Category: Net zero emissions

Where to next for aviation?

dchone July 9, 2026

What could aviation look like in a world shaped by energy security concerns, shifting geopolitics and changing technology pathways? The Shell Scenarios team provides detailed national and sector data insights into how different countries and sectors could develop under Shell’s global energy scenarios. These deeper explorations, which we call “Sketches,” help bring the scenarios to life so I am pleased to be able to introduce our first sector-based sketch, Aviation and energy to 2100, which has been drawn from The 2026 Energy Security Scenarios.

The global aviation industry is a massive sector with significant economic impact, projected to surpass $1 trillion in revenue in 2026, supporting 86.5 million jobs, contributing over $4 trillion to the global economy and carrying over 5 billion passengers in 2026. The global commercial aviation sector consumes some 7.2 million barrels per day of liquid hydrocarbon fuel, compared with around 100 million barrels per day of oil production in total.

Of the hydrocarbon fuel used by aviation globally, less than 1% is sustainable aviation fuel with bio-energy origins (bio-SAF). Net carbon dioxide (CO₂) emissions from aviation amount to more than 1 billion tonnes per year, or 2.3% of total anthropogenic CO₂ emissions. While this is modest in the context of today, it becomes problematic as emissions in other sectors decline and demand for aviation continues to grow rapidly. By 2050, CO₂ emissions from aviation could conceivably be more than 10% of the global total, given an overall reduction in global emissions from all sources and increases in aviation demand. The sector is therefore under pressure to manage emissions and achieve net zero CO₂ emissions by 2050.

First, a quick recap of the scenarios, namely Archipelagos, Surge and Horizon.

In Archipelagos self-interest and security concerns become deeply rooted in the national psyche. Security is pursued through geopolitical realignment. Economic growth suffers and while global conflict doesn’t emerge, nations act as if it will.
In Surge, economic security emerges through growth and productivity improvements, with AI technologies reshaping society and driving rapid change in the energy system.
Horizon takes a normative approach (i.e. the outcome is fixed) aimed at a world that achieves two key things: net zero emissions by 2050 and global warming below 1.5°C versus 1850-1900 by the end of the century.

The key question the Aviation Sketch examines is the journey to net-zero emissions.

In all cases, the sector faces a singular challenge: how to meet increasing passenger demand while also trying to grow the sustainable aviation fuel (SAF) market fast enough to meet carbon targets. By mid-century global passenger demand could be approaching triple that seen in 2025 but will almost certainly have doubled as shown below. Surge and Archipelagos both reflect differing underlying economic growth trends and border security implications; for example, Archipelagos is a world of both lower economic growth and a more challenging border crossing environment. Horizon assumes that people fly less due to concerns about the climate and the broader availability of long-distance rail services.

While demand will be met with new efficient planes, rapid growth in the sector can outpace the growth of SAF. This is illustrated in Surge where both SAF and e-SAF (synthetic fuels) growth is rapid but even combined cannot outpace the growth in demand in a more affluent society, until after mid-century.

By contrast, while passenger demand growth in Archipelagos is considerably lower than Surge, the robust economic conditions and government supporting mechanisms to grow the SAF market just aren’t there, and e-SAF never even emerges as a viable commercial fuel. This comes about from a trend in Archipelagos where governments increase defence spending and to balance available fiscal resources various supporting mechanisms to foster the energy transition are removed or certain energy transition projects are cencelled.

The only scenario where fossil fuel use in aviation falls towards 2050 is Horizon, and this is by design. It emerges from both a lower demand growth outlook and the rapid scale up of SAF and e-SAF, similar to that in Surge. But that scenario also requires the more rapid emergence of new transformative aviation technologies, such as battery electric planes for short haul commuter trips and hydrogen for medium range trips. Although neither of these are truly substantial by 2050, they nevertheless add to the weight of alternatives to drive down the use of crude oil-based fuels. Battery electric planes also appear in Surge, but hydrogen does not. The scenario relies instead on the rapid development of e-SAF from about 2040, which in turn requires considerable renewable hydrogen.

While both Horizon and Surge reach the point of little to no use of crude oil derived aviation fuel by late in the century, reaching net-zero emissions as early as 2050 requires considerable use of carbon removal credits. The global supply of high-quality direct air capture and reforestation credits in 2050 is between 2 and 3 billion tonnes per year, which is more than enough to deliver net-zero CO₂ emissions in Horizon, but is insufficient in Surge for 2050 although it can be achieved in the 2060s as emissions fall and credit supply rises. In Archipelagos, where direct air capture never emerges as a viable technology and land use change efforts are subdued at best, net-zero emissions cannot be achieved this century.

The Aviation Sketch produces some fascinating insights for a sector striving to manage carbon emissions and to do so on a rapid timetable. But it also highlights the dependency of the sector on energy system developments outside its direct influence, such as the emergence of direct air capture and the production of biofuels for various other sectors. Nevertheless, the sketch shows that given the right geopolitical and economic conditions, aviation can transition completely away from fossil fuels by adopting alternative fuel and propulsion technologies. However, the timeline for a full transition takes the sector towards the end of the century, with mid-century aspirations requiring extensive use of carbon credits.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Can France be the first major economy to end fossil fuel use?

dchone May 11, 2026

At the end of April, the first conference on transitioning away from fossil fuels was held in Santa Marta, Colombia. Fifty-seven countries attended and used the meeting to debate practical ways to move away from coal, oil and gas. But France went one step further and announced that the nation has produced a new road-map for transitioning away from fossil fuels. That road-map can be found here.

France is already a standout economy in terms of fossil fuel use, having one of the lowest levels globally as a percentage of total primary energy. This is because of the development of nuclear power throughout the 1970s and 1980s. More recently, France has added enough wind and solar to meet 20% of their electricity demand, such that generation is 90% non-fossil.

However, outside of electricity generation, fossil fuel use rises to 86% for all other energy services, with half being transport and half being for industry and residential services. Bioenergy makes up the other 14% of this use. In total, molecular fuels amount to just over 4 EJ per year of final energy demand, versus 6 EJ of final energy demand in total.

The French plan involves the progressive use of electricity for energy services, with electrification of vehicles, the use of heat pumps for home heating, and industrial technologies such as electric arc furnaces replacing existing blast furnaces for steel production. The report sets end-of-consumption targets for coal by 2030, oil by 2045 and fossil gas by 2050 for energy purposes. To this end, this strategy is broken down by sectors, and targets different milestones:

A target of 66% of new cars sales being electric by 2030.
A 25% increase in public transport use (bus, rail etc.) by 2030.
The decarbonization of industry through an approach involving the 50 largest French industrial sites in France.
An 85% reduction in oil-fired boilers in tertiary buildings, and a 60% reduction in the residential sector with the objective to phase out fossil oil for heating by 2035.
In the energy sector, France is setting out its objectives to phase out fossil fuels and increase decarbonized production, including renewable energy, nuclear power, hydrogen, biogas and alternative fuels.

