Shell expects the amount it pays annually to comply with emissions trading schemes and other carbon regulations around the word to nearly double, to around $1.5bn, in 2032 from a forecast of $0.8bn this year.
“Shell’s annual carbon cost exposure is expected to increase over the next decade because of evolving carbon regulations,” the oil major says in its 2022 annual report, released this week.
The compliance cost estimates are based on Shell’s forecast equity share of emissions from operated and non-operated assets, including joint ventures and associates.
The projections also rely on Shell’s internal carbon cost forecasts. In Europe, its operating plan assumes an EU emissions trading system (ETS) allowance cost range of $71–121/t of CO₂ in 2023–29, with federal prices in the US at $0–22/t and prices in Australia at $25–35/t.
Shell says it spent $493mn on compliance with the EU ETS in 2022. EU ETS allowance prices recently surged to record highs of more than €100/t ($106/t) but have since eased back towards €90/t.
Beyond 2030, where carbon policies and regulation are tougher to predict, Shell’s cost estimates are based on the expected costs of abatement technologies.
Post-2030, costs are estimated to be $125/t under Shell’s mid-price scenario. Under a high-price scenario, the costs are set at $220/t, reflecting the top of the cost range for bioenergy with CCS and the lower end of the direct air capture cost range.
Shell increased its spending on “CCS opportunities” in 2022 to around $220mn, up by 51pc from $146mn in 2021, including operating expenses and capex. Its equity share of captured and stored CO₂ was around 0.4mn t in 2022, in line with the 2021 amount.
In 2021, Shell launched its Powering Progress strategy to become a net-zero emissions business by 2050.
The strategy includes targets to reduce scope one and two emissions by 50 per cent by 2030, compared to 2016 levels. It had achieved a 30 per cent reduction by the end of 2022.