EVP Time
ans meeting with
Ref. Ares(2021)3343568 - 19/05/2021
Ref. Ares(2021)4887755 - 30/07/2021
, Royal Dutch Shell
05 May 2021
1. Shell Powering progress strategy and EU targets
On 21 February 2021, Royal Dutch Shell set out its Powering progress strategy to
accelerate its transformation into a provider of net-zero emissions energy products and
services. Shell also confirmed its expectation that total carbon emissions for the company
peaked in 2018, and oil production peaked in 2019.
The strategy involves:
Seeking access to an additional carbon capture and storage (CCS) capacity of 25
million tonnes a year of carbon by 2035. Currently, three key CCS projects of
which Shell is a part, Quest in Canada (in operation), Northern Lights in Norway
(sanctioned) and Porthos in The Netherlands (planned), will total around 4.5
million tonnes of capacity;
Using nature-based solutions to offset emissions of around 120 million tonnes a
year by 2030.
In addition, Shell communicates on its intent to transform itself into a supplier of low-carbon
energy such as biofuels, hydrogen, charging for electric vehicles and electricity generated by
solar and wind power. In particular, Shell seems to be considering becoming an actor of the
electrification of the economy and its accompanying dimension of “energy system integration”.
Shells commitment to net zero, and interim targets is to be welcomed, but there are significant
questions as to the credibility of their targets and plans.
Shell defines net zero as a balance between their global emissions and removals – where they
propose significant continuing emissions and significant offsetting to cover them. They
propose to halve the carbon intensity of their footprint, calculated in grammes per joule, and
access CCS and Nature-Based Solutions (NBS) to cover the rest. As a result there are
concerns as to whether the proposed trajectory for emissions and reliance on removals is
consistent with what is need to achieve global net zero, and more particularly domestic net
zero in the EU.
In addition there are concerns over whether offsets are double counted as the voluntary
market has yet to establish a definitive standard for accounting. One popular standard, the
Gold Standard proposes that to be credible any offset needs to be backed by an adjustment to
emissions by the host country as required by the Paris Agreement. Other standards, including
particularly VERRA, the main voluntary standard in the US resist the application of an
adjustment to voluntary offsets and claims and propose “paral el” accounting. We have not
taken a public position on accounting for voluntary claims and offsets but consider alignment
of accounting standards between voluntary and compliance markets is desirable. Shel ’s
position on the issue is not clear.
Main messages
Shel ’s commitment to decarbonize its activities through investment in a mix of
relevant low-carbon technologies is welcome. We will need the support of all big
industrial players to deliver our EU targets.
On this note, let me stress that the increased climate ambition for 2030 is a great
opportunity to modernize the EU’s economy. The new climate target of net 55
percent domestic emission reductions by 2030 just agreed by EU colegislators in
the Climate Law context is a significant step up in ambition.
As President Biden’s climate summit of last week shows, there is clearly a growing
sense of global momentum towards a greener, net-zero future for the planet and a
will to keep the promise of the Paris Agreement.
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EVP Timermans meeting with
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05 May 2021
Inquire about the significant plan to use of carbon offsets and whether the
proposed trajectory for emissions and reliance on removals is consistent with what
is need to achieve global net zero, and more particularly domestic net zero in the
EU.
Inform Shell that the European Commission is exploring the development of a
regulatory framework for the certification of carbon removals based on robust and
transparent carbon accounting compatible with the EU objective of climate-
neutrality.” The Commission plans a communication on this topic by the end of the
year and, as announced in the Circular Economy Action Plan, it will make a
legislative proposal by 2023.
2. CCUS
Shel ’s interest in CCS: see scene setter of points 1 and 3.
Main messages
CCS is a promising technology which we expect will play a role in reaching our
climate neutrality objective under the EU Green Deal. It will be crucial to kick-start
the deep decarbonisation of energy-intensive industries, which are difficult to
decarbonise with currently existing technologies and also enlarges the portfolio of
decarbonisation options for the future.
But for CCS to fulfil its potential, we need to work further to remove the barriers to
the uptake of this technology. The EU supports the development of CCS both
through its regulatory framework and through the EU budget.
On the regulatory side, the EU ETS incentivises investment in CCS through
exempting installations which capture the CO2 and transport it to permanent
storage facility from surrendering allowances. The 2018 revision of the EU ETS
has already strengthened the carbon signal. The increased ambition for 2030 and
the long-term target for climate neutrality will strengthen it further, which should
benefit investments in CCS.
