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1 CDP Climate Change 2017 Information Request Royal Dutch Shell Module: Introduction Page: Introduction CC0.1 Introduction Please give a general description and introduction to your organization. Shell is one of the world s largest independent energy companies in terms of market capitalisation, operating cash flow and production. The company explores for oil and gas worldwide, both from conventional fields and from sources such as shales and deep water. We work to develop new oil and gas supplies, and have a global network of refineries and chemical plants. Shell transports and trades oil, gas and other energy-related products, such as carbon-emission rights, and continues to invest in new business models in renewable energy enabled by digital technology. We serve around 30 million customers every day through our global network of 43,000 Shell-branded retail stations. Shell s business is divided into three areas: Upstream, Integrated Gas and Downstream: - Upstream is responsible for Shell s conventional oil and gas businesses around the world, including deep water as well as shale oil and gas. It explores for and recovers crude oil and natural gas, and develops major new projects. - Integrated Gas manages Shell s manufacturing and distribution of liquefied natural gas (LNG) and gas-to-liquids products. It includes natural gas exploration and extraction and the operation of the upstream and midstream infrastructure necessary to deliver gas to market. It also includes the New Energies business, created in 2016, which invests in low-carbon energy solutions such as biofuels, hydrogen, wind and solar power. - Downstream manages Shell s refining and marketing activities for oil products which are sold around the world for domestic, industrial and transport use. It also produces and sells chemicals for industrial customers. Shell s oil sands mining activities in Canada are also part of the Downstream business (note: in May 2016, Shell completed the divestments of all its in-situ and undeveloped oil sands interests in Canada and reduced its share in the Athabasca Oil Sands Project (AOSP) from 60% to 10%). CC0.2 Reporting Year Please state the start and end date of the year for which you are reporting data. The current reporting year is the latest/most recent 12-month period for which data is reported. Enter the dates of this year first. We request data for more than one reporting period for some emission accounting questions. Please provide data for the three years prior to the current reporting year if you have not provided this information before, or if this is the first time you have answered a CDP information request. (This does not apply if you have been offered and selected the option of answering the shorter questionnaire). If you are going to provide additional years of data, please give the dates of those reporting periods here. Work backwards from the most recent reporting year. Please enter dates in following format: day(dd)/month(mm)/year(yyyy) (i.e. 31/01/2001). 1

2 Enter Periods that will be disclosed Fri 01 Jan Sat 31 Dec 2016 CC0.3 Country list configuration Please select the countries for which you will be supplying data. If you are responding to the Electric Utilities module, this selection will be carried forward to assist you in completing your response. Select country United States of America Canada Nigeria Netherlands Singapore Germany Malaysia United Kingdom International Waters Australia Rest of world CC0.4 Currency selection USD($) Please select the currency in which you would like to submit your response. All financial information contained in the response should be in this currency. CC0.6 Modules As part of the request for information on behalf of investors, companies in the electric utility sector, companies in the automobile and auto component manufacturing sector, companies in the oil and gas sector, companies in the information and communications technology sector (ICT) and companies in the food, beverage and tobacco sector (FBT) should complete supplementary questions in addition to the core questionnaire. If you are in these sector groupings, the corresponding sector modules will not appear among the options of question CC0.6 but will automatically appear in the ORS navigation bar when you save this page. If you want to query your classification, please respond@cdp.net. If you have not been presented with a sector module that you consider would be appropriate for your company to answer, please select the module below in CC0.6. 2

3 Module: Management Page: CC1. Governance CC1.1 Where is the highest level of direct responsibility for climate change within your organization? Board or individual/sub-set of the Board or other committee appointed by the Board CC1.1a Please identify the position of the individual or name of the committee with this responsibility The overall accountability for climate change within Shell lies with the Chief Executive Officer (CEO) and the Executive Committee (EC - CEO, CFO and main business and functional Directors). The Royal Dutch Shell Board of Directors has oversight of all areas of risk, including climate change. For climate change risk, the Board is supported by the Corporate and Social Responsibility Committee (CSRC). The Committee is currently made up of Non-executive Directors and their role is to review and advise the Board on policies and performance against the Shell General Business Principles, the Shell Code of Conduct and mandatory HSSE & SP standards. Outside the Executive Committee and the Board, the most senior individual with direct responsibility for climate change, and nominated risk owner, is the Executive Vice President (EVP) Safety and Environment (S&E) who has direct access to the CEO. Group CO2, a corporate team with global remit is responsible for evaluating climate change related risks to the Shell group, supports the business in developing CO2 management strategies and has oversight of the company s CO2 management implementation programme. The team is led by the VP CO2 who is the climate change risk focal point, and reports to the EVP S&E. CC1.2 Do you provide incentives for the management of climate change issues, including the attainment of targets? Yes CC1.2a Please provide further details on the incentives provided for the management of climate change issues Who is entitled to benefit from these incentives? Corporate executive team The type of incentives Monetary reward Incentivized performance indicator Efficiency project Other: Safety, water use, oil spill volumes, energy intensity Comment Executive Committee members annual bonus is aligned with Shell s stated business strategy and commitments, which focus on financial measures, operational excellence, and sustainable development. In 2016, sustainable development continued to account for 20% of the company scorecard, which helps determine the annual bonus for all our employees, including members of the Executive Committee (EC). In 2016, the EC's sustainable development measures were split evenly between Shell's safety and environmental performance, including targeted measures covering operational spills, energy efficiency of refineries and use of fresh water. Targets are set each year by the Board s Remuneration Committee taking into account the performance achieved in the last three years. 3

