Net-Zero Commitments – Getting from Here to There

Good day and thank you for the invitation to participate in today’s discussion.

I am honoured to be here sharing Shell’s perspective alongside such respected and knowledgeable colleagues.

And I appreciate your willingness, Minister Wilkinson and Minister Champagne, to seek out expertise and explore a range of perspectives on net-zero emissions targets.

I would like to start by acknowledging that I am speaking today on the traditional ancestral territory of the Musqueam, Squamish, and Tsleil-Waututh Peoples. I am healthy and good spirits and I hope you are too.

When I started at Shell more than a decade ago, our footprint in Canada looked different than it does today. However, one of the things that has remained constant is how closely our dynamic Canadian portfolio has tracked with Shell’s global strategy over the years.

All of Shell’s global lines of business are present here in Canada. This was true when I started and remains true today.

Some of you may be aware of the ambitious strategy Shell recently laid out called Powering Progress.

Under this strategy, Shell will strive to generate shareholder value, power lives, respect nature and, most relevant to our discussion here today, become, by 2050, a net-zero emissions energy business, in step with society.

All of which we will achieve through our three business pillars, Growth, Transition and Upstream.

When we say net zero, this means net zero emissions from our operations – our Scope 1 and 2 emissions – and also net zero from the end use of all of the energy products we sell – our Scope 3 emissions. And on this last point, Scope 3 emissions, notably this target includes the emissions not only from the energy we produce ourselves, but also from the oil and gas that others produce and resell as products to our customers. This is significant because emissions from the end use of our products account for 90% of our total emissions.

Becoming net zero means being more energy efficient at our operations; delivering lower-carbon energy products, and capturing and storing any remaining emissions using technology, or balancing them with offsets.

It also means transforming our business and seeking out opportunities to provide more low-carbon energy working with our customers such as biofuels, hydrogen, electric vehicle charging, and electricity generated by solar and wind power.

As I reflect on my career to date, and the role I will play going forward in growing Shell’s Renewables and Energy Solutions portfolio in Canada, I have come to appreciate that Shell Canada not only embraces the energy transition, it embodies it.

And there is a recognition from my Global colleagues that, in many ways, through the operations we already have here and the many opportunities we’re exploring, both Shell and Canada are at the vanguard of this transition.

We have a clear continuing role to play in delivering on our global net-zero emissions commitment and Canada represents a fertile market in which to grow our nascent Renewables and Energy Solutions business.

So the question then becomes, how can we build on the momentum we’ve established here in Canada to do our part in meeting net-zero emissions?

And what tangible actions can Governments take to help incentivize corporations to set targets and deliver against them?

We have some thoughts to share from our own journey towards establishing a net-zero target, informed by our more than 100 years of continuous operations in Canada and experience working across a range of carbon markets around the world.

 

TARGET SETTING

I would like to emphasize that Shell appreciates Canada’s efforts in striving to achieve net-zero emissions and for actively encouraging companies to do the same.

As one of a handful of countries with clear ambitions, Canada has already established itself as a leader in addressing the climate challenge.

Uncertainty, or lack of clarity around how countries are planning to address the climate challenge, is one of the biggest risks to new investment in lower-carbon technologies, which can make it difficult to deliver against our own targets.

Not only does having an ambition for net-zero emissions align with Shell, it lets us know where the goal posts are, which is critical when organizations like ours explore potential opportunities around the world.

For Shell, we will measure our progress against our net-zero commitment by how we perform against our own targets – 6-8% reduction in carbon intensity by 2023, 20% by 2030, 45% by 2035 and 100 percent by 2050; the equivalent of net zero absolute emissions. To start, these net-zero targets are supported by very clear transition milestones that we have set over the next decade including:

• Improving operational efficiency by ending all routine flaring and keeping our methane intensity below 0.2% by 2025
• A shift to natural gas by acknowledging peak oil production for us happened in 2019 and is expected to decline 1-2 % per year; that we will have no new frontier exploration post 2025 and as a result, natural gas share of hydrocarbon production will grow to 55%
• Growing our low-carbon hydrocarbon business by doubling the amount of electricity sold – selling 200 TWh/year renewable power – enough to serve 50 million consumers and operating 2.5 million EV charge points
• Investing in new fuels such as biofuels and hydrogen such that we produce 8x more than we produce today
• Accessing 25 MTPA CCS and using 120 MTPA NBS for offsetting
   

COLLABORATION

While countries are often the ones to set climate targets, action from industry and, consumers, is critical to deliver the reductions needed to achieve them.