The Commission has undertaken to develop a regulatory framework for
certification of carbon removals and propose a scheme by 2023. The aim would be
to incentivise the uptake of carbon removal and increased circularity of carbon, in
full respect of the biodiversity objectives.
At the same time, care should be taken that CCS infrastructure does not become a
stranded asset. With a view to future CCS deployment, it is important to plan
adequate CO2 transport and storage infrastructure, and consider sharing
infrastructure to reduce costs.
CCUS is another element of climate neutrality under any scenario, one building
block of our long-term vision, and part of the green deal narrative.
CCU processes are energy intensive, therefore they are only relevant if powered
with abundant low-cost clean energy. Where hydrocarbons can be replaced by
carbon-free technologies (renewable electricity or hydrogen-fuelled mobility), CCU
products can hardly compete because of their much lower energy efficiency rates.
They are most relevant where carbon compounds are needed – eg chemical
industry, or construction sector.
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Defensives
How can the TEN- E Regulation revision help the deployment of CCS in Europe?
The Commission tabled a proposal for a revised TEN-E Regulation in December
2020 which provides natural gas infrastructure and oil pipelines will no longer be
eligible for PCI status. This is an important policy signal showing that we are
aligning our funding with our long-term policy objectives in the context of the Green
Deal.
CO2 transport pipes and facilities for liquefaction and buffer storage will continue
to be considered for funding.
CO2 transport by other modes than pipeline is not included as the Connecting
Europe Facility is not the appropriate funding mechanism for financing mobile
assets but is intended to address particular cross-border challenges, such as
permitting.
Background
CCS - Regulatory framework
EU ETS Directive
The main incentive for deploying CCS in the EU is that industrial and power installations
covered by the EU ETS do not need to surrender allowances if they capture the CO2 and
transport it to permanent storage facility, which is permitted according to the requirements
of the CCS Directive. (Article 12 (3.a)).
CCS Directive
The directive on the geological storage of CO2 (so-called "CCS Directive") establishes a
legal framework for the environmentally safe geological storage of CO2 to contribute to
the fight against climate change. It covers all CO2 storage in geological formations in the
EU and the entire lifetime of storage sites. It also contains provisions on the capture and
transport components of CCS, though these activities are covered mainly by existing EU
environmental legislation, such as the Environmental Impact Assessment (EIA) Directive
or the Industrial Emissions Directive, in conjunction with amendments introduced by the
CCS Directive.
The Directive does not provide any financial incentives to CCS installations. Stakeholders
have been arguing that the CCS Directive is very onerous to storage operators given the
requirements that it imposes (such as the obligation for operators to pay for monitoring
costs for 30 years after post-closure transfer of responsibility to the state or the important
financial security requested with the storage permit application, among others). Such
requirements are necessary to ensure that storage operators operate the sites in such a
way that prevents carbon leakage. Due to the lack of commercial CCS installations, there
will not be any such insurance products on the market in the short-term. It becomes
evident that such risk can be contained only by the competent authorities of the Member
States willing to go ahead with CCS.
3. Clean Mobility
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Main messages
Transport has a key role to play in reaching the climate objectives: transport
emissions need to decrease by 90% by 2050. The road transport segment is
responsible for a fifth of total EU greenhouse gas emissions. Therefore, it holds
great potential to accelerate emission reductions.
The recovery of the automotive sector from the COVID-19 pandemic offers the
opportunity for a green transformation, where innovative zero-emission
technologies and the development of the necessary infrastructure will be key.
The Next Generation EU put forward by the Commission will facilitate the green
recovery, by allocating significant funds enabling the transition towards zero-
emission mobility.
CO2 standards have proven to be a key driver for innovation: the stricter targets
applying since 2020 have triggered a spectacular surge in the uptake of battery
electric and plug-in hybrid cars across Europe. This has been further enhanced by
incentives provided by Member States in their recovery plans.
As part of the June 2021 ‘fit for 55%’ package, the Commission wil propose to
revise the CO2 emission standards for cars and vans in order to ensure a clear
pathway towards zero-emission mobility.
The preparation of the impact assessment accompanying this revision is ongoing.
The main issues considered are the CO2 target levels, the incentive mechanism
for zero- and low-emission vehicles, as well as the role of renewable and low-
carbon fuels (details in Background).
