Call for Experts to inform SBTi’s Oil and Gas Standard development

Fossil fuel combustion and industrial processes represent the single largest source of CO2 (85%) and overall greenhouse gas emissions (64%) worldwide (IPCC, 2022). The goals of the Paris Agreement hinge on a radical transformation of the fossil fuel sector, addressing emissions intensity and both the demand for and production of fossil fuels.

The Science Based Targets initiative (SBTi) is already tackling fossil fuel demand from other industries through its sector-specific and cross-sector guidance, target-setting criteria, as well as financing for fossil fuels through its financial sector framework. After much work in this area over several years, it is announcing its next step to develop a specific standard for the oil and gas sector.

Today, the SBTi opens its call for experts to apply to be part of its new oil and gas Expert Advisory Group (EAG) to support its work. In this blog, Alberto Carrillo Pineda, Co-Founder and Chief Technical Officer for the SBTi, provides an update on the SBTi’s work to develop sector-specific methodology and guidance for oil and gas companies to set emission reduction targets aligned with the latest climate science. He also outlines our plan to drive change in the fossil fuel sector and shares details of our new Terms of Reference, including a delivery timeline for the Oil and Gas Standard.

Aligning fossil fuels with 1.5°C

The production of fossil fuels is unlike any other heavy emitting sector. SBTi guidance and criteria for most other sectors like cement, steel, buildings and transportation focus on abating emissions associated primarily with the combustion of fossil fuels, as well as from other sources (e.g. process emissions) and electricity. Holistically addressing the emissions from the production and supply of fossil fuels calls for a different approach - it must view the challenge from three angles: supply, demand and finance.

Credible 1.5°C scenarios require deep reductions in GHG emissions from the production and supply chain of fossil fuels alongside a large reduction in demand. Urgent and coordinated action is therefore required from fossil fuel companies, end users and financial institutions. As such, SBTi’s framework must tackle the issue from these three angles:

• Supply: Fossil fuel companies must set science-based targets to reduce emissions associated with the production and supply of fossil fuels, by driving efficiency improvements and transforming business models.

• Demand: End-users, including companies in heavy industry, power generation and transportation, must transform their operations to cut fossil fuel use. The SBTi drives these emission reductions through cross-sectoral criteria and sector-specific resources.

• Finance: Financial institutions (FIs) have incredible potential to influence the real economy to drive clean energy investment and cut fossil fuel demand. The SBTi has proposed including specific fossil fuel requirements in its financial sector framework.

Developing a target-setting standard for oil and gas companies

Because of the considerable impact of the oil and gas industry and the pressing need for companies in this sector to set credible 1.5°C-aligned targets, the SBTi is developing a corporate standard for companies within this sector. This standard will address emissions from exploration and extraction to retail and marketing, as well as the emissions from the use of fossil fuels.

The SBTi began developing target setting methodology and guidance for oil and gas companies a number of years ago. Acknowledging the diversity of views on the initial resources, the transformation that SBTi embarked on to increase ambition from well-below 2°C to 1.5°C and the prioritization of the Corporate Net-Zero Standard, the oil and gas project was put on hold in 2021.

The project recommenced in 2022. We published an external expert review in January 2023, outlining specific technical and methodological issues related to the development of an Oil and Gas Standard. The conclusions enabled the SBTi to define the further activities and research needed. We also recruited new expert talent with specialist knowledge into the team.

Now, to further advance this project, the SBTi has released new Terms of Reference for the development of an Oil and Gas Standard outlining the timeline and development process. Using the knowledge developed thus far, the project team will evaluate options for the key elements of the standard, including:

• Sector scope and disaggregation: The anticipated scope of the standard includes the full oil and gas value chain, from exploration and extraction to retail and marketing. This will include the transportation and storage of fossil fuels which was recommended by the January 2023 review. The criteria and guidance will be defined at the activity-level as opposed to segment-level (upstream, midstream and downstream), which is designed to make it easier for companies to apply the correct criteria when setting targets. In line with the conclusions of the January 2023 report, the initiative intends to disaggregate scope 1 and 2 emissions targets from scope 3 emissions targets in recognition of the significant differences in pathways and the unique levers that companies have for each scope.

• Emissions scenarios and pathways: As part of the development process for oil and gas criteria and guidance, the SBTi has initiated a review of climate mitigation scenarios and emissions reduction pathways that could be used in the finalized oil and gas target-setting methodology. Significant new work has been done on this subject, particularly by the International Energy Agency (IEA), which recently released a report on emissions from oil and gas operations and a broader analysis of the industry’s position in their net-zero transition model. Scenarios and pathways such as these are central to all methodology developed by the SBTi, and will incorporate the unique considerations necessary to decarbonize the oil and gas industry in line with 1.5°C.

• Target setting metrics and methods: Any science-based target needs the metrics to measure progress. These metrics must be reflective of a 1.5°C-aligned pathway and the necessary changes to business models in order to remain ambitious and achievable. The SBTi is currently researching which methods and metrics (emissions and non-emissions) should be used to apply criteria at the activity-level.

Sector standards for other energy and utilities sectors

The SBTi is prioritizing the development of a standard for oil and gas companies to set science-based emission reduction targets. However, the standard will include inherent overlaps with the coal sector and gas utility and distribution sector. The technical development of the oil and gas standard will be used to inform SBTi’s approach to the rest of the energy sector, including gas utilities as well as a revision of SBTi’s guidance for electric utilities and power generation.

Call for Experts

The SBTi is convening a new EAG for the oil and gas sector in January 2024. Those interested can review the Terms of Reference and submit an application by 15 December 2023.

This EAG will provide expert input to inform the technical development and ensure the standard is practical and ambitious. Using our robust and transparent standard development procedures, the initiative will progress towards a goal of publishing the corporate standard for the oil and gas sector in late 2024.

The SBTi’s oil and gas target setting guidance will provide the resources necessary for businesses in the sector to align with limiting global warming to 1.5°C and ultimately transform their operations and business models.

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