The hydrogen goal is built around the deployment of up to 8 GW of electrolyzers by 2035. As of end 2025, global operational hydrogen electrolyzer capacity is approximately 2.5 GW, with total installed capacity (including projects under construction or having reached a final investment decision) ranging between 4.0 GW and 6.3 GW. Much of the current capacity is in China.

At the detailed level for domestic action, the plan discusses the transition away from fossil fuels in the context of two main areas;

Shifting to EVs in the passenger car fleet.
Shifting to heat pumps for domestic heating.

The above two categories make up the bulk of the discussion within the document, and the government sets out some ambitious plans to achieve this. They want two thirds of vehicle sales to be electric by 2030 and to help that the government will encourage the domestic car companies to mostly build electric cars by 2030. Current total car production in the country is over 1 million per year, and the government wants at least 1 million EVs per year produced locally by 2030.

The government also wants to install 1 million heat pumps per year by 2030. They are doing quite well so far with over 600,000 installed in 2022, so presumably that is even higher today. Unlike many other countries, heat pump installation appears to be progressing well in France.

The plan also includes industrial natural gas use and commercial vehicles, but the attention to both these categories is lacking in detail. For trucks it simply says ‘. . . . but also the electrification of heavy goods vehicles and buses.’ For industry it says ‘. . . The decarbonization of industry through an approach involving the 50 largest French industrial sites in France’, but no detail is offered, although electrification appears to play a key role as it is mentioned later in the document. While the route to electrification of buses is now available, that is not yet the case for heavy goods vehicles. Similarly, widespread use of electricity in industry is not yet a simple story, but progress is being made.

While there is an important caveat in the document which restricts the discussion to energy, the document makes little to no mention of key areas of fossil fuel use for energy where abatement is challenging, notably;

Aviation (this may be indirectly covered by the call for more biofuel production)
Shipping
Heavy industry (vs. industry and light industry which are mentioned)

Domestic aviation is quite modest in France due to the high-speed rail network and river or coastal shipping in French waters is unlikely to be a major activity. As such, with the bulk of aviation and shipping coming under international agreements, they are often excluded from national emissions goals.

Outside of the energy sector fossil fuels are used extensively in areas such as;

Bitumen and asphalt
Lubricants
Petrochemicals

But in keeping with the caveat no mention is made of these uses.

A look at The 2026 Energy Security Scenarios released by Shell in January of this year provides some useful context for the French goals. Starting with the Horizon scenario, which lays out a pathway for net-zero emissions globally in 2050, France has not fully transitioned away from fossil fuels by that date, but it is making good progress. Horizon recognizes that in 2050 the world has reduced fossil use use considerably, but certainly hasn’t eliminated it. As such, the scenario includes an important dependence on industrial carbon removals, carbon capture and storage and management and restoration of land carbon sinks. The report acknowledges the use of such credits but doesn’t elaborate and further.

However, in a scenario that better reflects the real-world pressures for change, the picture is quite different. For example, the Surge scenario is a world of rapid technological change and robust economic growth, which leads to a faster transition but also rising short-term fossil fuel demand to meet growing energy needs. Although France makes progress transitioning away from fossil fuels, trucks, home heating and rapidly growing aviation demand all prove more problematic than imagined. By 2050 the truck fleet is well on its way to full electrification, but growing demand for road freight cuts into the pace of the transition.

The Surge scenario highlights both the inevitability of change to the energy system, but also that the pathway is not straightforward. While Horizon illustrates what needs to be done, in a similar vein to the French transition document, Surge helps to decipher the world as it is.

In Archipelagos an even slower transition plays out, with other national priorities interfering with progress.

In the case of France, the power system is almost certain to have transitioned from any dependency on fossil fuels by 2050. The passenger car system should be mostly electric by then and heat pumps will likely dominate in homes. But there could still be a way to go for a full transition, with aviation, road freight and various industrial uses proving stubborn to dislodge.

A landmark announcement from China

dchone October 3, 2025

Last week, in the midst of the UN General Assembly and the associated Climate Week in New York, Chinese President Xi Jinping announced a new greenhouse gas target for the country for the period out to 2035 as required under the Paris Agreement. This will form part of the formal UNFCCC submission of the Chinese nationally determined contribution, due this year and required to extend to 2035 as per the Paris Agreement rule-book. President Xi said that by 2035 China’s greenhouse gas emissions would be 7 to 10% lower than the peak, which although unspecified and yet to happen, is imminent. The peak relates to China’s first nationally determined contribution (NDC), submitted in February 2016, when the country pledged to peak CO₂ emissions by around 2030, reduce CO₂ intensity by 60-65% from 2005 levels by the same year, and increase the share of non-fossil fuels in its primary energy mix to around 20% by 2030.

The new goal is the first absolute reduction target announced by China and sets the scene for the subsequent 30 years journey to net-zero emissions. China set its net-zero target in 2020 through a previous announcement by President Xi Jinping. That announcement reiterated the aim to have CO₂ emissions peak before 2030 and then went on to commit to achieve carbon neutrality before 2060; to lower CO₂ emissions per unit of GDP by over 65% from the 2005 level, to increase the share of non-fossil fuels in primary energy consumption to around 25%, to increase the forest stock volume by 6 billion cubic meters from the 2005 level, and to bring its total installed capacity of wind and solar power to over 1.2 billion kilowatts by 2030.

According to the English version of the Chinese State Council website, President Xi Jinping announced China will, by 2035, reduce economy-wide net greenhouse gas emissions by 7 percent to 10 percent from peak levels, striving to do better; increase the share of non-fossil fuels in total energy consumption to over 30 percent; expand the installed capacity of wind and solar power to over six times the 2020 levels, striving to bring the total to 3,600 gigawatts; scale up the total forest stock volume to over 24 billion cubic meters; make new energy vehicles the mainstream in the sales of new vehicles; expand the National Carbon Emissions Trading Market to cover major high-emission sectors; and basically establish a climate resilient society.

So how important is this and how does it compare to a possible scenario for China?

In Shell, as part of our development of global energy scenarios, our energy team models the world energy system under different scenarios through to 2100. We use International Energy Agency (IEA) data for the period up to the present, then our own modelling capability for the future. Much of the data is published and it can be used to look into the energy system supporting specific sectors within individual countries. The current 2025 Energy Security Scenarios provide an up-to-date analytical toolkit for assessing the Chinese target.

The first step is to look at the goal itself; notably it is a reduction of 7 to 10% in greenhouse gas emissions, not just CO₂. This probably makes the target more difficult than at first look, in that methane, nitrous oxide and other greenhouse gases are notoriously difficult to manage. These are often fugitive emissions from multiple sources, and a good proportion are related to agriculture, such as rearing cattle and growing rice in the case of methane.

