Earlier this year, the International Energy Agency issued a stark warning: To have a chance of keeping global warming under 1.5 degrees Celsius, a threshold to prevent some of the worst impacts of climate change, new oil and gas development would have to stop this year. But fossil fuel companies—even those that claim to be aligned with the Paris climate agreement, which sets the goal to limit warming to “well below” 2 degrees Celsius (35.6 degrees Fahrenheit) and to aim for 1.5 degrees—are still investing billions in new projects.
A new report from the nonprofit Carbon Tracker details how much production needs to shrink at the world’s largest oil and gas companies to be on track for global climate goals. By the next decade, the report finds, many companies will have to cut production by more than 50%. Trying to offset emissions with things like tree planting can’t cover the gap. “It’s hard to make the math work with any other solution than to reduce fossil fuel use very rapidly,” says Axel Dalman, an associate analyst at Carbon Tracker. “The industry will say, ‘Well, we can use offsets. We can use carbon capture and storage.’ Neither of those are reliable methods of reducing CO2 emissions.”
The researchers calculated that ConocoPhillips will have to reduce production by 69%. Chevron faces a 52% cut. Shell will have to shrink production by 44%. BP and ExxonMobil will each have to cut production by a third. Only a handful of fossil fuel companies—BP, Eni, TotalEnergies, and Shell—have acknowledged that their production will have to drop at all. But even they are still investing in new oil exploration.
“I think they’re using some delay tactics to avoid really tough and immediate changes,” Dalman says. “Some of them are still skeptical about how fast the transition will happen, especially in the next decade. And so they don’t want to be the first ones to jump. They don’t want to cut production rapidly and then find that they are losing out. But if you’re claiming to be serious about ‘net zero 2050’ and claiming that you’re willing to transform from today and not just in 20 years time, then exploring for new assets just seems inconsistent.”
Even companies that claim to be aiming only for the weaker goal of limiting warming to well under 2 degrees Celsius are making investments that aren’t on track, the report found. ExxonMobil, for example, made multibillion dollar investments in 2020 in oil fields in Guyana that are incompatible with keeping warming to 1.65 degrees Celsius.
A separate study published today in Nature also found that most fossil fuel reserves will need to stay buried to meet the Paris agreement goals. Companies that aren’t planning for the transition risk having expensive stranded assets, the Carbon Tracker report says. Policy changes like a reduction in fossil fuel subsidies could help force action, and investor pressure could also help.
“From our perspective, it’s certainly very positive that the financial industry and investors are starting to take this quite seriously,” says Dalman. “For the longest time, investors have been quite happy if they get decent returns, perhaps even just in the short term, and they were pretty content with letting companies decide what they disclosed. They sort of trusted management boards to know what was the right thing to do. But clearly, they’ve woken up to the reality that they need to push much harder. Because these are long-term issues that go beyond the concerns of any one CEO and their tenure.”