Is Royal Dutch Shell, one of the world’s biggest oil and gas companies, really turning its back on fossil fuels?

Not only has it announced that it will pull out of exploration in the Arctic – having spent around $7 billion – but it has also helped to fund a new Energy Transitions Commission (ETC), which aims to set out a pathway to a low-carbon economy. Launched last week at Fortune Magazine’s Brainstorm E conference in Austin, Texas, the Commission includes a number of heavyweights in the clean energy world, including Lord Nicholas Stern, author of the Stern Review; former US Treasury Secretary Hank Paulson and Felipe Calderón, former President of Mexico and current chair of the Global Commission on the Economy and Climate. The heads of the Rocky Mountain Institute, the World Resources Institute, the European Climate Foundation and The Energy and Resource Institute India – well-respected think tanks all – are also on board.

Could this be the start of a change in strategy? I’m not so sure.

Shell’s decision to halt exploration in the Arctic is a win for common sense and capital discipline, but why did it take $7 billion of shareholders’ money to come to this view? Analysis by Carbon Tracker and others has previously indicated that Arctic oil needs much higher prices to give investors an economic return. Yet the decision appears to be only a reluctant pause as Shell suggests it would have continued to drill if it had found more oil and gas and it has only halted exploration ‘for the foreseeable future’.

The jury is still out on whether or not Shell has as yet fully grasped either the need for real capital discipline or that the energy sector is undergoing fundamental technological transformation and it therefore risks wasting billions more of shareholder money.

Meanwhile, the ETC, whose commissioners include not just Chad Holliday, Shell’s chairman, but also senior figures from BHP Billiton, GE Oil and Gas and RWE, dangerously ignores the pace of change being demanded by governments to keep the world within 2⁰C, a target the world’s governments have agreed to to avoid catastrophic climate change.

“Our aim is to provide an objective fact-base and set of insights to inform decision-makers, both public and private,” says the Commission’s website. But will this be possible?

We question the credibility and independence of an Energy Transitions Commission funded by fossil fuel incumbents and Shell’s track record on climate change does not inspire us with confidence. Shell has repeatedly stated that we will not meet the 2ºC target. For example,in 2014 Shell stated “there is a high degree of confidence that global warming will exceed 2°C by the end of the 21st century”. (See Shell’s letter to shareholders about stranded assets May 16, 2014)

It is great news that companies such as Shell now recognise the need for an energy transition to low-carbon fuel sources, but there is a real danger that they try to redefine what that means in the interests of their existing business models. Indeed, the Commission’s website highlights that one of its first projects could be to answer the question: “What would it take to make fossil fuels part of the solution?”

Fossil fuel companies are sitting on huge reserves and resources of coal, oil and gas that cannot be burned without breaching the commitment of limiting climate change to 2°C. Our research has shown that many of the oil and gas companies’ proposed projects could end up being “stranded assets” because they rely on continuing high demand for their products and assume that tougher climate policies will not emerge and technological breakthroughs will not occur, despite evidence that both these things are already happening.

Ultimately, the 2°C target threatens business as usual for fossil fuel companies because they cannot explain how decarbonisation of the energy system fits with growing their businesses for decades to come. Incumbents seldom see technological disruptions coming and neither do they see the consequences in climate terms. In truth they are facing stranded business models. It is hard, therefore, to see how any commission funded by fossil fuel incumbents who have a vested interest in the status quo can come up with the solutions that are needed.

The Commission in its goals talks about independent advice for a sustainable future and concludes by saying:

“Ultimately, we want to enable more energy for more people, and cleaner energy for a sustainable future. Our challenge is to balance these two needs and encourage change.”

One does not need to scratch the surface deeply to see how this inherent balancing act is likely to play out. The Commission website and positioning paper talks of the need for an energy transition to achieve no more than 2ºC of warming, yet critically there is no commitment and it is carefully balanced with other considerations.

Take the Commission’s objective to set out a pathway for 50% of global electricity to come from zero-carbon sources by 2050. In isolation, it sounds like a laudable aim. But the International Energy Agency’s Energy Technology Pathways Scenario says the target of at least 50% zero-carbon electricity needs to be met by 2027 and by 2050 zero-carbon sources must make up at least 80% of the energy mix in order to be on track for 2⁰C. If fossil fuels still provide 50% of power in 2050 this is consistent with 4⁰C of global warming.

Not only does the ETC’s target threaten catastrophic climate change, it is also remarkably unambitious. Fossil fuels currently make up two-thirds of global power generation, accounting for 42% of all today’s energy demand. If they continued to provide 50% of power generation in 2050 it would mean over the next 35 years, unmitigated fossil fuels would only give up 17% of the power market.

This type of incremental change may suit the status quo business models of the world’s fossil fuel companies but it is not the kind of ambitious thinking and rapid transition that is required – and now feasible. Growing numbers of governments and organisations are seeking to be net zero carbon by 2050. The cost of renewable sources of energy has fallen substantially over the last decade and will continue to fall in the next decade. This period also looks set to see huge advances in energy storage, which could be the final piece of the clean energy puzzle.

It is also worth noting that the ETC’s launch follow’s Shell’s recent departure from the Prince of Wales Corporate Leaders Group, the influential climate change body it co-founded, at the same time pressure mounted on the company to halt its drilling operations in the Arctic Ocean.  It is deeply concerning that the Commission gives the appearance of being a hastily-conceived attempt to regain the initiative in response to a recent surge in shareholder engagements on climate change, in part driven by our research, which have taken many energy companies by surprise.

For the Commission to represent a firm unambiguous commitment from the industry to drive towards a climate secure global energy system – one that delivers the energy we need without compromising the security of our climate – it would need to be truly independent, representative, free of commercial conflicts of interest and not least underwritten by a firm commitment from Shell and its fossil fuel partners to keep the amount of warming below 2ºC. Instead, they shy away from true commercial independence and the firm quantitative commitments required thereby demonstrating a lack of both imagination and commitment.

Given that we have left the possibility of an orderly transition to a climate-secure energy system to the last possible minute and we know what we have to do, what we need now are firm commitments to action, not more Commissions, enquiries or talking shops.

Anthony Hobley, CEO of the Carbon Tracker Initiative