We estimate that China’s total anthropogenic CO₂ emissions in 2024 were 13.0 Gt, of which 12 Gt comes from their energy system. In 2018 China reported that the other greenhouse gases amounted to a further 2.22 Gt CO₂ equivalent, which appears to be the best currently available figure. That puts total greenhouse gas emissions in 2024 at about 15.2 Gt CO₂ equivalent. But this is not the peak, which is the baseline for their 2035 goal. In our Surge scenario, which represents a world of rapid change as new technologies emerge in the energy system and artificial intelligence becomes ubiquitous globally, peak Chinese CO₂ emissions are in 2027 at 13.4 Gt CO₂, so 15.6 Gt CO₂ equivalent for total greenhouse gases, if we assume the total non-CO₂ emissions remain at 2.2 Gt.

A 10% reduction in emissions by 2035 from the peak therefore means emissions of 14.0 Gt CO₂ equivalent in that year. If we assume that the 10% reduction target applies equally to CO₂ and the other greenhouse gases, that means a CO₂ target of some 12 Gt CO₂ in 2035 for China.

The Surge scenario CO₂ profile is shown above and by 2035 emissions in China are consistently tracking downwards and have reached 11.6 Gt. This is slightly below the stated Chinese goal, implying that they could do even better, which is also what President Xi said in his announcement.

Surge is a scenario which is illustrative of many of the trends that can be seen in China today. It highlights the rapid shift towards road transport electrification, both for cars and trucks, the immense capacity available in China for manufacturing solar PV panels and batteries, the development of new nuclear power technologies, the production of synthetic fuels for sectors such as aviation, and perhaps most importantly, a real effort to manage CO₂ emissions. In that framing, increased natural gas use in the Surge scenario helps China reduce coal demand in the short term. Overall, it’s an exciting story-line and reflects the technological dynamism in the Chinese economy today.

But Surge isn’t a scenario with an outcome that limits warming to 1.5°C, for that the CO₂ goal for China in 2035 would need to be 8 Gt, or a reduction of some 30% in just 8 years, as illustrated in our Horizon scenario. Nevertheless, Surge sees the world reach net-zero CO₂emissions by 2080 and limit warming to 2°C in 2100, with China playing a key role in delivering that outcome. Not only does Surge see China consistently reduce emissions over the coming decades, but China, which we call the Great Wall of Change in our scenario archetype categorization, is the major producer of the energy infrastructure the world needs to reach net-zero emissions.

The announcement by President Xi may not have been everything that everyone was hoping for, but it is a critical and important step to push the world towards the requirement of Article 4 of the Paris Agreement, ‘a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century‘.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Like it or not, carbon management is the future

dchone May 28, 2025

One of the differentiating features of the Shell scenarios work is the timeline through to 2100 that is offered. Many other energy scenarios more typically model through to 2050, such as in the World Energy Outlook from the IEA. But for a thorough analysis of the long term emissions of CO₂ and temperature, a view to 2050 isn’t sufficient.

The Shell scenarios have always recognised that while fossil fuels lose market share and eventually make their way out of the energy system, in the medium term there will continue to be abundant use. This is the result of a world that still depends on fossil fuels for nearly 80% of global energy needs and for many other uses too. Even in the long term, under the most rapid transition pathway we could devise, a modest tail of fossil fuel use extends into the 22^nd century before finally declining to almost zero use. Without managing carbon emissions, the CO₂ from this tail will add up, which in turn would drive up temperature until fossil fuel use stops, given increases in temperature come from the accumulation of CO₂ in the atmosphere over time, not the level of CO₂ emissions in any given year.

The 2025 Energy Security Scenarios extend through to 2100 and therefore offer insight into this long tail of fossil fuel use and how the associated CO₂ emissions might be managed. The scenarios comprise three storylines; two exploratory scenarios called Surge and Archipelagos, and Horizon, our third scenario, normative and illustrative of a rapid acceleration of the energy transition. In Surge, an era of robust economic growth is ushered in by artificial intelligence technologies, with the transition accelerating as a result, whereas the Archipelagos scenario sees a world where trade friction and geopolitics impinge on the speed of the transition.

In Horizon, the CO₂ still to come, assuming no management of CO₂, amounts to 1 trillion tonnes, enough to take the world to almost 2°C from where we are today. In Surge and Archipelagos the numbers are 1.7 trillion tonnes and over 2 trillion tonnes respectively, which implies temperatures well over 2°C. The long tail is important because climate action to date has largely assumed that fossil fuels could be quickly phased out by a rapid transition. Rather, a dual focus is required, comprised of building a new energy system but also recognising the need to mange the CO₂ from the legacy system as well.

While the Horizon scenario serves as a useful reference for the pathway to net-zero emissions in 2050, Surge and Archipelagos offer a flavour of the world that we are actually dealing with. Surge embodies a rapid transition, with technologies like solar PV and grid batteries scaling at rates considerably faster than now. But it is also a world of higher economic growth, which brings with it more demand for goods and services (which includes those solar PV panels) and therefore more energy demand. In the short term that means even more fossil fuel use. But by the end of the century fossil fuels have shifted from the current level of 78% of the energy system to just under 10% – a startling transition in 75 years. With a focus on carbon management, net-zero emissions comes earlier, in 2080, too late for limiting warming to 1.5°C, but sufficient for 2°C in 2100 after a short period of overshoot of 2°C.

Nevertheless, Surge still requires a commercial breakthrough for the deployment of carbon capture and storage (CCS) technology. In the scenario this happens via direct air capture (DAC) with geological storage (DACCS), which is deployed at very large scale after 2040. The big technology companies, seeking ways to manage their growing indirect carbon footprints, step in and invest. DAC also lends itself to modular assembly line production, which is how the technology scales rapidly. The scenario recognises that a complete end to fossil fuel use is a 100-year journey, during which time carbon management must play an increasing role.

A DACCS unit operating late in the century in **Surge** (AI generated).

The three scenarios don’t just focus on technology to capture carbon but also highlight the importance of land carbon management. This includes ending deforestation, encouraging the agriculture sector to engage in carbon farming (soil carbon management), embarking on large scale reforestation and protecting critical ecosystems with high carbon stocks, such as mangroves, wetlands, and grasslands. The size of the land management prize, as demonstrated in the Horizon scenario, is 600 billion tonnes of CO₂ over the course of the century, or 15 years of current CO₂ emissions.

The current global CO₂ story can be illustrated as shown below, with most CO₂ emissions coming from fossil fuel use, but there are contributions from current land use activities and industries such as cement manufacture. The bioenergy industry is shown as carbon neutral, as the CO₂ that is emitted when the fuel is used is reabsorbed when the originating biomass grows.

By 2060 in the Surge scenario, the global CO₂ story has changed considerably. Fossil fuel use has dropped by about half but remains a big part of the energy system. However, emissions are down by nearly 75% due to extensive carbon management activities. By 2080, when Surge reaches net-zero emissions, fossil fuel use has fallen by two-thirds, but is still important in industry and aviation.

The importance of carbon management throughout this century cannot be understated, and this was the message from a recent Tony Blair Institute report as well. Their report states (amongst other key points);

Prioritise global investment in carbon capture –
- investing in solutions that capture emissions at source before they reach the atmosphere, together with breakthrough technologies like direct air capture that permanently remove carbon. Both are technologically feasible but need policy and capital to scale.

