Re?ections on Kyoto

-World Economic Forum

Davos, Switzerland
2 February 1998

. COR .

Chairman of the Committee of Managing Directors
Royal Dutch/ Shell Group

President of Royal Dutch Petroleum Company

 

 

Cor Reflections on Kyoto

Cor was appointed president of Royal Dutch
Petroleum Company in July 1992. He has been a Group
Managing Director of the Royal Dutch/ Shell Group of
Companies since July 1989 and Chairman of the Committee
of Managing Directors since July 1993. As a Group
Managing Director, his spheres of interest include: the 
Human Resources and Organisation; Legal; and Planning,
Environment and External Affairs.

In 1967 Mr Joined Billiton NV as a
business economist and became head of its Financial and
Economic Affairs department following the acquisition of
Billiton by Shell Petroleum NV. Between 1972 and 1980 he
held further Billiton appointments in Switzerland and the
Netherlands. Since 1980 his appointments include: Area
Coordinator for South?east Asia, Shell International
Petroleum Company; Vice-president Finance, Shell
Francaise; Chairman of the Board of Management,
Deutsche Shell; Regional Coordinator Europe, Shell
Internationale Petroleum Maatschappij.

Mr was born in Venlo, the Netherlands in
1937. In 1962 he graduated in economics from the
Netherlands School of Economics, where he also quali?ed
as a chartered accountant in 1966. In 1989 he was awarded
the Ie Klasse des Verdienstordens de?r Bundesrepublik
and in 1993 he was made Knight of the Order of
the Netherlands Lion.

 

Cor Reflections on Kyoto

The Kyoto Protocol is a signi?cant signal for change, but the
challenges governments will face in meeting their targets should not
be underestimated. The issue of climate change is still fraught with
complexity and uncertainty. The implicit message from Kyoto is that
there are no easy answers or rapid solutions. The Royal Dutch Shell
Group of Companies welcomes this, and believes that continued
scienti?c research allied with a prudent precautionary approach is

the right one.

Shell companies see affordable, clean and reliable energy
products as essential to sustainable development: ?meeting the needs
of the present without compromising the ability of future generations
to meet their own needs.? They therefore intend to continue to ?nd
and produce oil and gas ef?ciently and responsibly, to move fast in
the commercial development of renewables, and to develop their
businesses in gas-?red power generation. They will also continue
wherever possible to increase energy ef?ciency and to reduce
emissions of greenhouse gases, both in their own operations and in
those of customers who are willing to be helped to do the same.

The goal, in Shell?s View, should be better living standards for more

of the world?s people through development which is globally spread and

globally sustainable. Kyoto has set useful signposts, and that goal may
be more attainable as a result of what was achieved there.

The issue of global climate change, its
probable causes and potential
consequences has been one of the
most widely debated topics of recent
years. And so: the state of the
world we leave for future generations
must concern us. And since the
balance of scientific evidence suggests
a link between climate change and
human activity, we have a responsibility
to take prudent precautionary

action.

But it is ironic that many of those
human activities have also brought huge
bene?ts in terms of economic and
social development. Is it now necessary,
for the long-term future of our planet,
to limit such development? Or will
there be technical solutions which allow
development to continue?

Unfortunately, we cannot wait to have

all the answers, and this dilemma is one
which, on balance, has been sensibly
tackled in the Kyoto Protocol. Some say
that the Kyoto Protocol signals that the
world?s energy balance is on the verge

of a period of evolution.

The outcome of Kyoto

We in Shell, on the whole, welcome the
outcome of Kyoto as progress on a long
road. Intergovernmental negotiation on
this scale was unprecedented.
Considering the dif?culties, reaching an
agreement at all was a considerable
achievement. As you know, it was agreed
to reduce the emission of greenhouse
gases in developed countries by 5% by
2008 2012 compared to 1990 levels.
Differentiated targets, carbon trading
and joint implementation were

included in the agreement.

?Since the balance of
scienti?c evidence
suggests a link
between climate
change and human
activity, we have a
responsibility to take
prudent
precautionary
action. But it is
ironic that many of
those human
activities have also
brought huge bene?ts
in terms of economic
and social
development. 

 

Cor Reflections on Kyoto

?Shell companies
will respond
according to
decisions made in
individual countries
where they operate,
as well as
continuing their
own reduction
measures. Their
knowledge of the
energy market will
also enable them to
contribute to the
debate on the right
sorts of policies, and
to discuss practical
measures, with the
governments
concerned. 

Of course, there have been criticisms,
but this is not an issue susceptible to
simple remedies. It is complex, and
fraught with dissent on scienti?c, social
and political grounds. Priorities differ
according to each nation?s economic
and social challenges.