4 Who is entitled to benefit from these incentives? The type of incentives Incentivized performance indicator Comment Energy efficiency (the amount of energy consumed for every unit of output) is used as a representative measure for GHG performance. We improve energy efficiency within our operations, i.e. through the improvement of reliability of equipment and undertaking energy efficiency projects which result in the reduction of CO2. Since 2015, Operational Safety Tier 1 Events became part of the sustainable development share of the scorecard. All employees All employees Monetary reward Recognition (nonmonetary) Other: Safety, water use, oil spill volumes, energy intensity Other: Variety of indicators depending on specific improvements made (incl. reduction and efficiency increase) For 2017, sustainable development will continue to account for 20% of the annual bonus scorecard. The safety component (10%) will still cover process safety events and personal safety, but based on recommendations from the Corporate and Social Responsibility Committee, the Remuneration Committee has focused the environmental component (10%) on greenhouse gas (GHG) in three specific business areas: refining, chemical plants and flaring in upstream assets. This goes beyond carbon dioxide to include other GHGs such as methane. Sustainable development accounts for 20% of the overall company scorecard. For 2016, the sustainable development performance for employees has been assessed based on the safety measure Total Recordable Case Frequency. In determining the final score, the Chief Executive Officer takes into account the overall sustainable development performance. For 2017, sustainable development will continue to account for 20% of the annual bonus scorecard. The safety component (10%) will cover process safety events and personal safety, and based on recommendations from the Corporate and Social Responsibility Committee, the Remuneration Committee has focused the environmental component (10%) on greenhouse gas (GHG) in three specific business areas: refining, chemical plants and flaring in upstream assets. This goes beyond carbon dioxide to include other GHGs such as methane. The annual Chief Executive Officer s HSSE & SP Awards programme recognises individuals and teams working to improve Shell s performance in the areas of health, safety, security, environment (HSSE) and social performance (SP). All employees Other nonmonetary reward Other: Variety of indicators depending on specific improvements made (incl. reduction and efficiency increase) All employees are eligible for individual recognition via the annual individual staff appraisal process. The efforts that individuals have made to GHG specific activities that are part of their annual goals are considered and rewarded based on their performance. In addition, there are special recognition awards where individuals are rewarded for significant accomplishments in specific projects. 4

5 Page: CC2. Strategy CC2.1 Please select the option that best describes your risk management procedures with regard to climate change risks and opportunities Integrated into multi-disciplinary company wide risk management processes CC2.1a Please provide further details on your risk management procedures with regard to climate change risks and opportunities Frequency of monitoring Annually To whom are results reported? Board or individual/sub-set of the Board or committee appointed by the Board Geographical areas considered Shell has a global approach to climate change risk management, covering all regions worldwide where we operate or explore. How far into the future are risks considered? > 6 years Comment Shell s approach to risk management includes a variety of processes. The company s Control Framework is at the basis of these processes. Risks and opportunities are assessed at Group, business and asset levels. CC2.1b Please describe how your risk and opportunity identification processes are applied at both company and asset level i) Company level Risks and opportunities are assessed via a single Control Framework (CF) that is designed to manage rather than eliminate the risk of failure to achieve business objectives. It therefore only provides reasonable assurance against material misstatement or loss. The CF applies to all wholly-owned Shell companies and ventures/other companies where Shell, directly or indirectly, has a controlling interest. For new projects, the CF defines the Opportunity Realisation Process that requires assurance at specific stages of the process and outlines the required governance. A comparable process is in place for existing assets. A dedicated department has the responsibility of actively monitoring company levels of and GHG intensity. This includes a dedicated GHG Project Manager to guide the largest projects, representing around 80% of all additional GHG from new investments, in managing GHG-related content, from both a risk and an opportunity standpoint. Risks are assessed for likelihood of occurrence and on Shell (financial/non-financial terms). ii) Asset level Risks and opportunities are assessed via the Shell Risk Assessment Matrix (part of the Shell HSSE&SP CF) that identifies consequences to people, assets, environment and reputation. Applied severity bands range from no damage/effect to massive damage/effect. Likelihood is reported on an increasing scale from Never heard of in the Industry to Has happened more than once per year at the location. Major installations are certified against internationally recognized environmental management system standards (e.g. ISO14001). The risks and opportunities of climate change are assessed for new assets or projects in development by considering a project screening value of GHG at $40/tonne in all investment decisions. New and existing assets are required to have an internal GHG & Energy Management Plan detailing their GHG profile and performance as well as improvement options. CC2.1c How do you prioritize the risks and opportunities identified? Shell s prioritisation of risks and opportunities follows a structured approach. We actively monitor our portfolio GHG footprint of all assets as well as our products to quantify future regulatory costs related to GHG or other related climate policies. This allows us to effectively prioritize areas of greater concern and assess mitigation 5