Scale up nature-based solutions
- from planting forests to developing carbon-smart crops, we must harness the power of nature and science together. Nature is one of our best allies in this fight, and we need to back it with smart science and innovation.

Coming back to the evidence from the scenario stories, managing carbon in this century means the difference between limiting warming to a level society can adapt to or allowing the surface temperature rise to exceed 2°C, and possibly by several tenths of a degree.

Is a nuclear-powered marine sector a possibility?

dchone March 10, 2025

I recently had the opportunity to attend a workshop in London where the global marine community was beginning to think about the possibility of nuclear power for ships. Various governments, companies and marine classification societies have recognised that the technology for nuclear power in commercial ships both viable and visible in the medium term, even while there is no short-term prospect of such ships coming into service. But these same organisations also recognise that creating a safe marine regulatory environment for nuclear powered ships could take many years, so starting now is a prudent step to at least allow for the possibility of this technology to emerge.

But under what conditions might such a development take place? Is there any pathway to nuclear powered shipping?

An AI projection of the engine room of medium sized SMR powered container ship.

Scenarios are the ideal tool for addressing such questions and the recently released 2025 Energy Security Scenarios are well placed for this purpose with one of the scenarios featuring nuclear powered commercial shipping. Just to be clear, these story-lines are exploratory in nature, as is the case with all the scenarios that Shell produce (including those with normative outcomes – see Horizon below). There is no intent to forecast the emergence of nuclear shipping but rather to awaken people to the possibility that it could happen and the circumstances required.

The 2025 Energy Security Scenarios are comprised of three scenario story-lines:

Surge – an era of robust economic growth is ushered in by artificial intelligence technologies that are welcomed and not overly challenged, with economic growth and AI infrastructure driving up energy demand. The geopolitical landscape offers a spur for change as China and the USA compete for AI dominance. A new technocratic era emerges.

Archipelagos – self-interest is deeply rooted in national psyches. The world is still mindful of the energy system disruption in 2022 following Russia’s invasion of Ukraine, but also a world that reacts to the pressures of increasing migration across multiple borders and uneven global trade patterns. Trade friction and geopolitics impinge on the speed of the energy transition, but this is countered somewhat by growing societal pressure to address climate change, which forces action.

Horizon – illustrative of a rapid acceleration of the energy transition and introduction of carbon management practices to sharply reduce emissions, both in response to a comprehensive policy framework with strong societal and political support. The scenario takes a normative approach aimed at a world that achieves two key things: net-zero emissions by 2050 and global warming limited to 1.5°C by the end of the century.

The three stories also illustrate three very different pathways that could be taken by the marine sector, but all three scenarios indicate that change is coming.

In Horizon, the urgent need to get to net-zero emissions in the near term drives the sector to quickly rally around hydrogen fuel cell technology (or the use of hydrogen could also be interpreted as ammonia for marine fuel) as a solution that can be delivered in the near term. While biofuels do help lower the carbon footprint of marine bunkers for a period, the singular early push towards hydrogen dominates the storyline. By 2050 the technology is very well established and by 2075 most ships are using fuel cell technology and hydrogen as the energy source. By late in the century the marine sector is back to a single fuel, as has been the case for many decades up to now. While the scenario sees an end to fossil fuel use in the sector, this isn’t the case by 2050, the current year for a net-zero emissions goal as adopted by the International Maritime Organization (IMO) in July 2023. This means that in 2050 the sector will need to make considerable use of carbon removal offsets, which the Horizon scenario makes available in abundance by mid-century.

In Archipelagos, a broadly slower transition means that by 2050 the situation is little changed from today. Biofuels are in use and hydrogen fuel cell technology has been established, but deployment remains limited within the global shipping fleet. However, as pressure mounts on the sector with the world heading towards 2°C of warming and the first 2°C year already on the record books in a warm El Niño year in the early 2050s, fuel cell technology starts to gain momentum. By 2075 hydrogen fuel cell propulsion is ordered for the majority of new ships, but it still takes a further 30-40 years for the global fleet to completely change. The end of fossil fuel use in shipping isn’t seen until about 2120.

In Surge, a very different pathway emerges in a world of technology achievements and broad societal acceptance of science and technology. In the period up to the early 2040s a number of different marine technologies appear, including hydrogen fuel cells, ammonia, biofuels, green methanol and drop-in synthetic fuels. But the array of technology choices becomes a problem in itself, with the sector that traditionally prefers a single fuel not seeing significant investment in any one option.

In a parallel development in Surge, the small modular reactor (SMR) comes into the picture in the 2030s as major AI technology companies fund development, seeking new secure energy solutions for very large data centres. The technology matures quickly, and AI itself helps solve early issues. SMR use becomes much broader than data centres, with assembly-line style production bringing down costs, leading to a near plug-and-play nuclear customer experience in the 2040s. A handful of marine companies adopt the SMR developments and form a consortium to build a medium sized SMR powered container ship which undergoes successful trials and multiple port visits in the late 2030s and early 2040s.

Finally, in the mid-2040s in Surge, after years of stop‒start progress in alternative marine fuels but pressure still building on the sector to reduce emissions, a major Chinese shipping company places an order for five large SMR container ships, each with twin 30 megawatt reactors. These are put into service in 2050 on well-established routes from Shanghai to the US West Coast and to Rotterdam in the Netherlands. Following a successful start, the technology becomes established throughout the industry, to the extent that by 2090, all large vessels have SMR propulsion.

The nuclear story in Surge only comes about for several very specific reasons. These are all challenging to imagine.

Nuclear is not immediate, so its emergence depends on no other early single emissions solution for the marine sector becoming locked in (as is the case in Horizon). This is both a technology issue and an issue with society not fully addressing CO₂ emissions in the near term in alignment with the Paris Agreement.
Broad societal acceptance of nuclear power, which aligns with the techno-optimism of Surge.
A global security situation that can accept the wider use of nuclear technology (problematic in Archipelagos).
Changes in the commercial nuclear regulatory environment, which tends to licence specific fixed sites for nuclear power, rather than considering the reactor as a mobile entity.
A marine regulatory environment that can classify and set high standards for commercial nuclear vessels.

None of the above is to argue that commercial nuclear shipping will happen, it may never appear, but it is nevertheless interesting to think about the problem in a structured way and consider the alternatives for the sector. Scenarios, – such as Shell’s 2025 Energy Security Scenarios are an excellent tool for doing this.

Artificial intelligence, climate and temperature

dchone February 17, 2025

Note: With the release of new scenarios from Shell, please read here what scenarios are, and what they are not.

