Shell bites the 2°C bullet

Shell has just published for the first time a scenario that lays out a pathway broadly consistent with the aim of keeping global warming to 2°C this century.

The major has published low-emissions scenarios before, but never ones consistent with the 2°C goal. The firm’s Mountains and Oceans scenarios were published in 2013. They envisioned reaching net-zero emissions this century, although research by the Massachusetts Institute of Technology (MIT) concluded they would still result in global temperature increases of approximately 2.4°C and 2.7°C, respectively, by 2100.

Unlike those scenarios, the Better Life With a Healthy Planet scenario does not model oil or gas demand, but simply lays out the policies and developments Shell believes are necessary to reach net-zero emissions well before the end of the century, to give the world a better chance of staying within the 2°C target.

Under the scenario, carbon pricing policies are operating in the EU, China, parts of North America, Australia, New Zealand, several Latin American countries, South Africa and South Korea by 2020. These policies engender a “significant and rapid” shift from coal to gas in power generation before 2030, most notably with coal use in China peaking around 2020.

Around the world, insurers and investors become increasingly aware of climate factors, and begin to adjust their business decisions accordingly, accelerating the move away from coal.

So far, so believable. Elements of all these occurrences are already under way, thanks to regional initiatives and last year’s Paris climate agreement. It is the scenario’s post-2030 timetable that is the most eye-catching part of the document.

In the developed world, the scenario sees the cost of renewables continuing to fall during the 2030s until they compete directly with gas-fired thermal generation.  Improvements in battery storage and demand-side management help solve intermittency issues, as does the development of an offshore hydrogen electrolysis system in the EU.

Oil and gas imports fall year after year as the EU electrifies its road transport sector through the build-out of transmission lines and hydrogen pipelines. Any gas-fired backup generation is equipped with carbon capture and storage (CCS), as is some biomass-fired generation, creating the potential for negative emissions.

Meanwhile, outside the developed world, electrification of the road transport sector also happens, although less quickly, and largely for smaller vehicles, especially in Asia. CCS is rapidly deployed throughout the developing world after the technology matures following investment in research and development in the developed world in the 2020s.

It is these large transformations in physical infrastructure and the necessity of as yet unproven technologies that are by far the most daunting challenge for policy makers. Even though they happen after 2030, the seeds of their development must be sown now.

In the Shell scenario, they rely partly on the development of a green technology race between the US and China, with other countries then benefiting from the falling price of these technologies.

Elements of this phenomenon are already under way, especially in the solar photovoltaic market, but such a competition is a long way from happening with CCS, and even further away from happening with vehicle electrification.

The race will need to get under way soon, it will need to avoid the pitfalls of recession, and it will need to be on a very, very fast track.

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