6 options and the most viable responses. For planned major projects, profiles are estimated and financial exposure from GHG regulations is assessed. All investment projects, as well as existing operations that undergo substantial modifications, are required to apply a project screening value of $40/tonne CO2e. Mitigation options for GHG risks are prioritised and managed by looking at cost-effective ways based on bespoke abatement curves that quantify as well as economic attractiveness. This includes considering the potential for CCS in the design of new projects. Actions to mitigate the key exposures and future mitigation options are agreed with the businesses and incorporated into their plans. For long term planning, Shell disaggregates its portfolio into a series of strategic themes. Asset classes in each of the themes have a 2025 GHG intensity aspiration and road-map based plans, with a granulated review of GHG related risks and opportunities to show the activities needed to achieve the guiding aspiration. We actively rank and monitor the prioritisation of long term opportunities that might be benefited rather than threatened by climate change regulation, based on the fit with our own competences, the potential materiality of the activity and its economic returns. Our main opportunity related contributions to reducing GHG, both our own and helping our customers emit less include: bring cleaner-burning natural gas to a wider market; supply more biofuels; progress Carbon Capture and Storage (CCS) technologies; and invest in lower carbon alternatives such as hydrogen, wind and solar. CC2.2 Is climate change integrated into your business strategy? Yes CC2.2a Please describe the process of how climate change is integrated into your business strategy and any outcomes of this process i/iii) Influence of internal reporting processes/paris Agreement on business strategy Shell s CO2 management strategy is actively driven by Group CO2, a corporate function that monitors and examines the strategic implications of climate change to Shell s business and the of developments in governmental policy and regulation with a direct line of accountability to the CEO and oversight of the company s GHG management programme. Shell collaborates and actively participates in dialogue with policy makers and industry associations to monitor climate change developments and to move the energy and climate change discussion forward. Shell identifies three main aspects that influence business strategy: activities to help risk management related to GHG regulation (e.g. energy efficiency); managing the physical s of climate change on our business and investment in opportunities that could benefit from intensifying GHG regulation (CCS, alternative energies, natural gas). Shell welcomed the Paris Agreement on climate change and is keen to promote and play its part in the energy transition to a low carbon future. In 2016, Shell defined reduction in carbon intensity as a strategic ambition for its aspired future. Shell is shaping its portfolio and strategy to take into account the shift to lowercarbon energy to ensure our company s resilience for the future; looking at cost-effective ways to manage GHG and the commercial opportunities these solutions bring; and linking remuneration for all employees to the management of GHG. ii) Examples: how business strategy has been influenced In 2016, we created the New Energies business to continue to explore investment opportunities arising from intensifying GHG regulation. This includes development of new fuels for mobility (biofuels/hydrogen); integrated energy solutions; wind and solar energy; connecting customers with new business models for energy, enabled by digitalisation. Shell s commitment to biofuels is demonstrated by a multi-billion-dollar investment in our joint venture Raízen. In 2016, Shell set out its strategy and identified 4 ambitions as part of this: to be a world class investment case; to be relevant in our industry and grow value share; to reduce our carbon intensity; and shared value. The addition of BG will accelerate Shell s financial growth strategy, particularly in deep water and liquefied natural gas. Also, the addition of BG`s natural gas positions makes strategic sense, ahead of the long-term growth in demand we see for this cleaner-burning fuel. iv) Influence on short term strategy (5-10yr) 6

