Oil companies are finally beginning to bow to the reality that the world is getting serious about climate change — or might be, sometime soon. And in that “might,” that lingering doubt, is contained a long and strange face-off, a game of bluff and counter-bluff, as fossil fuel giants maneuver to hang on as long as possible.

The latest chapter in this story is a new report from Royal Dutch Shell, Europe’s biggest oil company. It’s called the “Sky scenario” and it envisions a world that achieves net-zero carbon emissions by 2070, thus (in the company’s accounting) holding global average temperatures beneath the international target of 2 degrees Celsius.

The fact that an oil major is grappling with the 2°C target at all is notable — and the fact that it sees the pursuit of that target wiping out most of its primary business is more notable still. There are people in suits, sitting around conference tables in the Hague and Houston, talking about the end of fossil fuels as a major global industrial concern. That’s a pretty big step forward from even four or five years ago.

But some climate activists say that the Sky scenario is weak and self-serving.

A brief explainer on Shell's new climate report pic.twitter.com/wISnA2Ruis — Greg Muttitt (@FuelOnTheFire) March 27, 2018

Are they right? Is Shell just engaged in spin, playing some kind of (ahem) shell game?

Well, yes and no. Or rather, no and yes.

It’s not true that the Sky scenario is unambitious — it is wildly ambitious! Nor is it true that Sky is notably easier on fossil fuels than other common decarbonization plans.

But it is arguably true that the modeling community as a whole has shaped its work around protecting large energy incumbents from disruption, and that Shell’s work simply reflects that larger conventional wisdom.

In other words, the critiques that climate hawks level at Shell’s scenario are in fact critiques of the mainstream climate modeling community. And beyond that, they are critiques of the growing establishment consensus about what getting to 2°C will look like. (In a nutshell: continued emissions growth in the short term, then radical reductions and negative emissions in the long term.)

These are real disagreements that carry enormous economic, political, and geophysical implications. To get a better sense of them, let’s start with a closer look at Shell’s Sky scenario.

Shell’s scenario, like any that would zero out emissions, is ambitious

To be clear up front: The Sky scenario is ambitious as shit. Any plan to reach net zero emissions by 2070 — roughly 50 years from now — is ambitious. It would be a global energy transition faster than any in human history, requiring, in Shell’s words, “a complex combination of mutually reinforcing drivers being rapidly accelerated by society, markets, and governments.”

Just look at what Shell says would be required to achieve the Sky scenario:

1. A change in consumer mindset means that people preferentially choose low-carbon, high-efficiency options to meet their energy service needs. 2. A step-change in the efficiency of energy use leads to gains above historical trends. 3. Carbon-pricing mechanisms are adopted by governments globally over the 2020s, leading to a meaningful cost of CO2 embedded within consumer goods and services. 4. The rate of electrification of final energy more than triples, with global electricity generation reaching a level nearly five times today’s level. 5. New energy sources grow up to fifty-fold, with primary energy from renewables eclipsing fossil fuels in the 2050s. 6. Some 10,000 large carbon capture and storage facilities are built, compared to fewer than 50 in operation in 2020. 7. Net-zero deforestation is achieved. In addition, an area the size of Brazil being reforested offers the possibility of limiting warming to 1.5°C, the ultimate ambition of the Paris Agreement.

We’ll look at some of these more closely, but suffice to say, any single one of them would represent a gargantuan achievement. Engineering all seven at once would be a feat for the ages. It is definitely ambitious.

And there’s not much room for error. In one of the most striking passages of the report, Shell says that “achieving net-zero emissions in just 50 years leaves no margin for interruption, stalled technologies, delayed deployment, policy indecision, or national back-tracking.” Everything has to go just right.

Countries must implement carbon taxes in the 2020s, ramp them up to $50 per ton by 2030 and at least $100 per ton by 2050, and harmonize them across the globe — that’s what would be required to induce sufficient investment in low-carbon technologies.

