Chevron Corp. committed to an “aspiration” of net zero emissions from its operations by 2050 as the company responds to rising investor and societal pressure to play a bigger role in a transition to a low-carbon future.
Chevron also set a target of reducing carbon intensity by five per cent from 2016 levels by 2028 for the full lifecycle of its products, the company said Monday in a report. The target includes Scope 3 emissions, or those of its customers, which make up the majority of fossil fuel pollution.
While the pledge falls short of those made by European peers such as Royal Dutch Shell plc and BP plc, it’s the first time Chevron has outlined a multi-decade strategic commitment to reduce emissions. U.S. majors have been more reticent in adopting bold, long-term targets due to uncertainty over how to achieve them, an unwillingness to make large moves outside their core competency areas, and a desire to produce more oil and gas.
“In transition, companies that are delivering any unit of energy in at a more efficient carbon intensity are beneficial to our overall progress,” Bruce Niemeyer, Chevron’s vice-president for sustainability and strategy, said in an interview. “That’s the most important thing.”
Whether or not it’s enough to appease shareholders remains to be seen. In May investors defied Chevron’s board and voted to reduce Scope 3 emissions on an absolute basis, not just intensity, which is a measure tied to the amount of energy produced.
Follow This, the Dutch campaigner that filed the investor proposal, said Chevron’s new goal is “disappointing tokenism.” Rather than a five per cent reduction in Scope 3 intensity, absolute emissions need to come down by 40 per cent by 2030 to have any chance of achieving the 2016 Paris Agreement, the group said in a statement.
Niemeyer said today’s climate report “reflects a lot of investor feedback.”
Chevron isn’t the first U.S. oil company to adopt looser language around the definition “net zero” than when the term was first introduced a few years ago. ConocoPhillips and Occidental Petroleum Corp. have also set 2050 net zero as an ambition or an aspiration rather than a hard target.
But semantics aside, even those oil companies with seemingly stringent targets are light on detail with how to eliminate carbon emissions from their fossil fuels, especially in the outer decades of their plans. Exxon Mobil Corp. executives expressed skepticism over net zero targets earlier this year in a meeting with Citigroup Inc. banker Stephen Trauber because they had no concrete plans of how get there.
“I assured them most companies today who have committed to net zero don’t have a plan on how to get there, but they’re working to get there,” Trauber said last month.
Exxon is routinely evaluating its climate pledges “to reflect the changing landscape,” it said in a statement at the time. The company was forced to replace three of its directors earlier this year after an activist campaign that claimed the oil giant was ill-equipped for the energy transition.
Chevron’s announcement is “positive,” but “these are small steps when what investors asked for is a giant leap,” said Andrew Logan of Ceres, a nonprofit coalition of companies and investors who manage more than $47 trillion.
“What investors called for in casting their support for a shareholder proposal on Scope 3 targets this spring was a bold move to address product risk, one that was commensurate with the scale and scope of the climate challenge,” Logan said.
Chevron chief executive officer Mike Wirth last month emphasized what he sees as the importance of having an credible carbon strategy that balances the world’s need for reliable energy with the lowering of emissions. The current global shortage of natural gas, along with the run-up in oil and coal prices over the past few weeks, emphasizes how the world is still highly dependent upon fossil fuels.
The energy crunch in Asia and Europe show that “we must be very thoughtful in how we go about the transition,” Chevron’s Niemeyer said. “Prematurely cutting of one form of energy before the transition is really effected can be really problematic for us as a society.”
© 2021 Bloomberg L.P.