Accordingly, collaboration between industry, government and other stakeholders to define what net zero looks like for Canada, and identify a range of possible solutions, is vital to establish and realize shared climate ambitions. 

Recently, Shell and Microsoft announced a strategic alliance to jointly develop technologies that will help us accelerate achieving our carbon reduction ambitions while striving to build a platform to help customers and other organizations reduce their own emissions. Minister, you also mentioned Enerkem. Earlier this year we invested in Varennes Carbon Recycling – the first waste to low carbon fuels in Quebec. We will have a 40% interest in the plant using Enerkem technology.

And customers will play a crucial role. For Shell, becoming a net-zero emissions business means more than just offering customers more low-carbon products – we are also helping customers to find ways to reduce their overall carbon footprint. And increasingly, Shell is moving towards serving businesses and sectors that by 2050 are also net-zero emission. 

Our experience around the world, through initiatives like our partnership with Microsoft and Enerkem and working with our customers, has shown that where business steps up and works with governments and other stakeholders, real progress can be made.

The reverse is true as well.

Just as it can be helpful for government to understand industry’s perspectives to ensure that policies and other supports will be effective, so too is it helpful for organizations to understand governments’ perspective and lean on their experience and support in setting their own targets and delivering against them.

Companies aren’t always aware of what supportive government tools, policies or sources of funding are available and or how to knit them together to help deliver credible net-zero plans and associated emissions reductions.

Working together through forums like the Net-Zero Challenge can be a key enabler to help bridge the gap.

I know this government recognizes, as do we, the importance of joining up our net-zero journey with our commitment to Truth and Reconciliation with Canada’s Indigenous Peoples. 

Shell has found Indigenous communities to be profound allies in developing lower carbon solutions through initiatives like our partnership with the Tŝilhqot’in on a reforestation project in their traditional territory and our work with the First Nations Climate Initiative. 

I speak from very personal experience about the importance of having Indigenous voices in the conversation if we are going to be successful in our net zero and reconciliation journeys.

 

RECOGNIZING DIFFERENCES

Collaboration, ongoing dialogue and sharing perspectives are also all critical elements to better understand the unique circumstances facing Canada’s wide range of industries and the people they employ.

This is important for the Canadian Government in your efforts to craft transparent, fair and achievable net-zero emissions plans, for businesses in setting targets of their own and for Canadians seeking long-term sustainable employment.

The reality is that the opportunity and capacity to deliver reductions and manage the economic and social costs associated with doing so, can differ significantly between regions, industries and organizations.

Some have emissions sources that will be much easier to tackle. Others may face significant market or technology hurdles.

Helping organizations to set and achieve targets should take this into account and recognize that it will be simpler for some to reduce their carbon footprints than others.

Understanding the differing sets of challenges and opportunities different regions and industries face and creating an equitable balance in the level of support provided to each distinct area as a result will be key to maximizing the opportunities and mitigating the costs of the transition.

Organizations and stakeholders will have the clearest sense for what capacity and opportunity exists for their operations, which further reaffirms the value of collaboration in working together to set and achieve targets.

We encourage the Government to continue to actively seek out opportunities such as this to better understand the perspectives of all stakeholders and what is needed or helpful for them to achieve net- zero.

At the same time, it is important not to underestimate the challenge and to be prepared to address the social and economic impacts of the transition on consumers, workers and businesses.

 

GLOBAL PERSPECTIVE

Canada possesses many inherent strengths in achieving net zero.

One of the most notable, is the potential global net carbon benefit of the products we make in Canada, given the abundant resources we have, and the high standard to which we hold ourselves in their development. 

We know climate change is a global challenge. Targets and solutions aimed at addressing this challenge should consider the overall global impact as well.

LNG Canada is a great practical example of this in action. The lower carbon intensity natural gas that LNG Canada will ship to overseas markets can displace higher intensity forms of energy used in power generation, industrial and residential heating applications and transportation as these countries deliver on their own net zero commitments.

Including a mechanism (with associated verification) that recognizes the global climate benefit of Canadian exports of commodities and technologies within Canadian national and corporate net-zero targets can provide a competitive advantage as well as an incentive to further develop these products in Canada. 

At the same time, harmonized international carbon prices and carbon border adjustments need to ensure a level playing field to avoid the loss of opportunities and jobs to other countries with low or no carbon price.

 

SUPPORTIVE POLICIES

We know targets alone won’t be enough to deliver necessary emissions reductions at a national or at corporate level.

