Shell Banks on Runaway Climate Change

Imagine a world where coalitions form to address climate change. Global alignment to reduce energy consumption and CO2 emissions slows the demand for coal, while boosting efficiency and clean energy investment and deployment. Carbon prices and cap-and-trade schemes enable investment in carbon capture technologies as the world shifts to low-carbon technologies. This proactive approach to climate change, entitled "Blueprints," was identified by Shell in 2008 as one of three possible scenarios.

Shell has used scenario planning as a powerful business tool for making more strategic choices and being sensitive to uncertainties for 40 years. The "three hard truths" that were the foundation for the three scenarios in 2008 were that energy demand is surging, suppliers are struggling to keep up and stresses on our environment are increasing. The scenario entitled "Scramble" involves a lack of decisive action on climate change, thus coal and biofuels drive growth in developing countries, leading to rising food prices and air pollution, while the U.S. and Canada turn to "unconventional oil projects," such as Canada's tar sands.

In the past, Shell used scenario planning merely as a tool to gain insights but didn't advocate for any particular scenario. For the first time, Shell chose a scenario that it wants to manifest, and it says it chose the Blueprints scenario as being better for both the company and the world. The company announced this, and former Shell CEO Jeroen van der Veer even advocated for governments to impose a price for emissions.

Some large corporations, including the five biggest oil companies, Walmart and American Electric Power, including a price on carbon into their long-term financial plans. However, now years have passed without decisive action, and the Blueprints scenario hasn't been widely playing out. Governments haven't adopted strong climate policies, carbon emissions continue to mount, and climate change is a largely unpopular topic in the media. It appears that the Scramble scenario is actually playing out, not Blueprints, and Shell itself is leading the way.

Shell has invested $6 billion towards drilling in the Beaufort and Chukchi Seas in Arctic Alaska, but a recent court ruling by the 9th U.S. Circuit Court of Appeals threw offshore Arctic oil leases into question. Shell spent nearly $1 billion annually in Arctic drilling in the last few years, thus it was banking on the Scramble scenario and looking to capitalize off of this scenario. A coalition of native and environmental groups led a lawsuit that has halted Shell's plans to start drilling this summer, thus elements of the Blueprints scenario are manifesting.

Oil produced from Canadian tar sands are another example of Shell banking on the Scramble scenario. Because a lot of energy needs to be used to extract oil from this source, the greenhouse gas emissions are 23 percent higher than from conventional crude.

The proposed Keystone XL pipeline would help deliver hard-to-access Alberta tar sand oil to U.S. refineries. If the production, refining and combustion of 830,000 barrels per day of sands crude oil were actually met, the pipeline would contribute the climate-change equivalent of an additional 5.7 million cars on the road each year , according to a report by the State Department. Shell has invested millions in lobbying for this controversial project, furthering the push towards the Scramble scenario.

Although Shell has publicly stated that it supports the Blueprints scenario, its support of the Keystone XL pipeline, oil production from tar sands and Arctic drilling show otherwise. In the absence of decisive government action to curb climate change, Shell is scrambling to capitalize off of the current scenario.

"I will be one of those persons most cheering for an endless summer in Alaska," Peter E. Slaiby, vice president of Shell Alaska, said at the Arctic Imperative Summit.

Image credit: Shell (upper photo) and Greenpeace (lower image)