Companies working on carbon capture3/11/2024 Those committing to the Science Based Targets initiative (SBTi) have roughly doubled in each of the past four years (SBTi, 2022). Whether driven by policy, financial risks, reputation risks or stakeholders' concerns, more companies are taking steps to decarbonize each year. To avoid the most severe effects of climate change - as most recently set out in the Intergovernmental Panel on Climate Change's (IPCC) Sixth Assessment Report - global economic actors will need to take significant mitigating action (IPCC, 2021 2023). More companies are setting decarbonization targets, but not all emissions will be easy to tackle. We also examine a range of reports and guidance from industry stakeholders.ĭecarbonization calls for a broad range of solutions As part of this research, we include a case study on the oil and gas sector using publicly available information from a sample of 25 companies from across the globe with combined revenue of US$3.8 trillion and capital expenditure of US$279 billion in their latest fiscal year. In this research, we explore the risks of a variety of approaches for managing carbon emissions, including those that are more difficult to address - often referred to as hard to abate or residual. Such solutions also carry technological, financial, policy and stakeholder perception risks. Studies by global stakeholders generally recognize that these solutions have a role to play in decarbonizing the economy. This report does not constitute a rating action.Ĭompanies that have made ambitious decarbonization commitments may need to rely on technologies such as carbon capture and storage (CCS), carbon dioxide removal (CDR) and the use of carbon credits. It does not comment on current or future credit ratings or credit rating methodologies. This research paper was authored by members of the Sustainability Research and credit ratings teams within S&P Global Ratings. We believe that disclosure and transparency by companies about their chosen emissions-reduction solutions, and how they are planning for the associated risks, will better enable analysis of how companies might meet their decarbonization commitments.Īs solutions continue to evolve, companies that can understand and manage potential technical challenges are likely to be better placed to deliver the most efficient solutions, limiting financial costs and reputation risks.Īuthors Terry Ellis | S&P Global Ratings, Climate Transition Specialist Simon Redmond | S&P Global Ratings, Analytical LeaderĬontributors Azul Ornelas | S&P Global Ratings, Sustainable Finance Rating Analyst Yogesh Balasubramanian | S&P Global Ratings, Sector Lead Pierre Gautier | S&P Global Ratings, Senior Director Lai Ly | S&P Global Ratings, Global Head of Sustainability Research Editor Julie Dillon | S&P Global Ratings, Editorial Manager Rose-Marie Burke | S&P Global Ratings, Editorial Manager Bernadette Stroeder | S&P Global Ratings, Editorial Managerĭigital Designers Joe Carrick-Varty | S&P Global Ratings, Digital Content Producer Cat VanVliet | S&P Global, Senior Design Manager Overall, we see limited consideration or disclosure of the potential risks associated with carbon capture and storage, carbon dioxide removal or carbon credits, and the quality of disclosure varies, which restricts comparison of plans across our sample. Using the oil and gas sector as a case study, we find a mix of strategies under consideration. Each potential solution carries its own risks, and companies that pursue carbon capture and storage, carbon dioxide removal or carbon credits could face considerable uncertainties about financial costs as well as evolving regulations and voluntary guidance.
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