The assessment will look at the economic, environmental and social impacts and
will duly consider the interlinkages and synergies with the other relevant policies
(e.g.: the possible extension of emissions trading to road transport, the Renewable
Energy Directive and the revision of air pollutant standards (Euro 7/VII).
The availability of sufficient and adequate charging infrastructure is an essential
element for the transition towards zero-emission mobility. This will be addressed
by the upcoming revision of the Alternative Fuels Infrastructure Directive.
We have taken note of the calls to consider the role of renewable and low-carbon
fuels used in the road transport sector also in the context of the CO2 emission
standards.
We are looking into this topic in depth, analysing its pros and cons, including its
possible implementation issues and the need to avoid unwanted or
counterproductive consequences.
Beyond road transport, we need to ensure that all transport modes have
meaningful alternatives at hand to decarbonise their operations. By 2050, we need
to see a massive deployment of alternative fuels and clean options for planes,
ships and trains, as well as increased efficiency in their operation.
This is why, the Commission will soon present two initiatives to help decarbonise
aviation and maritime transport: “ReFuelEU Aviation – Sustainable Aviation Fuels
initiative” and “FuelEU Maritime – Green European Maritime Space”; these wil
focus on the use of sustainable renewable fuels in these transport modes. We are
also currently considering to establish the Renewable and Low-Carbon Fuels
Value Chain Alliance.
ETS extension:
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As announced in the European Green Deal communication, the Commission will
present in June 2021 legislative proposals to strengthen and extend the Emissions
trading system, including to the maritime transport.
The Commission is also considering to introduce emission trading for road transport
and buildings, as a complement to existing and future CO2 emission performance
standards for vehicles.
As regards aviation, appropriate amendments will be proposed to the EU
Emissions trading system to implement the carbon offsetting and reduction
scheme for international aviation (CORSIA) in a way that is consistent with the
EU’s 2030 climate objectives, and to increase the share of allowances auctioned
under the system for aircraft operators to further contribute to reducing
greenhouse gas emissions.
Defensives
What will be the role of renewable and low-carbon fuels in the future
transport fuel mix?
The Sustainable and Smart Mobility Strategy presented last year outlines the
vision of the Commission for the decarbonisation of the mobility sector aligned
with the 2030 climate objective in the context of reaching climate neutrality by
2050.
To reach our climate objectives, all policy levers must be pulled: replacing
existing fleets with low- and zero-emission vehicles and boosting renewable
and low-carbon fuels, shifting to more sustainable transport modes, as well as
internalizing external costs.
By 2030, renewable energy use in transport overall will have to increase
through the further development and deployment of electric vehicles,
advanced biofuels and other renewable and low-carbon fuels as part of a
holistic and integrated approach.
As all transport modes are indispensable for our transport system, they must
all become more sustainable. We need to ensure that sectors with emissions
more difficult to abate such as aviation and waterborne transport have access
to sufficient quantities of renewable and low-carbon fuels.
Air and waterborne transport have greater decarbonisation challenges in the
next decades due to the current lack of market-ready zero-emission
technologies. Therefore, these modes must have priority access to additional
renewable and low-carbon liquid and gaseous fuels, since there is a lack of
suitable alternative powertrains in the short term.
What is your view on a possible link between CO2 standards for vehicles
and fuels?
This link is one topic that is being analysed in the impact assessment and
considered for the revision of the CO2 emission standards.
The core objective of our policy regarding transport fuels is to reduce their
greenhouse gas intensity and we need to do so by the most effective means.
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EVP Timermans meeting with
, Royal Dutch Shell
05 May 2021
Decarbonised fuels (e-fuels, hydrogen, advanced biofuels) need to be
developed at scale. We need to create lead markets for such fuels, in
particular in sectors such as aviation where other decarbonisation
technologies are not available.
Therefore, following the calls from stakeholders, we will carefully assess if and
how to account for the contribution of advanced biofuels and e-fuels when
assessing compliance of vehicle manufacturers with their CO2 targets. The
Impact Assessment will analyse this issue and assess the associated costs
and benefits.
Why does the Commission consider both stronger CO2 standards for vehicles and
inclusion of road transport into emissions trading? Isn’t that double regulation?
The future policy mix required to achieve the 2030 ambition level will need both
economic incentives and specific targeted regulatory measures in all the sectors
concerned. The most important instrument for tackling emissions in the road transport
sector are the CO2 standards for new vehicles, but this instrument could usefully be
complemented by pricing incentives.
