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Shell (RDS.A) to Fast Track Emission Cut Post Court Ruling

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Following a historic Dutch court judgement last month, Royal Dutch Shell plc. (RDS.A - Free Report) is determined to explore methods to expedite its energy transition plan and massive carbon emission cuts, a move that could hugely ramp down the company's oil and gas operations.

Two weeks ago, the District Court in The Hague issued a major verdict in a climate dispute brought forth by environmentalists that might set precedents for other oil firms, ordering the oil supermajor to trim its carbon emissions by 45% within 2030 from its 2019 baseline.

The firm's CEO Ben van Beurden disagrees with the current court sentence and wants to appeal against the same. Nonetheless, the firm is looking for methods to decrease emissions even further while being meaningful and lucrative.

The Anglo-Dutch company, which assumes to have peaked its total carbon emissions in 2018, had already set emission-reduction goals earlier this year, aiming to slash its net carbon intensity by 6-8% in 2023 from the 2016 baseline and further 20% by 2030. Additionally, the decrease will expand to 45% in 2035 before achieving its goal of zero emission by 2050.

Ben van Beurden is overtly dissatisfied with Shell being singled out by a judgement that in his opinion does not contribute to the global CO2 emission reduction. He went on to say that Shell is unperturbed by the court decision, which cannot deter its mission to lead the global environmental struggle. The company set a clear objective of being carbon neutral, in line with the society's progress toward the Paris Agreement's aim.

For the time being, this currently Zacks Ranked #3 (Hold) player aims to continue delivering energy in the form of oil and gas products for the long haul, both to fulfill consumer demand and keep the firm financially robust. This balance sheet strength is necessary for Shell to carry on with investments. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, recently, Canadian oil sands producers namely Canadian Natural Resources (CNQ - Free Report) , Cenovus Energy (CVE - Free Report) , Imperial, MEG Energy and Suncor Energy (SU - Free Report) announced a collaboration to achieve net-zero greenhouse gas emissions from their operations by 2050 as the cash-rich companies face challenges in meeting the country's energy transition target.

This joint endeavor follows the introduction of substantial assistance packages for emission-reduction projects and infrastructure by the governments of Canada and Alberta. To assist Canada and meet its climate goals, the alliance will coordinate with the federal and Alberta governments.

In a faster-than-expected economic recovery, Canada's oil sands companies are generating billions more in free cash flow. However, they are spending it cautiously, which disappointed the environmentally-conscious investors.

The firms plan to connect oil sands plants in the Fort McMurray and Cold Lake areas to a carbon sequestration center. They will also make use of growing emission-reduction technologies, such as direct air capture and tiny modular nuclear reactors.

Shell’s Carbon-Reduction Initiatives

In order to attain its pro-environment targets, Shell has plans to expand the proportion of investments in non-hydrocarbon businesses over time. It continues to work on its green initiatives as it pledged to lower carbon emissions by 50% over the next five decades, solely concentrating on renewable and biofuels.

While the company became the first oil entity to link executive pay with carbon emissions for combating climate change, it has been on a renewable acquisition spree of late. On this front, it collaborated with IONITY, New Motion, First Utility and Silicon Ranch as it attempts to diversify its portfolio beyond oil and gas.

Shell's transactions with battery storage supplier sonnen and solar developer Cleantech further emphasize its growing shift toward lower-carbon fuels.

Also, it formed a partnership with Microsoft Corporation (MSFT) to develop advanced solutions for achieving net zero-emission. Shell’s purpose to create clean and efficient energy with Microsoft’s expertise in high technology, such as AI, cloud computing and the IoT led to a number of resourceful initiatives to minimize its carbon footprint as well as develop a safer and cleaner working environment. 

Additionally, management announced that the company will purchase the entire stake in Ubitricity, one of the largest electric vehicle (EV) charger providers in the UK in terms of individual devices in operation.

With this deal, Shell further strengthens its position in the rapidly-widening on-street EV charging market, offering critical competencies and helping the company better its overall EV charging offer.

Shell’s expansion into the EV chargers business is part of its plans to tap the growing popularity of pure energy resources. The company expects electricity demand to rise in the coming years with more people opting for electric vehicles and switching to cleaner energy agents.

This apart, Shell is tying up with the commercial vehicle sector to help ensure decarburization pathways through Shell E-Fluids as the road transport sector emits 8% of global energy-related carbon dioxide. Per Shell, both battery-electric vehicle (BEV) and fuel-cell electric vehicle (FCEV) solutions have a major role to play in curbing air pollution as the paths and timelines for road freight carbon depletion will differ by geography, sector and duty sector.

Company Profile

Shell is one of the primary oil majors, which constitutes a group of U.S. and Europe-based energy giants with global operations. The company is fully integrated as it participates in every aspect related to energy from oil production to refining and marketing.

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