BP’s net zero won’t deliver a Paris aligned future for its customers

Today Global Climate Insights (GCI) has released its company initiation report on oil and gas major BP Plc (LON:BP, BP report). This follows GCI’s report assessing Shell’s (LON: SHEL) climate plan and targets in 2021 (Shell report).

The report analyses how BP envisions its role in the global transition to limit warming to 1.5C and assesses the effectiveness and sufficiency of BP’s emissions reduction targets. The company’s net zero plan will be put to an advisory vote at its AGM in May 2022.

Key findings:

• GCI forecasts that BP’s climate targets will result in no absolute emissions reduction. Any emissions reduction as a result of divestment will be offset by increasing sales of oil and gas products.
• BP’s significant trading business is not reflected in its absolute emissions disclosure, estimated at 59% of the emissions from the products it sells.
• The targets put forward by BP are disconnected from its business outcomes. We estimate BP’s absolute GHG emission reduction targets cover only ~17% (415 MtCO2e) of the GHG emissions from products it sells. The lack of visibility to the remaining 83% (2,014 MtCO2e) of emissions may lead to increases that negate any emissions savings within its targets.

The report’s lead author, Shu Ling Liauw, Lead Analyst, Global Climate Insights, said:

“We are seeing a trend in the sector where ‘net zero’ strategies are completely detached from real business strategies and outcomes.

“Contrary to investors' expectation that net-zero plans lead to reduced emissions, both Shell and BP’s plans will increase absolute emissions from now to FY30.

“To be Paris-aligned, BP needs to become a leader in displacing and replacing, at pace, each hydrocarbon molecule sold with a low-carbon alternative for its customers.

“The current approach to climate transition strategies has taken the focus away from developing transformative business plans that shift customers from oil and gas to viable alternatives in the next 8 years.

“BP has undertaken more work than peers to quantify how the transition of its business model to an energy company will impact its capital employed and earnings. However, we still see a large disconnect between its FY30 earnings aspirations for its transition business and our forecast outcome for FY30 absolute GHG emissions.

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