7 GHG regulation will increase in future as the drive to de-carbonize energy sources and uses intensifies. Shell actively measures and monitors its own GHG footprint, specifically that of its major assets as well as its products to understand the company s exposure to GHG regulation, its mitigation options and the most viable responses. Projects and assets are assessed against industry top quartile GHG intensity benchmarks. This analysis affects design and technology choices in major projects as well as longer term portfolio-related options. To test the resilience of new projects, we assess potential costs associated with GHG. We apply a uniform project screening value (PSV) of $40 (real terms)/tonne CO2e to the total GHG of each investment. High-emitting projects undergo additional sensitivity testing. Projects in the most GHG-exposed asset classes have GHG intensity targets that reflect standards sufficient to allow them to compete and prosper in a more GHG regulated future. These processes can lead to projects being stopped, designs being changed, and potential GHG mitigation investments being identified, in preparation for when regulation would make these investments commercially compelling. We also test the resilience of our portfolio against externally published, future pathways, including credible low pathways. E.g., we have evaluated our portfolio under the IEA 450 Scenario. The IEA s projected GHG regulation would lead to lower demand for some of our products and potential impairments to some of our less energy-efficient assets. However, we could also see certain benefits as robust global CO2 pricing mechanisms would make some forms of energy, such as natural gas and renewables, more competitive compared with coal. Robust CO2 pricing mechanisms would also help encourage the development of CCS. These are areas that we invest in. v) Influence on long term strategy (10-20yr) Shell has long life assets that will last many decades. Some of these might have been designed according to outdated climate parameters. We are taking steps at our facilities to ensure that they are resilient to climate change. We progressively adjust our design standards for projects while, for existing assets, we identify those that are most vulnerable to climate change and take appropriate action. Looking further than planning and strategy periods that guide our current investments, Shell updates its Energy Scenarios every few years, which detail plausible energy future long term pathways. These scenarios have been an important influence on Shell s longer-term strategic thinking. In 2016, Shell published A Better Life with a Healthy planet: Pathway to New-Zero Emissions. This scenarios supplement presents a range of approaches to decarbonise the global economy in a way that might address both the challenge of climate change and the need for broader economic growth. Shell is keen to be at the forefront of new energy solutions which includes the development of cleaner and alternative energy technologies. We develop new technologies e.g. through our GameChanger programme (identifies unproven but potentially disruptive ideas) and Shell Technology Ventures (corporate venturing arm investing in companies). vi) Strategic advantage Key components of Shell s business strategy linked to climate change opportunities include supplying more natural gas to replace coal for power generation; investing in low carbon energy; progressing CCS technologies. CCS will be essential for meeting the goal of limiting global warming to well below 2 C. According to IEA, reaching this goal will require 6,000 million tonnes of CO2 to be stored by 2050, equivalent to about 100 times the global CCS capacity expected by the end of Shell is playing a leading role in the demonstration of CCS technology at Quest (Canada). Quest is related to our CCS reduction target (see 3.1a). Used in combination with renewables and CCS, natural gas is also essential for a significantly lower CO2 pathway beyond Around half of Shell s current production is natural gas and Shell has a leadership position in LNG production and sales. Our strategic hydrocarbon emphasis on natural gas is partly based on a strategic belief of an expanding role for natural gas in the future energy mix as a result of climate change regulation. CC2.2c Does your company use an internal price on carbon? Yes CC2.2d Please provide details and examples of how your company uses an internal price on carbon At Shell, we typically assess the GHG risks on all our planned ventures, including existing operations that undergo substantial modifications, applying a GHG project screening value (PSV) to the base case economics against scope 1 and 2 for all new projects since Since 2008, our GHG PSV has been $40 per tonne. The GHG PSV is estimated of the long-term potential costs that Shell assets could incur as a result of 7

8 governments taking actions to reduce CO2. The PSV tests the robustness of the economics of a project against potential future CO2 constraints and the resulting carbon price signal. The PSV incentivises investments in CO2 abatement, highlights projects with the most exposure to rising carbon prices and helps screen early-stage opportunities. In addition to applying the base case GHG PSV, we also consider GHG price sensitivities, both in the case of upsides and downsides e.g. for projects with a high exposure to carbon pricing or legislation, we consider the of higher GHG prices. The screening value can affect our project design in a number of ways. Some projects may be stopped at an early stage if the GHG footprint is too high or a design may be altered to reduce GHG at start-up. For example, we have stopped some projects at an early stage, due to high levels of CO2 in the hydrocarbon reservoir. Alternatively, a project may be designed to enable CO2 reduction at a later date if there is an increase in the local government imposed carbon price for example, by adding CCS. As well as guiding investment decisions, our GHG PSV is used as a reference to guide business planning assumption when current GHG costs are unknown or expected to change within the planning period. CC2.3 Do you engage in activities that could either directly or indirectly influence public policy on climate change through any of the following? (tick all that apply) Direct engagement with policy makers Trade associations Funding research organizations Other CC2.3a On what issues have you been engaging directly with policy makers? Focus of legislation Corporate Position Cap and trade Support Other: Global Carbon Market Other: Carbon Capture and Storage (CCS) Support Support Details of engagement 1. Actively engaged in revision of the EU-ETS. Shell position is to strengthen the ETS through more ambition for power sector together with 100% carbon leakage protection at benchmark for industry. 2. Shell has supported development of China s ETSs. We have participated in a number of business to business missions with IETA s Business Partnership for Market Readiness (BPMR) supporting the World Bank s PMR. Shell provided detailed input to IETA s proposals for developing the rules and procedures for implementation of Article 6 of the Paris Agreement. Working through the WBCSD and GCCSI to see CCS deployed more widely and potentially recognised within the proposed Paris agreement. Proposed legislative solution 1. More ambition for power sector though change in the ration between auction share and free allowances. Carbon leakage protection through dynamic allocation, use of real data for benchmark changes, placing cancelled allowances in fund for CSCF. 2. Introduction of a nationwide ETS in China from 2017; Shell has set up a trading desk in China and is actively participating in existing carbon markets. Development of government led carbon pricing frameworks in key markets to provide incentives for emission reduction activities (COP21 Decision paragraph 137). Linked carbon markets through development of internationally traded mitigation outcomes (ITMOs) and mitigation mechanisms (EMM) (Paris Agreement; Article 6). Enabling the construction of a series of demonstration projects globally with the objective of having CCS commercially viable in the 2030s. 8

