united kingdomen
Graph of the week

Graph of the week

24-07-2020 | Insight

The complexity of a carbon intensity target

  • Sylvia van Waveren
    van Waveren
    Engagement Specialist

Last week, the members of the Oil and Gas Climate Initiative (OGCI) set an ambitious target. They want to reduce the carbon intensity of their aggregate upstream oil and gas operations to below 2017 levels by 2025. OGCI is a consortium led by CEOs that aims to accelerate the energy transition in the oil and gas industry.

Its member companies include the largest global players in the sector: BP, Chevron, CNPC, Eni, Equinor, ExxonMobil, Occidental, Petrobras, Repsol, Saudi Aramco, Shell and Total. Together they account for over 30% of global oil and gas production.

Specifically, the consortium's target is to reduce the carbon intensity to between 20 and 21 kg of carbon per barrel of oil by 2025. In 2017, this carbon intensity stood at 23 kg. According to the International Energy Agency (IEA), this target corresponds to the reduction required in all sectors, including the oil and gas industry, to meet the Paris Agreement goals. The IEA has analyzed that this requires a reduction of 9% to 11%. OGCI is now aiming for a reduction of 9% to 13%.

Stay informed on our latest insights with monthly mail updates
Stay informed on our latest insights with monthly mail updates

What does OGCI's carbon intensity target cover?

The carbon intensity reduction target covers both carbon dioxide and methane emissions from the operated upstream oil and gas exploration and production activities, as well as emissions from associated imports of electricity and steam to these production activities and locations. Upstream operations account for about 50% of the operational emissions within OGCI on average.

The reduction in carbon intensity does not necessarily mean an absolute reduction in emissions, but it does entail a decrease in the amount of greenhouse gases emitted per unit of energy produced. At constant production levels, absolute emissions are reduced by at least 9%. If these levels fall – as is currently the case – absolute emissions will further decline. If production levels rise, absolute emissions may remain the same or even increase.

A complex issue

Understanding carbon intensity figures within the complex world of oil and gas companies is no mean feat. Critics may say that opting to focus on a carbon intensity-only target creates scope for stepping up production, which would not be in line with the Paris Agreement.

However, carbon intensity metrics can be useful, because they enable shifts in member companies' portfolios. They also allow new member companies to join the objective, while other companies can use the metrics as a benchmark. A carbon intensity target would then be a practical first step for OGCI members to further enlarge their contribution to the transition to a low-carbon economy.

Follow-up steps needed urgently

One might also wonder why the focus is only on carbon emissions from business operations, while emissions from the use of oil and gas products by consumers (scope 3) are many times higher. A mere 9% of greenhouse gas emissions originates from oil and gas production and processing, prior to the product reaching the customer.

This is exactly what we focus on in our engagement with oil and gas companies. As with other emitting industries, we expect them to not only address their operational emissions, but also to significantly reduce their scope 3 emissions. The only way to do so is by working much more closely with their industrial and private customers to help them reduce their ecological footprint.

We know that some OGCI members are already making agreements with their customers to further reduce net carbon emissions when using their products. And as investors, we will support them in this as much as possible. Together with the industry, new partnerships are being formed with a view to achieve practical results. Carbon-neutral routes for aviation, cars, shipping, steel and cement are just a few of the examples that spring to mind.

In our view, this is the only way to achieve global climate neutrality by around 2050 for governments, businesses and consumers.

Subjects related to this article are:


Please read this important information before proceeding further. It contains legal and regulatory notices relevant to the information contained on this website.

The information contained in the Website is NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws. The value of the investments may fluctuate. Past performance is no guarantee of future results. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency.

In the UK, Robeco Institutional Asset Management B.V. (“ROBECO”) only markets its funds to institutional clients and professional investors. Private investors seeking information about ROBECO should visit our corporate website www.robeco.com or contact their financial adviser. ROBECO will not be liable for any damages or losses suffered by private investors accessing these areas.

In the UK, ROBECO Funds has marketing approval for the funds listed on this website, all of which are UCITS funds. ROBECO is authorized by the AFM and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.

Many of the protections provided by the United Kingdom regulatory framework may not apply to investments in ROBECO Funds, including access to the Financial Services Compensation Scheme and the Financial Ombudsman Service. No representation, warranty or undertaking is given as to the accuracy or completeness of the information on this website.

If you are not an institutional client or professional investor you should therefore not proceed. By proceeding please note that we will be treating you as a professional client for regulatory purposes and you agree to be bound by our terms and conditions.

If you do not accept these terms and conditions, as well as the terms of use of the website, please do not continue to use or access any pages on this website.

I Disagree