Renewables must quickly take over power generation. Energy end uses typically reliant on hydrocarbon combustion — notably transportation and heating and cooling — must transition quickly to electricity. Electrification must rise at more than three times its recent historic rate until it represents almost 60 percent of final global energy consumption:

“Stubborn” sectors for which carbon solutions have been difficult to find — “aviation, shipping, cement, some chemicals, smelting, glass manufacture, and others” — must be addressed.

Technologies that have “stalled” — nuclear power, carbon capture and sequestration, biofuels — must be kickstarted. Everything must be accelerated.

Shell’s energy projections are roughly in line with other models

Glen Peters, research director at Norway’s Center for International Climate Research, did the yeoman’s work of comparing Shell’s Sky scenario to the scenarios that the IPCC now uses as the basis of its modeling (“Shared Socioeconomic Pathways,” or SSPs). There are around 30 SSPs, which vary widely based on different background assumptions. Peters set out to see how Sky’s numbers stack up.

The area where Sky most stands out is in its estimation of total global energy demand. As you can see, Shell’s projections (the blue line) are quite high, way up at the upper end of the range of scenarios IPCC considers:

The company expects rapidly rising affluence and living standards in the developing world. David Hone, the chief climate change adviser to Shell, says it was a deliberate choice:

Agree, Sky is higher, but given current growth and development trends and the rapid uptake of new energy services, we stand by that demand profile. — David Hone (@davidshellblog) March 28, 2018

As Simon Evans points out on CarbonBrief, high future demand is a fixed feature of all of Shell’s scenarios, historically. It’s not crazy to think Shell might be putting its thumb on the scales. It aspires to become an “energy services” company — an executive told Evans that “by 2030, its activities in the electricity sector will make up as large a share of its business as gas” — and such a company would certainly find soaring demand for energy services amenable.

How about fossil fuels? Does Shell make it easy on them, compared to other scenarios? Not really. Here are four graphs showing coal, oil, natural gas, and bioenergy in the SSPs and in Sky.

As you can see, Sky’s projections fall well within the range of mainstream models.

On coal, Shell actually shows higher consumption, for longer, than most other scenarios (which doesn’t do an oil and gas company much good). On oil, it’s right down the middle, though with slightly higher than average consumption in 2100. On gas, it’s somewhere in the middle of the crazy-wide range (nobody knows WTF will happen with gas), with both a notable rise through 2040 and a notable plunge thereafter.

Here’s a clearer look at what happens to fossil fuels in Sky:

Note that oil and gas do quite well through 2040. We’ll come back to that.

What about clean energy? Here’s how hydro, nuclear, wind, and solar compare in Sky and other SSPs:

On hydro and nuclear, Shell comes in toward the lower end of the range. For wind, it has a faster midcentury rise than most scenarios, then a plateau. But solar! Shell is wildly bullish on solar, more than virtually any other scenario. (Back in the real world, it has just recently tip-toed back into solar after bailing on it 12 years ago.)

Here’s Sky’s final energy mix in 2070:

Shell relies on negative emissions, but no more than other models do

How can fossil fuels still play a role in an energy system that is net-zero carbon? The answer lies in “negative emissions,” various ways that carbon can be pulled from the system and sequestered.

The prevailing idea is that we can exceed 2°C some time mid-century (known as “overshoot”), but then pull enough carbon out of the atmosphere in the latter half of the century to restore balance and pull temperatures back beneath 2 degrees.

Sky definitely relies on negative emissions to stay within the 2°C “carbon budget,” but does it do so notably more than other scenarios? Not really:

Sky shows emissions rising for longer than most other scenarios in the short term but then plunging faster around midcentury, going below zero earlier than most other scenarios.

Does Sky involve more carbon capture and sequestration (CCS) — the controversial technique of pulling carbon from pollution smokestacks and burying it — than other scenarios? Not really. In fact, somewhat counter-intuitively, Peters says that “the [International Energy Agency], Statoil, and Shell are all rather conservative on CCS” relative to other models:

Anyway, the point is made: Shell’s Sky scenario is roughly in line with other mainstream scenarios aiming at or near the 2°C target. But that’s not the end of the story.