Strong, supportive and predictable policies intended to grow supply and demand for low- and zero-carbon technologies will be instrumental in driving action.

Without the right policies in place, the pace of net-zero target adoption and the scale of investment needed to realize those targets won’t happen at the speed needed to meet the 2050 timeframe Canada and others are striving for.

To deliver net zero, we need decisive action by governments to help industry cut emissions at a faster rate; to support industrial competitiveness; and to deliver a just, fair and inclusive transition.

It’s worth noting that Canada has already made great strides in this area.

Building on the progress made through the Pan Canadian Framework, Shell sees the Government’s ‘A Healthy Environment and a Healthy Economy’ plan as a robust policy framework to support delivery of net-zero emissions and as a solid foundation for even further action.

Shell also appreciates the significant effort the federal government has put into developing the Clean Fuel Regulations and the consideration that has been and will continue to be given to feedback from industry and stakeholders across Canada.

We support the overarching goals of the Regulation and recognize the transformative potential of well-informed, thoughtful policies in shaping the energy transition. 

We have, in fact, experienced firsthand the difference the Canadian Government can make in delivering meaningful greenhouse gas reductions through supportive policy frameworks.

The Shell-operated Quest carbon capture and storage facility, which safely captures and stores more than one million tonnes of CO₂ each year, stands as a testament to the impact the right policies and funding can make.

Getting technologies off the ground can be difficult without the right support, and it’s not a stretch to say that the Quest CCS facility would not have been possible without assistance from both the Federal and Alberta governments.

Talking with industry and other stakeholders to understand how support through the Strategic Innovation Fund could be helpful, and what additional levers may be needed, will be key to ensure this assistance encourages adoption of and action towards net-zero targets.

 

FLEXIBILITY

The Quest CCS facility is also a great example of how government can effectively create the right environment to let industry innovate and bring forward solutions that best fit their unique circumstances.

Markets abhor a vacuum. If there is an end goal, a starting point and a gap in between, an opportunity is created to step forward with a solution.

Providing flexible supports that aren’t prescriptive on technologies or paths to realizing targets will create the space needed for industry to bring forward the most suitable and cost-effective solutions.

 

OFFSETS

Speaking from our experience, Shell has a three-tiered approach in evaluating what solution should be implemented to address emissions with the aim of achieving net zero.

First, we explore solutions that Avoid the creation of emissions such as deploying lower-carbon options like our hydrogen fuel dispensing stations for transport.

When Avoiding emissions is not possible, we endeavour to reduce them through efficiency measures or technology like the Quest carbon capture and storage facility I referenced earlier.

Finally, when Reducing is not possible, we seek to Offset.

If industry is going to be in a position to not only set targets, but achieve them, organizations must have the predictable policy and regulatory support to pursue all three tiers of solutions.

If net zero is the aim by 2050, then offsets must be on the table since opportunities like nature-based solutions will provide an overall, net, climate benefit.

We appreciate that the Government of Canada has recognized the role offsets and the Country’s natural capital can play.

However, to truly unlock the potential, Canada should have a fully fungible national offset system.

Doing so would present a massive opportunity to deliver real reductions and achieve targets in the near term.

Without the ability to trade offsets between provincial and federal offset markets for example, there is a very real risk that substantial opportunities may not be explored.

Often, the most compelling offset opportunities do not sit in the jurisdictions where industry has emissions reduction obligations.

Linking the two could be a profound enabler for offset and clean technology projects.

 

ALIGNMENT

Intrinsic to any efforts to link systems is first ensuring alignment.

Having clear sets of rules and supports at all levels of government will be critical in helping companies to achieve net-zero emissions.

This means ensuring climate programs across the country are working in harmony and do not conflict. I recognize this requires considerable effort and engagement at the provincial level – but it is critical. We are prepared to help in this regard.

It also means taking a look beyond our borders.

Striving to maximize international cooperation on the rules governing Article 6 of the Paris Agreement will help to encourage investment in emissions reductions and sinks, that will be crucial in achieving net-zero targets.

Canada’s vast natural capital has a role to play in lowering global emissions and enabling organizations access to international markets will help to unlock its true potential.

 

NO SINGLE SOLUTION

Achieving net-zero emissions is an ambitious goal. There is no single solution to realizing it.

There is no one-size-fits-all approach for organizations. Helping companies set a target encourages us to plan for where we need to go. Crafting supportive and predictable policies will help get us there. And the best way for us to develop both is to build on the expertise all levels of government, industry, Indigenous Peoples, communities, customers and other stakeholders collectively possess.

Thank you.