Plan for the Net-Zero Energy Transition
An important component of our Climate Risk Strategy is the Plan for the Net-Zero Energy Transition, first published in our Proxy Statement in 2022. The plan shows how we intend to play a valued role in the energy transition by executing on our Triple Mandate: reliably and responsibly meeting energy transition pathway demand, delivering competitive returns on and of capital and achieving our net-zero operational emissions ambition.
First, meeting transition pathway energy demand requires a focus on delivering production that will best compete in any transition scenario. This production will be delivered from resources with a competitive cost of supply and low GHG intensity, as well as diversity by market and asset type. Next, in delivering competitive returns, ConocoPhillips has been a leader in shifting the exploration and production sector’s value proposition away from one focused on production toward one focused on returns. Finally, to drive accountability for the emissions that are within our control, we are progressing toward achieving our net-zero Scope 1 and 2 emissions ambition.
In service of these three objectives, our plan describes how the company will:
- Maintain strategic flexibility:
- Build a resilient asset portfolio with a focus on low cost of supply and low GHG intensity to meet transition pathway energy demand.
- Commit to capital discipline through use of a fully burdened cost of supply, including cost of carbon, as the primary basis for capital allocation.
- Track the energy transition through a comprehensive scenario planning process to calibrate and understand alternative energy transition pathways and test the resilience of our corporate strategy to climate risk.
- Reduce Scope 1 and 2 emissions:
- Set targets for emissions over which we have ownership and control, with an ambition to become a net-zero company for Scope 1 and 2 emissions by 2050.
- Address Scope 3 emissions:
- Advocate for a well-designed, economy-wide price on carbon and engage in development of other policy and legislation to address end-use emissions.
- Work with our suppliers for alignment on upstream Scope 3 GHG emissions reductions.
- Contribute to an orderly energy transition:
- Build attractive LNG portfolio.
- Evaluate potential investments in emerging energy transition and low-carbon technologies.
The Energy Transition Challenge
Meeting the central aim of the Paris Agreement to strengthen the response to climate change is a worldwide imperative for which governments and companies alike have adopted net-zero ambitions. The resulting energy transition will be complex, with many possible pathways and uncertainties—more likely an evolution than a near-term step-change. We acknowledge the urgency and importance of limiting global average temperature increases. ConocoPhillips is applying its strategic capabilities and resources to meet this challenge in an economically viable, accountable and actionable way that balances the interests of our stakeholders. Our goal is to support an orderly transition that matches supply to demand and focuses on returns on and of capital while safely and responsibly delivering affordable energy.
Our plan does not include a Scope 3 (end-use) emissions target. We recognize that end-use emissions must be reduced to meet global climate objectives. However, it is our view that supply-side constraints through Scope 3 targets for North American and European upstream oil and gas producers would be counterproductive to climate goals. In the absence of policy measures that address global demand and the shape and pace of technology and policy yet to be determined, Scope 3 targets would shift production to other global operators, potentially eroding energy security and affordability.
The plan was endorsed by the board’s PPSC and was designed to help investors and other stakeholders gain an understanding of the valued role ConocoPhillips intends to play in an orderly energy transition.
Since first publishing the plan, we have continued to focus on implementing our Climate Risk Strategy and advancing the plan’s objectives. Our commitment to these efforts is demonstrated by our achievements made to date — many of which have been completed ahead of schedule. As we achieve our goals, we fine-tune our strategy and refine our commitments in ongoing alignment with the aims of the Paris Agreement.
Through our ongoing consideration of transition scenarios, the strategic planning process and stakeholder engagement, we expect the plan to continue evolving as the energy transition progresses over time. The following table shows our progress on key milestones since the plan’s first publication. Updates represent progress through the end of 2022 and include our 2023 plans to continue advancing our strategy to remain resilient under any scenario. Reflecting the recommended TCFD report structure, the following components of the plan are linked and detailed elsewhere in this report.
2022-2023 Progress Report | |
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Strategic Flexibility | |
Resilient Portfolio and Scenario Analysis |
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Reducing Scope 1 and 2 Emissions | |
Methane |
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Flaring |
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Overall GHG |
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Offsets |
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Addressing End Use (Scope 3) Emissions and Contributing to the Energy Transition |
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Advocacy and public policy |
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Supply chain engagement |
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LNG |
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CCS |
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Hydrogen |
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We acknowledge the findings of the Intergovernmental Panel on Climate Change that GHG emissions from the use of fossil fuels contribute to increases in global temperatures. We also recognize the importance that current science places on limiting global average temperature increases to below 2-degrees Celsius compared to pre-industrial times, and to achieve that, current science shows that global GHG emissions need to reach net-zero in the second half of this century. We support the Paris Agreement as a welcomed global policy response to that challenge.
We have had a public global climate change position since 2003. The position is reviewed periodically, agreed to by the Executive Leadership Team and then recommended to the board. Read more about our Climate Change Position.
Managing Our Energy Transition Plan
As we navigate an uncharted energy transition in coming years and decades, the plan will evolve in the same way it has developed: through experienced professionals, well-practiced processes, meaningful action, ongoing engagement and learnings from best practices. Our subject matter experts will closely monitor transition drivers including technology, policy and market sentiment. We will continue to actively collaborate with peers, industry experts and financial sector stakeholders to better understand these drivers and learn from best practices. We are also actively engaged throughout the entire organization — including our Board of Directors, Executive Leadership Team and operations teams — for successful strategy alignment and implementation.
Our Triple Mandate will drive continued focus and accountability for both returns and resilience, allowing us to play a valued, meaningful role in a managed and orderly energy transition. The updates in this report reflect our commitment to reducing Scope 1 and 2 emissions, addressing end-use emissions (Scope 3) in our supply chain and through policy advocacy, and developing business opportunities in LNG, CCS and hydrogen. We are well positioned to continue to execute this plan and participate in energy transition opportunities, while also fulfilling our commitment to create long-term value for our stakeholders.
We intend to report on continued implementation of our plan and provide periodic updates on our performance.
Energy Transition Activities
Planning for the energy transition requires a variety of sectors to collaborate and work together to drive change. Our emphasis on these activities is influenced by ongoing engagement with our stakeholders.