9 Focus of legislation Other: EU Climate Policy to 2030 Other: USA: Renewable Fuel Standard (RFS) - Methane Regulations Other: Canada: Federal Oil and Gas Regulation in Canada Other: Canada: Provinvial OIl and Gas Regulation in Alberta Other: Carbon Pricing Corporate Position Support Support Support Support Support Details of engagement Engaging through the Commission s outreach process on the 2030 Roadmap. Shell is taking advantage of multiple opportunities to talk with policymakers and stakeholders on the blend wall problem and the need to address the problem to protect consumers and preserve the RFS. Shell spoke at a Bloomberg conference and a conference held at the University of Illinois and testified at an EPA hearing concerning the RFS standards. Shell also filed written comments on EPA s proposed 2014 RFS standards. Regarding methane, Shell has been an industry leader in engaging with EPA to write a workable rule for new/modified onshore sources. We have also been influential in modifying API s position and encouraging the trade association to work productively with EPA. And we took a lead role in influencing the positions of several majors/iocs. We have met repeatedly with EPA and the White House over the past two years as Shell only, with industry cohorts and with API. We remain very engaged with API and EPA as the new EPA begins work on revising Obama-era regulation. Shell supports fixing methane/voc rule rather than eliminating. Direct engagement with government civil servants and through the Canadian Association of Petroleum Producers. Direct engagement with government and through the Canadian Association of Petroleum Producers. Broad engagement through many channels including speeches, workshops, Shell Scenario presentations, World Bank initiatives, Proposed legislative solution A single GHG target for the EU rather than a wide variety of targets and approaches. Serious problems are developing in the US transportation fuel system as a result of the federal renewable fuel standard (RFS), as the mandated levels of renewable fuels exceed levels that are compatible with vehicles and infrastructure. This is referred to as the blend wall problem. If this problem is not quickly addressed, the RFS will limit supplies of gasoline and diesel in the US with potentially significant adverse s on consumers and the USA economy. In addition, if the government does not appropriately address these issues, public and political support for the RFS program could diminish. This situation creates tremendous investment uncertainty for companies like Shell that are pursuing cellulosic biofuels. Consequently, Shell has stepped up its advocacy and become much more vocal on these issues to try to fix and preserve the RFS. In May 2016, the USA issued a final rule for regulating methane from new/modified oil and gas upstream sources. The rule focuses on applying technology such as low-bleed pneumatics and work practices such as leak detection and repair (applicable only to onshore production). In February 2016, the Administration announced plans to regulate methane from existing onshore oil and gas sources. The Obama administration had planned to issue a draft rule at the end of The federal government is developing climate change regulations covering carbon pricing and upstream methane. Consultation is ongoing through Q2/Q No draft regulations have yet been tabled for either framework. The Alberta Provincial Government has an existing framework for GHG regulations, the Specified Gas Emitters Regulation (SGER) which regulates GHG from large facilities in the province. Effective January 1st, 2018, SGER will be replaced by a performance standard mechanism. Details of the performance standards have not yet been finalized. Further, industry oil sands emission limit will be capped at 100MT/yr. As of January 1st, 2017, Alberta will implement an economy wide carbon levy. Alberta is also regulating methane in the sector. Government led carbon pricing is an essential policy tool to drive system-wide efficiencies and incentivise the extension of low carbon 9

10 Focus of legislation Carbon tax Corporate Position Support with minor exceptions Details of engagement local advocacy groups, civil society groups, social media (blogs, Twitter etc.). In 2015 we became members of the World Bank CPLC. In mid-2015 our CEO joined with other oil and gas industry CEOs to call for increased use of carbon pricing. The call has resulted in an initiative for the industry to work closely with CPLC (amongst others) to progress adoption of government led carbon pricing. Shell s preference remains for trading schemes (ETS) including cap and trade. Shell supports government led carbon pricing instruments such as a carbon tax where an ETS is not favoured by the government. This includes South Africa. Proposed legislative solution electrification and other technological development and implementation at the lowest cost to society. Continue support of implementation of a carbon tax. Shell has been advocating independently and increasingly via trade bodies. CC2.3b Are you on the Board of any trade associations or provide funding beyond membership? Yes CC2.3c Please enter the details of those trade associations that are likely to take a position on climate change legislation Trade association IETA WBCSD European Round Table of Industrialists FuelsEurope Is your position on climate change consistent with theirs? Consistent Consistent Mixed Mixed Please explain the trade association's position Using market based instruments such as cap-and-trade to effectively drive the mitigation of GHG. Need to aggressively address global and prepare for the need to adapt to changes in the climate. Favour cost effective mechanisms to address GHG in the EU, but concerned that the ETS is leading to competitive distortion. FuelsEurope recognises that climate change is real and warrants action. FuelsEurope supports the efforts of the international community to address the risks of climate change and believes that How have you, or are you attempting to, influence the position? Active participation in working groups. A Shell representative is currently a Board Member. Shell has supported IETA events at COP22 and throughout 2016 as implementation of the Paris Agreement was discussed. We strongly supported the IETA view that carbon market architecture should result from implementation of Article 6 of the Paris Agreement. Active participation in the Energy & Climate Working Group, co-chair of that group and a WBCSD Executive Committee member throughout Active participation in the working group and seeking to steer the position to a more pragmatic position of engagement. Active participation in FuelsEurope Information Groups to ensure they are aligned with the Shell approach on Climate Change or are not opposed to it. 10

