Long-term Incentive Plan (LTIP) will also double from 10% to 20%. The 
target range is a 6-8% reduction in net carbon intensity by 2023 against 
the 2016 baseline NCF of 79 grams of carbon dioxide (CO ) equivalent per 
megajoule. 
 
   The other targets linked to our strategic ambitions will also evolve, 
with the metric connected to commercialising advanced biofuel technology 
broadening to a measure of growing new cleaner energy product offerings. 
The targets for the leading energy transition measures are commercially 
sensitive and will be disclosed retrospectively. The energy transition 
condition was included again in the 2020 LTIP awards for Executive 
Directors and Senior Executives and was also incorporated into the 
Performance Share Plan awards made to around 16,500 employees globally. 
 
   [Q]Executive Directors and Executive Committee members participate in 
the LTIP. Around 150 Senior Executives participate in the same plan. The 
measures and metrics for that plan also apply to 50% of the Performance 
Share Plan (PSP) awarded to around 16,500 employees. 
 
   TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) 
 
   This publication and the description of our energy transition strategy 
are part of our continuing work to implement the recommendations of the 
Task Force on Climate-related Financial Disclosures (TCFD). 
 
   We assess our portfolio decisions, including investments and divestments, 
against the risks and opportunities associated with climate change and 
the energy transition. These include for example, policy actions such as 
higher regulatory costs linked to carbon emissions and demand changes 
which lower demand for oil and gas. 
 
   MANAGING CLIMATE-RELATED RISKS AND OPPORTUNITIES 
 
   Our approach to assessing and managing the risks and opportunities 
associated with climate change includes considering different time 
horizons. The time horizons and their relevance to risks, opportunities 
and business planning are as follows: 
 
 
   -- Short term (up to three years): we develop detailed financial projections 
      and use them to manage performance and expectations on a three-year 
      cycle. 
 
   -- Medium term (generally three to 10 years): most of our expected 
      production and earnings in this period come from our existing assets. 
 
   -- Long term (generally beyond 10 years): for this period, it is expected 
      that the current Shell portfolio will change and evolve with the energy 
      transition. Decision-making and risk identification on the thematic 
      structure of the future portfolio are guided by the pace of society's 
      progress and the aim of being in step with society as it moves towards 
      the goals of the Paris Agreement. 
 
 
   The overall climate change risk consists of four components, based on 
the nature of our exposure and the options for our mitigation responses. 
The four components are regulatory risks, commercial risks, physical 
risks and societal risks. We provide more details about how we manage 
these in our Annual Report. 
 
   SCENARIOS 
 
   Our portfolio and strategy have been assessed against a wide range of 
outlooks. These include the potential impacts of various possible energy 
transition pathways, and changes in societal expectations around climate 
change. Our latest set of Shell scenarios [R] was one of the many 
variables used in guiding our updated strategy which we announced in 
February 2021. 
 
   SENSITIVITY TO OIL PRICES 
 
   We estimate that a $10 per barrel change in oil prices would have an 
impact of roughly $6 billion per year on our cash flow from operations. 
Of this, $4 billion would come from Upstream and $2 billion from our 
Integrated Gas business. Cash flows from our Growth pillar and Chemicals 
and Products businesses have limited exposure to commodity prices and so 
are not included in this calculation. This is an indicative estimate and 
not a prediction. 
 
   Based on this assumption, if the oil price sustainably increased by 
around $15 per barrel, as it did in January and February 2021, that 
would be expected to create an additional $9 billion in medium-term cash 
flow per year from operations from our Upstream and Integrated Gas 
businesses. Similarly, a $15 fall in the oil price would be expected to 
result in a $9 billion reduction in cash flow from operations per year 
in the medium term. 
 
   [R] 
https://www.shell.com/energy-and-innovation/the-energy-future/scenarios/the-energy-transformation-scenarios 
 
 
   SENSITIVITY TO GOVERNMENT-LED CO(2) PRICES 
 
   Shell views carbon pricing as a key policy tool for meeting the 
temperature goal of the Paris Agreement as it helps to increase demand 
for low-carbon energy and creates incentives for investment in 
low-carbon technologies and infrastructure. 
 