The inclusion of road transport into emissions trading would increase the certainty in
delivering the cost-effective emission reductions expected from this sector, irrespective
of transport activity demand, since the cap sets a limit on the emissions. Such certainty
is not possible through other types of measures.
The introduction of carbon pricing in the road transport sector would also shorten the
payback time on investments in more efficient vehicles and thus increase the incentive
to switch to zero-emissions vehicles.
Carbon pricing would also raise revenue which may be used for investment linked to
the higher climate ambition,
However, there are also non-price related market barriers and the price elasticity of
road transport is limited. Therefore a carbon price incentive cannot replace other
policies such as regulatory standards and infrastructure support.
How would the inclusion of road transport into EU emissions trading work?
We are working on the assessment of a strengthening and possible extension of the
ETS with a view to propose a reform in June 2021.
We are looking carefully at the interlinkages and implications of each policy option at
EU and national level in the impact assessments of the fit for 55 package.
In this context we also investigate the gradual inclusion of road transport into ETS, as
well as considering a potential parallel coverage under ETS and ESR.
From experience, we know that developing a new carbon market requires setting up a
well-functioning monitoring, reporting and verification framework. Thus, we are looking
into how to set up transitional arrangements or a pilot period.
One could imagine an extension taking form of a separate ETS for new sectors during
a transitional phase. So the start of the EU system could possibly replace the already
existing German emissions trading for buildings and road transport.
Will some crop-based biofuels be eligible under the RefuelEU Aviation initiative?
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We need to focus on the most innovative, sustainable and scalable fuel technologies.
Crop-based fuels can pose issues of sustainability (competition with food and feed
crops), have reputational issues, and are not scalable to match future needs.
Advanced biofuels and synthetic fuels can be produced in much greater volumes and
have high decarbonisation potential.
Background
Shell projects of (possible) road transport relevance
Infrastructure: planned growth of global electric vehicle network from more than 60,000 points to
day to around 500,000 by 2025.
Low-carbon fuels: planned extension of biofuels production and distribution (acquisition of
Biosev by Raizen joint venture will mean an increase of production capacity by 50% to 3.75
billion litres a year – around 3% of global production).
Clean power: aim to sell 560 tWh a year by 2030 (thus double the amount they sell today) and
to be the leading provider of clean Power-as-a-Service.
Hydrogen: aim to develop integrated hydrogen hubs to serve heavy-duty transport, aim to
achieve double-digit share of global clean hydrogen sales.
LNG: extend leadership by delivering more than 7 million t/year by 2025.
Main elements of the revision of CO2 standards for cars and vans
Our overall
objectives for the revision of the CO2 standards for cars and vans are multiple.
o First of all, we want to ensure that the sector contributes to achieving our enhanced EU
economy wide 2030 climate ambition and climate-neutrality in 2050.
o Secondly, consumers should benefit through energy savings and better air quality.
o Thirdly, also EU industry should benefit: providing a clear and long-term signal to reach
zero-emission mobility should guide both the sector’s investments as well as the
development of the necessary accompanying measures, in particular on the recharging
and refuelling infrastructure side. Innovation in zero-emission mobility will be key for
maintaining our leadership in automotive technology and employment of highly-skilled
workers.
As regards the
future CO2 target levels, in order to contribute to the new climate objectives, we
have to raise the ambition level and we have to set the pathway for further emissions reduction.
We are also looking at the
incentive mechanism for zero- and low-emission vehicles
introduced in the legislation, aiming to stimulate the uptake of such vehicles by granting a bonus
for manufacturers that do better than the benchmarks set.
Finally, we have taken note of the calls to consider the
role of renewable and low-carbon
fuels used in the road transport sector also in the context of the CO2 emission standards. Two
mechanisms have been proposed, mainly by fuel suppliers, which would allow manufacturers to
account for the use of such fuels for the purpose of complying with their CO2 targets. We are
looking into this topic in depth, analysing its pros and cons, including its possible
implementation issues and the need to avoid unwanted or counterproductive consequences.
(Shell provided no contribution to consultation activities of the CO2 standards revision.)