11 Trade association IOGP API CAPP USA: C2ES Australian Industry Greenhouse Network (AIGN) Business Council of Australia Australian Petroleum Production and Exploration Is your position on climate change consistent with theirs? Mixed Mixed Mixed Consistent Mixed Mixed Consistent Please explain the trade association's position effective measures must be undertaken by all significant world economies under an effective and clear international agreement. At the same time, the growing global demand of secure, reliable and affordable energy must be addressed in order to fight poverty in several regions of the world and to allow access to higher living standards to a rising middle class in many developing countries. FuelsEurope supports the EU ETS as the EU s flagship instrument within its energy and climate policy framework, as a cost-effective market mechanism for reduction in the power and industry sector". FuelsEurope does not support higher carbon price in ETS. IOGP supports EU ETS in Europe and appropriate carbon leakage protection; however, they are not always supportive of all measures that would push the EU ETS price. Supports the need to address climate change but will not actively support mechanisms such as cap and trade. Supports the need to address climate change and engages with government on the best approaches for business. Provide pragmatic solutions and realistic energy pathways forward to lower. Supports the need to address climate change through market-based approach to achieve genuine, lowest cost emission reductions. Australia s policy response to risks associated with climate change should be workable, at lowest possible cost, fiscally responsible, not make Australian industries uncompetitive (representing interests of top 100 businesses in Australia). Using market based approach to address climate change, but without distorting Australia s international competitiveness. How have you, or are you attempting to, influence the position? Attempting to nuance the position of the association with regard to raising the EU ETS ambition and encouraging IOGP to focus the association s advocacy on the key upstream issues where there is alignment. Attempt to mitigate negative positions when necessary. Little scope for major positive advocacy work on climate change legislation. Active participation in working groups. As a strategic partner throughout 2015 and into 2016, we have influence over the work programme, but not over the findings and resultant policy positions. A Shell representative is a C2ES Board Member. We influence through attendance and engagement in meetings, input into submission processes and one-on-one advocacy. We influence through attendance and engagement in meetings, input into submission processes and one-on-one advocacy. We influence through attendance and engagement at meetings, input into submission process and active participation in working groups. 11

12 Trade association Is your position on climate change consistent with theirs? Please explain the trade association's position How have you, or are you attempting to, influence the position? Association (APPEA) USA: Western States Petroleum Association (WSPA) Mixed The Western States Petroleum Association (WSPA) is a non-profit trade association representing companies that explore for, produce, refine, transport and market petroleum, petroleum products, natural gas and other energy supplies in California, Oregon, Washington, Arizona and Nevada. WSPA is full-service, broad-based, memberdriven petroleum industry trade association within the western United States dedicated to effectively and efficiently eliminate or mitigate the risks and threats in the states we operate and to ensure and promote a vibrant oil and gas industry through policies that are socially and environmentally responsible. CEFIC supports EU s current climate and energy targets for ETS must not create higher unilateral financial burdens to industry, removing resources needed for investing in a more sustainable economy or creating a cap for growth in Europe. CEFIC efforts focus on optimising EU s innovation, allocating resources to help increase energy efficiency. CEFIC do not support higher carbon price in ETS. WSPA advocates on behalf of Shell and other member companies on issues such as: hydro fracking, fuel specifications, refinery safety, tax issues, pipeline safety, air quality, environmental remediation, water, lubricants, crude by rail, oil spill response and climate change (specifically in California: AB 32 and Low Carbon Fuel Standard). European Chemical Industry Council (CEFIC) Mixed Active participation at all levels in CEFIC working groups to ensure they are aligned with Shell approach to climate change or are not opposed to it. Further effort focuses on the advocacy messaging to a more positive tone towards climate change. IPIECA Consistent The oil and gas industry has a key role to play in reducing through the provision of natural gas and the development of CCS. Active participation in working groups and a member of the IPIECA Executive Committee. In the context of energy & climate change, we have encouraged the association to take a more progressive approach on the issue and to push harder on the need for CCS. CC2.3d Do you publicly disclose a list of all the research organizations that you fund? No CC2.3e Please provide details of the other engagement activities that you undertake The information provided under 2.3a and 2.3c are only a selection of organisations that Shell is a member of or engages with on different topics. The selection focusses on organisations that have a specific climate change focus or working groups on climate change where we are regular and active participants through our respective departments; however, the list is not comprehensive. Shell is also active through important stakeholders, such as the World Bank, where we are a member of their Carbon Pricing Leadership Coalition. During 2015 we helped kick-off the work of the Energy Transitions Commission and our Chairman is a Commissioner within that body. Shell is pleased to participate in the ETC alongside a diverse group of other individuals and organizations who want to make a meaningful contribution to low-carbon lives and economies. The aim of the ETC 12