   Shell's annual carbon cost exposure is expected to increase over the 
next decade because of evolving carbon regulations. This expected 
increase is based on forecasts of Shell's equity share of emissions from 
operated and non-operated assets, and real-terms carbon cost estimates 
which range from $5 to $110 per tonne of GHG emissions in 2030. This 
exposure also takes into account the estimated impact of free allowances 
as relevant to assets based on their location. The regulatory carbon 
cost estimate is refreshed on an annual basis as part of the development 
of our business plan. 
 
   RISK OF STRANDED ASSETS 
 
   Every year we test our portfolio under different scenarios, including 
prolonged low oil prices. In addition, we rank the break-even prices of 
our assets in the Upstream business to assess their resilience against 
low oil and gas prices. At December 31, 2020, we estimate that around 
75% of our current proved oil and gas reserves will be produced by 2030 
and only around 3% after 2040. We also estimate that around 70% of our 
proved plus probable oil and gas reserves, known as 2P, will be produced 
by 2030, and only 5% after 2040. 
 
   EVOLVING REGULATORY DISCLOSURE REQUIREMENTS 
 
   Disclosure requirements related to climate-related risks and 
opportunities are evolving and may result in more stringent disclosure 
mandates. Several regulatory bodies, including in the EU, the UK and the 
USA, are exploring frameworks and guidance for increased disclosure and 
creating uniform criteria for how economic activities score on 
environmental sustainability. Shell continues to monitor regulatory 
developments in this area, including progress on the EU Taxonomy and the 
adoption of the EU Delegated Acts for the technical screening criteria 
and disclosure methodology. We will develop responses as appropriate. 
 
   INCREASING TRANSPARENCY 
 
   We are implementing the recommendations of the Task Force on 
Climate-related Financial Disclosures (TCFD) in our reporting. We are 
also engaging with others including the investor group Climate Action 
100+ and the Science Based Targets initiative as they develop new 
reporting, accounting and target-setting frameworks for the oil and gas 
industry. The Science Based Targets initiative is a partnership between 
CDP, the United Nations Global Compact, the World Resources Institute 
and the World Wide Fund for Nature. 
 
   The structure of this report outlining our energy transition strategy is 
based on our continued engagement with Climate Action 100+ and on the 
net-zero disclosure standard developed by that group for the oil and gas 
industry. 
 
   The table below shows where to find Shell's disclosures that respond to 
the recommendations by the TCFD in our 2020 reports, publications and 
websites. 
 
 
 
 
TCFD RECOMMENDATION                 DISCLOSURE 
--------------------------------    ------------------------------------------------------- 
GOVERNANCE: 
 Disclose the organisation's governance around climate-related risks 
 and opportunities. 
a) Describe the Board's             Annual Report: (pages 96/97) "Our governance 
 oversight of climate-related        of climate change"; (pages 143/144) "Governance 
 risks and opportunities.            -- Safety, Environment and Sustainability 
                                     Committee", and (pages 186/187) "Risk management 
                                     and controls" 
b) Describe management's            Annual Report: (page 96/97) "Our governance 
 role in assessing and               of climate change" 
 managing climate-related 
 risks and opportunities. 
STRATEGY: 
 Disclose the actual and potential impacts of climate-related risks 
 and opportunities on the organisation's businesses, strategy, and financial 
 planning where such information is material. 
a) Describe the climate-related     Annual Report: (pages 18-21) "Strategy and 
 risks and opportunities             outlook", "Powering Progress" 
 the organisation has identified     Annual Report: (page 98) "Climate-related 
 over the short, medium,             risks and opportunities" 
 and long term.                      CDP 2020 Climate Change submission: sections 
                                     C2.2/2.3/2.4 
                                     Risks and Opportunities 
b) Describe the impact              Annual Report: (pages 98/99) "Impact of climate-related 
 of climate-related risks            risks and opportunities on strategy, planning 
 and opportunities on the            and business" 
 organisation's businesses,          Annual Report: (pages 94/95) introduction 
 strategy, and financial             of "Climate change and energy transition", 
 planning.                           "Shell's absolute emissions and carbon intensity 
                                     targets", "How we plan to deliver", and "Transparency 
                                     and collaboration" 
                                     Annual Report: (page 221) "Climate change 
                                     and energy transition" 
                                     CDP 2020 Climate Change submission: section 
                                     C3 Business Strategy 
c) Describe the resilience          Annual Report: (pages 98/99) "Impact of climate-related

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