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How changing demand and supply for energy can help tackle climate change

The current energy crisis raises a fear that countries and companies will shy away from their promises to tackle climate change.

The current energy crisis raises a fear that countries and companies will shy away from their promises to tackle climate change. Image: Unsplash

Ben van Beurden
Adviser to the Board of Directors, Shell
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  • Tackling climate change requires changing energy demand as well as supply.
  • A sector-by-sector approach, supported by public-private partnerships, is the best way to achieve this.
  • Companies must be more transparent about the way they report on sustainability.

With the huge uncertainty caused by the war in Ukraine, volatile energy prices and threats to a secure supply of energy, there is a fear that countries and companies will shy away from their promises to tackle climate change. I don’t believe they should. On the contrary, the world can – and must – accelerate its actions to achieve a net-zero emissions energy system.

Tackling climate change

There is no question that the world urgently needs to cut carbon emissions. In its most recent publication, the Intergovernmental Panel on Climate Change (IPCC) states that without immediate and deep emission reductions across all sectors, limiting global warming to 1.5°C is beyond reach.

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Tackling climate change depends, for a significant part, on switching from fossil fuels to low-carbon energy. Energy companies have an important role to play in changing this energy supply – Shell is playing its part, among many other things by offering much more wind and solar power, and electric car charging.

This change in supply is necessary, but it won’t be enough. If the world wants to succeed in tackling climate change, it needs to change demand as well.

Reducing emissions sector-by-sector

Imagine if Shell stopped supplying aviation fuel in an attempt to reduce carbon emissions and accelerate the energy transition. So we’d close our kerosene factories, stop selling it to our customers and leave this sector altogether. Would this reduce the number of flights across the world? Would this help the world to come closer to achieving net-zero emissions or stop climate change? Not really.

That’s because reducing emissions from aviation is incredibly difficult. New planes and engines stay in use for decades. Electricity and hydrogen can be solutions for the long term, but not today. If Shell no longer supplied kerosene, airlines would simply buy fuel elsewhere. Demand for fossil fuels would not change at all.


What is the World Economic Forum doing to help aviation meet net zero goals?

So instead of one company, Shell, addressing the supply side of the argument by ending sales to aviation altogether, society needs a different approach. A sector-by-sector approach like the Clean Skies for Tomorrow initiative. This coalition of businesses, governments and other organizations, led by the World Economic Forum, the Rocky Mountain Institute and the Energy Transitions Commission, is helping the aviation sector as a whole to achieve net-zero emissions.

Every partner in this sector has a role to play. From aircraft manufacturers to airlines and from airports to governments. Energy businesses like Shell also have to play their part. This is why in Rotterdam in the Netherlands, for example, we are investing in an 820,000-tonnes-a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam. Expected to start production in 2024, this will be among the largest in Europe producing sustainable aviation fuel and renewable diesel made from waste and certified sustainable vegetable oils.

If the right policies and regulations are put in place to accelerate the change of demand in aviation … it will help the sector move away from kerosene, and emissions from aviation as a whole will start to fall.

Ben van Beurden, Chief Executive Officer, Shell.

This sustainable aviation fuel will not replace all the kerosene in the world in the next few years. But if the right policies and regulations are put in place to accelerate the change of demand in aviation – preferably an international mandate for sustainable aviation fuel – it will help the sector move away from kerosene, and emissions from aviation as a whole will start to fall.

Aviation is just one sector. Governments, businesses, and organizations like the Forum are working together in the Mission Possible Partnership to change the type of energy that is used in all sectors that are difficult to decarbonize. Known as the “hard-to-abate” sectors, such as shipping, heavy-duty road transport and the production of chemicals, steel and cement.

Transparent reporting on sustainability

But even with a successful sector-by-sector approach, we would still not get far without support from society. I have no illusions that people can have a hard time trusting oil and gas companies to do the right thing when it comes to climate change. And I believe there is only one sustainable way to remedy this: we have to be transparent about what we do, so people can make up their own minds about us.

That includes being transparent about the way we report on our sustainability. This is why Shell is a member of the Forum’s Stakeholder Measurement Metrics. When it comes to ESG reporting, these metrics make it easier to compare companies, which is desperately needed. We also show the short, medium and long-term targets we are using to transform Shell into a net-zero emissions business. Each year we will publish a report on how we are delivering on these targets, so everyone can see the progress we are making. And we ask our shareholders to vote on this progress as set out in the first of these reports at our AGM in May.

To make real change in the global energy system, the world needs more low-carbon energy, more momentum for a sector-by-sector approach and the right metrics to transparently show our progress. Given the amount of uncertainty in the world and an urgent need to cut carbon emissions, governments, businesses and society can and should accelerate their efforts to tackle climate change.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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World Economic Forum

May 21, 2024

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