In my View, the Japanese hosts and
the Chairman of the key negotiating
session, His Excellency Mr. Estrada of
Argentina, made a highly commendable
contribution to the outcome. It is a
signi?cant signal for change, and the
targets, in general, are far more realistic
than anticipated.

Although the full implications still
have to be clari?ed, we believe that
certain features of the Protocol offer
encouraging opportunities not only for
productive action but also for pro?table
business within and outside our
industry. I will come back to that later.
First, however, I want to look at the way
ahead in the context of the energy
future.

Easily available and affordable energy
from fossil fuels has shaped the world
we live in today a world that is more
prosperous, overall, than at any time in
its history. We all know that the ?ght
against poverty and deprivation in so
many areas of the world cannot be won
without economic development, which
again is inextricably linked to the supply
and price of energy. But the burning of
fossil fuels, together with other human
activities such as deforestation,
undoubtedly releases greenhouse gases
especially carbon dioxide into the
air. And that has increased the natural
greenhouse effect.

We in Shell believe that while
continuing research is needed to

increase understanding of the scienti?c,

social and economic aspects of the
problem, precautionary measures such
as the emission limits for greenhouse
gases set in train by the Kyoto
agreement are necessary. The Kyoto
Protocol appears to have provided a
basis of ?exibility and realism. We
should not, however, underestimate the
challenges governments will face in

meeting their targets.

The role of govermnents

Each country must consider the
implications of its own targets and put
together policies and measures to meet
them. Naturally, they will do so with due
consideration of the impact of potential
measures on national economies.

Shell companies will respond
according to decisions made in
individual countries where they operate,
as well as continuing their own
reduction measures. Their knowledge of
the energy market will also enable them
to contribute to the debate on the right
sorts of policies, and to discuss practical
measures, with the governments
concerned.

Policies to achieve greenhouse gas
reductions should work with the market,
not against it. Basically, business has a
tremendous ability to generate
technology as needed, but it requires a
framework to stimulate this. The
removal of subsidies and other market

distortions is also important; however, so

is encouraging the development of
?climate friendly? technologies, and
here some market stimulation is
acceptable.

I see huge potential opportunities for
the kind of creative imagination which,
for example, brought us into the

information age. That in itself has

brought environmental bene?ts by
reducing the need to move goods and
people. Apparently unrelated
technologies often converge to bring
about signi?cant advances in products
and their performance. There is a
constant pattern in market economies:
from discovery to technical innovation:
greater ef?ciency bringing lower costs;
lower prices bringing increased
demand. New, ?fast?forward? advances
in climate-friendly technologies could
bring commercial success as well as
climatic bene?ts.

One of the keys to successful
implementation of emission targets is a
pragmatic focus on cost?effective
measures. We know that details of
various aspects of the Protocol will have
to be decided through further dif?cult
negotiations to ?put more meat on the
bones?. This will make the Conference
of the Parties meeting in November all
the more important. However, certain
concepts are welcome, such as tradable
permits, and joint implementation
through the clean development
mechanism.

There is no doubt that improving the
energy ef?ciency of developing
countries could offer mutual bene?ts:
trading opportunities for the developed
world, technology transfer and potential
economic transfer into the developing
countries. Developed countries must
take the lead in reducing emissions.
However, this is a global problem which
needs global solutions. At some point
the developing countries must be
involved and committed, although it is
understandable that they are concerned
about having a brake put on their
progress to solve a problem which is not

primarily of their making.

development and the long-term energy

Cor Reflections on Kyoto

?We believe that
affordable, clean
and reliable energy
products are
essential to
sustainable
development:
meeting the needs of
the present without
compromising the
ability of future
generations to meet
their own needs. 

What is Shell?s approach?
Our thinking on climate change 
especially on the action it demands is

in?uenced by our view of sustainable

scene. We believe that affordable, clean
and reliable energy products are
essential to sustainable development:
meeting the needs of the present
without compromising the ability of
future generations to meet their own
needs.

In the coming century energy
demand is expected to rise steeply, to
support continuing improvement in
living standards for a growing global
population. Today, fossil fuels supply
around 85% of the world?s primary
energy needs. Throughout 20th century
as demand increased, energy supplies
became more diversi?ed. Today, they
are starting to include identi?ed
renewables like biomass, photovoltaics
and wind energy.

Our studies of the long-term energy
future make us believe that:

0 Technology will provide us with
new solutions, both on the
energy demand side with greater
ef?ciency of use and on
the supply side with more
diversi?ed sources, including
new renewables.

0 The global use of fossil fuels Will
increase but may peak towards the
middle of the next century. The
use of coal will grow as part of this
but not to the same level as some
others would suggest.

The relative carbon content of

world energy use has decreased
steadily over the past hundred
years, and we expect this to

continue.

 

Cor Reflections on Kyoto

?We will continue to
?nd and produce oil
and gas ef?ciently
and responsibly to
?lel the next 20-30
years of economic
growth, particularly
in developing
countries.?