The fateful gambles built into mainstream models

Climate hawks have three main problems with mainstream models: a premise and two fateful gambles that follow from it.

Shell states the premise clearly: “From 2018 to around 2030, there is clear recognition that the potential for dramatic short-term change in the energy system is limited, given the installed base of capital.”

In other words, given the enormous investments in current carbon-intensive assets — the sheer financial momentum of the current system — we can’t turn on a dime. We have to allow some time for existing wells to run dry, mines to shut down, power plants to close, factories to retrofit, and new technologies to scale up. We’ll spend the 2020s and 2030s laying the groundwork and then go like gangbusters after that.

In this vision, fossil fuel companies remain robust and are even called upon to make new investments in exploration and extraction through 2050. (Shell sees natural gas booming through 2040.)

It is a decarbonization strategy built around creating a smooth, extended exit for big energy incumbents, avoiding stranded assets. It rules out true emergency measures or radical disruption of the fossil fuel industry.

It isn’t exactly a best-case scenario for fossil fuels — that would be climate change proving a hoax — but it is about as well as they could conceivably do given the 2°C target.

The problem is, our carbon budget to stay below 2°C is already perilously small. (Though there’s disagreement over exactly how small.) Once you accept that radical reductions are off the table for the short term, you’re banking a lot on the long-term.

Thus the two gambles.

The first bet is that we will, in fact, be able to pull massive amounts of carbon out of the atmosphere in the latter half of the century, atoning up for the sins of the first half. Virtually all the 2°C scenarios in circulation today rely heavily on negative emissions. I ran the Sky scenario by modeler Christopher Clack of Vibrant Clean Energy and he noted that, from 2070 forward, Shell has us burying around 11 gigatons of CO2 a year, “equivalent to 1.7 times the current total emissions from the United States, or one-third of today’s global emissions.” That’s a lot to bury.

But there’s just no way to allow continuing high emissions in the short-term without jacking emissions down way below zero later on. A slow ramp-up on the front side necessitates massive negative emissions on the back side.

Without negative emissions, emissions would have to basically drop off a cliff, starting today.

Translating carbon budgets to emission pathways (250GtCO₂/yr for 1.5°C, from Rogelj et al 2018). CO₂ removal allows slower short-term mitigation (still unprecedented), but can we get the necessary scale? See my presentation at the Swedish Parliament.https://t.co/JJYXYbNtbC pic.twitter.com/OhfIt4cHMx — Glen Peters (@Peters_Glen) March 16, 2018

Peters says we just have to suck it up, accept we need negative emissions, and get started developing them.

But climate activists say it is folly to bet the welfare of the species on the massive global deployment of a technology that, as of today, is unproven at scale.

And they point out that delaying rapid reductions arguably makes the overall task more difficult. A recent paper in Nature Climate Change argues that temperature could be held beneath 2°C without global emissions falling to zero. Global emissions would only have to drop by two-thirds and then level off — as long as they started dropping immediately, got there by 2060, and there was no overshoot.

If we overshoot 2°C and have to pull temperature back down, we not only have to push emissions to zero, we have to push them way beneath zero. We have to bury a bazillion tons of CO2 waste in every cave we can find.

In other words, in exchange for a little more breathing room early in the century, we are pledging to build, in Shell’s estimation, 10,000 CCS facilities later on. We could avoid it if we just cut, fast, now, but the kind of WWII-style mobilization that would require is well outside the bounds of the politically possible, at least for the foreseeable future. So instead, we make promises to clean up the mess later.

The second gamble is about our chances of hitting our target. The standard that’s generally used is a model that gives us a 66 percent chance of limiting temperature rise to 2°C. But as climate hawks are forever pointing out, what nations agreed to in Paris was to regard 2°C as a ceiling and “pursue efforts” to limit temperatures to 1.5°C.

A two-thirds chance of hitting 2°C doesn’t sound like much of an effort to hit 1.5°C. And which target is pursued makes a difference:

Pursuing efforts to hit 1.5°C means pushing emissions into negative territory about 10 years earlier than Shell’s scenario. (Without negative emissions, 1.5°C is almost certainly already out of reach.)