In early February the European Copernicus climate service announced that the January 2025 global average surface temperature was the highest ever recorded for that month. This came despite a shift away from the warmer El Niño conditions in the Pacific that are often associated with record breaking months, and which had been an underlying contributor to the yearly temperature anomaly of 1.55°C recorded for 2024. These recent temperature measurements raise the question as to where and when the global average surface temperature might settle in the decades ahead, given the ongoing rise in anthropogenic fossil fuel CO₂ emissions, as seen, for example, from 2023 to 2024. A casual inspection of recent emissions data gives a first indication of no change in direction, but beneath the headline trend of rising fossil fuel emissions, a very different story is beginning to emerge. To see that trend and imagine the changes ahead requires considerable analysis and a view about future societal trends.

So, we come to The 2025 Energy Security Scenarios, released by the Shell scenarios team last week. Three scenarios are offered, two which explore the future based on underlying trends playing out across the world today and one which takes a normative approach to understand the full depth and speed of change required to achieve net-zero emissions in 2050 and to limit warming to 1.5°C by 2100. All three scenarios recognise that the world is currently being shaped by security, competitiveness, and climate concerns, with technologies like artificial intelligence rushing headlong towards us.

The two exploratory scenarios are called Surge and Archipelagos. In Surge, an era of robust economic growth is ushered in by artificial intelligence technologies (AI) that are welcomed and not overly challenged, with economic growth and AI infrastructure driving up energy demand. The geopolitical landscape offers a spur for change as China and the USA compete for AI dominance. The Archipelagos scenario sees a world still mindful of the energy system disruption in 2022 followings Russia’s invasion of Ukraine, but also a world that reacts to the pressures of increasing migration across multiple borders and uneven global trade patterns. Trade friction and geopolitics impinge on the speed of the energy transition, but this is countered somewhat by growing pressure to address climate change, which forces action across society, but not at the pace needed for achievement of net-zero CO₂ emissions in the nearer term.

Horizon, our third scenario, is normative and illustrative of a rapid acceleration of the energy transition and introduction of carbon management practices to sharply reduce emissions, both in response to a comprehensive policy framework with strong societal and political support. Horizon includes a fast and comprehensive change in global land management practices, including an end to deforestation in the 2030s, in combination with strong government support for the full range of carbon capture and storage technologies.

The 2025 Energy Security Scenarios are built on the back of The Energy Security Scenarios released in 2023, but by including Surge the scenarios team has explored the implications for energy in a world where AI begins to reshape society. This has a real impact on the energy system for several reasons. Most importantly, it sees energy demand increase due to greater economic growth and it transforms the way energy infrastructure is built in the decades ahead.

For two centuries the energy system has largely evolved through the development of big, bespoke projects, like offshore platforms extracting oil or the many huge refining complexes that dot the globe. But a trend that has emerged in recent years is to build equipment on assembly lines and assemble it, ‘Lego-like’, in the field. Solar PV is like this, and grid electricity storage has scaled up rapidly on the back of battery production. In Surge, this trend spreads and accelerates and the general technology push enabled by an AI world supports this, both at the manufacturing facilities and by enabling virtual networks of otherwise disconnected devices in the field.

Shown above, assembly line production of small modular direct air capture units in the late 2030s illustrates the change in the way energy infrastructure is built and deployed. Modular production accelerates the transition and AI systems ensure efficient integration of multiple units in the field.

The trend towards modular production benefits solar PV, electricity storage, heat pump deployment, hydrogen production via electrolysis, direct air capture of CO₂ and the introduction of small modular nuclear reactors (SMR). Other energy system technologies also benefit. In Surge, the introduction of SMRs via this route eventually transforms the marine sector and takes it away from liquid and gaseous fuels like marine diesel and LNG. The first SMR ships come into service just before 2050 and by late in the century in Surge, all ocean-going vessels are nuclear. However, this development isn’t seen in Archipelagos or Horizon.

Surge also sees a new business model for carbon management. A trend that has emerged in recent years has resulted in considerable venture capital funding for the development of direct air capture (DAC) technologies, with companies such as Google, Airbus, Microsoft, BCG and NYK all agreeing to buy future DAC carbon credits. Dozens of DAC startups have appeared and projects, albeit modest in scale, are underway. In Surge this trend accelerates as the cost of DAC drops rapidly with assembly line production of capture modules, akin to building air conditioners or refrigerators. The voluntary carbon market flourishes, with DAC credits underpinning it, and high credibility carbon neutral labelling enters widespread use. Both consumers and business customers demand carbon neutral goods and services. One outcome is that by the late 2040s global DAC with geological storage (DACCS) use exceeds traditional CCS within power generation and industry. The future of geological storage of CO₂ becomes a DAC story, with billions of tonnes per year of CO₂ captured and stored via this route later in the century.

Surge offers insight into a higher growth pathway, something which many governments are striving for. The increased growth means greater energy demand, but as discussed it also brings with it a faster transition and rapid scaling of carbon storage. Surge therefore reaches net-zero CO₂ emissions well within this century, meaning that by 2100 surface temperature warming is limited to 2°C, albeit after a temporary overshoot of this threshold.

But even in a slower growth, more fractious world, illustrated by Archipelagos, the momentum in the energy transition is sufficient to reach net-zero emissions by about 2120, which delivers about 2.2° of warming. The implication of this, in combination with Surge, is that warming is unlikely to exceed 2-2.5°C, a significant shift from multiple reports in the early 2010s where scenarios that delivered 4°C of warming were highlighted in adaptation analyses. Evidently, in just a decade, the current momentum in the energy transition has delivered a new global warming paradigm for consideration.

The energy transition is now at a tipping point; the questions at hand are not whether society can reach net-zero CO₂ emissions or whether society is able to limit surface temperature warming, but how soon will net-zero emissions be realised and just how low might the eventual temperature plateau be.

In Brazil, land use change looms large

dchone July 19, 2024

The recent release of the Brazil Scenarios Sketch, based around the Shell Energy Security Scenarios, highlights the role that land-use change could play for Brazil to achieve two important outcomes; reaching net-zero CO₂ emissions within its domestic economy and becoming an important supplier of carbon removal units into the global economy as the world strives to balance carbon emissions and reach net-zero. In fact, these two outcomes are inextricably linked.

The CO₂ emissions starting point from Bazil is shown in the illustration below, with land-use change being the largest component of the story, eclipsing fossil fuel emissions and even exceeding the large bioenergy CO₂ loop.

Within the scenarios team in Shell, understanding and accounting for land emissions has become a core component of the modelling expertise that has been developed. It is approaching the level of detail that is used in energy system modelling, although the uncertainty related to land-use emissions is much greater than that associated with energy system emissions. Nevertheless, by using a consistent data focused approach, clear trends emerge, and conclusions can be reached relating to changes of direction.

In Brazil, the 785 Mt CO₂ emissions shown above come mainly from ongoing deforestation. However, there are contributions from other ecosystems which are under threat. The breakdown is shown below and illustrates the detail available in the scenarios land-use database, which includes nearly twenty different land-use change types. While the categories are referenced by ecosystem type, the fact that they are shown as net positive emissions means that degradation is underway.