13 is to become an independent learning organisation providing policy suggestions, but not to actively engage in lobbying. We participate in the ETC alongside 28 other companies, foundations and organisations. We also publish our own material on climate change and energy transition issues, such as through our ongoing scenarios work (New Lens Scenario supplement Pathways to net-zero published in 2016). Shell is also working with some countries as they shape their energy future. Each country has its own opportunities and challenges depending on factors such as wealth, population density, and level of industrialisation. Our discussions with governments include ways to improve energy efficiency, as well as ways to increase the use of natural gas and low carbon fuels such as biofuels, wind, solar and hydrogen. We discuss how to develop compact city designs and public transit systems, and policy options including carbon pricing to help bring through technologies such as CCS. In the Netherlands, for example, we are working with policymakers and industry representatives to help determine the shape and speed of the transition to a lowcarbon energy future. The Netherlands has large wind resources, but also a large petrochemical and industrial sector, and has set itself a target of reducing GHG by between 80% and 95% by Such ambitious targets will require significant shifts in the way energy is produced and consumed across the economy. In 2016, Dutch energy company Eneco, the Port of Rotterdam, German engineering group Siemens, Dutch contracting company Van Oord and Shell initiated a coalition to accelerate the energy transition in the Netherlands. At the National Climate Summit in Rotterdam in October 2016, the coalition called on the Dutch government to prioritise the international climate goals set during the climate summit in Paris and decide on a long-term policy framework to support them. By the end of the year, the coalition had more than 50 member companies. The coalition believes accelerating the energy transition in the Netherlands will require the active involvement of individuals and companies, as well as long-term government policies on climate, energy and the economy. CC2.3f What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climate change strategy? We do have a process in place that ensures that all direct and indirect activities are consistent with our overall climate change strategy. The Executive Committee has ultimate authority on policies in respect of climate change. The Group CO2 policy team is responsible for preparing proposed policy positions based on emerging Shell analysis, business input and external input with the EVP for Safety and Environment accountable. The team also ensures consistency in application of Shell s core principles and policy tasks in interactions with policy makers. A high level working group called the Policy Forum chaired by an EC member- (includes businesses and / or functions representatives depending on topics discussed) is responsible for proposing policy and for communicating policy externally, and reviews and approves the high-level policy framework and key policy decisions and advocacy positions. Delivery of these policy and advocacy positions, and external input and engagement is aligned via: Government Relations team in respect of political and government processes, to inform development of positions adapted to local circumstances. The Government Relations team also coordinates the relevant advocacy, ensuring alignment with other Shell advocacy goals at local and national level. Investor Relations team in respect of investor perspectives, especially Socially Responsible Investors. The Investor Relations team also manages responses to investor questions on this topic and provides periodic briefings to interested investors. External Relations team in respect of media and wider public questions. Further Information Note: Whenever we use the phrase CO2 it means CO2 equivalent and covers other greenhouse gases (GHG). 13

14 Page: CC3. Targets and Initiatives CC3.1 Did you have an reduction or renewable energy consumption or production target that was active (ongoing or reached completion) in the reporting year? Absolute target CC3.1a Please provide details of your absolute target ID Abs1 Scope Scope 1 % of in scope % reduction from base year Base year Base year covered by target (metric tonnes CO2e) Target year 5% 25% Is this a science-based target? No, as there is currently no established science-based targets methodology in this sector Comment The Quest Carbon Capture and Storage (CSS) Project began operations in late The project is located at the Scotford Upgrader in Alberta Canada and is designed to capture, transport and store over one million tonnes of CO2 annually. In 2015, the project captured 370,000 tonnes of CO2 from the site s Scotford Upgrader. In 2016, in its first full year of operation, Quest safely captured and stored more than 1 million tonnes of CO2 ahead of schedule (net: about 954,000 tonnes of CO2). See also "Further Information". CC3.1e For all of your targets, please provide details on the progress made in the reporting year ID % complete (time) Abs1 14.3% 100% % complete ( or renewable energy) Comment Quest, at the Athabasca Oil Sand Project in Alberta, Canada, is the first use of CCS on an industrial scale in an oil sands operation. The project started operating in August 2015 and captured 370,000 tonnes of CO2 from the site s Scotford Upgrader in In 2016, in its first full year of operation, Quest safely captured and stored about 954,000 tonnes of CO2 (net), which equals 112% (column "% complete ( or renewable energy)") of the planned reduction for CC3.2 Do you classify any of your existing goods and/or services as low carbon products or do they enable a third party to avoid GHG? Yes 14

