OPINION: New analysis from financial think tank Carbon Tracker Initiative (CTI), warning of $1 trillion in future stranded assets, is another wake-up call.

The “Adapt to Survive” document represents a detailed follow-up to the May flagship report from the International Energy Agency (IEA).

Its analysts argue in bald and emotive language the oil majors are “betting against the success of global efforts to tackle climate change”.

This argument would be strongly disputed by the industry and is based on claims that companies cannot individually meet the ultimate Paris climate-agreement goal of keeping future global warming to 1.5 degrees Celsius above pre-industrial levels.

Mike Coffin, head of oil, gas and mining at CTI and a former BP geologist, argues that the 1.5-degrees target is fast becoming a “seriously considered benchmark” for Paris alignment.

That claim could be disputed when so many climate scientists warn the prospects of meeting the 1.5-degrees target are slim.

But it is a fair figure in many people's minds if more extreme weather consequences are to be avoided.

The production of ConocoPhillips needs to drop by just under 70%, and Chevron by 52%, by the 2030s to meet the 1.5-degrees benchmark, Carbon Tracker claims.

By contrast, Shell’s output needs to fall by 44% and BP’s by 33%, or face swaths of stranded assets, the think tank says.

The findings underline the way European oil majors have been taking the lead in decarbonising their operations.

Working on the IEA’s recent “net zero emissions by 2050” scenario, CTI is convinced there is already more than enough proven hydrocarbon reserves than should be allowed to be burned.

The financial think tank argues there should be no more exploration and few new existing projects sanctioned.

Industry's big gamble

Yet Carbon Tracker also claims $18 billion of oil and gas investment was sanctioned in 2020 that is inconsistent with limiting warming to even 1.65 degrees Celsius.

And the think tank believes a number of large projects — inconsistent with a 2.7-degrees world — are on course for future sanction.

BP says the work it is already doing to cut carbon is recognised in this latest report and is ongoing inside the business.

Shell announced in February that its production had peaked in 2019 and the company was on its way to net zero by 2050.

The Anglo-Dutch business has already cut its exploration spending by 80% from its peak and expects that downward trend to continue.

Since then, however, Shell has had its commitments to climate action successfully challenged in a Dutch court by environmentalists.

The European oil major has been ordered to cut its carbon emissions quicker, 45% by 2030, even as the latest UN climate report ups the ante on the industry by warning we are now at “code red for humanity.”

The Carbon Tracker report concentrates its fire on the oil industry, bypassing the role and importance of policymakers or continuing demand for hydrocarbons.

Some of the analysis may be disputed, but it can’t be ignored, as it will feed investor pressure as well as potentially more climate lawsuits.

US oil companies may want to take particular note, even though courts in the US have been supportive of them so far.

(This is an Upstream opinion article.)