The scenario storyline for Brazil features two scenarios, Sky 2050 and Archipelagos. Both start with the realities of the 2020s, including the struggle to end deforestation in Brazil. As time moves on into the 2030s Sky 2050 takes a normative approach that starts with the desired outcome of global net-zero emissions in 2050 and works backwards in time to explore how that outcome could be achieved. By focusing on security through mutual interest, the world achieves the goal and a global temperature rise of less than 1.5°C by 2100. Archipelagos follows a possible path in a world focusing on security through self-interest. Even so, change is still rapid, and the world is nearing net-zero emissions by the end of the century but the temperature outcome in 2100 is a plateau at 2.2°C.

Both scenarios incorporate significant shifts in land-use policies and practices in Brazil. These are partly driven by government and incentive structures, but also driven by necessity and the recognition across society in Brazil that the threats emerging from ongoing deforestation, such as biodiversity loss and changes in South America rainfall patterns are unsustainable in the shorter term.

In Sky 2050 there is global recognition that Brazil holds the keys to net-zero emissions for many countries, in that the potential for natural carbon removals coming from Brazil can balance ongoing emissions in scores of economies. This leads numerous countries to invest in actions in Brazil to end deforestation, an essential first step towards delivering credible carbon removal credits from reforestation. In the scenario Brazil still overshoots its 2030 goal to end deforestation but has certainly achieved the goal by 2035. By then reforestation activities are becoming extensive with some 4 Mha of land under project management.

In the second half of the 2020s in Sky 2050 the agricultural sector adopts sweeping reforms, driven by a clear financial incentive structure underpinned by both domestic and international demand for soil carbon credits. The use of biochar in farming is taken up, together with changes in cropping and grazing. By 2030 these three new practices are drawing down 34 Mt of CO₂ per year, or about 10 Mt of carbon added to the soil, which in turn means improvements in farm output. The carbon credits produced by the farmers are sold into the domestic emissions trading system or transferred out of Brazil to other countries via Article 6 of the Paris Agreement. In 2030 farm income is bolstered by well over $2 billion as a result.

Biochar use has a long history in Brazil. Analysis of soils has revealed that more than 2,000 years ago, Amazonian Indians used to bury stable carbon in the soil. A mixture of broken pottery and various other organic materials has maintained the high fertility potential of these areas to this day. Biochar production is a technique through which carbon from biomass is transformed into stable carbon that can be captured in the soil. In addition to this long-term carbon sequestration role, biochar is also beneficial to soil performance as it improves the retention and diffusion of water and nutrients. Biochar is a soil additive produced through pyrolysis, a process that involves heating biomass waste (manure and agricultural residues) at high temperature in an oxygen limited environment.

By 2050 in the Sky 2050 scenario, Brazil is drawing down nearly 700 Mt of CO₂ through nature-based removals, with reforestation and agricultural biochar practices accounting for well over half the amount. But changed grazing and cropping practices as well as forest management and agroforestry also play important roles. The role of carbon markets acting as a conduit for international financing of domestic actions in Brazil cannot be understated. Without a global demand for carbon removals, the nature-based project investment required and incentives paid out to farmers cannot emerge on the scale necessary for Brazil to make all the changes that the scenario imagines.

In the Archipelagos scenario self-interest prevails globally. As a result, Brazil is not presented with the same level of partnerships or the major global demand for carbon removals. The result is that the country doesn’t end deforestation, although by mid-century the practice has been halved and the net-CO₂ impact is zero as reforestation and forest management activities balance the losses still being seen. Agricultural practices do change in Archipelagos, but with the global voluntary market being the primary driver of change rather than a mixture of voluntary and compliance markets, progress is slower than Sky 2050. However, the same endpoint is eventually reached, albeit one to two decades later.

In both Sky 2050 and Archipelagos the changes that Brazil can deliver in land-use practices mean that net-zero CO₂ emissions in the country is quite possible, coming a decade either side of mid-century with Sky 2050 delivering the outcome more rapidly. In both cases fossil fuel emissions have been reduced by some 20% when net-zero CO₂ emissions is achieved, but that reduction is far from being the major contributor to the outcome.

Brazil: Leading the world to net-zero emissions

dchone June 24, 2024

As the world strives to get to net-zero emissions, Brazil can play a formidable role in helping to enable such an outcome, but it won’t happen without the broad recognition of carbon removal credits and a trading capacity to shift the credits between countries.

I have recently been in Rio de Janiero, Sao Paulo and Brasilia participating in the launch of a new analysis by the Shell scenario team that is focused on Brazil and looks in depth at the energy transition in the country, but also the enormous potential for managing carbon dioxide on a scale that is globally relevant. That analysis or country Scenarios Sketch, Brazil: Leading the world to net-zero emissions (in both Portuguese and English), builds from The Energy Security Scenarios, using the detailed country level data for Brazil that we in Shell have available from our World Energy Model.

Brazil is both unique and fascinating from a carbon cycle perspective, given the size of the rainforest, the large agricultural sector, and the important role that both bioenergy and hydroelectricity play in the country today. As such, this Scenarios Sketch is entirely different to all the others we have worked on, in that it draws heavily on our land carbon analysis work and required a deep dive into the Brazil bioenergy sector.

The emissions starting point for Brazil is unlike any other country. Fossil fuel CO₂ emissions, primarily from oil, are 453 Mt per year, but significantly less than land use CO₂ emissions of 785 Mt per year, largely coming from ongoing deforestation in the Amazon region. Fossil fuel CO₂ is also surpassed by the bioenergy system, although that system is effectively carbon neutral. Total CO₂ emissions are around 1.3 Gt per year, but total greenhouse gas emissions are just over 2 Gt per year, with the addition of methane and nitrous oxide mainly coming from the agricultural sector.

The Brazil Scenarios Sketch incorporates two scenarios, Sky 2050 and Archipelagos. Both start with the realities of the 2020s, meaning that the energy system and future energy policy landscape are showing real signs of change, but also recognising that an insufficient amount of progress has been achieved on the scale required to reduce emissions substantially by 2030. As time moves on into the 2030s Sky 2050 takes a normative approach that starts with the desired outcome of global net-zero emissions in 2050 and works backwards in time to explore how that outcome could be achieved. By focusing on security through mutual interest, the world achieves the goal and a global temperature rise of less than 1.5°C by 2100. Archipelagos follows a possible path in a world focusing on security through self-interest. Even so, change is still rapid, and the world is nearing net-zero emissions by the end of the century but the temperature outcome in 2100 is a plateau at 2.2°C.

In the context of Brazil, while the energy transition takes some interesting twists and turns, the initial focus in Sky 2050 is on ending deforestation. In the scenario this is achieved in the early 2030s through a concerted government effort, in combination with the existing efforts through the voluntary carbon market. Government-to-government partnerships flourish and support the effort as countries outside Brazil recognise it is in their interests to see deforestation end such that Brazil can move into a phase of bona fide carbon removal through land-use change.

This achievement sets the scene for significant reforestation efforts driven by carbon markets, as the global demand for carbon removals ramps up and compliance markets, such as the EU Emissions Trading System, open their systems to an inflow of removals from outside their domestic boundaries. The important dynamic that results from ending deforestation is a leap in confidence that land-based credits from Brazil now represent true carbon removal and questions on additionality, that have hampered the avoided deforestation credit market, are put to rest.