15 CC3.2a Please provide details of your products and/or services that you classify as low carbon products or that enable a third party to avoid GHG Level of aggregation Description of product/group of products Are you reporting low carbon product/s or avoided? Taxonomy, project or methodolog y used to classify product/s as low carbon or to calculate avoided % revenue from low carbon product/ s in the reporting year % R&D in low carbon product/ s in the reporting year Comme nt Product Shell's CANSOLV technology enables capturing the CO2 and SO2 at SaskPower s new world-scale CCS project in Saskatchewan, Canada, since The SaskPower facility at the Boundary Dam Power Station is capable expected of to capturing more than around 1 million tonnes of CO2 per year, which is up to 90% of CO2 from one train of the power plant. The Shell CANSOLV technology uses regenerable aqueous amine solutions to capture the SO2 and CO2. The efficiency drive continues achieving a sustained reduction in fuel consumption in the chartered and managed fleet of vessels. For example, in 2016, for our managed fleet of vessels, 55,000 tons of CO2 were avoided by the effective use of advanced hull paint schemes which reduce the frictional resistance of the vessel passing through the water and thus reduce the level of fuel consumption. Cleaner-burning LNG is a fuel for heavy-duty road transport, shipping and rail. It is virtually free of sulphur and has lower levels of nitrogen oxides and particulates. It can be used as an alternative transport fuel to diesel and heavy fuel oil. Shell has created a network of five LNG truck refuelling stations in the Netherlands. One of the stations, located on the premises of one of the largest Dutch supermarket chains, is used by 150 LNG delivery trucks a day. In shipping, LNG is already used as a fuel with around 100 vessels in use today. Using LNG as a fuel for shipping on a wide scale would lead to significant reductions in marine. In 2016, Shell signed an agreement with one of the world s biggest cruise operators, Carnival, to supply LNG to fuel two of the world s largest passenger cruise ships. These will be the world s first LNG-powered cruise ships, due to start sailing in north-west Europe and the Mediterranean in In 2016, Shell and Keppel Offshore & Marine Ltd won a bid for Singapore's first licence to fuel ships with LNG. Avoided Product Avoided Product Avoided Product Shell has been involved in wind power since 2001 in the USA. We have interests (50%) in 6 operational wind power projects in North America and one in Europe. Our share of the energy capacity from these projects was about 420 megawatts at the end of Low carbon product and avoided 15

16 Level of aggregation Description of product/group of products Are you reporting low carbon product/s or avoided? Taxonomy, project or methodolog y used to classify product/s as low carbon or to calculate avoided % revenue from low carbon product/ s in the reporting year % R&D in low carbon product/ s in the reporting year Comme nt Product Hydrogen has the potential to be an important low-carbon transport fuel and Shell is part of several initiatives to encourage the adoption of hydrogen electric energy. In Germany, for example, the government is supporting the development of a national network of hydrogen electric fuel stations across the country by We are working on this project with our joint-venture partners in H2 Mobility Germany French gas supplier Air Liquide, German car manufacturer Daimler, Austrian oil and gas company OMV, German engineering firm Linde and French oil and gas company Total. The hydrogen will be delivered by truck as a gas to retail sites. Under the terms of the partnership, at least 50% of the hydrogen sold must be produced without emitting greenhouse gases. In 2016, the first two stations in the H2 Mobility network opened in Germany. Outside this network, we also have three hydrogen filling stations in Germany and two in Los Angeles, California. In the UK, we are partnering with ITM Power, a company specialising in hydrogen fuel-cell products, to make hydrogen fuel available at three Shell retail sites in the southeast of the country. The first of the UK stations opened in February Shell is assessing the potential for similar projects in the USA, Canada, Switzerland, Austria, France, Belgium, Luxembourg and the Netherlands. For example, in California, USA, we are working with Toyota and the state government to build hydrogen refuelling stations, which Shell will own and operate when completed. Lubricants are designed to increase the efficiency of equipment including engines - and reduce fuel consumption. Shell is one of the largest investors among international energy companies in the research and development of lubricants for motorists, commercial vehicles and industrial sectors. We employ more than 200 scientists and engineers in lubricant research and development. In 2016, Shell introduced a new range of heavy-duty engine oils in the USA, under the Shell Rotella brand. These were developed to meet the requirements of new American Petroleum Institute specifications for lubricants, which include reducing engine. A range of more efficient regular priced fuels (Shell FuelSave Diesel / Shell FuelSave Unleaded petrol) have been developed. Shell FuelSave is now available in all major Shell markets (excl. USA). Launched to the mass market category of main grade fuels (as distinct from premium fuels) this product is available at all Shell stations in countries where this product has been launched. Avoided Product Avoided Product Avoided 16