0 As a result, carbon dioxide
emissions could peak in the period
2020-2030. This would lead to
stabilisation of atmospheric CO2
levels at just over twice the pre-
industrial level, close to the target
proposed by the European Union.

This last point is encouraging, but

even against this background Shell
companies will certainly play their part
in limiting greenhouse gas emissions
while continuing to help meet the

world?s energy needs.

What is Shell doing?
Let me brie?y tell you what actions we
intend to take:

We will continue to ?nd and produce
oil and gas ef?ciently and responsibly
to fuel the next 20-30 years of
economic growth, particularly in
developing countries.

We will provide more natural gas and
develop our businesses in gas??red
power generation, for the cleaner
production of electricity.

We are moving fast in the area of
renewables, with a new core business
called Shell International Renewables.
We will be investing $500 million over
the next ?ve years, to build a fully
commercial business for the future.
Among various potentially commercial
renewables, we are especially interested
in technologies related to solar power
and to biomass energy.

We are looking initially at bringing
the bene?ts of affordable power to rural
communities in developing countries
where there is no electricity grid. In the
longer term we can see prospects for
large?scale power generation from
biomass linked to grids. We believe the
conversion of sunlight into affordable

energy through solar and biomass can
make a signi?cant contribution to
sustainable economic development for
generations to come.

We will of course continue wherever
possible to increase our energy
ef?ciency and to reduce emissions of
greenhouse gases both in our own
operations and in those of our
customers who are willing to be helped
to do the same.

We measure and report on our own
unit emissions of greenhouse gases and
have targets for continuous
improvement. For example, we have
already made commitments to continue
reductions in ?aring and venting. We
look for cost-effective opportunities and
new measures to achieve further
improvements.

As far as customers are concerned,
we contribute to reducing their
greenhouse emissions mainly by
developing energy-ef?cient products
and promoting their ef?cient use. At
the same time, we are providing
customers with lower carbon fuels 
especially natural gas and, as I told
you, are developing and marketing
renewables.

Every little helps
Our contribution to targets for
greenhouse gas reductions may be small
in global terms. Greenhouse gas
emissions come from so many of
society?s activities that no single source
is ever a large part of the total. But the
climate change problem will only be
tackled successfully if everyone plays
their part.

The issue of climate change is still
fraught with complexity and uncertainty.
Personally, I welcome the implicit

message from Kyoto that there are no
easy answers or rapid solutions. A
prudent precautionary approach is, in
our view, the right one.

We should not forget the speed of
technological progress and of advances
in scienti?c knowledge. If governments,
in co?operation with industry,
implement policies which are
appropriate and affordable today, then
more resources will be available to fund
the research and help develop the

Cor Reflections on Kyoto

technologies which are affordable and ?Shell believes the
effective tomorrow without goal should be better
unacceptable economic and social living standards for

consequences.
Shell believes the goal should be
better living standards for more of the

more of the world ?3

people through

development which

world?s people through development is globally spread
which is globally spread and globally and globally
sustainable. Kyoto has set useful sustainable. 

signposts, and I hope we will ?nd the
goal more attainable as a result of what

was achieved there.

Shell International Limited (SI), 1998. Permission should
be sought from SI before any part of this publication is
reproduced, stored in a retrieval system, or transmitted by any
other means. Agreement will normally be given, provided that
the source is acknowledged.

This publication is one of a range published by Group
External Affairs, SI, Shell Centre, London SE1 7NA,
England, covering aspects of the oil, gas, coal and
chemicals businesses. For further copies, and for details of
other titles available in English or as translations, please
contact the External Affairs department of your local Shell
company. Alternatively, write to the above address or

fax 0171-934 5555 (London) quoting department
reference PXX, or telephone 0171?934 5293.

Shell companies have their own separate identities but in
this publication the collective expressions ?Shell? and
?Group? and ?Royal Dutch/Shell Group of Companies? may
sometimes be used for convenience in contexts where
reference is made to the companies of the Royal Dutch/
Shell Group in general. Those expressions are also used
where no useful purpose is served by identifying the
particular company or companies.

Printed in England by Vitesse Printing Co. 23169/0298/10111

 

0 Recent Speeches 0

Managing transition 
energy supplies in the early 215t century
Mark Moody?Stuart

Contributing to
sustainable development
Phil Watts

Shell International Renewables 
bringing together the Group?s
activities in solar power,
biomass and forestry
jeroen van der Veer
jim Dawson

It?s more thanjust business
Mark Moody?Stuart

Taking action to earn trust 
the health, safety and environment
imperative for Shell exploration and
production companies
Phil Watts

A developing contribution 
Shell companies in Africa
Phil Watts

Challenges to the international petroleum industry 
economic actor or social activist?
Phil Watts