Not content with land-based removals, in Sky 2050 Brazil sets about developing a CCS industry, starting with the many ethanol plants in the Sao Paulo region where the prospects for geological storage of CO₂ look good. The fermentation of sugar to produce ethanol releases CO₂ in pure form which can be captured and geologically stored. Further, the combination of bioenergy production or use with carbon capture and storage (BECCS) delivers permanent removal of CO₂ from the atmosphere.

In Sky 2050 in CO₂ terms, by 2040 Brazil is already in a net-drawdown position, with a complete turnaround in land-use emissions and a CCS industry well established and storing over 50 Mt CO₂ per year.

As the transition proceeds in Sky 2050, Brazil also reaches net-zero greenhouse gas emissions by 2050. But doing so requires considerable investment in CCS and mechanisms to incentivise landowners and the agricultural community to adopt new practices and change behaviours. In Sky 2050 a good proportion of these investments and incentives come through the carbon market, both from the domestic emissions trading system and projects channelled through Article 6 of the Paris Agreement. Importantly, Brazil has sufficient space in its carbon budget to allow for international trading of removal credits.

Picturing Brazil from an emissions trading perspective in the early 2030s, it might look like the illustration below. There are many potential counterparties, but the illustration imagines the EU ETS and the aviation sector as two potential partners. In Europe the EU ETS (I) will reach a point of zero new allowances by 2040, so by the 2030s industrial concerns could already be feeling the pressure given the lack of immediate abatement opportunities. In the aviation sector in the 2030s, technical solutions (e.g. SAF, e-fuels, hydrogen) for abatement will take decades more to fully implement, so carbon removals are the only short to medium term option.

By 2040, say, Brazil could be supplying significant volumes to these counter-parties but not compromising its own net-zero ambitions. A similar story could emerge domestically through the implementation of the planned emissions trading system.

Importantly, trade in carbon removals can bring investment and income into the Brazilian economy. But much of the story depends on a fully functioning Article 6 and a willingness by regions such as the EU to make use of it. To date, the signs pointing to such an outcome have been limited, despite some effort by the Article 6 negotiators at UNFCCC meetings.

The Brazil Scenarios Sketch provides many energy and greenhouse gas insights into a vibrant country with an interesting story to tell. You can find that story here.

Normative or exploratory – how should scenarios be developed?

dchone June 10, 2024

In a time when there is much being written about limiting warming to 1.5°C, the so-called normative scenario has come of age. These emerge from a class of scenario analysis where a principal outcome is predetermined, rather than the traditional exploratory scenario which finds an outcome as a result of applied societal and geopolitical trends. In the case of 1.5°C scenario analysis, the story-line and findings are determined by the need to achieve net-zero emissions by 2050 and to limit cumulative CO₂ emissions to some specified amount, which is the 1.5°C carbon budget. A further constraint is applied when a scenario with no or limited temperature overshoot is created. In that case the carbon budget would be rigidly enforced such that future atmospheric CO₂ removal technologies and practices cannot be applied to correct an excess in shorter term CO₂ emissions.

A no-overshoot 1.5°C normative scenario with a fixed carbon budget delivers a prescribed pathway that must be followed in order to achieve that same outcome in the real world; a recipe of sorts. However, picking and choosing certain parts of the pathway and calling for their implementation as policy approaches may be somewhat perilous; it could ignore inter-dependencies that the scenario requires for the outcome it achieves. Such is the case for the call to place a moratorium on new fossil fuel projects.

A new paper from researchers at University College London and the International Institute for Sustainable Development explores ways in which fossil fuel extraction can be curtailed, with their analysis opting for the development of a social-moral norm against completely new fossil fuel projects rather than an attempt to limit extraction from exiting projects or shut existing extraction sites down. The paper was recently discussed in a Financial Times article.

The researchers assess a range of 1.5°C scenarios compiled for the Intergovernmental Panel on Climate Change’s (IPCC’s) Sixth Assessment Report (AR6). For these particular scenarios the demand for oil, coal and gas can be met from fields and mines already in production or under development. The scenarios that they assess are the C1 scenarios (limiting warming to 1.5°C with low or no overshoot), including only those scenarios that do not exceed IPCC feasibility and sustainability thresholds on carbon sequestration. Such thresholds effectively exclude scenarios dependent on high levels of carbon sequestration technologies, such as carbon dioxide removal (CDR), which the authors argue are unproven at scale and which, if they failed to materialize, would pose a risk to the achievability of the 1.5° goal. While a tight limit on future CDR deployment can be a valid scenario assumption, it is a questionable assumption in the real world, given that society is now so close to the 1.5°C threshold.

In any case, the scenarios chosen by the researchers, like the IEA NZE Scenario, make some highly challenging assumptions about the energy system to meet the net-zero, no overshoot and carbon budget constraints imposed within them. These assumptions include reducing the demand for energy services such that fossil fuel demand falls even faster than would be the case based on substitution alone. The IEA had to make the same assumptions in its own NZE 2050 scenario and states the following on its website;

Clean energy technologies are deployed at unprecedented speed in the NZE Scenario, but many CO₂-intensive energy assets will still be in use in 2030. Reducing their emissions or replacing them depends on scaling up novel or complex low-emissions solutions and deploying them around the world, and that will take time . . . . . . In the absence of energy demand reductions from behaviour change, achieving the same emissions reductions in end-uses would require ramping up low-emissions technologies at staggering speed. In aviation, the use of sustainable aviation fuel would need to increase more than twice as fast as in the NZE Scenario . . . . . . In road transport, the use of more EVs would require an additional 1.3 million tonnes of critical minerals by 2030 – roughly the amount of critical minerals used in the EV sector today . . . . .

Examples of the assumed IEA behavioural changes come from every sector. In the buildings sector, they include adjusting space heating and cooling temperatures. In the transport sector, they include more public transport and reduced car use in cities, eco-driving on highways and switching from planes to trains or videoconferencing.

As already noted, these behavioural changes mean that oil, gas and coal demand fall even faster than would be the case for a mitigation or substitution only story, which in turn allows the scenario to meet the carbon budget and no-overshoot constraints. This also means that the need for new fields and mines for fossil fuel production is reduced, to the extent that the scenario designers can then make the claim that no new fossil fuel production facilities are required.

We then come to the UCL/IISD report. Within the paper there is no mention of the need to see a long list of behavioural changes emerge across global society; rather, it launches into an analysis and discussion about the policy framework that should be implemented to limit development of further fossil fuel resources. The authors reach the conclusion that state and non-state proponents of ambitious climate action should engage in policy and advocacy aimed at diffusing and institutionalizing a social-moral norm against new fossil fuel projects. The researchers note that a social-moral norm is a standard of appropriate behaviour that is expected of an agent with a particular identity.

