A decade of change

For most of the decade just passed I have been involved in the subject of climate change at Shell. This is unusual in one respect in that jobs in Shell normally have a tenure of 3-5 years, but this hasn’t exactly been a “normal job”. In fact, the job I have today bears little resemblance to the one I took on in June 2001. At that time domestic legislation wasn’t on the agenda or was in its infancy, the Kyoto Protocol was stuggling for ratification and many companies and industry associations were detached from the issue or at best focussing on “voluntary actions” as the way forward.

 The science agenda was also very different in 2001 – the conversation typically centred on 550 ppm, or double pre-industrial levels. This was probably more one of convenience than deep thought, but it also reflected a much lower perception of “climate sensitivity” than is currently proposed. As the science has become better understood over the last decade we have collectively shifted the goal posts. Now, it is easy to be heckled for even mentioning 550 ppm, although the recent Shell scenario work shows that such a target is already very challenging and is perhaps the best that we might actually achieve. 550 ppm is certainly better than a world heading towards 1000 ppm (the flip side of the more CO2 optimistic scenario), but nevertheless the discussion today is squarely focussed on 2 degrees Centigrade or something like 450 ppm. But just as we are becoming settled with that discussion, an even more ambitious 350 ppm objective, based on new thinking about impacts, is on the table for consideration – although with no clarity whatsoever as to how we might achieve it.

One activity I particularly look forward to every 8-10 months is attending the MIT Forum on the Science and Policy of Global Change. The forum is put on by the Joint Porgram of which Shell is one of the sponsors. Following the work done there over a number of years is a great way to get a perspective on the development of climate models and an appreciation of the increasing sophistication of the calculations behind them. The Joint Program is the source of one of my favourite climate science graphics , the wheel of fortune “Greenhouse Gamble“. It shows the uncertainty the world faces in terms of temperature rise – but even this has changed. In 2003 the “no policy” wheel still had a sizable wedge in the 1-3 degrees C range. This is now gone  (reduced to a sliver) as the understanding of climate sensitivity has changed.

Externally, the biggest change has been the rise of carbon markets. I had barely settled into my new office in 2001 when a colleague dropped a copy of the European Emissions Trading System Draft Directive onto my desk and asked me for comments! So here we are today, nearly nine years later, with a global market of some 8 billion tonnes in 2009 (PointCarbon) at a value of nearly €100 billion. This is largely EU-ETS based, either directly or through the CDM. The nine years that have passed also illustrates, like the technologies I discussed in my last post, that big changes takes decades to find root, grow, mature and become mainstream. Although several new carbon markets will probably appear during the current decade, it may not be until the 2020’s that we truly see the real start of the big changes in the energy system that they can deliver. That will mean a 20-25 year journey from concept to something approaching mainstream.

 This has also been a journey in Shell as well. In 2001 we were experimenting with our own internal emissions trading system, primarily to build understanding and gain acceptance of the idea across the company. At the same time we were in the process of hiring just one person to launch our Environmental Products trading unit, which in turn has gone from strength to strength as carbon markets have grown and our own exposure to carbon pricing has materialised. As early as 2002 we were advocates of an EU-ETS based on absolute targets and mandatory participation. This was in stark contrast to an EU industry position that was largely built around voluntary participation and relative (i.e. output based) targets. Compare that with the recent Copenhagen Communique which had some 900 companies globally signing on and organisations such as USCAP advocating an economy wide cap-and-trade approach in the USA.

 In 2001 I was “climate change in Shell”. The job itself was just three years old and I was the second incumbent. Although there was some exploratory thinking on carbon capture and storage (CCS) and coal bed methane technologies taking place in our EP division, most of what the Group was doing emanated from the Corporate Centre where I was based. That is far from the story today. Activities relating to CO2 management permeate across all our businesses and at every level of the organisation. Hundreds of people are involved in CO2 based programmes ranging from CCS projects in Australia and Norway to CER origination in China. Rather than being a lone representative in the Corporate HSE team, I work in a dynamic Group CO2 team based in our Downstream Business, but with a second line of reporting to the CEO.

 Such is the nature of this issue to a large oil and gas company today