ReFuelEU Aviation
The ReFuelEU Aviation initiative (a key deliverable of the European Green Deal and
Sustainable & Smart Mobility Strategy) aims to ensure the conditions are right in the
aviation internal market (notably in terms of level playing field) for sustainable
development and boosting the uptake of Sustainable Aviation Fuels (SAF), with a special
focus on advanced biofuels and synthetic fuels. Whereas SAF are expected to play a
major role in decarbonising aviation to meet EU climate goals, its use remains close to
0.05% of total jet fuel use. The Commission has completed recently an impact
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Main messages
The Taxonomy Delegated act creates the world's first-ever “green list” – a classification
system for environmentally sustainable economic activities. It will create a common
language that investors can use when investing in projects and economic activities that
have a substantial positive impact on the climate and the environment. This has been
done in close consultation of stakeholders, balancing opinions, while respecting the
legal mandate of the Taxonomy Regulation.
The ambition of the Taxonomy needs to be high and match the Euoprean Green Deal.
We noted the concerns from stakeholders, and will continue the discussion on sensitive
issues, including gas. We will maintain the balanced stakeholder involvement, and will
also open mid-2021 a web-platform for submitting views on extending the taxonomy.
Defensive
Will the Commission use the taxonomy for setting sector policies and spending?
No. The only mandated public use of the taxonomy is for labels for green corporate
bonds or certain financial products. Any other public use of the taxonomy will be
assessed on a case by case basis. The taxonomy does not define public
investment priorities. It does not define unsustainable activities. As stressed in the
accompanying Communication, the implications of taxonomy use would be carefully
assessed before employing it in other policies.
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Background
State of play: On 21 April the Commission adopted a sustainable finance package1,
including the Taxonomy Delegated Regulation on mitigation and adaptation, a new
Corporate Sustainability Reporting Directive and a Communication that focusses on
how these requirements can help companies transition to sustainability. The Delegated
Regulation is now subject to the scrutiny of the Council and Parliament. The four-month
period can be extended by an additional two months. Application would be as of
1/1/2022.
Sensitivities: The taxonomy has attracted a lot of attention primarily for the concern that
it would set a precedent for upcoming sector policies and that it would be used to
allocate public funds. This delayed the adoption from the end of 2020. Most of sensitive
issues have been resolved or postponed to subsequent delegated acts and it is unlikely
that these (e.g. forestry, hydrogen, steel, hydropower, bioenergy) would become
reasons for rejection by co-legislators. The most sensitive point in the final stages was
the treatment/inclusion of gas-powered energy and/or heat generation (if it replaces
coal or oil); where Member States’ positions were diametrically opposed, with a
majority against the inclusion of gas. The final delegated act does not include such
activities, but the Communication announces a separate complementary delegated act
as soon as possible covering activities such as agriculture, certain energy (gas and
nuclear mentioned) and manufacturing activities.
What the Taxonomy is: The Taxonomy Regulation introduces a green classification
system that translates the EU’s climate and environmental objectives into criteria for
specific economic activities, giving a reference point for comparison. For being
taxonomy aligned, an activity needs to a) make a substantial contribution to at least
one of the six climate and environmental objectives, b) do no significant harm to any of
these objectives, and c) meet minimum social safeguards.
The Regulation mandates two uses for the taxonomy:
o EU and Member States should use it for setting requirements for environmentally
sustainable financial products (i.e. “labels”), and
o Larger companies and financial market participants have to disclose to what extent
their activities/products meet the taxonomy criteria.
The EU Taxonomy is not a mandatory list of economic activities for investors to invest
in. Nor does it set requirements on environmental performance for companies or for
financial products. There is no obligation for companies to be Taxonomy aligned, and
investors remain free to choose where they invest. For the private sector, disclosure is
the only requirement under the Regulation.
The Regulation covers six environmental objectives: climate change mitigation, climate
change adaptation; the sustainable use and protection of water and marine resources;
the transition to a circular economy; pollution prevention and control; the protection and
restoration of biodiversity and ecosystems. The Delegated Acts on the other four
environmental objectives should be adopted by the end of 2021.
Contacts
-Briefing Coordination:
(DG CLIMA)
- Shell’s decarbonation strategy:
(DG CLIMA)
1 https://ec.europa.eu/info/publications/210421-sustainable-finance-communication en
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- CCS:
(DG CLIMA)
- Clean mobility :
(DG CLIMA)
(DG
MOVE)
- Taxonomy:
(DG CLIMA)
Electronically signed on 30/07/2021 17:07 (UTC+02) in accordance with article 11 of Commission Decision C(2020) 4482
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