Oil and gas companies have approved $50bn (£41bn) worth of investments in new projects that undermine international climate targets since 2018, a new study has uncovered.
In a report published today, Carbon Tracker said that no major oil firm is investing in a way that is compatible with the Paris Agreement's aim to keep global warming well below 2ÀöC.
The think tank warned that 18 projects recently sanctioned by fossil fuel companies will struggle to deliver an economic return for shareholders in a low-carbon world.
These include ExxonMobil's $2.6bn Aspen project in Canada – the first greenfield oil sands proposal in five years – which will require an oil price of over $80 a barrel to deliver a 15% return.
“Every oil major is betting heavily against a 1.5ÀöC world and investing in projects that are contrary to the Paris goals, Carbon Tracker senior analyst, Andrew Grant, said.
“The best way to both preserve shareholder value in the transition and align with climate change goals will be to focus on low-cost projects that will deliver the highest returns.“
ExxonMobil, Chevron, Shell, BP, Total, Eni, ConocoPhillips and Equinor spent at least 30% of their 2018 investment on projects that are inconsistent with a 1.6ÀöC world, according to Carbon Tracker's estimates.
The report warns that oil and gas companies risk wasting $2.2trn by 2030 if they base investment decisions on governments' emissions policies, which would lead to 2.7ÀöC of warming.
Exxon Mobil has the greatest risk of stranded assets in a low-carbon world, with more than 90% of its potential spending up to 2030 likely to go towards projects incompatible with the Paris Agreement, the report states.
Carbon Tracker said that investors are increasingly concerned about the risks climate change poses to their portfolios, and are trying to drive companies to be more sustainable through initiatives such as Climate Action 100+.
Investment decisions on a further $21bn in 12 projects inconsistent with a low-carbon world are due this year.
“These projects represent an imminent challenge for investors and companies looking to align with climate goals,“ the report warns.
“The eternal search for growth in the context of finite planetary limits means either the failure of climate targets, exposure of investors to “stranded assets“ – investments that destroy value when industry dynamics change – or both.“
Image credit: Shutterstock
