LONDON/NEW YORK, November 1 – The world’s listed oil and gas majors must cut combined production by a third by 2040 to keep emissions within international climate targets and protect shareholder value, Carbon Tracker finds in a report today.

At current rates of emissions, the total carbon budgets to limit temperature rise to 1.5˚C and 1.75˚C will be exceeded in 13 years and 24 years respectively[1]. Yet, since 2011, global proved reserves of oil and gas have increased, and amount to some 50 years at current production. Despite public statements to the contrary, none of the majors’ emissions targets are found to be aligned with the Paris Agreement.

In Balancing the budget: Why deflating the carbon bubble requires oil & gas companies to shrink Carbon Tracker analyses current and future projects to identify which would still be economic in a 1.6˚C world using the International Energy Agency’s Beyond 2 Degrees (B2DS) scenario, in line with the Paris commitment to limit global temperature rise to “well below” 2°C.

Building on previous work the report extends the concept of the global carbon emissions budget to the company level using new project-level emissions data from Rystad Energy to set out ‘company carbon budgets’.

“If companies and governments attempt to develop all their oil and gas reserves, either the world will miss its climate targets or assets will become “stranded” in the energy transition, or both. The industry is trying to have its cake and eat it — reassuring shareholders and appearing supportive of Paris, while still producing more fossil fuels. This analysis shows that if companies really want to both mitigate financial risk and be part of the climate solution, they must shrink production.”

Mike Coffin, Oil & Gas Analyst at Carbon Tracker and report author.

The report finds that the majors would need to cut group production by 35% by 2040 to align with this goal but the picture differs widely between companies depending on the proportion of low-cost, low-carbon projects in their portfolio. It also warns that other fossil fuel producers, especially those with undiversified portfolios, may need to make much deeper cuts.

The main findings from our modelling are:

  • None of the majors are on track to be aligned with Paris by 2040;
  • ConocoPhillips faces the biggest production cuts of 85%;
  • ExxonMobil, the biggest oil major, would need cuts of 55%;
  • Eni requires cuts of 40%, Chevron and Total both 35%, and BP 25%;
  • Shell’s portfolio is most aligned but it would still need cuts of 10%.

Exxon, Total and Conoco have few low-cost, low-carbon project options that would be economic in a 1.6˚C world. A quarter of ConocoPhillips’ production is from rapidly declining shale/tight oil and it has few sufficiently competitive projects to replace this production within a B2DS budget. This is also a factor in the declining production for ExxonMobil and Chevron.

The report warns that oil projects already approved are almost sufficient to meet demand in a 1.6˚C world and there is very little headroom for new fossil fuel projects. This analysis factors in a relative shift from oil to gas, with average absolute carbon emissions reductions of 40% by 2040 required by the majors to stay within budgets.

To have any chance of reducing warming to “well below” 2˚C or to “pursue efforts” to hit the ultimate Paris target of 1.5˚C, cuts will have to be made across industry; after all, the majors alone represent a minority of global production. For investors, however, the focus will be on efforts to mitigate risks and maximise returns at their own investee companies rather than other potential asset stranding elsewhere.

“Our Breaking the Habit work shows the amount of capex consistent with achieving “well below” 2˚C. Based on the same project level analysis we can express this in terms of a carbon budget with associated production levels. This therefore gives a comprehensive picture with consistent metrics that can be factored into company planning.“

Mark Fulton, Chair of Carbon Tracker’s Research Council.

Investors and civil society groups are pressing companies to be much more transparent about their spending plans and drop projects that are not climate-friendly. The company carbon budgets in this report can be used to support investors and fossil fuel companies in setting targets.

Carbon Tracker’s analysis to date has argued that it is in shareholders’ best interests for fossil fuel companies to restrict investment in new production to only the most competitive projects. Focusing on low-cost, low-carbon projects results in portfolios that generate industry-leading returns and minimises the risk of stranding in the low-carbon transition. Yet most companies are pumping and reinvesting as normal, despite investors clamouring for change.


The majors have set out a range of emissions targets and ambitions in response to investor pressure, but none has committed to an absolute cap on full-life cycle emissions and the production limits that are necessary to align with Paris. Additionally, company targets often only apply to the portion of production they actually operate.

“Only Shell, Total and Repsol have targets which include the “Scope 3” emissions created by burning their products, which account for the vast majority of CO2 related to fossil fuel use. While an improvement on many peers, they have only pledged to reduce the carbon intensity of the energy they produce, which means they can continue to grow fossil fuel production — increasing CO2 emissions overall and leaving open the risk of stranded assets. Our climate system works on finite limits, so strategies that allow infinite growth are a square peg in a round hole.”

Andrew Grant, Senior Oil and Gas Analyst and co-author of the report.

Carbon Tracker warns investors that before companies can claim to be aligned with the Paris Agreement they must at a minimum reflect absolute climate limits, not intensity targets; cover emissions from their own operations and from use of their products (Scope 1, 2 and 3); and cover emissions from the vast majority of the company’s owned production.

The analysis also warns that company carbon budgets assume levels of carbon capture and storage that may not be realised in the timeframe. Consequently, “they represent the minimum reduction in carbon emissions that companies must achieve, and we encourage companies to go further.”

“In our first 2011 report, Unburnable Carbon: Are the world’s financial markets carrying a Carbon Bubble? we highlighted the finite global carbon budget and the risks from excess supply of fossil fuels. Carbon Tracker has been consistent in finding most fossil fuels must remain in the ground. Yet as this new report highlights, companies and the governments that grant them their licences are still intent on expansion.  It is now more urgent than ever that shareholders promote, then support, plans for the oil and gas sector to manage rapid decline in production.”

Mark Campanale, Founder and Executive Director


  • Carbon Tracker’s methodology offers an economically rational way to understand which fossil fuel projects fit in a low-carbon future and allows oil majors to align with international climate targets while maximising shareholder value.
  • By setting carbon budgets for each company it gives them an incentive to reduce the emissions intensity of their production while staying within an absolute emissions limit.
  • It uses the IEA’s B2DS scenario to model supply of oil and gas under a 1.6˚C demand pathway and data from Rystad Energy to assess the economics and carbon emissions of individual projects. With available supply outstripping demand, it assumes that the projects with the lowest production costs will be most competitive, while high-cost projects relying on higher prices risk becoming “stranded assets”.  It aggregates projects at the company level to produce “carbon budgets” for each oil and gas major that are aligned with the Paris Agreement.

[1] Source: IPCC, Global Carbon Project, BP, CTI analysis

Once embargo lifts the report can be downloaded here:


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