To summarize: Shell’s Sky scenario, like most mainstream decarbonization scenarios these days, delays radical emission reductions for a few decades; to compensate, it targets only a 66 percent chance of 2°C and banks on hundreds of gigatons of negative emissions later in the century.

The problem is not so much that Shell is constructing a scenario designed to be gentle on giant energy incumbents; the problem is that most 2°C scenarios do that. (This has led to suspicions that scientists and modelers are softening their conclusions to avoid freaking pols out; you can read more about that here.)

None of the scenarios in Peters’s comparison show a world with low demand growth or deliberate degrowth strategies; none portray immediate, behavior-based conservation; none model geoengineering or step-wise, Paris-style ratcheting down of emissions. Those kinds of scenarios are more difficult to model, but ease-of-modeling is not necessarily a good guide to thinking.

Basically, models show a fairly narrow set of paths to 2°C (or close to it); insofar as we take them as guides for policy and investment, we will be implicitly accepting their assumptions.

The mind game oil companies are stuck in

Oil companies have known about climate change for a long time. (Check out this amazing informational film Shell made about global warming ... in 1991.) They have done a remarkably good job encouraging confusion and delay.

But it looks like the jig is up. Big oil can’t deny climate change anymore or pretend it won’t affect their business. Shareholders and investors are demanding a reckoning. So oil majors are shifting, one by one, to negotiating the longest and smoothest surrender possible.

This self-interested maneuvering is more obvious when it comes to Exxon, the very American oil company that was funding climate denialist groups just a few years ago. It now supports a carbon tax with no chance of passing. And it promises its investors, as a hedge against climate change, that it will invest in CCS and algae biofuels — both of which are long shots, to put it charitably. Exxon is grumpily conceding absolutely as little as possible to climate hawks, for as long as possible.

Shell (being less American and more European) is under more social pressure and is more serious in its decarbonization modeling, but Sky still reflects the institutional, establishment bias toward delaying substantial carbon reductions until the latter half of the century. Activists want it to model, and commit to, more rapid reductions.

Though the company announced in November that it aspires to reduce carbon emissions from its operations 50 percent by 2050 (a “soft target”), activists plan to file a resolution at the company’s annual meeting in May calling on Shell to commit to specific emission-reduction targets, to which it would be legally accountable. (Shell chief executive Ben van Beurden has called it an “unreasonable ask” that would have the company “tying its hands.”)

Activists point out that, even by its own accounting, Shell still plans to invest 90+ percent of its tech development money into fossil fuel extraction, which doesn’t exactly signal a fundamental shift in business models.

And they point out that Shell has played this game before. As Greg Muttitt at Oil Change International recounts in a scathingly critical post, back in the late 1990s, Shell declared that it would play a central role in the energy transition, issued some inspiring white papers, formed partnerships with some NGOs ... and then dropped it all a few years later when the pressure was off. This time, shareholder activists have vowed not to let up.

There is an element of Jedi mind trick to all this. The premise of the activist argument is that Shell’s assets will be at risk if governments pass strong decarbonization policy, and thus that it owes shareholders more transparency and ambition. That is the premise of the Task Force on Climate-related Financial Disclosures recently formed by Michael Bloomberg.

But will governments pass strong decarbonization policy?

Shell certainly wants to be ready if they do, but neither it nor any public company beholden to shareholders is going to run out ahead of governments. No company executive is going to pass up available revenue based on the worry that governments might do something.

Shell needs to appear game, to appear to take climate change seriously, but also to leave itself room to maneuver.

Still, activists want Shell and other oil companies on their side, in part to convince governments to act. “Look,” they want to say, “even oil companies are gearing up for global warming!”

So they are staring down oil companies. Shareholders are getting restless. Oil companies are looking nervously over their shoulders at governments. And governments, for now, are slumbering, not even on track to hit their modest Paris commitments.

Oil companies are waking up, fitfully. But until governments wake alongside them, progress on climate change will remain woefully insufficient, the difficult work will be further delayed, and the mess we bequeath our children will grow ever larger and more expensive.