Plans approved by the biggest multinational fossil fuel corporations include $50bn of investments since last year that not only undermine climate targets but also threaten shareholder returns.
A new report released on Thursday by financial think tank Carbon Tracker says the set of projects currently being put in motion proves that none of the six largest oil and gas companies conforms to standards established by the Paris climate agreement to limit global warming to a maximum of 1.5 degrees Celsius.
The Breaking the Habit report states that demand for fossil fuels will need to decrease drastically to meet climate goals set by the international community and that only the lowest-cost investments are likely to deliver economic returns – given those aims.
It highlights 18 projects – cumulatively worth $50bn – that have already begun and are “deep out of the money in a low-carbon world”.
One such initiative is ExxonMobil’s $2.6bn Aspen project, a greenfield oil sands venture in Canada, which would require an oil price of more than $80 per barrel to produce a 15 percent return.
The report says no new oil sands projects “fit within a Paris-compliant world”.
Some of the drilling is in deep water, shale or the Arctic, contributing to so-called “stranded asset risk” arising from potential changes in the regulatory environment limiting the use of fossil fuels, a shift in demand toward renewable sources of energy or even legal action.
“In the last year or two, there’s been a societal uptick of interest in climate change, mirrored in the investment community,” Andrew Grant, the report’s author and senior analyst at Carbon Tracker, told Al Jazeera.
“This really comes straight back to the science,” he said. “There’s a finite amount that we can release into the atmosphere, [our] carbon budget.”
Of all the oil majors, ExxonMobil has the highest risk of stranded assets, as more than 90 percent of projects for the next decade would be beyond the 1.6-degree pathway, according to the report.
Shell is second at 70 percent, followed by Total at 67 percent, Chevron at 60 percent, BP at 57 percent and Eni at 55 percent.
In a business-as-usual scenario, Carbon Tracker suggests fossil-fuel companies are expected to spend $6.5 trillion by 2030 – and the world would be on the 2.7-degree course, with temperatures rising quickly.
Investment in projects that keep the planet within the 1.6-degree scenario would mean that oil and gas companies are spending $4.3 trillion, as the more expensive projects entail higher stranded asset risk and are ruled out.
Compliance with the Paris Agreement would require dramatic changes, says the report. But it also suggests that European oil giants – BP, Shell, Total and Equinor – are doing more than others in assuring investors that they are “responsive to climate concerns”.
Carbon Tracker is a nonprofit funded by a variety of European and American foundations that was established to promote new ideas on how to manage climate risk.
Grant said that climate limits should be reflected in investment behaviour, but that many fossil-fuel companies “believe we’ll fail in our climate ambitions”.
“As a world, we have to reduce our CO2 not just in relative terms, but in absolute terms,” Grant said, adding that the most competitive energy projects are those with the lowest supply costs – social and environmental.
Projects with the highest costs “don’t go ahead, or they go ahead and fail to be economic”.