the Paris climate change agreement goal of less than 2 degrees Celsius above pre-industrial levels:

The Sky scenario illustrates a technically possible, but challenging pathway for society to achieve the goals of the Paris Agreement.

Sky is the latest in a series of Shell scenarios, and the company declares that it is "our most optimistic scenario in terms of climate outcomes."

That circles right around back to technology. The rising tide of citizen and corporate action on climate change is directly linked to the fact that alternative energy technology is beginning to compete, and in some markets beat, conventional fossil fuels. In other words, today there is a choice, and solutions are at hand.

In Sky, Shell frames out the current state of affairs:

A new energy system is emerging. The Paris Agreement has sent a signal around the world: climate change is a serious issue that governments are determined to address.

Do you see what they just did there? Although Shell insists that Sky is not a policy prescription, the scenario loops government action into its DNA.

Here's the general idea behind Sky:

The Sky scenario...reveals the potential for an energy system to emerge that brings modern energy to all in the world, without delivering a climate legacy that society cannot readily adapt to.

Shell emphasizes that the Sky scenario is a realistic one, but the company cautions that successful action on climate change is "not guaranteed." In other words, policy comes into play:

The Sky scenario relies on a complex combination of mutually reinforcing actions by society, markets and governments. It recognises that the necessary changes will unfold at different paces in different places, and must ultimately transform all sectors of economic activity. The changes are economy-wide, sector-specific, and amount to re-wiring the global economy in just 50 years.

And, Sky is quite clear on the level of aggressiveness required. Here's a snippet from the full scenario:

In Sky, governments around the world implement legislative frameworks to drive efficiency and rapidly reduce CO2 emissions, both through forcing out older energy technologies and through promoting competition to deploy new technologies as they reach cost effectiveness...Legislation in many jurisdictions forces grids towards 100% renewable energy by the 2040s. Appliances, commercial and residential buildings, and personal transport are all targeted with aggressive efficiency or emission standards.

The landing page wraps up with the cautionary note on the difference between scenarios and policy proposals:

Scenarios are not policy proposals – they do not argue for what should be done, nor forecasts – what will be done. They are not predictions, nor business plans, and investors should not rely on them to make decisions.

Considering that the US is now the only nation on Earth not participating in the Paris climate change agreement, Sky could also read as a stinging indictment of the Trump administration's energy policy, and a message that other US energy policy stakeholders -- namely corporations, cities and states -- that they need to step up their game.

Action on climate change: more to Sky than meets the eye

If you take a look at the full Sky scenario, you can see that Shell's vision for 2070 is a web of transformations, not simply a cut in the role of fossil fuels. A dramatic increase in renewable energy is a key factor, but not the only one:

1. A change in consumer mindset means that people preferentially choose low-carbon, high-efficiency options to meet their energy service needs.
2. A step-change in the efficiency of energy use leads to gains above historical trends.
3. Carbon-pricing mechanisms are adopted by  governments globally over the 2020s, leading to a meaningful cost of CO embedded within consumer goods and services.
4. The rate of electrification of final energy more than triples, with global electricity generation reaching a level nearly five times today’s level.
5. New energy sources grow up to fifty-fold, with primary energy from renewables eclipsing fossil fuels in the 2050s.
6. Some 10,000 large carbon capture and storage facilities are built, compared to fewer than 50 in operation in 2020.
7. 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.

It's also important to note that Shell's vision for 2070 still has oil maintaining a lead position over both coal and natural gas.

According to Shell's breakdown, coal accounts for 27% currently, oil has 32% and natural gas comes in at 23%.

In 2070, the Sky scenario envisions coal at just 6%, natural gas at 6%, and oil at 10%.

What about hydrogen?

In another interesting twist, Sky foresees a rapid increase in the use of hydrogen, driving down the demand for liquefied petroleum gas products like propane and butane.

The hydrogen picture is complicated by the fact that currently, most hydrogen is produced from fossil natural gas.

However, Sky underscores the role of renewable hydrogen, and the potential for rapid growth is there because renewable hydrogen can piggyback on existing natural gas infrastructure:

Onshore and offshore hydrogen electrolysis systems also begin to emerge around the world inSky. Initially, they make use of the growing off-peak surplus of electricity from renewable sources, but later become fully integrated base-load systems. As a result,after 2040, hydrogen emerges as a material energy carrier, steadily growing to account for10% of global final energy consumption by the end of century.

The emphasis on hydrogen infrastructure is especially interesting from a green branding perspective. It provides Shell with a shareholder rationale for continuing to develop its oil and gas assets, since those will eventually be repurposed:

As oil and gas use falls over time in Sky, redundant facilities are repurposed for hydrogen gas storage and transport.

In other words, don't expect Shell to drop everything and pivot to renewables on a dime.

Do expect more actions like the company's recent acquisition of US solar farm developer Silicon Ranch.

By bidding on renewable energy projects, Shell can also be credited indirectly with helping to reduce the cost of renewables. Even if it doesn't get the winning bid, the company's growing interest in renewable energy helps to heat up the competition and drive costs down.

Image (screenshot): via Royal Dutch Shell.

Tina Casey headshot

Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes.

Read more stories by Tina Casey