Against a backdrop of geopolitical upheaval, including the war in Ukraine and shifting US policies under the Trump administration, fossil fuel firms are moving further away from alignment with international climate goals.
LONDON, 8 April – No major oil and gas producer comes close to being Paris-aligned, and many have regressed in the past year, according to new research from financial think-tank Carbon Tracker.
The report, Paris Maligned III, is the first analysis of the sector since the re-election of the Trump administration and comes a decade after the landmark Paris Agreement was signed. While many oil and gas firms have been vocal in announcing a pivot away from green energy in recent months, Carbon Tracker’s research is the first to quantify how firms are doubling down on fossil fuels in terms of investment options, recent project approvals, production plans, emissions targets and executive remuneration.
European producers – bp, Eni, Equinor, Shell and TotalEnergies – have seen their scores decline since last year’s assessment as a result of increased, and longer-term, production targets. bp fell from top position, with a “D” grade, down to an “F”, having abandoned its target to curb production.
Many examples of climate backsliding have come in recent weeks, coinciding with a US administration shifting sharply away from renewables and toward oil and gas production. For instance Equinor and Eni both increased their production targets within a month of the Trump administration’s day 1 executive orders in favour of oil and gas development.
However, while Trump’s policies may reinforce the trend, they are not the only – or even primary – factor. Strategic shifts have been in motion for some time, regardless of companies’ geographic location. For instance, Bp started trailing its reset in October, with the European energy crunch caused by the war in Ukraine, as well as high interest rates, also driving the regression.
Carbon Tracker highlights that almost all producers are planning to increase oil and gas production in the coming years, with most likely to invest in new projects that would be incompatible with a 1.7˚C, or even 2.4˚C, warming scenario. For example, Italian producer Eni is planning to increase its oil and gas output by around 27% by 2030 and is expected to take a final investment decision on the Verus gas field in Australia in the coming years. The field could emit over a gigaton of C02 and would likely be incompatible with a 2.4˚C warming scenario, according to Carbon Tracker analysis.
Implications for investors
Despite political and market headwinds, European investor engagement on climate risk remains strong. Last month Sarasin and Partners sold its stake in Equinor and resigned its role as co-lead of the engagement of CA100+ investors with the Norwegian firm, criticising its pursuit of “short-term returns over long-term sustainable capital creation.”
Carbon Tracker said its analysis “underscores doubts that the sector is able or willing to set itself on a pathway to align with the Paris Agreement goals” and said that investors with climate mandates “will need to question continued positions in these companies”.
It also noted that mainstream investors concerned solely with financial return should take note of rising transition risk exposure in the sector. Despite Trump’s support for oil and gas production, demand for these fuels faces structural decline.
Road transport accounts for over half of all oil demand and the growth of electric vehicles means that demand will likely fall sharply by 2040. As such, Carbon Tracker said the growing climate misalignment of major oil and gas firms leaves them increasingly exposed to financial risks that should concern all investors.
Rich Collett-White, Carbon Tracker Analyst and report lead author, said, “Most producers are ignoring peaking demand and remain far from a Paris-aligned path. Investors — whether they have a climate mandate or not — should think twice about backing risky new production for short-term gain.”
Notes to editors
After the embargo lifts (00.01 GMT Tuesday 8 April) the report can be downloaded here: https://carbontracker.org/reports/paris-maligned-3/
For more information and to arrange interviews please contact:
Conor Quinn conor.quinn@greenhouse.agency +44 7444 696 214
About Carbon Tracker
The Carbon Tracker Initiative is a not-for-profit financial think tank that seeks to promote a climate-secure global energy market by aligning capital markets with climate reality. Our research to date on the carbon bubble, unburnable carbon and stranded assets has begun a new debate on how to align the financial system with the energy transition to a low carbon future. www.carbontracker.org
Key findings
- No oil and gas producer we assessed comes close to being Paris-aligned, and some have regressed in the past year. No company performs well on more than one of our six key metrics.
- Our analysis underscores doubts that the sector is able or willing to set itself on a pathway to align with the Paris Agreement goals. Investors with climate mandates will need to question continued positions in these companies, while policymakers should consider what further policies are necessary to accelerate the energy transition. Mainstream investors, meanwhile, will find our metrics useful as proxies for transition risk exposure.
- European listed companies fare best, taking seven of the top 10 spots in our ranking table. Spain’s Repsol ranks highest, in part for being one of only two companies with plans to cut hydrocarbon production. UK-based Harbour, newly assessed this year, comes in second place.
- Newly assessed state-owned national oil companies (NOCs) perform poorly. Three of them, alongside US listed producer ConocoPhillips, take joint last position.
- The scores for European producers bp, Eni, Equinor, Shell and TotalEnergies have all fallen since last year’s assessment as a result of increased, and longer-term, production targets. Companies planning to increase oil and gas production are in effect betting that the world will fail to meet the Paris Agreement goals.
- US shale producer Ovintiv and Canadian oil sands firms have the least competitive, and thus least climate-compatible, potential project options. Gulf state NOCs sit at the other end of the spectrum.
- Companies’ methane plans, included in our scoring for the first time this year, are typically more climate-aligned than their overall GHG targets. However, there is still considerable room for improvement because significant sources of methane emissions are overlooked.
Companies’ clean energy investments do not feature in Carbon Tracker’s analysis
Our assessment is strategy-agnostic, so while decisions by companies to increase new hydrocarbon developments affect their score, their cutting of green investment does not. While some observers may find these renewables rollbacks disappointing, it is important to bear in mind that the oil and gas sector accounted for a negligeable proportion of global clean energy investment. Moreover, increasing investment in clean energy may not lead to a decline in a producer’s overall emissions, as this is largely a function of their oil and gas production.
