MADRID (Reuters) - Spain’s Repsol (REP.MC) pledged on Monday to reduce net carbon emissions from its operations and most of its products to zero by 2050 and absorb a 4.8 billion euro ($5.3 billion) hit to the value of its oil and gas assets in the process.
Describing the move as an industry first, Repsol said it wanted to lead a wider transition to renewable energy, in line with the goals of the 2015 Paris Agreement to avert catastrophic climate change.
Repsol announced its target as delegates opened a United Nations climate summit in Madrid aimed at injecting fresh impetus into the accord, which enters a crucial implementation phase next year.
Oil and gas producers are coming under increasing pressure from shareholders and environmental activists to reduce their role in fuelling climate change, and investors have poured money into funds that take account of companies’ green credentials.
Repsol’s pledge makes it an outlier relative to larger energy companies, which are still investing in developing oil and gas fields that are incompatible with the Paris goals, according to financial think-tank Carbon Tracker.
A Repsol spokesman said the new target covers 95% of the emissions released by the use of products it sells, which are complex to account for and have become a key issue for shareholders.
These emissions - known as Scope 3 - are typically around six times larger than the combined emissions produced by oil companies’ own operations and power supply needs, according to Reuters calculations.
Basing asset values on prospects for oil and gas prices in line with the Paris Agreement would bring a post-tax impairment charge of 4.8 billion euros in 2019, but that will not affect cash flow or shareholder remuneration, the company said.
Companies aiming to achieve “net-zero” usually balance emissions from their operations by investing in technology that can store carbon, or in natural sinks such as forests.
Repsol said it could reach at least 70% of its goal using technology that was already developed or nearly mature, and then would implement carbon capture, use and storage to raise that figure, and turn to natural sinks if necessary.
“We are convinced that we must set more ambitious objectives to fight climate change,” Chief Executive Josu Jon Imaz said in a statement.
Giving extra impetus to its new goals, Repsol will link at least 40% of managers’ long-term variable pay to its emissions reduction targets.
It will also increase its targets for low-carbon generation capacity to a total 7.5 gigawatts in Spain and beyond by 2025, double its production of biofuels from vegetable oils, and start producing green hydrogen in its refining business.
Reporting by Ashifa Kassam and Isla Binnie, Additional reporting by James Mackenzie; Editing by Matthew Green and Rosalba O'Brien