The problem with this argument is that it tackles the result of energy demand, rather than the cause. Simply shutting off supply will of course limit fossil fuel use, but the outcome could be very disruptive and have unintended consequences, such as limiting energy access to those most in need. If the solution to the carbon budget problem involves curtailing energy service demand, then surely the social-moral norm that the authors should have argued for is around limits on energy service use. This is basis for the so-called Flygskam in Sweden, a word that literally means “flight shame”. The movement discourages people from flying to lower carbon emissions. Japan used such a mechanism quite effectively after the Fukushima nuclear accident to encourage higher temperatures in buildings in the summer, therefore lowering the need for energy for air conditioning.

But shaming and aggressive persuasion aren’t always welcome and may have a limited duration before reversion kicks in. The Sierra Club argued in a 2023 article that climate-obsessed travelers should ditch the guilt and support efforts to cut aviation’s carbon footprint. They saw three problems with the shaming approach – it puts the burden on individuals, rather than accelerating the systems changes that will cut carbon from flight; it simply won’t scale as flying is a large and growing sector, and we live in a diverse, interconnected, and increasingly mobile world; finally, other solutions do exist and need to be scaled rapidly. The article concludes that society needs to support the kinds of policies and investments that will allow fossil-fuel-free travel. But then the aforementioned IEA issue of speed of deployment crops up and the carbon budget is under threat once again.

While the arguments put forward in the UCL/IISD paper are cogent and thought through, they do over-simplify a complex problem. In fact, there isn’t a simple solution to the 1.5°C issue, even though many argue that there is. Perhaps the root of the problem is a gospel like belief in extreme normative scenarios that only deal with the period from now to 2050, rather than attempting to understand the alternative solutions and outcomes that full century exploratory scenarios can highlight.

The Shell Energy Security Scenarios offer such insight. Sky 2050 is a blend of normative and exploratory, in that it does meet the goal of net-zero emissions in 2050 and does adhere to a 1.5°C carbon budget, but it explores the possible outcomes more holistically, embracing near term stubbornness (for change) in the energy system, land use reform, future industrial removals and carbon credit trading, all part of a world also transitioning rapidly towards a new energy system. Archipelagos is an exploratory only scenario. It recognizes the accelerating rate of the energy transition as multiple pressures are placed on it, including climate action, supply disruption and price volatility. Both scenarios extend their analysis beyond 2050 and chart a course through the second half of the century, a necessity to fully understand where the energy system is ultimately headed. The often used end-point of 2050 for energy system scenario analysis is now too near for such scenarios to offer an appropriate solution set for the Paris Agreement goals.

You can find The Energy Security Scenarios here.

‘Phantom’ carbon credits or a transparent attempt to innovate?

dchone May 9, 2024

In the past week, a story published by the Financial Times based on a report from Greenpeace claimed, inaccurately, that Shell had benefited from selling “millions” of Canadian carbon credits that were not traceable to a direct emission reduction. In fact, the carbon credits in question come from the gold standard for managing CO₂ emissions, a carbon capture and geological storage project (CCS). There is a story to be told about this, but it isn’t the one you’d have read in this weekend’s article. It’s also a story that involves me.

The story dates back to the early 2010s as Shell (and its JV partners) was planning the construction of a first CCS facility both for Shell and Canada, but also one of the first of a handful to be operating in the world. The Shell-operated project is known as Quest (current Shell interest 10%), and since startup in 2015 it has been storing about 1 million tonnes per year of CO₂ in a safe geological formation deep below the prairies in Alberta.

First, it’s crucial to understand the nature of CCS projects. They take years to be planned, engineered and constructed before capturing CO₂ on a large scale. But they don’t come with an obvious business model that provides a return to investors, such as through the sale of a product or the provision of a service that is in high demand. Instead, innovative policy mechanisms and regulatory measures are needed to underpin a CCS project. This remains true in 2024. While some governments recognise the need and are rising to the challenge, the deployment of CCS technology is significantly behind the pace and scale needed to realise 2050 net zero targets, largely because of the absence of sustainable long term business models. The technology itself is well proven and ready to go.

Two main business models exist today; in the US there are tax credits ranging from $80 to $180 per tonne of CO₂, depending on the exact nature of the project. In the EU there is the EU Emissions Trading System (EU ETS) and its prevailing carbon price that has reached as high as €100 in recent times. Even these robust mechanisms aren’t always enough for projects, but in the late 2000s there was far less in play to underpin CCS, so project developers and government policy makers had to get creative, which is what happened.

In 2008, a solution that had emerged in the EU in which I was involved used emissions allowances from the EU ETS as a source of funding for CCS projects. The idea targeted the notionally ‘spare’ allowances in the ETS New Entrant Reserve and 300 million of these were earmarked for sale for CCS funding (sadly, as the ETS carbon price collapsed to around €3 this mechanism never delivered as intended). In Canada, Shell brought this concept to the attention of Alberta policy makers, and they decided to use their own carbon credits in a related way.

At the time Quest was being considered, Alberta introduced its Specified Gas Emitter Regulation (SGER), which established a CO₂ emission performance benchmark for large emitting facilities. The benchmark would decline by a set rate each year. Parties had to comply by either reducing emissions, buying “credits” from companies that had performed better than their benchmark, purchasing offsets from pre-approved programs, or else paying a fee into a technology fund. The regulation is now known as TIER, but the core concept remains the same. Quest was issued credits under Alberta’s CCS Protocol which could be used to comply with the regulation.

In 2011, the carbon price was low with an uncertain outlook, making the development of Quest uneconomic. To address this, the Government of Alberta and Shell agreed on a mechanism that would support the project in the initial phases, with the government issuing a second CCS credit for a maximum period of 10 years, or less if the project reached cost neutral status. Quest reached that milestone in 2022. There were limitations on how the additional credit could be used, including that it should primarily be used for regulatory compliance by affiliate company facilities. Then, as now, only the holder of the Base credit has the right to claim an emission reduction. Accordingly, these additional credits were not counted when determining Shell’s corporate greenhouse gas emissions.

To return to the claim in the Financial Times article, all the additional credits that Shell earned were used only to meet our own environmental obligations in Alberta. We did not sell them to any other company. Additionally, this program was not a secret. The government of Alberta described the mechanism in a 2011 press release and Shell acknowledged the same mechanism in the official project close-out report published by the Government of Alberta in 2016.

At the very least, Quest is an important proof of concept for Canada and the world, and it issues an annual knowledge sharing publication, which serves academic institutions, industry and regulators. But it’s much more than that: without innovative fiscal and regulatory frameworks in place that enabled the Quest investment, 8.8 million tonnes of CO₂ that have been captured and stored by the project would otherwise have been released into the atmosphere.

For that reason, it is great to see more structural incentives, like Canada’s proposed Investment Tax Credit and Alberta’s proposed Carbon Capture Incentive Program, which could support the next wave of CCS investments. But it is also sad to see conceptual and innovative funding ideas, to get critical carbon management technologies up and running, facing undue criticism .

Cautionary note | Shell Global