Chevron Treads Softly With Latest Emissions Pledge

Chevron has become the largest US producer to pledge net-zero carbon emissions from its upstream operations by 2050, and will reduce the emissions intensity of its full value chain through incremental targets.

The moves — announced as part of Chevron’s latest climate report — reinforce Energy Intelligence’s long-held view that investor demands for net-zero operational (i.e. Scope 1 and 2) emissions would become the minimum standard for large Western producers, with some defined strategy for end-use (i.e. Scope 3) emissions also needed.

What Chevron Has Pledged

• Net-zero Scope 1 and 2 emissions “aspiration” for its upstream business by 2050;

• 5%-plus reduction target for the Scope 1-3 carbon intensity of its entire portfolio, including all products sold, by 2028;

• 2%-3% Scope 1 and 2 emissions intensity target for its refining business by 2028 (Chevron has existing targets to reduce its oil upstream intensity by 40% and gas upstream intensity by 26% by then).

All targets are against a 2016 baseline.

What It Translates To

Chevron says its new 2028 target for Scope 1-3 emissions will reduce the emissions intensity of its portfolio to 71 grams of CO2 equivalent per megajoule of energy sold.

Achieving that goal would mark a 5.2% reduction compared to 2016 — but a meager 0.6% reduction from its emissions intensity levels last year.

To be sure, 2020 was an unusually disruptive year, with extreme dislocations in output and utilization potentially causing a whole host of measures to be distorted relative to “sustainable” levels. But the optics are striking if most of the work to achieve a target that’s seven years out has already been done.

Chevron spokesman Sean Comey tells Energy Intelligence that the company's targets “do not translate into annual linear reductions, and in fact may have year-to-year variations.” He added that Chevron sets its targets as “checkpoints” that align with key Paris climate agreement to “indicate directionally where we are headed.”

How Chevron Compares

On “Aspiration:” Oil and gas producers from BP to ConocoPhillips to TotalEnergies typically couch their net-zero plans as “ambitions” rather than firm targets to emphasize that certain policies, technological advancements and cost reductions that lie outside their control will be required to achieve them. So Chevron’s use of “aspiration” to describe its goals does not necessarily imply a weaker commitment than its peers.

“In this context, the meanings are effectively the same,” Comey says of the use of “aspiration” rather than “ambition.” “Factors beyond our control will impact our ability to meet this aspiration, including technology improvements, government policy, regulations, and evolving carbon offset markets.”

Of course, most investors, analysts and laypeople see these pledges as “targets” regardless, and are demanding that companies concretely demonstrate that they are on track.

On Net-Zero Scope: The dividing line between Chevron’s net-zero ambitions and its European peers comes down to more than whether Scope 3 emissions are included.

Chevron has also limited its net-zero ambitions to just its upstream, meaning its midstream, refining, chemicals and LNG businesses are excluded. Those other business lines account for around 38% of Chevron’s Scope 1 and 2 emissions, company emissions disclosure documents show.

What's Next

The coming months will show whether Chevron’s new ambitions pass muster with investors given the number of key limitations and provisos in place.

More than 60% of Chevron's shareholders passed a resolution in May calling on the company to put forward a plan to “substantially” reduce its emissions, including Scope 3.

What qualifies as “substantial” is, of course, in the eye of the beholder, but progressive shareholder activist group Follow This, which sponsored that resolution, called Chevron's targets "disappointing tokenism."

Andrew Logan with sustainability investor group Ceres tells Energy Intelligence that investors will likely need more given the "major gap" in Chevron's goal-setting between 2028 and 2050, particularly given the modest scope of its near-term targets.

Investors have increasingly asked companies to add firm targets for the 2030-35 time frame to get a clearer sense on how 2050 goals might move from ambition to reality.